IS THE SP500 CHEAP OR EXPENSIVE?

Hello, long time since my last writing. I decided to simplify the site so I erased the old typings.

I was talking this night with somebody important to me, and I was a little scared about what she has done. She has bought some stocks and some of these stocks are banks. When I asked her why she has done this, she told me that obviously because the stocks are cheap.

So I decided to share some information with her and here it is. So if you are lucky it will help to you, but do not take it as a recommendation, the responsibility is yours and you should know some things before investing in the stock market. Do not you read a lot of information before you buy a new gadget?

Well take a look on the chart. As I cannot imagine the future I check if the market is efficient and whether the prices of the stocks have any sense.

In the chart you will find the prices that were paid for the stocks and the price that an investor should have paid for them (in red), based in the real performance of the SP500 .

I do the valuation of the stock price with a discounted cash flow for 10 years, and the interest rate considered in each moment is real long interest rate. So easy to do if you have the information.... A pity that we cannot have that information in advance.

Soon I will give you another piece of information that perhaps will tell you when to trigger your stocks buying anxiety. But calm down, this is not the moment yet.

Meanwhile I recommend to you one of the best places to learn, the Yale University, here you have a nice link http://www.irrationalexuberance.com/index.htm.

And remember being focus is the only way to control the reptilian brain.
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