Frank Curzio, whose newsletter I’ve been getting for 20 years now, notes that the capitalization of today’s U.S. stock market is $14 trillion or so, down $3 trillion since March. But that’s still about 150% of our nearly $10 trillion Gross Domestic Product (sort of like a stock selling at one-and-a-half times sales). In the early Seventies, Frank says, before the Nifty Fifty collapsed,the market was selling at just 78% of GDP – and plunged to 34% at its low in 1974.

I was writing for New York Magazine back then, and frequently found myself beginning paragraphs with the line . . . ‘If the world doesn’t end – and it usually doesn’t’ . . . to make the point that stocks sure seemed cheap. The market was selling at the equivalent not of one-and-a-half times sales, if you will, but just one-third of sales. In the dreadful period from 1929 to 1932, when the market fell 88%, it went from selling at 81% of GDP, Frank writes, to just 20%.

None of this is remotely to say we are headed for anything like 1974, let alone 1932. We’re not. But if you are expecting ‘Dow 36,000’ any time soon – well, put it this way: I don’t expect to see Dow 3,600 or Dow 36,000 any time soon. But if it had to be one or the other (and fortunately it does not), the former would have to be a lot more likely than the latter.

The Fed is back on our side, and the prospect of tax cuts could moderate, or perhaps even preclude, any further decline. What’s more, the Dow 36,000 folks still believe the Dow is currently selling for less than a third of its sensible fair value. (I got to spend some time with one of them over New Year’s – a most charming fellow.) But it’s worth noting that by historical standards, anyway, the stock market as a whole – certain special situations notwithstanding – is not yet cheap here.

Mark Centuori: ‘[Given the market’s drop], Risk Grades is worth another look. New features have been added since you plugged it in September, among them the ability to expose portfolios to various ‘historic, distress conditions.’ There’s really no other site like it.’


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