I hear this subject frequently debated. The DJIA/S&P/NASDAQ should be at 5000, 10000, 20000 or whatever.
It is misleading to talk about the actual valuation. Why?
Stocks underperform true inflation. Over the past 10 years, stocks have underperformed true inflation (gold) by nearly 1% per month.
Now, a pro-State troll says “A clever person can pick stocks profitably.” That makes as much sense as “If you make the right picks, you can win at Roulette.” Nobody is a clever enough stock picker to overcome a 1% deficit *PER MONTH*.
Now, a pro-State troll says “Stocks are cheap! You can buy cheap, wait for a spike, and cash out for a profit.”
Here is an analogy. To keep things simple, suppose that inflation were 0%. I tell you “You can deposit money with me. I’ll take 1% per month, but I’ll give you a random bonus or deduction whenever you make a deposit.” Does that sound like a good deal? Would you take it? I’ll even say “I’ll give you a bunch of envelopes, some with deductions and some with bonuses. You get to pick which one, when you make a deposit. If you’re clever, it’ll be a good deal!” Would you do it now?
Even if stocks are cheap, they can stay cheap for months or years. In the meantime, you’re paying that 1%/month cost to the financial casino.
Stocks underperform intlation by 1% *PER MONTH*. That’s a huge handicap to overcome, no matter how clever a stock picker you are.
The number on your statment may increase, but you’re getting ripped off by inflation and all the fraud/waste/theft of a large corporate bureaucracy.
Most people think that their investments grow exponentially. That’s only true if returns exceed inflation. If your return is less than inflation, then you have asymptotic growth and not exponential growth. If your real return on savings is -10% per year, then the most you can ever save is 10x your annual savings rate.
It was very shocking to realize that the stock market is one big scam. It’s like discovering that Santa Claus doesn’t exist.
Given that stocks consistently underperform inflation, the “fair value” of the stock market is zero. Anybody who claims they can pick stocks well enough to overcome the true cost of inflation/fraud/theft is lying or delusional. If you invest in the stock market, you’re guaranteed to be robbed.