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Stock Market P/E Now Higher Than Just Prior to the Great Depression

AUG 25, 2018

Price to earnings ratio is one of the most basic valuation tools available to stock market investors. Simply put, it allows you to measure how much you are paying for the ongoing operations and profits of any given public company.

Distill it down to its most basic actionable information based on almost 140 years of back-tested data, and you arrive at two hard-and-fast conclusions:

When the S&P 500 P/E ratio is above 27, it is in territory that is beyond overvalued. It is beyond bubble valuation. It is in a hyper-bubble, and you should be an aggressive seller of stocks.

When the S&P 500 P/E ratio is below 5, you are at rock-bottom undervaluation, and you should be buying stocks aggressively.

Right now? The S&P 500 has a P/E of 33. Higher than the P/E of 32 at the time of the most calamitous crash in stock market history, which precipitated The Great Depression in 1929.

Remember, here at GoldSilver, our goal is to serve and educate our customers about the role precious metals can play in a balanced investment portfolio.

We just happen to find ourselves at a time when every other major market (US and global stocks, bonds, and real estate) are all at all-time overvalued levels, and gold and silver represent tremendous, once (or less)-in-a-generation relative undervaluation, representing enormous upside opportunity and crash protection.