Musings · The debt-to-GDP ratio in developing economies remains less than half the level in...

transcript

Musings

September 8th, 2015

9/7/2015 www.lanyonadvisory.com 1

Where are we Today ?

Current Shiller PE Ratio: 24.36, Sep 4th, 2015

Mean: 16.62

Median: 16.01

Min: 4.78 (Dec 1920)

Max: 44.19 (Dec 1999)

Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10

Source: http://www.multpl.com/

Current S&P 500 Price to Sales Ratio: 1.66, Sep 4th 2015

Mean: 1.40

Median: 1.43

Min: 0.80 (Mar 2009)

Max: 1.79 (May 2015)

An Old Friend: The Stock Market’s Shiller P/E Ratio, Cliff S. Asness

Results For S&P 500 From Different Starting Shiller P/Es 1926‐2012

Starting P/E Avg. Real Worst Real Best Real Standard

Low High 10 YR Return 10 YR Return 10 Year Return Deviation

5.2 9.6 10.30% 4.80% 17.50% 2.50%

9.6 10.8 10.40% 3.80% 17.00% 3.50%

10.8 11.9 10.40% 2.80% 15.10% 3.30%

11.9 13.8 9.10% 1.20% 14.30% 3.80%

13.8 15.7 8.00% -0.90% 15.10% 4.60%

15.7 17.3 5.60% -2.30% 15.10% 5.00%

17.3 18.9 5.30% -3.90% 13.80% 5.10%

18.9 21.1 3.90% -3.20% 9.90% 3.90%

21.1 25.1 0.90% -4.40% 8.30% 3.80%

25.1 46.1 0.50% -6.10% 6.30% 3.60%

Tobin's Q is at a current level of 1.061, a decrease of 0.0076 or 0.71% from last quarter. This is a decrease of 0.008 or 0.75% from last year and is higher than the long term average of 0.7445.

http://advisorperspectives.com/dshort/updates/Regression-to-Trend.php

Interest Rates

Exhibit 6 The debt-to-GDP ratio in developing economies remains less than half the level in advanced economies

69 31 213

80 188

Australia

Debt-to-GDP ratio, 2Q141 Household Non-financial corporate % Advanced economies Developing economies Japan 65 101 234 400 Hungary 29 114

Germany

United States

United Kingdom

Denmark

Sweden

325 Netherlands

317 Greece

Government

38 125

76 65 46 38 73

55 222

55 217

67 178

35 104

38 104

Russia 9

Romania

Turkey

Chile 15 136

Israel

Ireland 85 189 115 390 Malaysia

Singapore 76 201 105 382 China

Belgium 56 136 135 327 Thailand

South Korea 81 105 44

Canada 92 60 70 Indonesia 20 46 22 88

Mexico 22 44

313 Poland 35 42 57 134

302 South Africa 39 49 45 133

90 Czech Republic 33 49 47 128

259 Brazil 25 38 65 128

252 India 9 45 66 120

Misc Slides

Source(s): Strategas, TIS Group.

Said Too Many Paper Barrels of Oil?; WTI Support $44?

Potential Issue? Recent Large Buyer of June Puts at $20…

Bounced Right off $44 on 1/28 and Again on 3/17

Figure 1. World liquids relative surplus or deficit (production minus consumption) and WTI crude oil price adjusted using the consumer price index (CPI) to real February 2015 U.S. dollars, 2003-2015. Source: EIA, U.S. Bureau of Labor Statistics, and Labyrinth Consulting Services, Inc.

Source(s): DavidStockmansContraCorner.com.

No Clear Relationship Between Surplus/Deficit & Oil Price

Source(s): Morgan Stanley.

Every Marginal Barrel of Oil Requires Higher Prices

Source(s): Zerohedge.

Shale States Had No Recession, Rest of U.S. Still Down

Source: GMO *The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward- looking statements. U.S. inflation is assumed to mean revert to long-term inflation of 2.2% over 15 years.

7-Year Asset Class Real Return Forecasts*

As of January 31, 2015

6.5% Long‐term Historical U.S. Equity Return

STOCKS BONDS OTHER

0.9% 0.8% 0.8%

0% -0.2%

U.S. Large

U.S. Small

U.S. High Quality

Intl Large

Intl Small

Emerging U.S. Bonds

Intl Bonds

Hedged

Emerging Debt

Inflation Linked Bonds

Cash Timber

General This is neither an offer to sell nor a solicitation of an offer to buy interests in any investment fund. This document is for informational purposes only and should not be distributed. This material has been prepared by Lanyon Advisory Services for private clients. The views expressed are those of Lanyon Advisory Services only and are subject to change. This information should not be construed as investment advice; it is presented for information purposes only.

No Warranty Lanyon Advisory Services, LLC does not warrant the accuracy, adequacy, completeness, timeliness or availability of any information. Risk Summary Investment objectives are not projections of expected performance or guarantees of anticipated investment results. Actual performance and results may vary substantially from the stated objectives with respect to risks. Investments are speculative and are meant for sophisticated investors. An investor may lose all or a substantial part of its investments. Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

Musings · The debt-to-GDP ratio in developing economies remains less than half the level in...

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