Items Tagged With Investing

When Adam Smith wrote about the "invisible hand" in 1776, he referred to the natural forces that allow the market to correct for seemingly disastrous situations with no intervention on the part of government. Unfortunately, the natural forces of the market are no longer relevant. Wall Street's ecosystem has been polluted by a flawed broker-dealer model, leveraged complexity and a lack of proper oversight.

Despite all the doom and gloom seen over the last year, the S&P 500 index is still looking expensive. At Friday's close the benchmark index traded at a Price to Earnings (P/E) ratio of 24.30, much higher than the 17.17 ratio seen a year ago when the downturn started. FYI - the long term average P/E ratio for the S&P 500 is around 15. With some commentators proclaiming that we are facing the greatest crisis since the Great Depression, why do stocks remain expensive?