Just a note - if there is one weekly comment that I hope that regular readers of these comments will not miss, it is last week's piece - Valuing the S&P 500 Using Forward Operating Earnings. Economic risks and credit strains will come and go, but one thing that will remain important to investors over the very long-term is the ability to properly assess stock valuations. I know that last week's comment had more math than usual, which isn't everybody's cup of tea. But it's nothing that you can't do on a standard calculator, and even if you don't use the equations, I strongly encourage investors to read the comments carefully.
It's not always obvious to the listener when an analyst's argument is full of holes, but you should always be on red alert when a single year of earnings is taken, at face value, as the basis for market valuation. If you passively accept that premise without training your neurons to revolt like little Frenchmen at the gates of the Bastille, you'll be at the mercy of all sorts of false and misleading claims about valuation based on models that have absolutely no predictive reliability in historical data. In the absence of historical evidence, people can say anything they want without accountability.
If there is one thing that is singularly responsible for the abysmal returns of the S&P 500 over the past 12 years, it is the ludicrous set of valuation "models" that Wall Street has repeatedly foisted onto an uninformed public in order to sell them on the notion that dangerously overvalued markets were actually "cheap." Knowledge is your best defense. Valuation matters.