My point is this: For every period where high-P/E markets fizzled, there are comparable ones, of roughly similar frequency, where they did well. The market's average P/E ratio is a bad market forecaster.
http://www.forbes.com/forbes/2003/0929/116.html
Professor Cliff Asness responding to a similar Fisher piece:
Besides promoting me from hedge fund manager Cliff Asness to "noted University of Chicago Professor Craig Asness" in "Professors and Markets" , Kenneth Fisher disparages an approach I advocate for forecasting long-term stock returns. He's "back-tested" it and found it doesn't get every decade right. Nobody would claim it works all the time. But many noted researchers have shown that when stock prices are higher versus fundamentals, as they are now, future long-term returns are often lower. This common sense helps explain a fair amount of historical decade-by-decade stock returns. So, we're left to choose between a tool that has reasonable (not perfect) power, or Fisher's best guess that the bubble's coming back. I know what Professor Craig Asness--a good-looking fellow, I might add--is betting on.
Clifford S. Asness. PH.D.
Managing Principal,
AQR Capital Management
New York, N.Y.
http://www.forbes.com/forbes/2003/1006/022.html