Subject: Re: S&P500 valuations
The price to book value is a completely different way of looking at the valuation,
and on this measure we are also 47% overvalued compared to the data back to 2000
(which is a period that on the whole has been a fairly optimistic, and thus low yielding).
Price to book values have been much lower prior to 2000.

Simplistic rules of thumb like price to book can be quite misleading.

For example...

The ratio of tangible investments to intangible investments in the US was about 2 to 1
prior to the 1990s. Around the end of the 1990s they began to converge. After 2000, the
trend has been in the opposite direction -- investment in intangibles has increasingly
outweighed investment in tangible assets. In 2020, investment in intangibles was more than
double investment in tangibles.

Tangible investments show up as assets on the balance sheet. Intangible investments show
up as expense on the income statement, unless they were acquired. This means book value is
being understated nowadays because these intangible investments are not showing up on the
balance sheet. And because intangible investments now significantly outweigh tangible
investments, it's material. Historical comparisons of price to book thus become problematic.

Ears