Subject: Re: Dividends
Thanks Jim, but I suppose by simply avoiding tech and investing in say RSP the P/S drops to about 1.5?

No, alas.
The figures I quoted (just a single way of demonstrating a more general problem) are the MEDIAN figures. So that's the valuation level of the middle of the pack firm, not any big tech outlier or specific industry. The high valuations are unusually broad these days, hitting both fancy and boring. I can't say that valuations of "ordinary" typical firms will fall at some point, but I can say with confidence that they're very high compared to history. You're not getting very many dollars of sales or earnings for each dollar worth of stock you buy. The more history you consider, the higher the prices look.

This is a mix of a couple of factors.
The simplest is that high multiples are pretty widespread (cyclically adjusted P/E ratios) throughout the list of companies, not just among the modern tech giants. As with any market cycle.

Then, those multiples are being applied to earnings which are unusually high relative to history, even when smoothed--we've seen remarkable net profit margins lately. That's the flip side of low share of GDP going to workers and government in the last 10-15 years, partly via lower net interest costs. This is why valuations based on earnings show that things are expensive, but valuations based on sales show things to be REALLY expensive.

The truth probably lies somewhere in between...I have no idea what net profit margins are going to do in aggregate in the US in the next many years, but absent any better information it seems best to assume they will fall back at least partway towards old norms rather than expanding without limit or staying near happy record highs forever. The levels that used to be cyclical highs are now cyclical lows, so that's the number I might guess. The most recent figures are around 10.9%, quite a bit above the highest single quarterly figure 1951-2004 at 8.54%. The average 1952-2006 was 6.5%, measured a very slightly different way. Given all those, a future normal average in the range of 8% might be the least bad guess?

One Fed chart that is potentially useful
https://fred.stlouisfed.org/gr...

How to dodge the problem?
Don't own the broad cap-weight US market. RSP won't save you, but I think it's probably a better bet than SPY.
Pick individual securities that are not themselves plainly overvalued.
If you want a broad index, I prefer QQQE (equal weight Nasdaq 100) to RSP (equal weight S&P 500) for the long haul. The valuation is higher than usual for both, but the rate of earnings growth has been so much better for so long among the Nasdaq 100 that if that trend remains mostly true then QQQE will grow into its current price far sooner than RSP will.
Or just live with the expectation of pretty low returns for a few years.
One approach which I do not recommend is expecting historically "normal" returns and then being unpleasantly surprised.

Here's yet one more chipper thought:
US stocks have become more expensive very slowly on trend in the last 50-100 years, accounting for a pretty significant fraction of the long run real returns.
Is there any law of nature saying that the reverse could not be true in the next 50-100 years? What if that all unwound?
Instead of ~2% real earnings growth giving ~3%/year real price growth, what if ~2%/year real earnings growth gave ~1%/year real price growth for the rest of your life? (add dividend yield to price growth to get real total return, and those aren't the exact real numbers)

Jim