No one really knows where the stock market is heading but many forecast it anyway. There are stocks to sell, money to manage and articles or blogs to write. The Daily Ticker's Henry Blodget has been busy debating Josh Brown, CEO of Ritholtz Wealth Management and founder of The Reformed Broker blog, on Twitter about his recent market call that stocks could plunge 50% in the next year or two. Henry and Josh sat down on The Daily Ticker set to setttle their score once and for all.
Brown says that valuations aren't necessarily the reason stock prices plummet.
"We crashed in 2007 on 12-13 times earnings," he notes in the video above. "Nobody was looking at that and saying we were overvalued."
But Blodget says Brown's argument ignores "the fact that profit margins are at record highs" and assumes they'll stay there forever rather than "do what they have always done in the past...go back to normal or way below."
Brown doesn't buy it. "Profit margins have been trending higher for almost two decades" and there are structural reasons for that, he argues in response.
"The S&P 500 of your father's era were capital goods manufacturers [with] net margins of 7% on average...the S&P today is 19% tech," he continues. "Software companies have 20% net margins. Why are we rooting for profit margins? Don't we want companies to spend money?"
Does Henry agree? Watch the video to find out!
Are stocks overvalued or undervalued? Tell us in the comment section below!
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