Now Stocks Are 48% Overvalued, Says Smithers

We've been pointing out for a while that, based on a cyclically adjusted PE ratio, the stock market is significantly overvalued--say, 20% or so.

To arrive at this view, we use a "fair value" estimate for the S&P 500 of about 900, which is close to the one used by fund manager Jeremy Grantham, fund manager John Hussman, and others. This compares to the S&P's current level of about 1100.

But now Andrew Smithers, an excellent economist based in London, is telling us that we're way too optimistic, that fair value for the S&P 500 is actually in the 700-750 range. Smithers, therefore, thinks the stock market is about 50% overvalued.

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