Ben Carlson works for Ritholtz Wealth Management and Bloomberg columnist in mid July wrote a column called this time really is different. Sir John Templeton of Templeton Mutual Funds wrote 16 Rules for Investment Success and one of them is this time is different. Often when people do not know they tend to say, well this time it is different to reflect something has fundamentally changed. What has changed is the metrics the street tends to use:

The CAPE (cyclical adjusted price-to-earnings) ratio is above what it tends to be. The CAPE has been used since 1871 and started at 16.7. The average from 1960 moves to 20; the average in 1980 is 21.7. The current reading is 30, is that too high or normal?

Now consider the composition of the corporate and financial markets – they are different

In 1957, the S&P 500 consisted of 425 industrial stocks, 60 utilities and 15 railways

1988, the S&P 500 consisted of 400 industrials, 40 utilities, 40 financials and 20 transportation stocks.

In 1902, US Steel was the biggest US Company with 170,000 workers generating sales of 3,340 sales per employee (90,000 in today’s dollars). Today Facebook generates $2 million in revenue per employee.

50 years ago, retail investors had 90% of the market; now 95% is professional investors.

The first stock market index fund was not created until 1976.

All the above illustrate things change and things changed rapidly in the investing world. Most of them are good, but the street decides. This means making mistakes is a normal, but learning from them is what can be the difference next time. In the market with hindsight everyone can beat the market, but in reality the landscape changes and we are all mere mortals.

Linking to dividend paying stocks, in general the street will value profitable stocks higher than non profitable stocks and those that pay a sustainable dividend will be in business longer than those that do not pay dividends. Part of investing is try not to lose money, a sustainable dividend helps accomplish that goal. Within the dividend world there are many alternatives, the world changes but some things tend to remain constant.

There are more questions than answers, till the next time – to raising questions.