The above from Bloomberg BusinessWeek.
- The higher the PE, the lower the Earnings Yield, the less attractive the valuations are;
- The higher inflation, the higher the interest rates, the more attractive is the risk free alternative (fixed deposit) for investing.
In Malaysia the PE is around 18 (at least, that is what I read recently).
The inflation is officially about 2%, I guess it is around 5-7%.
In other words, according to the Rule of 20, I think that shares are slightly overvalued.