Understanding Brock Value charts
Brock Value is the long-sought answer to the question: what is the market worth? BV is a valuation metric with just two inputs: GDP and interest rates. Compared to questionable old-school metrics (and even new ones like Shiller’s CAPE), BV provides more reliable measurements, especially at critical turning points.
|Above Red Line||1.2%|
|Below Green Line||10.5%|
|Median 10-year compound annual real total returns, 1919-2006|
The red and green lines found on most of the BV charts on this site indicate the normal range of the market. Measuring one-third of a standard deviation above and below BV (the white line), these guidelines serve as boundaries, beyond which valuation is extreme in one direction or the other. When the market (the yellow line) trades above the red line, it is overvalued. When this happens, my analysis shows that prospective (ten-year) returns are lower than average. Conversely, when the market trades below the green line, it is undervalued and ten-year returns are higher than average.