"The CAPE has a far better forecasting record than the traditional P/E.
The CAPE currently stands at 23.6, according to Shiller. That is higher than 90% of comparable readings since the 1870s.
The good news here, if there is any, is that valuations exert only a weak gravitational pull over the stock marketâ??s near-term direction. So there is no reason that the bull market couldnâ??t continue for a lot longer.
But the stock marketâ??s long-term prospects certainly appear bleak: According to an analysis Asness recently conducted, the current CAPE level of 23.6 translates into a forecast that the S&P will produce a 10-year real return â?? between now and mid 2023, in other words â?? of just 0.9%.
[quote]Headhunter wrote:
"The CAPE has a far better forecasting record than the traditional P/E.
The CAPE currently stands at 23.6, according to Shiller. That is higher than 90% of comparable readings since the 1870s.
The good news here, if there is any, is that valuations exert only a weak gravitational pull over the stock marketâ??s near-term direction. So there is no reason that the bull market couldnâ??t continue for a lot longer.
But the stock marketâ??s long-term prospects certainly appear bleak: According to an analysis Asness recently conducted, the current CAPE level of 23.6 translates into a forecast that the S&P will produce a 10-year real return â?? between now and mid 2023, in other words â?? of just 0.9%.
Where did the CAPE stand one and two years ago? I bet it indicated a bleak outlook then too. I think the ten year outlook is probably on the low side but I’m not sure the two to four year outlook is. I think a lot of money could be made in that time on the long side. We’ll see.
Yes, it is overvalued. When the Fed engaged in three bouts of quantitative easing (QE1, QE2, and QE3), the market was never allowed to hit rock bottom - it was temporarily and unstably “propped up” by the Fed’s ridiculous monetary policy, especially considering that nobody was fully aware of the long-term effects of such a policy. In essence, it was an economic experiment, and we continue to be in the midst of this experiment, because we still have not discovered what the long-term results will entail. Any economist will tell you that the stock market is in uncharted territory at this point - the fundamentals have not applied to the stock market since the beginning of the year.
[quote]The Greek wrote:
Yes, it is overvalued. When the Fed engaged in three bouts of quantitative easing (QE1, QE2, and QE3), the market was never allowed to hit rock bottom - it was temporarily and unstably “propped up” by the Fed’s ridiculous monetary policy, especially considering that nobody was fully aware of the long-term effects of such a policy. In essence, it was an economic experiment, and we continue to be in the midst of this experiment, because we still have not discovered what the long-term results will entail. Any economist will tell you that the stock market is in uncharted territory at this point - the fundamentals have not applied to the stock market since the beginning of the year. [/quote]
Yeah, but given the fed minutes and Bernankes talk yesterday the pump is primed for a nice bull run through the next few months or maybe into the end of this fiscal year.
How it all unwinds? Whoever knows that will be making the forbes 100.