Wow: Shiller PE is 34.52

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fredflinstone
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Wow: Shiller PE is 34.52

Post by fredflinstone » Tue Jan 30, 2018 8:24 am


Jags4186
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Re: Wow: Shiller PE is 34.52

Post by Jags4186 » Tue Jan 30, 2018 8:26 am

fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
It was 71 in 2009. We could have a 100% run in us still.

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fredflinstone
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Re: Wow: Shiller PE is 34.52

Post by fredflinstone » Tue Jan 30, 2018 8:28 am

Jags4186 wrote:
Tue Jan 30, 2018 8:26 am
fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
It was 71 in 2009. We could have a 100% run in us still.
Actually it was about 15 in 2009. Click on the link.

Bacchus01
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Re: Wow: Shiller PE is 34.52

Post by Bacchus01 » Tue Jan 30, 2018 8:28 am

What is it when you drop 2008 and 2009?

Da5id
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Re: Wow: Shiller PE is 34.52

Post by Da5id » Tue Jan 30, 2018 8:36 am

fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
What exactly are you saying? Sell sell sell! Stay the course! Panic! Hard to distinguish from your post.

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Top99%
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Re: Wow: Shiller PE is 34.52

Post by Top99% » Tue Jan 30, 2018 8:37 am

"Be fearful when other people are greedy". I think I heard that somewhere once.
Adapt or perish

alfaspider
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Re: Wow: Shiller PE is 34.52

Post by alfaspider » Tue Jan 30, 2018 8:38 am

fredflinstone wrote:
Tue Jan 30, 2018 8:28 am
Jags4186 wrote:
Tue Jan 30, 2018 8:26 am
fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
It was 71 in 2009. We could have a 100% run in us still.
Actually it was about 15 in 2009. Click on the link.
I think you are talking about two different PE ratios (10 year trailing vs current). 10 year trailing was quite low in 2009 because equity prices were low. However, current PE was high because earnings were in the toilet that year.

Keep in mind that the 10-year PE is still averaging in the worst "great recession" years of 8-10. If equity prices and corporate profits stayed flat for the next 3 years, we'd still see that 10-year trailing PE ratio come down a good bit.

1-year trailing PE is elevated (still below .com bust levels), but is actually down a bit from last year for the S&P 500. Forward PE is only slightly above average.

At the end of the day, nobody really knows whether this bull market has a month left, a year, left, or five years left. No point in getting too worked up about it. Stay the course.

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climber2020
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Re: Wow: Shiller PE is 34.52

Post by climber2020 » Tue Jan 30, 2018 9:21 am

fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
Do you have any good evidence that this information can be used to time the market in a predictable, reliable manner?

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jjustice
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Re: Wow: Shiller PE is 34.52

Post by jjustice » Tue Jan 30, 2018 10:35 am

The CAPE can certainly tell you when it is not a profitable time to buy US stocks--unless perhaps you are a short-term trader.

John

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Re: Wow: Shiller PE is 34.52

Post by sgr000 » Tue Jan 30, 2018 10:48 am

Da5id wrote:
Tue Jan 30, 2018 8:36 am
fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
What exactly are you saying? Sell sell sell! Stay the course! Panic! Hard to distinguish from your post.
Personally, I tend to stay the course and panic. Pretty sure one of those is more productive than the other, though.

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Re: Wow: Shiller PE is 34.52

Post by Crisium » Tue Jan 30, 2018 10:56 am

jjustice wrote:
Tue Jan 30, 2018 10:35 am
The CAPE can certainly tell you when it is not a profitable time to buy US stocks--unless perhaps you are a short-term trader.

John
Don't you mean, unless you are a long-term investor?

Buying (broad index) stocks in 1999 was profitable, for example. Took a bit of time though.

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Re: Wow: Shiller PE is 34.52

Post by harvestbook » Tue Jan 30, 2018 11:09 am

This thing's been high practically since it was invented.

Image
I'm not smart enough to know, and I can't afford to guess.

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jjustice
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Re: Wow: Shiller PE is 34.52

Post by jjustice » Tue Jan 30, 2018 11:16 am

Crisium wrote:
Tue Jan 30, 2018 10:56 am
Don't you mean, unless you are a long-term investor?

Buying (broad index) stocks in 1999 was profitable, for example. Took a bit of time though.
I see your point, but I wouldn't say that buying US stocks in 1999 was a profitable activity, since saving that money and investing it a few years later was much better. 'Profitable' has a time dimension, but I don't know exactly how to state it.

John

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Re: Wow: Shiller PE is 34.52

Post by alfaspider » Tue Jan 30, 2018 11:20 am

jjustice wrote:
Tue Jan 30, 2018 10:35 am
The CAPE can certainly tell you when it is not a profitable time to buy US stocks--unless perhaps you are a short-term trader.

John
But who is just sitting on a large sum of cash waiting to buy? The problem is you may know that stocks are elevated at a given time, but it may have more time to run. People were getting nervous about stocks getting expensive back when they got past the 2007 highs (they were even talking about high CAPE), but 4 years ago was a very profitable time to buy.

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Re: Wow: Shiller PE is 34.52

Post by Da5id » Tue Jan 30, 2018 11:22 am

jjustice wrote:
Tue Jan 30, 2018 11:16 am
Crisium wrote:
Tue Jan 30, 2018 10:56 am
Don't you mean, unless you are a long-term investor?

Buying (broad index) stocks in 1999 was profitable, for example. Took a bit of time though.
I see your point, but I wouldn't say that buying US stocks in 1999 was a profitable activity, since saving that money and investing it a few years later was much better. 'Profitable' has a time dimension, but I don't know exactly how to state it.
The problem with using CAPE, or anything, for market timing is that it is a losing game. OK, you say CAPE is too high now. What action does that dictate? I guess that could mean 100% bonds/cash? Not buying more stocks but standing pat with what you have? What exactly is the CAPE level you will use to reenter the market? What if the market continues to go up, but more slowly, might you not buy stocks for a long time. Will the 2008-2009 crash aging off the CAPE10 change your asset allocation? Should it?

I'm not arguing that by some standard the market may be "overpriced". It may very well be and the recent runup feels frothy/makes me nervous. I just question what one might usefully do with that notion other than rebalance to ones targets as needed and stay the course...

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patrick013
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Re: Wow: Shiller PE is 34.52

Post by patrick013 » Tue Jan 30, 2018 12:49 pm

Schiller recently said that stock AA should be on the lower side.

Other analysts think it's wonderful the earnings surprises last
quarter.

I think I'll go with Schiller.
age in bonds, buy-and-hold, 10 year business cycle

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Re: Wow: Shiller PE is 34.52

Post by asif408 » Tue Jan 30, 2018 12:51 pm

Da5id wrote:
Tue Jan 30, 2018 11:22 am
The problem with using CAPE, or anything, for market timing is that it is a losing game. OK, you say CAPE is too high now. What action does that dictate? I guess that could mean 100% bonds/cash? Not buying more stocks but standing pat with what you have? What exactly is the CAPE level you will use to reenter the market? What if the market continues to go up, but more slowly, might you not buy stocks for a long time. Will the 2008-2009 crash aging off the CAPE10 change your asset allocation? Should it?

I'm not arguing that by some standard the market may be "overpriced". It may very well be and the recent runup feels frothy/makes me nervous. I just question what one might usefully do with that notion other than rebalance to ones targets as needed and stay the course...
Shift your stock allocation to stocks outside the US, where CAPE levels compared to their historic norms are more reasonable in almost every other investable country. That's an obvious action item, if you so choose to use CAPE to market time. Otherwise, if you overwhelmingly believe the US is special and you should expect higher returns from US stocks than any foreign stocks, then yes, you're only action is to stay the course.

Da5id
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Re: Wow: Shiller PE is 34.52

Post by Da5id » Tue Jan 30, 2018 12:55 pm

asif408 wrote:
Tue Jan 30, 2018 12:51 pm
Shift your stock allocation to stocks outside the US, where CAPE levels compared to their historic norms are more reasonable in almost every other investable country. That's an obvious action item, if you so choose to use CAPE to market time. Otherwise, if you overwhelmingly believe the US is special and you should expect higher returns from US stocks than any foreign stocks, then yes, you're only action is to stay the course.
I've been 1/3 int'l:2/3 US stocks for some time. I'm good with that ratio, don't believe that fidgeting with that proportion in response to the different CAPEs is a good move.

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Re: Wow: Shiller PE is 34.52

Post by Jebediah » Tue Jan 30, 2018 2:59 pm

Trailing earnings yield is 3.79%.

2 year treasury yield is 2.11%

Your choice if that's worth the risk.

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Re: Wow: Shiller PE is 34.52

Post by Stormbringer » Tue Jan 30, 2018 3:15 pm

I really don't trust the Shiller PE right now for two reasons:
  1. The 10-year data set includes 2008-09, which was a fairly extreme financial event.
  2. Interest rates remain very low, which puts upward pressure on PE.
Even if you do have faith in the metric, Dr. Shiller himself has said it is not useful for timing the market.
"Compound interest is the most powerful force in the universe." - Albert Einstein

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Re: Wow: Shiller PE is 34.52

Post by Regressor » Tue Jan 30, 2018 3:26 pm

Stormbringer wrote:
Tue Jan 30, 2018 3:15 pm
I really don't trust the Shiller PE right now for two reasons:
  1. The 10-year data set includes 2008-09, which was a fairly extreme financial event.
  2. Interest rates remain very low, which puts upward pressure on PE.
Even if you do have faith in the metric, Dr. Shiller himself has said it is not useful for timing the market.
Regarding a. even if you exclude the crisis years, valuations are still high And CAPE is very close to 30:
https://www.ft.com/content/793fbb08-f5e ... 4187b3017e

Not Law
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Re: Wow: Shiller PE is 34.52

Post by Not Law » Tue Jan 30, 2018 3:33 pm

On a parallel note, those mutual fund 10 year historical earnings will be going sky high over the next 14 months.

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Re: Wow: Shiller PE is 34.52

Post by asif408 » Tue Jan 30, 2018 3:35 pm

Stormbringer wrote:
Tue Jan 30, 2018 3:15 pm
Interest rates remain very low, which puts upward pressure on PE.
Then why is Europe's PE half of the US, and their interest rates are lower?

hulburt1
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Re: Wow: Shiller PE is 34.52

Post by hulburt1 » Tue Jan 30, 2018 3:39 pm

I only go by my gut. And we are not done. Been investing for 40 years my gut says stay and ride this horse for 3 years..

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Re: Wow: Shiller PE is 34.52

Post by MrPotatoHead » Tue Jan 30, 2018 3:42 pm

re; Shiller PE is 34.52

And if you multiply it by the IQ of Bigfoot and divide it by the circumference of the Loch Ness monster you will get a Fibonacci number, but only if Jupiter is in the third house.

Here is a reality, this time it is different. I have never seen a regulatory environment so changed, in my now, rather lengthy business career. Just the reversal of the NLRB decision on joint employers was seismic, gosh knows what other businesses are seeing. It ss astounding. I would rather these academics start publishing and working through the myriad of regulatory burdens that have been lifted and what their likely impact will be. That would be far more useful than another would be bogeyman shadow casting on the wall. Oh look, that one appears really scary. Never mind, it is my wife's philodendron.

dcabler
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Re: Wow: Shiller PE is 34.52

Post by dcabler » Tue Jan 30, 2018 4:37 pm

sgr000 wrote:
Tue Jan 30, 2018 10:48 am
Da5id wrote:
Tue Jan 30, 2018 8:36 am
fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
What exactly are you saying? Sell sell sell! Stay the course! Panic! Hard to distinguish from your post.
Personally, I tend to stay the course and panic. Pretty sure one of those is more productive than the other, though.
Hah! Love it. I think I'll try both next time.

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Re: Wow: Shiller PE is 34.52

Post by Valuethinker » Tue Jan 30, 2018 4:50 pm

asif408 wrote:
Tue Jan 30, 2018 3:35 pm
Stormbringer wrote:
Tue Jan 30, 2018 3:15 pm
Interest rates remain very low, which puts upward pressure on PE.
Then why is Europe's PE half of the US, and their interest rates are lower?
Probably sectoral and stock specific issues.

US earnings have recovered from the recession faster-- particularly the financials. And the US has a much heavier weighting in tech stocks. Also US companies are more likely to buy back shares, thus distributing cash to shareholders.

The delta on the US tax policy is also responsible for recent performance-- companies will repatriate that cash, and most of it will be paid out to shareholders via dividends or share repurchases.

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Re: Wow: Shiller PE is 34.52

Post by FIREchief » Tue Jan 30, 2018 5:10 pm

MrPotatoHead wrote:
Tue Jan 30, 2018 3:42 pm
re; Shiller PE is 34.52

And if you multiply it by the IQ of Bigfoot and divide it by the circumference of the Loch Ness monster you will get a Fibonacci number, but only if Jupiter is in the third house.

Here is a reality, this time it is different. I have never seen a regulatory environment so changed, in my now, rather lengthy business career. Just the reversal of the NLRB decision on joint employers was seismic, gosh knows what other businesses are seeing. It ss astounding. I would rather these academics start publishing and working through the myriad of regulatory burdens that have been lifted and what their likely impact will be. That would be far more useful than another would be bogeyman shadow casting on the wall. Oh look, that one appears really scary. Never mind, it is my wife's philodendron.
Thank you!! :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Wow: Shiller PE is 34.52

Post by 3funder » Tue Jan 30, 2018 8:21 pm

Jags4186 wrote:
Tue Jan 30, 2018 8:26 am
fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
It was 71 in 2009. We could have a 100% run in us still.
Yeah, but the 71, for all intents and purposes, lasted for a hot second. You're definitely right that we could have a 100% run ahead, but I'm astounded by our 34.52.

3funder
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Re: Wow: Shiller PE is 34.52

Post by 3funder » Tue Jan 30, 2018 8:25 pm

fredflinstone wrote:
Tue Jan 30, 2018 8:28 am
Jags4186 wrote:
Tue Jan 30, 2018 8:26 am
fredflinstone wrote:
Tue Jan 30, 2018 8:24 am
http://www.multpl.com/shiller-pe/

Just saying.
It was 71 in 2009. We could have a 100% run in us still.
Actually it was about 15 in 2009. Click on the link.
There was a very short period around that time when the Shiller PE was in the stratosphere, though.

haban01
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Re: Wow: Shiller PE is 34.52

Post by haban01 » Tue Jan 30, 2018 8:26 pm

I had on moneytalk with Bob Brinker over the weekend. He thinks Shillers methodology is completely flawed using the 10 year average. In the end someone will be right, we just don't know who :)...
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

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Re: Wow: Shiller PE is 34.52

Post by zaboomafoozarg » Tue Jan 30, 2018 8:28 pm

Jebediah wrote:
Tue Jan 30, 2018 2:59 pm
Trailing earnings yield is 3.79%.

2 year treasury yield is 2.11%

Your choice if that's worth the risk.
It's looking less and less like it.

I was 75/25 US/international a couple years ago but have transitioned to 60/40 now. Was contemplating a move to 50/50.

3funder
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Re: Wow: Shiller PE is 34.52

Post by 3funder » Tue Jan 30, 2018 8:33 pm

haban01 wrote:
Tue Jan 30, 2018 8:26 pm
I had on moneytalk with Bob Brinker over the weekend. He thinks Shillers methodology is completely flawed using the 10 year average. In the end someone will be right, we just don't know who :)...
I think it's definitely worth knowing where we stand in terms of valuations; it shouldn't be used as a market-timing tool, but I can't stand those who swear it's meaningless. Semi-meaningless? Sure. Totally meaningless? Doubtful.

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Re: Wow: Shiller PE is 34.52

Post by Noobvestor » Wed Jan 31, 2018 2:22 am

zaboomafoozarg wrote:
Tue Jan 30, 2018 8:28 pm
Jebediah wrote:
Tue Jan 30, 2018 2:59 pm
Trailing earnings yield is 3.79%.

2 year treasury yield is 2.11%

Your choice if that's worth the risk.
It's looking less and less like it.

I was 75/25 US/international a couple years ago but have transitioned to 60/40 now. Was contemplating a move to 50/50.
50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Wow: Shiller PE is 34.52

Post by ryman554 » Wed Jan 31, 2018 3:01 pm

patrick013 wrote:
Tue Jan 30, 2018 12:49 pm
Schiller recently said that stock AA should be on the lower side.

Other analysts think it's wonderful the earnings surprises last
quarter.

I think I'll go with Schiller.
Why, may I ask, would you go with Shiller (who, admittedly, in a post below yours, said that CAPE should not be used to market time...)

The only way I would be convinced to go with Shiller is:
1. You publish a list of Shiller's predictions in the past 10 years and see if he has been statistically correct more often than not to a p-value of 0.05. (Yeah, crummy statistics, but forces you to at least try to remove luck from the equation)
2. For CAPE, in particular, you show a backtested set of actions which have been demonstrated to be correct to some statistical significance.
3. Given the knowledge in #2 and #3, you can prove to me that nobody else -- at least the quants/institutional guys -- knows enough to do the same thing. If they do, it moves the market before you can act on your suspicions.

I'm not picking on you. Nor am I picking on Shiller. But if you are going to "go with somebody's theory", then you had better answer the three questions above affirmatively before you go changing behaviour.

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Re: Wow: Shiller PE is 34.52

Post by richard37 » Wed Jan 31, 2018 3:10 pm

Noobvestor wrote:
Wed Jan 31, 2018 2:22 am
zaboomafoozarg wrote:
Tue Jan 30, 2018 8:28 pm
Jebediah wrote:
Tue Jan 30, 2018 2:59 pm
Trailing earnings yield is 3.79%.

2 year treasury yield is 2.11%

Your choice if that's worth the risk.
It's looking less and less like it.

I was 75/25 US/international a couple years ago but have transitioned to 60/40 now. Was contemplating a move to 50/50.
50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.
Random question. When you talk about 50/50 US / International I assume you are talking about the equity portion of your asset allocation? So if I am 80 / 20 equities and bonds then with the 50/50 US / International example 50% of my 80% would be US and the other 50% International??

Thanks!

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Re: Wow: Shiller PE is 34.52

Post by RRAAYY3 » Wed Jan 31, 2018 3:16 pm

richard37 wrote:
Wed Jan 31, 2018 3:10 pm
Noobvestor wrote:
Wed Jan 31, 2018 2:22 am
zaboomafoozarg wrote:
Tue Jan 30, 2018 8:28 pm
Jebediah wrote:
Tue Jan 30, 2018 2:59 pm
Trailing earnings yield is 3.79%.

2 year treasury yield is 2.11%

Your choice if that's worth the risk.
It's looking less and less like it.

I was 75/25 US/international a couple years ago but have transitioned to 60/40 now. Was contemplating a move to 50/50.
50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.
Random question. When you talk about 50/50 US / International I assume you are talking about the equity portion of your asset allocation? So if I am 80 / 20 equities and bonds then with the 50/50 US / International example 50% of my 80% would be US and the other 50% International??

Thanks!
Your portfolio : 40 us / 40 int’l / 20 bonds

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jhfenton
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Re: Wow: Shiller PE is 34.52

Post by jhfenton » Wed Jan 31, 2018 3:25 pm

richard37 wrote:
Wed Jan 31, 2018 3:10 pm
Random question. When you talk about 50/50 US / International I assume you are talking about the equity portion of your asset allocation? So if I am 80 / 20 equities and bonds then with the 50/50 US / International example 50% of my 80% would be US and the other 50% International??

Thanks!
Yes. And that's right about where we are. 80/20@50/50.

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Re: Wow: Shiller PE is 34.52

Post by minimalistmarc » Wed Jan 31, 2018 3:36 pm

All you need to know is that in 20 years or more share prices will be much higher than they are now.

If you don't believe that, then there is no point investing.

I am staying the course with 100% equities as I am still in a peak accumulation phase.

I am fairly nihilistic regarding a market crash, it will happen at some point, although it also may never happen again, I don't really care. I like to accumulate shares so cheaper is better.

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Re: Wow: Shiller PE is 34.52

Post by UpperNwGuy » Wed Jan 31, 2018 4:01 pm

I think the OP owes us an explanation of what he meant by his post.

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HomerJ
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Re: Wow: Shiller PE is 34.52

Post by HomerJ » Wed Jan 31, 2018 5:06 pm

jjustice wrote:
Tue Jan 30, 2018 11:16 am
Crisium wrote:
Tue Jan 30, 2018 10:56 am
Don't you mean, unless you are a long-term investor?

Buying (broad index) stocks in 1999 was profitable, for example. Took a bit of time though.
I see your point, but I wouldn't say that buying US stocks in 1999 was a profitable activity, since saving that money and investing it a few years later was much better. 'Profitable' has a time dimension, but I don't know exactly how to state it.

John
It's not actionable John. No one knows when to get out and get back in. Sure, saving that money and investing it a few years later was better.

But no one can predict that ahead of time.

CAPE was very high in 1996. You could have pulled out your money and waited to invest it a few years later. But the stock market never got as low as it was in 1996 again. Even at the bottom in 2002, the stock market was still higher than it was in 1996.

Read that again. In 1996, CAPE was the highest it had been since the Great Depression. All warning bells were going off.

Yet it was the cheapest time to buy in the past 22 years.

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HomerJ
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Re: Wow: Shiller PE is 34.52

Post by HomerJ » Wed Jan 31, 2018 5:08 pm

asif408 wrote:
Tue Jan 30, 2018 12:51 pm
Shift your stock allocation to stocks outside the US, where CAPE levels compared to their historic norms are more reasonable in almost every other investable country. That's an obvious action item, if you so choose to use CAPE to market time.
Sorry you should have done that 5 years ago if you think that's an obvious action item, if you choose to use CAPE to market-time.

And it would have cost you.

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9-5 Suited
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Re: Wow: Shiller PE is 34.52

Post by 9-5 Suited » Wed Jan 31, 2018 5:26 pm

For those who have concerns about this but want to stay the course, using new money to pay down debt (if you have any) is a reasonable compromise. Stay invested but knock down your leverage ratio and level of jitters.

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patrick013
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Re: Wow: Shiller PE is 34.52

Post by patrick013 » Wed Jan 31, 2018 6:14 pm

ryman554 wrote:
Wed Jan 31, 2018 3:01 pm
patrick013 wrote:
Tue Jan 30, 2018 12:49 pm
Schiller recently said that stock AA should be on the lower side.

Other analysts think it's wonderful the earnings surprises last
quarter.

I think I'll go with Schiller.
Why, may I ask, would you go with Shiller (who, admittedly, in a post below yours, said that CAPE should not be used to market time...)
I'm not a big fan of multi year PE's although in some markets they can be
useful. When I read Schiller's article in Barron's last week his view that
AA for stock should be less than more made a little more sense than the
fan club of "high PE's are great" analysts. I think real growth has been
pretty low and if gas prices were higher could be negative. So there is
some merit in his real PE analysis even if it lacks precision. Could be
missing another year or two of 10%+ returns but even VG is expecting
a market correction.

Noticed more people going or have gone into Intl stocks so that is getting
them out of the high PE, high estimate, US stock market.
age in bonds, buy-and-hold, 10 year business cycle

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Noobvestor
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Re: Wow: Shiller PE is 34.52

Post by Noobvestor » Wed Jan 31, 2018 7:44 pm

richard37 wrote:
Wed Jan 31, 2018 3:10 pm
Noobvestor wrote:
Wed Jan 31, 2018 2:22 am
zaboomafoozarg wrote:
Tue Jan 30, 2018 8:28 pm
Jebediah wrote:
Tue Jan 30, 2018 2:59 pm
Trailing earnings yield is 3.79%.

2 year treasury yield is 2.11%

Your choice if that's worth the risk.
It's looking less and less like it.

I was 75/25 US/international a couple years ago but have transitioned to 60/40 now. Was contemplating a move to 50/50.
50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.
Random question. When you talk about 50/50 US / International I assume you are talking about the equity portion of your asset allocation? So if I am 80 / 20 equities and bonds then with the 50/50 US / International example 50% of my 80% would be US and the other 50% International??

Thanks!
Sorry for the lack of clarity, and yes: I mean 50/50 on the stock side. I don't see any reason to hold international bonds at this time - unhedged, they add currency volatility; hedged, they add cost; either way, the yields aren't attractive to me.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

RAchip
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Re: Wow: Shiller PE is 34.52

Post by RAchip » Wed Jan 31, 2018 10:58 pm

Its simpler to look at dividend yield. It seems unusually low to me. Which means stock prices are unusually high.

Da5id
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Re: Wow: Shiller PE is 34.52

Post by Da5id » Thu Feb 01, 2018 9:14 am

RAchip wrote:
Wed Jan 31, 2018 10:58 pm
Its simpler to look at dividend yield. It seems unusually low to me. Which means stock prices are unusually high.
Perhaps worth looking at buybacks as part of the "yield" too. Buybacks have modestly exceeded dividends in S&P 500 in recent years.

carofe
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Re: Wow: Shiller PE is 34.52

Post by carofe » Thu Feb 01, 2018 9:34 am

I have been watching that website for a while. Too High P/E tells me that it may be good to do small tactical allocation. 4 months ago I increase my bond allocation +10%, and I'm re-balancing every time my stock allocation drift is 2-3%.
High Shiller P/E just tells me that the next decade total return won't be great. It can be in a form of sluggish return, or many mini crashes or a major crash.
US Total Stock Market + Intermediate Term Bond. That's it.

cjking
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Re: Wow: Shiller PE is 34.52

Post by cjking » Thu Feb 01, 2018 9:59 am

Da5id wrote:
Tue Jan 30, 2018 11:22 am
The problem with using CAPE, or anything, for market timing is that it is a losing game. OK, you say CAPE is too high now. What action does that dictate?
Using figures in my spreadsheet, which might differ slight from those quoted here, by inverting CAPE I get an expected return of 3.2% for US equities and 4.9% for a world-ex-US fund. So there is an alternate asset with a significantly higher expected return.

Da5id
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Re: Wow: Shiller PE is 34.52

Post by Da5id » Thu Feb 01, 2018 10:02 am

cjking wrote:
Thu Feb 01, 2018 9:59 am
Da5id wrote:
Tue Jan 30, 2018 11:22 am
The problem with using CAPE, or anything, for market timing is that it is a losing game. OK, you say CAPE is too high now. What action does that dictate?
Using figures in my spreadsheet, which might differ slight from those quoted here, by inverting CAPE I get an expected return of 3.2% for US equities and 4.9% for a world-ex-US fund. So there is an alternate asset with a significantly higher expected return.
Doesn't answer my question though. What action are you taking? Dump 100% of US and go 100% ex-US? Hmm.

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