Wow: Shiller PE is 34.52
- fredflinstone
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Re: Wow: Shiller PE is 34.52
It was 71 in 2009. We could have a 100% run in us still.
- fredflinstone
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Re: Wow: Shiller PE is 34.52
Re: Wow: Shiller PE is 34.52
What is it when you drop 2008 and 2009?
Re: Wow: Shiller PE is 34.52
What exactly are you saying? Sell sell sell! Stay the course! Panic! Hard to distinguish from your post.
Re: Wow: Shiller PE is 34.52
"Be fearful when other people are greedy". I think I heard that somewhere once.
Adapt or perish
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Re: Wow: Shiller PE is 34.52
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.fredflinstone wrote: ↑Tue Jan 30, 2018 7:28 amActually it was about 15 in 2009. Click on the link.
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.
- climber2020
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Re: Wow: Shiller PE is 34.52
Do you have any good evidence that this information can be used to time the market in a predictable, reliable manner?
Re: Wow: Shiller PE is 34.52
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
John
Re: Wow: Shiller PE is 34.52
Re: Wow: Shiller PE is 34.52
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
This thing's been high practically since it was invented.
I'm not smart enough to know, and I can't afford to guess.
Re: Wow: Shiller PE is 34.52
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
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.
Re: Wow: Shiller PE is 34.52
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...
- patrick013
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Re: Wow: Shiller PE is 34.52
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.
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
Re: Wow: Shiller PE is 34.52
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 wrote: ↑Tue Jan 30, 2018 10:22 amThe 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...
Re: Wow: Shiller PE is 34.52
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.asif408 wrote: ↑Tue Jan 30, 2018 11:51 am 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.
Re: Wow: Shiller PE is 34.52
Trailing earnings yield is 3.79%.
2 year treasury yield is 2.11%
Your choice if that's worth the risk.
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
I really don't trust the Shiller PE right now for two reasons:
- The 10-year data set includes 2008-09, which was a fairly extreme financial event.
- Interest rates remain very low, which puts upward pressure on PE.
“The greatest shortcoming of the human race is our inability to understand the exponential function.” - Albert Allen Bartlett
Re: Wow: Shiller PE is 34.52
Regarding a. even if you exclude the crisis years, valuations are still high And CAPE is very close to 30:Stormbringer wrote: ↑Tue Jan 30, 2018 2:15 pm I really don't trust the Shiller PE right now for two reasons:
Even if you do have faith in the metric, Dr. Shiller himself has said it is not useful for timing the market.
- The 10-year data set includes 2008-09, which was a fairly extreme financial event.
- Interest rates remain very low, which puts upward pressure on PE.
https://www.ft.com/content/793fbb08-f5e ... 4187b3017e
Re: Wow: Shiller PE is 34.52
On a parallel note, those mutual fund 10 year historical earnings will be going sky high over the next 14 months.
Re: Wow: Shiller PE is 34.52
Then why is Europe's PE half of the US, and their interest rates are lower?Stormbringer wrote: ↑Tue Jan 30, 2018 2:15 pmInterest rates remain very low, which puts upward pressure on PE.
Re: Wow: Shiller PE is 34.52
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
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.
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.
Re: Wow: Shiller PE is 34.52
Hah! Love it. I think I'll try both next time.
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Re: Wow: Shiller PE is 34.52
Probably sectoral and stock specific issues.asif408 wrote: ↑Tue Jan 30, 2018 2:35 pmThen why is Europe's PE half of the US, and their interest rates are lower?Stormbringer wrote: ↑Tue Jan 30, 2018 2:15 pmInterest rates remain very low, which puts upward pressure on PE.
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.
Re: Wow: Shiller PE is 34.52
Thank you!!MrPotatoHead wrote: ↑Tue Jan 30, 2018 2:42 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.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Re: Wow: Shiller PE is 34.52
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.
Global stocks, US bonds, and time.
Re: Wow: Shiller PE is 34.52
There was a very short period around that time when the Shiller PE was in the stratosphere, though.fredflinstone wrote: ↑Tue Jan 30, 2018 7:28 amActually it was about 15 in 2009. Click on the link.
Global stocks, US bonds, and time.
Re: Wow: Shiller PE is 34.52
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 |
|
"Stay the Course" |
"Press on Regardless"
- zaboomafoozarg
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Re: Wow: Shiller PE is 34.52
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.
Global stocks, US bonds, and time.
- Noobvestor
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Re: Wow: Shiller PE is 34.52
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.zaboomafoozarg wrote: ↑Tue Jan 30, 2018 7:28 pmIt'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.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
Re: Wow: Shiller PE is 34.52
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...)patrick013 wrote: ↑Tue Jan 30, 2018 11:49 am 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.
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.
Re: Wow: Shiller PE is 34.52
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??Noobvestor wrote: ↑Wed Jan 31, 2018 1:22 am50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.zaboomafoozarg wrote: ↑Tue Jan 30, 2018 7:28 pmIt'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.
Thanks!
Re: Wow: Shiller PE is 34.52
Your portfolio : 40 us / 40 int’l / 20 bondsrichard37 wrote: ↑Wed Jan 31, 2018 2:10 pmRandom 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??Noobvestor wrote: ↑Wed Jan 31, 2018 1:22 am50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.zaboomafoozarg wrote: ↑Tue Jan 30, 2018 7:28 pmIt'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.
Thanks!
Re: Wow: Shiller PE is 34.52
Yes. And that's right about where we are. 80/20@50/50.richard37 wrote: ↑Wed Jan 31, 2018 2:10 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!
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Re: Wow: Shiller PE is 34.52
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.
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
I think the OP owes us an explanation of what he meant by his post.
Re: Wow: Shiller PE is 34.52
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.
Re: Wow: Shiller PE is 34.52
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.
- 9-5 Suited
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Re: Wow: Shiller PE is 34.52
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.
- patrick013
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Re: Wow: Shiller PE is 34.52
I'm not a big fan of multi year PE's although in some markets they can beryman554 wrote: ↑Wed Jan 31, 2018 2:01 pmWhy, 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...)patrick013 wrote: ↑Tue Jan 30, 2018 11:49 am 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.
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
- Noobvestor
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Re: Wow: Shiller PE is 34.52
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.richard37 wrote: ↑Wed Jan 31, 2018 2:10 pmRandom 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??Noobvestor wrote: ↑Wed Jan 31, 2018 1:22 am50/50 is a nice place to be IMHO. Half-and-half feels neutral, discourages tinkering, and is also close to market weights. Win win win.zaboomafoozarg wrote: ↑Tue Jan 30, 2018 7:28 pmIt'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.
Thanks!
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
Re: Wow: Shiller PE is 34.52
Its simpler to look at dividend yield. It seems unusually low to me. Which means stock prices are unusually high.
Re: Wow: Shiller PE is 34.52
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.
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.
Re: Wow: Shiller PE is 34.52
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.
Re: Wow: Shiller PE is 34.52
Doesn't answer my question though. What action are you taking? Dump 100% of US and go 100% ex-US? Hmm.