Robert Shiller on StreetSmartPost

StreetSmartPost by Sy Harding, with several insightful observations

Why you should not ignore what Shiller is Saying

Saturday, August 23, 11:45 a.m.

Robert Shiller, Nobel laureate in economics, had an article in the New York Times last weekend, and followed it up with an interview on CNBC Tuesday. Some of his comments:

"There’s something bizarre going on."

"The U.S. stock market looks very expensive right now. . . . . . The CAPE 10 P/E ratio is at 25, far above its 20th century average of 15.21, a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999, and 2007. Major market drops followed those peaks."

I will interrupt with an observation:

The fact that the current market valuation level was exceeded three times in those extreme bubbles of the last 130 years, has some believing that until overvaluation reaches those extremes again there is little risk.

It might be well to realize that there have been not three, but 25 bear markets over the last 113 years (as far back as my data goes). Their average decline was 36%. The average of the worst ten was 50%.

So the real story is that market valuation is now much higher than at the peak of 22 of the last 25 bear markets. That is, 88% of the time a bear market began with market valuation at the current level or lower. That is almost 9 to 1 odds against higher prices.

Click on the following link to read the full article at StreetSmartPost
http://bit.ly/1wwm4VA

This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 
Past performance is not indicative of future results