Quote:
Originally Posted by stinkypete
I'm specifically talking about the Shiller P/E or CAPE or whatever you want to call it. I'm probably wrong to criticize Shiller himself, but the people who quote the Shiller P/E as proof that this market is yuuuuuuuuugely overvalued and due for a big crash without accounting for secular trends in monetary policy or garbage earnings around the mortgage crisis are fools.
last two times the fed tightened were 1999 (before tech bubble) and 2005 (before mortgage collapse). QE ended October 2014. Monetary policy helped drive valuations higher and monetary policy is no longer accommodating. Valuations by themselves can only tell us when the market is expensive/cheap...
what other metric would you use to give yourself an idea of how expensive/cheap valuations are? I guess PM's managing hundreds of millions are also "fools." And this bull market will last foreva??
look at earnings themselves on the SPX which peaked in 2014. what could possibly lead to higher earnings besides Trump lowering taxes or easing regulations?
http://www.multpl.com/s-p-500-earnings/
if only "fools" use the Shiller P/E to get an idea of valuations, then what are you advocating? a trailing 12-month P/E? or a forward looking P/E that is crap anyways because analysts will ratchet down earnings expectations numerous times throughout the year...?
FED started QE in March 2009 so Shiller P/E is taking into account earnings almost exclusively within the time period of when QE began.
J/W would be nice to get an idea of what you think is so much better to get a sense of valuations instead of just calling Shiller P/E trash?