The Cyclically Adjusted Price Earnings Ratio, abbreviated as CAPE, or the more precise P/E10, closely tracks the real (inflation-adjusted) price of the S&P Composite. After dropping to 13.3 in March 2009, the P/E10 has rebounded to 23.0. The historical average is 16.39 raising concerns about the current price level of the S&P Composite. Let me explain. Words: 1298
Read More »Official and ShadowStats Monthly Inflation Rates: 1872 to Present (+2K Views)
[There is a considerable difference between the official BLS inflation rate (1.63%) and the ShadowStats' alternative method of calculating consumer prices (9.07%) but] I believe that the optimum method is probably somewhere between the two. [Let me explain.] Words: 390
Read More »Is the Stock Market Over-priced? These Charts Provide Some Insight (+2K Views)
Secular stock market declines have ranged in length from over 19 years to as few as 3 [and] the current decline is now in its 10th year. Every time the P/E10 has fallen from the top to the 2nd quintile [as it has done recently], it has ultimately declined to the 1st quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require [either] an S&P 500 price decline below 540 [or] for corporate earnings to make a strong and prolonged surge. [Which is it going to be and, if it is the former, when might it occur? Only time will tell! Let me explain.] Words: 1338
Read More »