October has been a terrible month for equities yet this is only a start of what’s to come.
This version of the original article, by Mish Shedlock, has been edited* here by munKNEE.com for length (…) and clarity ([ ]) to provide a fast & easy read. For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE bi-weekly Market Intelligence Report newsletter (see sample here)
Decline Barely Started
Despite the rout, the S&P is just barely down for the year.
Expect a “Lost Decade”
The Shiller PE Ratio also known as “CAPE”, the Cyclically Adjusted Price-Earnings Ratio, is in the stratosphere. It’s not a timing mechanism, rather it’s a warning mechanism.
The main idea is that earnings are mean reverting [and], on that basis, stocks are more overvalued than any time other than the DotCom era. That [being said, this] is misleading. In 2000 there were many sectors that were extremely cheap. Energy was a standout buy then. So were retail and financials. It’s difficult to find any undervalued sectors now other than gold.
A Financial Crisis Coming