10 year returns from 96 to 06 was mediocre. The tech bubble burst due to valuations eventually. And please don’t compare CAPE from many decades ago. Expensive stocks can get much more expensive.You didn't digest it.I did and I don’t agree with most of what he said.It's been a bad predictor of returns. Did you digest any of the posts that Homer made?A belief based on CAPE data, is not a prediction.
CAPE has been a good predictor if you believe the information.
Even if the definition of high and low change drastically over cherry picked time periods, the time period from the article does show what “high” valuation is defined as numerically in terms of CAPE ratio.
So are we now in a different period where “high” abruptly changed after 2020?
I can understand the definition and value of CAPE changing between totally different multi decade periods. But please explain how the definition of “high” CAPE suddenly changes drastically in a few years. We have data point to show what CAPE ratio corresponds to in terms of returns.
How can one possibly say that CAPE in 2012 was high?
Even if the formula for CAPE changed, the linear trend of high CAPE and low returns would still be true.
The historical plot shows this as peaks are followed by low returns even if those peaks change over different time periods.
In 1996, CAPE was at its highest since right before the Great Depression. 1996 was a fantastic time to invest.
In 2018 CAPE Was higher than 1929 and 1996. The last six years have delivered excellent real returns, higher than historical averages, actually.
In 2018, anybody investing based on valuations like CAPE would have been out.
Based on actual CAPE data, I would not get out of stocks in 2018 even if I was trying to time markets. That’s because history shows that expensive stocks can remain expensive a long time.
That’s why I said before that CAPE or any other valuation metric is not a short term timing indicator.
CAPE doesn’t predict when to get in or out of stocks. And that’s not how I use CAPE.
Statistics: Posted by smartinvestor2020 — Sat Feb 24, 2024 4:06 pm — Replies 126 — Views 5215