Only twice in history has the shiller pe ratio for the s&p 500 been as high as it is now: dot com bubble and the months leading up to black Tuesday (start of the depression). I've switched from buying equities as of late and started targeting bonds, as the yields are looking better and better each day. I'm not sure if a pullback is coming, but the market is certainly overvalued compared to historical trends.

My thesis is one of three things will happen: a) earnings will rise faster than price, justifying current valuations, b) there will be a pullback, or c) current valuations will become the new normal. I'm not dumping equities at this point, but I'm definitely in wait and see mode.

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Posted by bluemoons

the marsh

Member since Oct 2012

5530 posts

Posted on 2/16/17 at 2:53 pm to chongo

quote:
Only twice in history has the shiller pe ratio for the s&p 500 been as high as it is now: dot com bubble and the months leading up to black Tuesday (start of the depression). I've switched from buying equities as of late and started targeting bonds, as the yields are looking better and better each day. I'm not sure if a pullback is coming, but the market is certainly overvalued compared to historical trends.

My thesis is one of three things will happen: a) earnings will rise faster than price, justifying current valuations, b) there will be a pullback, or c) current valuations will become the new normal. I'm not dumping equities at this point, but I'm definitely in wait and see mode.

You and I have similar thoughts here. The only thing I would add is that earnings would have to rise a whole hell of a lot faster than they have been in order to catch up with price. If current valuations become the new normal, I'm a happy human

This post was edited on 2/16/17 at 2:54 pm

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Posted by tirebiter

7K R&G chile land aka SF

Member since Oct 2006

9360 posts

Posted on 2/16/17 at 6:47 pm to chongo

quote:
Only twice in history has the shiller pe ratio for the s&p 500 been as high as it is now: dot com bubble

Comparing today's CAPE ratio to 1999/2000 is very misleading, companies going public then were magically valued pre-revenue. Investing in value stocks at that period was a great investment move. That was about 11 years in for me and worked out well, and it pissed me off people kept making money on tech companies worth nothing until it blew up in their faces.

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Posted by Shepherd88

Member since Dec 2013

4596 posts

Posted on 2/16/17 at 8:27 pm to chongo

P/E ratio is also taking into account the 10 year treasury being at historical average levels... which it's not.. so there's a strong argument that if you take into account a 10 yr even at 4% then the S&P 500 is currently 15% discounted.

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