Chat with us, powered by LiveChat

Shiller CAPE Ratio At All-Time High and Climbing Rapidly

Inflationary surge
Print Friendly, PDF & Email

EDITOR NOTE: Numerous price indexes--including the Warren Buffett Indicator, Case-Shiller National Home Price Index, S&P 500 Dividend Yield chart, Shiller CAPE Ratio, and the S&P 500 Price to Book Value chart--are screaming “asset bubbles!”. These indicators, designed to report extreme levels, are now showing extremities as a “sustained norm” thanks to a boost from the Federal Reserve. The Fed has essentially reframed what would normally be considered an anomaly to a mere segment of its strategic implementation. Of course, this is nothing new, as the central bank has successfully gaslighted America into believing that economic intervention reflects the natural flow of the economy (transfer that to the idea of freedom and it’s like saying the disruption of your freedom is a natural part of your freedom, which doesn’t make sense). In the end, we as Americans are going to pay for it, in the near term as inflation deepens, in the intermediate-term as the market eventually craters, and in the long term as our income and wealth are virtually seized, by tax or debasement, to pay for the debasement of our wealth--the vicious cycle that started it all.

Singer Billy Joel almost got it right in his song “We didn’t start the fire.” The Federal Reserve started the asset bubble fire.

The famous Buffett Indicator is signalling a massive stock market bubble or serious overheating.

Here is your first assignment for class. Plot the Buffett Indicator (Wilshire 5000 Total Market Full Cap Index/GDP *100 against The Federal Reserve Balance sheet). It should look like the following:

If we look at global market cap / global GDP, all stocks now worth equal to 133% of global GDP, meaning Buffett indicator screaming BUBBLE! But maybe this time is different in an era w/negative real yields & upcoming exponential earnings growth in the tech sector.

How about Robert Shiller’s cyclically-adjusted price-to-earnings (CAPE) ratio? It is climbing rapidly and is above Black Tuesday’s spike in 1929 but still below the peak of the bubble.

CAPE Ratio

In terms of price-to-book ratio for the S&P 500 index, the P/E ratio is rising rapidly and it just below the bubble level.

CAPE Ratio

The S&P 500 dividend year is at its lowest point since the bubble and considerably below Black Tuesday (1929) and Black Monday (1987).

CAPE Ratio

Speaking of Robert Shiller, the Case-Shiller National Home Price Index keeps rising rapidly along with The Federal Reserve’s balance sheet.

CAPE Ratio

What will happen if The Fed stops flooding the markets with liquidity? I don’t think they can stop the fire.

Original post from Confounded Interest

Bank Failure Scenario Kit - sm2



  • This field is for validation purposes and should be left unchanged.

All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

Precious Metals and Currency Data Powered by nFusion Solutions