Friday, December 9, 2016

Shiller PE Danger Zone

Out along the edges
Always where I burn to be
The further on the edge
The hotter the intensity
--Kenny Loggins

The 'Shiller PE,' named after Yale economist Robert Shiller of Irrational Exuberance fame, is a ten year moving average of stock price to earnings. It is also referred to as CAPE--cyclically adjusted price to earnings.

CAPE is currently north of 27, a level historically associated with excessive valuation and epic market tops.

Doesn't mean they can't run higher...see the era. Does mean that we're treading in the Danger Zone.

position in SPX

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