EconoMonitor

Finance Lunchbox

There’s a Cat, a Killer, and There’s Shiller

Crouched behind the magnolia bush, I can hear rustling inside shrubs ten feet away. The night is quiet…deeply still. As quick as I can swallow there is a sudden, two-second onslaught of screeches and scratches to my back and shoulder before I throw the howling cat to the ground…in hackneyed suspense, my heart finally settles, though only for a moment… my pupils dilate as wide, calloused fingers advance around my neck.

So let’s talk about the Shiller CAPE. It’s high, very high. It suggests forward looking stock returns are going to be low, very low. Robert Schiller, in a recent interview, made it clear the measure is not intended as a market timing mechanism.

For those watching the CAPE advance along with the total market cap to GDP, some, presuming the killer is in the bushes, will dart for full-on safety, only to find it’s the cat.  Cautious observance coupled a comfortable and limited exit from stocks is better considered.

May I also recommend a warm brandy in your left hand as you fervently postulate your CAPE approach to others, if you are of drinking age, of course.

 

 

 

 

 

The opinions voiced in this material are for general information purposes only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial adviser prior to investing. Securities and advisory services offered through LPL Financial, a registered Investment Adviser. Member FINRA / SIPC

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