CAPE

honkballs

> lump sum investing is the best option statistically. *A 2017 Journal of Financial Planning study split starting CAPE levels into ranges and found that, for its methodology, when starting CAPE was above 18.6, DCA produced a higher average annual return than lump sum; and when CAPE was above 31, every historical observation in its sample favored DCA.* At the moment Global all-country equities: ~31.7 CAPE

DarkwingDucky44

Ok, here you go. I would have found proper sources, but I'm beyond caring at this point. If you don't understand or can't put 2+2 together, nothing will lay it out for you. Hopefully you can start to piece things together eventually though. >U.S. stock market valuations in 2026 share striking parallels with 1929—including high market concentration and speculative retail participation—but modern economic safeguards make a repeat of the Great Depression unlikely. >Valuation and Speculation 1929: The Shiller CAPE (Cyclically Adjusted Price-to-Earnings) ratio peaked around 32.6 amid extreme leverage, where investors often put down only $1 to borrow $10 to buy stocks.2026: The CAPE ratio has climbed past 41, exceeding 1929 levels and trailing only the 1999–2000 dot-com bubble. Speculation is driven by a massive boom in artificial intelligence (AI) and cryptocurrency, alongside expanded private-market access for retail investors. >Market Concentration 1929: A handful of prominent industrial and trust companies dominated the general market narrative before the collapse. 2026: Market leadership is heavily concentrated, with AI-linked mega-cap stocks making up roughly 40% of the S&P 500 market capitalization. >Safeguards and Infrastructure 1929: The financial system lacked robust regulatory infrastructure. There was no Federal Reserve with modern intervention tools, no Securities and Exchange Commission (SEC), and no federal deposit insurance (FDIC) for bank accounts. 2026: Modern interventions—such as Federal Reserve monetary policies, circuit breakers on exchanges, and federal backing of bank deposits—provide structural buffers that did not exist during the Great Depression. >Debt and Economic Backdrop 1929: High corporate and individual leverage unraveled rapidly when liquidity vanished and the banking sector collapsed. 2026: The economy faces record-high sovereign and corporate debt levels (with national debt exceeding 120% of GDP) and a high Buffett Indicator (total market cap to GDP over 200%). However, unemployment remains relatively stable compared to the 1930s collapse. Now you may have noticed those safeguards to prevent a similar outcome to 1929. However Republicans are regularly interfering with these safeguards and seemingly attempting to dismantle them. Such as the FED. And none of this even begins to touch on things like real wages, a massive drop in first time homebuyers and the fact that the only thing propping up the current employment rate is people having to work 2-3 jobs, just to pay their bills. That is not sustainable in any fashion. But sure. Keep drinking that koolaid and pretending that everything is on the up and up.

VotedOut

You left out the extreme overvaluation metrics: [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg)

Deep_Fennel638

163 CAPE

Deep_Fennel638

The current price includes a massive premium (CAPE = 163) based on an assumption of rapidly accelerating growth. If forward estimates stall, suggesting growth is no longer accelerating, that premium should start to shrink.

itsalwayscalls

Putting my reply under top comment because people need to see it. Margin debt is absolutely in line with the historical % of assets at 1.8% In fact it is well below the 3% of assets of 2007. The Shiller pe ratio or CAPE has continuously proven to be invalid due to record profit growth. The past few months we hit a record profit growth percentage ever. We are growing into the PE ratios and it is coming down.

itsalwayscalls

Margin debt is absolutely in line with the historical % of assets at 1.8% In fact is is well below the 3% of assets in 2007. The Shiller pe ratio or CAPE has continuously proven to be invalid due to record profit growth. The past few months we hit a record profit growth percentage ever. Stop with the FUD.

nlutrhk

Looking at the S&P500 CAPE chart here: https://www.gurufocus.com/economic_indicators/56/sp-500-shiller-cape-ratio - Year 2000 it peaked at 43 before the dotcom crash, ok. - 2007 27 before the great recession, ok. - 1987 18 before black Monday. - 2026 Aug (now): 42  - hasn't been below 20 since end of 2009. It doesn't seem to be much of a predictor in recent history with OP's threshold of 30. 

VotedOut

So you just want to ignore history of how these things always tend to play out, when almost all of the warning signs are there once again? This time is different, eh? SpaceX is trading at 76x price-to-sales. ARM is trading at 50x price-to-sales. RKLB and ASTS aren't mega-caps (they're large caps), but they get shilled on social media, and they're trading at 56x and 215x price-to-sales respectively. Crypto has been proven to be nothing but scams over and over again, but Bitcoin is still supposedly worth $1.5 Trillion market cap according to the market. Buffett is not going all-in from what I'm aware of. And he's 95 years old and not running things himself for much longer. And the Buffett Indicator isn't useless when seen in the context of the other charts I linked. It's at an extreme level even with the Buffett Indicator model in the chart I linked assuming exponential growth of the indicator over time, such that we have a "fair" Buffett Indicator value of 50% in 1960, growing to a "fair" \~135% in 2026 (vs. the overvalued 247% it's at right now). I'm going to link those charts again: [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg) [S&P 500 weighting being taken over by the tech sector](https://finviz.com/map?t=sec) It's wild how almost everyone I show these charts to just brushes them off like they're nothing to be concerned about - when I think they're perhaps the main thing to be concerned about. This isn't some "bears have called 20 of the last 2 recessions" bullshit. Valuations being this high (2 standard deviations over-valued, as they were in the dotcom bubble) have actually been a pretty good indicator preceding market crashes and negative returns for the next 5 years (or 10 years, or 20 years). Combine that with qualitative red flags underneath the surface that show that the increasing [escalation of commitment](https://en.wikipedia.org/wiki/Escalation_of_commitment) on AI CapEx spending far exceeding AI revenues is probably not sustainable and probably not going to end well pretty soon. This is one of the worst times in history to FOMO into the market as an index investor, and one of the best times in history to take some chips off the table. But most people are just like "DURR.. I'm not selling until it has already crashed and proven that things have gone to shit."

VotedOut

"Slow and steady" and "extremely cautious" my ass. The S&P500 going up 15-30% per year isn't slow & steady. Clown tech stocks pumping like 100-1000% per 1-2 years or some mega-caps trading at 50-100x price-to-sales ratio isn't slow and steady. The S&P 500 valuation is at dotcom bubble level metrics right now. Perfect growth with no recession for the next few years is priced in to the market, but earnings growth slowdown or recession/depression is not. Here are the charts again (as of June, but they look the same in August now, if not a bit more inflated): [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg) [S&P 500 weighting being taken over by the tech sector](https://finviz.com/map?t=sec) Supply shortage leading to supply glut is a very common pattern that plays out in history. New technology hype sectors pumping and then crashing is also a very common that plays out in history (railroad bubble, electricity bubble the preceded the Great Depression, dotcom bubble of the late 90s, etc.)

Rav_3d

Sure, that's one statistic that is a bit concerning, but earnings growth has been stellar and if that continues, that number will go down even if stock prices stay the same. Also, CAPE is a terrible market timing technique. I'm far more concerned with treasury yields. If they keep rising, that's what has the biggest potential to kill the bull market. But again, we have no idea when bad things are going to happen, even if we're certain they will. The market could go up another 20%, 50%, 100% before the bust. That's why I take my cues from the market. In every bust, the trend slowed for months before finally flipping down. It's possible we're in one of those periods now, time will tell.

VotedOut

This will probably be my last post. I've explained and made my cases, but you're acting like I haven't when I've practically spelled them out for you. Read my other two posts below that I wrote in addition to this (since I couldn't fit my entire long post in one post, and had to separate it into 3). And if necessary, read my previous posts. Much of what you reply is addressed in my posts. I HAVE made my case of why I think infinite compounding growth is not mathematically sustainable once you get to a certain size, and is usually actually harmful. If you disagree, that's fine. I HAVE made the case for why huge mature market-saturated mega-cap companies should have a moral imperative to pay a dividend instead of attempting toxic "growth" that involves accounting tricks, enshittification, and toxicity. I HAVE made the case that enshittification is not just a meme and is a real thing, multiple times. I know some things have gotten better and not everything has been enshittified, but more and more shit is being enshittified as companies get more desperate to find ways to juice their earnings growth in mature saturated markets. I gave you some examples. If you disagree, that's fine. I HAVE made the case that the system would be better under tempered capitalism than the clown hyper-capitalism USA is currently running. Notice I've been emphasizing a distinction between the two. I don't know much about Japan, but it sounds like they're running their capitalism more tempered and reasonably from what you're saying (although their government has a high level of debt if I'm not mistaken). Maybe they learned their lesson after their 1980s bubble & crash to not be so obsessed with Nikkei line-go-up parabolically every year (or maybe not, I don't know). \----- And again, allow me to redirect your attention back to what I personally think is the most important thing to pay attention to at this moment in time as an investor - the fact that we're in a fucking undeniable tech and finance bubble that almost never ends well. (Copying and pasting the 3rd part of my last post here) Perfect growth with no recession for the next few years is priced in to the market, but earnings growth slowdown or recession/depression is not. Here are the charts again (as of June, but they look the same in August now, if not a bit more inflated): [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg) [S&P 500 weighting being taken over by the tech sector](https://finviz.com/map?t=sec) It's wild how almost everyone I show these charts to just brushes them off like they're nothing to be concerned about - when I think they're perhaps the main thing to be concerned about. This isn't some "bears have called 20 of the last 2 recessions" bullshit. Valuations being this high (2 standard deviations over-valued, as they were in the dotcom bubble) have actually been a pretty good indicator preceding market crashes and negative returns for the next 5 years (or 10 years, or 20 years). Combine that with qualitative red flags underneath the surface that show that the increasing [escalation of commitment](https://en.wikipedia.org/wiki/Escalation_of_commitment) on AI CapEx spending far exceeding AI revenues is probably not sustainable and probably not going to end well pretty soon. This is one of the worst times in history to FOMO into the market as an index investor, and one of the best times in history to take some chips off the table. But most people are just like "DURR.. I'm not selling until it has already crashed and proven that things have gone to shit."

VotedOut

With all that said, I'll redirect your attention back to the start of the conversation that I think is the most important thing to pay attention to at this moment in time as an investor - the fact that we're in a fucking undeniable tech and finance bubble that almost never ends well. Perfect growth with no recession for the next few years is priced in to the market, but earnings growth slowdown or recession/depression is not. Here are the charts again (as of June, but they look the same in August now, if not a bit more inflated): [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg) [S&P 500 weighting being taken over by the tech sector](https://finviz.com/map?t=sec) It's wild how almost everyone I show these charts to just brushes them off like they're nothing to be concerned about - when I think they're perhaps the main thing to be concerned about. This isn't some "bears have called 20 of the last 2 recessions" bullshit. Valuations being this high (2 standard deviations over-valued, as they were in the dotcom bubble) have actually been a pretty good indicator preceding market crashes and negative returns for the next 5 years (or 10 years, or 20 years). Combine that with qualitative red flags underneath the surface that show that the increasing [escalation of commitment](https://en.wikipedia.org/wiki/Escalation_of_commitment) on AI CapEx spending far exceeding AI revenues is probably not sustainable and probably not going to end well pretty soon. This is one of the worst times in history to FOMO into the market as an index investor, and one of the best times in history to take some chips off the table. But most people are just like "DURR.. I'm not selling until it has already crashed and proven that things have gone to shit."

Rethaxion

It’s up to you, but interest rates are high and the Shiller CAPE for US stocks is 42. I’m actually considering adding more short duration govt bonds.

Dani_Bolsa

CAPE being back near 1999 levels is at least a signal that long-run forward returns are usually not great from here, even if it is a blunt tool. I wouldnt use it to time a crash, but I would use it to sanity-check position size and not assume the next 10 years will look like the last 10. That's one reason I like 50K Trade for active stuff - if I'm trading around the edges, the Extra Margin up to 1:200 on real stocks and ETFs matters more than pretending the index is cheap because it keeps going up.

antoine1246

Forward P/E now is 20 versus 24.5 peak in 1999. Shiller CAPE peaked at 44.2 in 1999 versus 41.4 in july 2026. That distinction is interesting, it shows that the assumption is that future earnings will be enormously higher than normalized historical earnings. But the most important thing is the macro environment, back then the macro environment was way more forgiving, 4% gdp growth, core inflation at 1.9%, payroll averaged about 230k new jobs a month and hormuz was open. Unemployment was similar though and the fed was hiking interest rates. The economy was booming back then. Now, we have a stagnating economy where investors are inventing enormous future growth. Thats a big bet.

PraetorianFury

This is likely referring to either the Shiller CAPE ratio or the Buffet indicator. The former averages earnings over 10 years and is distorted by COVID. The latter doesn't take tech giants' non-USD earnings into account. There's a ton of speculation going on but during the dotcom bubble you had people paying millions of dollars for companies with no revenue at all. There is no comparison.

DigitalArbitrage

Can you elaborate on what you mean here? CAPE refers to stocks have a high price relative to those companies' net income. K-shaped economy refers to some consumers doing well financiall while are other consumers are not. Those two things don't seem related.

skilliard7

3% after inflation yield on 30 year TIPS is pretty solid when you consider that the CAPE yield on US equities is like 2.5%.

0DTE_Demon

Ignore Shiller CAPE ratio, believe in unprecedented growth?

bulbwiz

Honestly, the rules-based allocation is fine, but the real question is whether those rules actually add value over a simple 75/25 portfolio you rebalance yourself. CAPE timing sounds smart until you realize it can keep you underweight equities for a decade while the market rips higher. If it were me, I'd just buy the underlying ETFs directly and save the fee drag.

Dani_Bolsa

Yeah, I get why that number makes people uncomfortable. I got burned before trying to treat CAPE like a timing tool, and all it really did was make me second-guess good trades while the market kept grinding higher. What I actually use it for is sizing and expectations, not some magic sell signal. If I want more flexibility when things are stretched, that's part of why I've been using 50K Trade - being able to scale positions without needing a huge account makes it easier to stay tactical instead of just sitting there paralyzed.

Downtown_Metal_7837

No, not one single person here uses CAPE to decide how to invest in stocks other than you.

VotedOut

The index funds setup sucks right now (though it still beats buying clown stocks). Perfect growth with no recession for the next few years s priced into market, earnings growth slowdown is not. [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg) ...And even if you're looking farther than 10 years in the future... climate change and the death of U.S. soft power and (currency reserve status) could possibly be the death of line-go-up infinite compounding growth capitalism as we know it for a while. That all may not come to pass, but the risk of it is definitely being underestimated by the masses who treat buying index funds at any price and retiring rich in 20+ years is a law of nature, when it's actually just a gamble.

Electronic_Sun2127

High CAPE periods can last a long time even while markets keep rising. Would be curious to see how this strategy performed through one of those stretches, since reducing equity exposure could mean missing further upside.

Infamous_Ad8730

CAPE ratio is based on older style economy that was nearly all based on 5-10% margin businesses like car manufacturing, steel and metals, consumer goods, etc. that are the "E" part of CAPE. Todays economy is WAY , way more centered on much higher margin businesses like technology, communications, and information. NVDA's margin is a whopping 75% and MSFT, AAPL, GOOGL and many others are north of 50%. New economy earnings (the "E" again) vs old economy of much lower (WAY lower) margins.

Vivid-Dealer-9088

The standard advice to hold bonds proportional to age (110-age in stocks) made more sense when bonds yielded 5-6% and stocks were at normal valuations. At current CAPE ratios above 40, the math gets messier. Bonds yield decent real returns again post-2022, so the diversification argument is back - but the "sequence of returns risk" framing is probably more useful than rules of thumb. If you're 5 years from retirement and your portfolio drops 40%, can you delay retirement? If yes, you can hold more equities. If no, some fixed income acts as a buffer you can sell instead of stocks at the bottom. The actual question is: what's your ability to absorb bad timing, not what's your age.

alpacaMyToothbrush

Required? No. Advisable? Yeah. CAPE is near all time highs, we're entering into a period with slower growth and higher inflation. That's exactly the sort of Sequence of Returns where safe withdrawal rates are lowest. I recommend you look at [the vpw backtesting spreadsheet](https://www.bogleheads.org/wiki/Variable_percentage_withdrawal) and the mid 1960's stagflation retirement. Or if you want a more recent example, a y2k retiree. Someone retiring in 2000 with a 60/40 portfolio is likely gonna make it 30y, maybe 40.. Someone who was all in stocks is looking much worse. I'm ~ 3y out from retirement. I have a sizable bond tent that I will be unwinding after retirement, but I will probably stay 20-30% bonds. I have definitely missed out on a lot of gains by being conservative over the years, but honestly, I'm crying into my champagne. A good salary and a high savings rate conquers all.

Rdw72777

Exactly. When you look at the CAPE PE of the individual stocks you realize how stupid of a metric it is.

Rdw72777

CAPE is such a terrible metric. It uses 10-year average earnings for Christ’s sake

DuePomegranate

Low CAPE may be a relic of the past, due to accounting changes in the 90s, Quantitative Easing, and mass/automated participation in the stock market especially via index funds.

_176_

> I know the arguments. Margins are higher now, the index looks very different, mega caps actually make a ton of money. So maybe comparing this directly to 1999 isn’t that useful. The main argument is that CAPE uses average earnings over the last 10 years and earnings have grown like 30% YoY for the last decade so CAPE is expected to make no sense. Anyone pushing CAPE is trying to sell you something.

_176_

They're telling you they didn't know the CAPE uses the average earnings of the last 10 years as the denominator and earnings have been growing at an unprecedented rate for the last 10 years so CAPE is basically garbage.

Singularity-42

I never understood the point of CAPE. I mean what is the CAPE for Nvidia? I get it that it is dangerous for the market as a whole, but if we are in a K-shaped economy wouldn't high CAPE be a symptom of that too?

Best-Development-739

CAPE is not an absolute truth. The ratio is comparing earnings of today with earnings over the last 10 years. The composition of the market has changed a lot in those 10 years - much more weight in growth. Earnings growth running at 20% or so now… warrants a higher multiple.

sleezly

Not necessarily true. It depends on the CAPE ratio. When CAPE is low, 100% equities at all times is the optimal approach. https://earlyretirementnow.com/2017/09/20/the-ultimate-guide-to-safe-withdrawal-rates-part-20-more-thoughts-on-equity-glidepaths/comment-page-1/

malignantz

Everyone panicking needs to read this analysis from Karsten Jeske, Ph.D, CFA: [Building a Better CAPE Ratio - Early Retirement Now](https://earlyretirementnow.com/2022/10/05/building-a-better-cape-ratio/) >CAPE has been elevated for such a long time, people wonder if this measure is still relevant. In the comments section, people ask me all the time what kind of adjustments I would perform to “fix” the CAPE. Can we make the Shiller CAPE more comparable over time, to account for different corporate tax environments and stock buybacks and/or dividend payout ratios over the decades? Yes, I will present my ideas here today... So, what do I find? The adjustments certainly lower the CAPE, but don’t get your hopes too high. Even after the adjustments, the CAPE is still a bit elevated today! Let’s take a look at the details…

C0II1n

CAPE during dot com was 44x, and is 42x right now. Historical avg around 17x. So your own logic is against you on that front

Rav_3d

CAPE is noise. Everything but price is noise. It's a bull market.

Think_Reporter_8179

The CAPE has had an upward trend. So CAPE 42 in 1999 was worse than CAPE 42 today. What you need to do is perform a Residual calculation on the CAPE and it's pretty eye opening. The Residual is the deviation from the trend. Essentially if that deviation hits 15, there is typically a downturn within 3-6 months after. https://www.reddit.com/u/Think_Reporter_8179/s/HA8ogkRElp

Far_wide

CAPE has a decent historical correlation to forward returns, that's borne out by the stats. You can say 'this time is different' if you like, but that is what you're doing.

Far_wide

People are talking a lot of crap here. CAPE statistically does have a moderate correlation with forward returns. It cannot predict a crash, but it's absolutely a useful indicator.

Freed4ever

Like most things in finance, CAPE was overfit. It does indicate stressed values, but that is not sufficient for a crash.

iforgotitagin

I think CAPE matters. Unfortunately, it is only easily available for the S&P 500 and slightly less available for major international markets. Because of CAPE I currently have my entire equity portfolio invested in non-S&P 500 US equities and non-US equities. It is tougher to calculate but outside the S&P 500 CAPE ratios are much closer to normal.

AccelerationFinish

> Not saying that means a crash. CAPE has been pretty awful for calling tops and people have been saying stocks are too expensive for years. Then why tf are you posting this

MaybeTheDoctor

I’m confuse, when I look a CAPE I see “33”. Is this a different Cape?

zxc123zxc123

CAPE might not have been accurately reflected into stock market CAPE ratio due to the GFC being a housing bubble with real estate leveraging issue that spilled over to the financials which then made it a systemic issue. Financials were overvalued, but their P/Es weren't off the fucking charts crazy either. That's because the leverage was hidden and fees charged where a fraction of the much larger total RE/financing pie. Not saying that looks coast clear either since PC & PE firms could technically be doing the same shit while sovereigns/munis/local/individual/sbiz are all loaded up on debt too. We're seeing leveraging in AI, leveraging in ETFs or with margin in brokerages, etc. But I'll just add that crypto is blowing up, PMs have been deflating, and there are segments of the market where valuations aren't high either. If anything we look less crazy than mid-to-late 2025.

Noveltyrobot

I can feasibly imagine a scenario where capex spend ramps down, all that cash flow is turned into earnings, and then the CAPE comes down simply because of more earnings with not a lot of meaningful change in price. What say the CAPE warriors then?

anon-187101

it's funny, I just read another comment of yours on a 5 month-old thread on the "flyagonal", when you mention your skepticism of market performance over the next decade my first thought was of the current CAPE

uncleBu

CAPE does not take into account that there are two private companies that are wildly unprofitable that would be in the top 20 of the SP500 based on market cap if they were public. Back in the 90s that wasn’t the case. Back of the envelope that would put the CAPE close to 50. The current market is by far the most extended we have ever experienced in history. If there was ever a time to think about value investing it is now.

GAV17

I think CAPE is a decent measure but for markets that don't change much over time like many developed and emerging markets. EPS growth adjusted for inflation was much higher in the last 10 years than it was in the 90s. Having the same CAPE with a much higher EPS growth, means today valuations are much more attractive. The US market has been to dynamic in this century IMO for CAPE to be relevant. CAPE is also a better measure for cyclical countries where earnings tend to be all over the place over time. Or it's a good metric during crashes to compare vs other down periods.

option-trader

A clock is right twice a day. That's how you should view CAPE.

ImAPonderer2

Japan’s CAPE got > 60 in the late 90s. Maybe we’ll go higher.

Mysterious-Nature538

***I mostly look at NYC Cab driver index, not the CAPE index.***

Both_Yoghurt1437

The only thing I know about CAPE is that the higher the CAPE, the more chance of tornados. Probably not the same CAPE lol.

flannel_jackson

No. Would never even consider using CAPE to make any kind of investment decision whatsoever.

cyphr0n

Here’s the thing. The CAPE is a 10 year inflation adjusted average. A fast growing company that starts year 1 at 300 PE but grows at 30%, on the 10th year it’s P/E is 21. Yet, on average the P/E is 54. The CAPE predicts that it’s overvalued on average, but 20 P/E at in year 10 is not. That’s the problem with using the CAPE on hyper growth companies.

DarkUnable4375

An outsized amount of earnings are coming from GOOG, AAPL, MSFT, NVDA, etc. These guys could single handedly distort CAPE ratio, if it depends on earnings from the previous 10 yrs.

RetiredEarly2018

Has the CAPE valuation been adjusted for the changes in accounting practice since 1999?

Etherius

The problem I have is that during the 2008 Great Recession, CAPE was at or below historic norms.

yatv

Average market PE and CAPE ratios are not higher than the dot com bubble levels.

aka0007

It actually is different this time, and here's why. The Shiller CAPE divides price by 10 years of trailing earnings. Margins have structurally doubled, because software ate the index. That makes the denominator stale and the ratio inflated. Margin-adjust it and today's 41.5 CAPE becomes \~33.5. Above the modern median of 27, yes. Dot-com was 44. We're not there. Broken ruler says stocks are tall. Maybe get a new ruler.

financiallythriving

The Shiller CAPE Ratio sits at approximately 42.03 for the S&P 500, a level last seen during the dot com bubble but this time it’s different so it doesn’t matter

Perspective-Parking

This is 100% going to happen again. Anyone taking massive losses can only blame themself for not being positioned. It’s the most obvious it’s ever been. South Korea was a teaser of what’s coming. \-US Margin Debt at ATH. The US is far more levered than Korea, look at Leopolds fund. \-Trifecta of Bubbles in Credit, Equity and Housing \-Fed has pumped record money into the system to inflate asset bubbles \-AI is showing little to no payback on expected trillions in capex \-We are running out of money for capex so now record corporate bond debt bubble with rising bond rates from vigilantes \-market Schiller PE and CAPE Ratios are higher than the dot com bubble levels \-market cap to GDP is 230%. This is 130% higher than average and higher than it was during the dot com bubble I could go on and on. This is NOT a healthy market.

eptesicusfuscus

Hmm, I'd go a little further and say that there may be reasons why CAPE should be expected to be relatively high, though I do think it appears excessively high, too. I don't have the time to explain it well, right now, but roughly I think there's more money in the market and some of it looks like risky speculation and overvaluation and some of it looks like "we aren't in the past, anymore" so the structure of the market has changed

Camqt

Valuations are definitely high, but earnings are solid. CAPE has been crying bubble for years, yet the market keeps climbing. Maybe it's just AI productivity gains. Still, I wouldn't go all in.

YukiBridge

Are we still talking about CAPE ratios? Good grief…

eptesicusfuscus

Why is CAPE important to you? Why shouldn't it be high?

Potential_Salt_5780

Are we still talking about CAPE ratios? Good grief…

zoomin1098

if ur asking abt value and have never heard of the Buffett indicator or Shiller CAPE, ur in the rt place.

thewimsey

> Shiller CAPE, Shiller CAPE showed that US equities were massively overvalued in 2013 as well. It has *never* been used to successfully predict what the market would do in the future, and people should stop pretending that anything can predict the future.

httk13

People in the investing space like Ben Felix have been referencing CAPE for why the S&P would underperform before COVID. Imagine how much money someone would have lost out on listening to that nonsense instead of just DCAing into the market. To give you an idea, SPY is up 285% from COVID lows with dividends reinvested. So... yeah. Good luck with your silly indicators.

dekusyrup

This is why CAPE became a thing.

VerdantPathfinder

Shiller CAPE, Buffet indicator, a couple other measures

MindMonitor

For context, here are some 2025 numbers. **Amazon 2025 Quarterly Operating Cash Flow** **Q1 2025:** $32.52 billion **Q2 2025:** $35.53 billion **Q3 2025:** $54.46 billion **Q4 2025:** $26.03 billion (Gemini referring to AWS financial reports in 2025) You have to add substantial infrastructure AI/Data center investments, impacting cash flow in 2025 (and 2026). Also note numbers are aggregated across branches, while tarrifs only impacted certain parts of AWS. So is 600 million a lot? I was curious and got to above. I’m not sure if it’s even meaningful to assess. I think the point about funelling money from citizens to companies seems too brittle - so many things has and could have gone wrong if this was a deliberate move from the Trump administration, and I honestly can’t give them credit to think up any such plan in the first place. 600 million in AWS context seems like a blip and a footnote in a quarterly report, no? Did you know that in other countries, goverment bodies are communicating that companies must keep track of tarrif expenses, because they will be eligible for compensation. If you want to look it up check out the CAPE portal. I don’t think it’s entirely clear for average US citizens how big of mistake this was.

Neither-Deal7481

SPY's Shiller P/E (CAPE) ratio is close to dotcom's level which was 44. Also, it's 50% concentrated in tech betting on AI. You got any other counter arguments that are verifiably wrong?

External_Anteater730

From Palazzo's paper (from the Fed): [https://papers.ssrn.com/sol3/papers.cfm?abstract\_id=6900766](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6900766) Basically a revised CAPE ratio that takes into account Clinton's accounting shenanigans in the 1990s that obscures R&D spend and special items, messing traditional CAPE and making it seem unreliable relative to recent boom/bust cycles. Not surprised if the Fed uses this to track market health now

External_Anteater730

Yep, look at CAPE-H for buy in

Zealousideal_Owl2388

I think he means sure it goes down 5 or 10% every now and then but remains at CAPE 38+ for half a decade now when we used to consider CAPE 25 expensive

skilliard7

Your advice is outdated from when the 10 year yielded less than 4%, inflation was 8+%, and the SP500 CAPE ratio was sub 30. Right now 30 year bonds yield over 5.2%. and inflation protected bonds yield over 3%. At current interest rates, a 30 year TIPS will double in value over 30 years after adjusting for inflation. So the idea that it's a "massive inflation drag" is downright false. The equity risk premium has not been this small since 1999.

Ticksdonthavelymph

Yes it is. CAPE was over 40 for last two months. This is result

Bernden

Do some research on CAPE ratio.

Deep_Fennel638

Shiller CAPE: https://finance.yahoo.com/markets/stocks/articles/stock-market-sounds-alarm-triggered-093200244.html

ivolution

Just because Buffett was a great investor doesn't mean the Buffett Indicator is a great valuation metric. A lot of the earnings are now generated globally especially for the so called "AI bubble companies" and they have very weak correlation with the US GDP. So 2.4 std sound scarier than it is. There are other metrics like the Shiller's CAPE which look at earnings and also scream overvalued, but as with Buffett's indicator, there is some inflation of the indicator itself, especially taking into an account the funny interest rates and monetary supply we had in the past decade. Regardless of their individual quality using a multitude of metrics can gives us a better picture, for example [isthestockmarketovervalued.com](http://isthestockmarketovervalued.com) 5 of 8 indicators scream OVERVALUED. And it concerns me too. Nevertheless I am staying invested, but I am lowering my return expectations and paying more attention to diversification and risk management.

External_Anteater730

Thanks for your thanks! Many Fed papers never get read; helps to stay informed by reading them as it insinuates how they'll create policies. Judging from CAPE-H it lends even more reason for them to hike rates.

External_Anteater730

We think modern tech industries are structured too differently towards hyper growth and that CAPE is no longer adequate to capture it, but when you recalculate CAPE by treating R&D as a long term investment instead of a one off expense, and removes "special items" (which corps can use to boost earnings more easily), H-CAPE indicates we're in the middle of a cycle that is expecting drawdowns! https://larryswedroe dot substack dot com/p/the-cape-that-cried-wolf-has-the (Not affiliated in any way with Larry, just posting in case you don't want to read the 59 page Fed paper) As for the Fed Reserve Board Palazzo's paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6900766 I blame Clinton for the obfuscation of accurate data that caused CAPE to be dismissed all these years. As for how it directly applies to the AI industry- CAPE and CAPE-H align with stock concentration risks, circular investments, and misallocated funding for non-profit-making products. You can project the curve on top of the velocity by which PEs/VCs were throwing money hand over fist to fund datacenters. Now, as PE is blowing up due to subprime loans being, shocker, subprime and these borrowers default, the velocity slows and less of these funds are inclined to lend. I would not be surprised if Meta's Hyperion would be rented out to Anthropic/OAI, nor if Oracle defaults over their OAI deal, and if both events coincide with a similar CAPE-H drawdown

Agitated_Reason4504

At 42 shiller CAPE you can have it. Either earnings explode exponentially or there is a considerable amount of pain ahead (historically speaking)

Novel_Board_6813

A Treasury yield is a contractual nominal yield if held to maturity. An equity earnings yield is only current earnings divided by price. Equity owners also receive future growth, reinvestment, buybacks and changes in valuation. That part is just wrong and made me question this Jamaal Ghauri guy Dude apparently has no track record, besides marketing. Blew up once (if you go to zero you’re out). Now has a new fund, from 2025 (statistically useless track record) Valuations suck for timing. CAPE, possibly the most reliable one, is very unreliable statistically, less useful than costs or volatility drag, to name a few “10 year… mediocre results”… These valuations happened a couple times, depending how you count it. It’s like saying “It rained in the two times I forgot to carry an umbrella… maybe I’m Thor” A scientist would say n=1 And US has high PEs. Lots of intl markets are not that high. So it barely makes sense either way. Europe isn’t even expensive by that metric Long term, cash and bonds (the advice OP received) lose to inflation a lot of the time. 37% for bills and 27% for bonds in 30 yrs, according to Anarkulova et al data, with 2650 country years or so… Anything might happen. Historically, logically and statistically, the guru us giving bad advice. He might get lucky though

cyphr0n

You can use many other measurements and it will say the same. CAPE says it’s overvalued right now and it’s not. The crash will be due to a catalyst such as overbuilding of AI and the unwinding of it not because of the current CAPE ratio.

zoomin1098

Buffett indicator and Shiller CAPE ratio. That is all you need to know.

Practical_Estate_325

Just makes you an imbecile compared to me. Yup, I was the owner of the SOXX. Actually, I got out at 617 over a month ago. Once again, the point is that even imbeciles (like you) can make money in the melt up, just as a monkey throwing darts at a board can rack up some points. I am eager to feel the vibes coming thru the airwaves as your palpable screams reverberate in realization that Shiller CAPE has cut all your profits down to squat, as is the forward-looking fate of your lot. (Also, lose the "internet tough guy" commentary. The more you use it, the more you just confirm the imbecile narrative).

Practical_Estate_325

You're bragging about only a 75% YTD in this current overextended market? Thanks at least for being honest. Even an imbecile would have known enough at the beginning of the year to just park their money in SOXX (up 90%+ on the year), so looks like I was insulting imbeciles by calling you one. But the bigger point is what Shiller CAPE says about the future, and not the past. As such, happy landings in advance!

Practical_Estate_325

Lol, this doesn't make the Shiller CAPE irrelevant. The Shiller CAPE isn’t a tech stock predictor; it’s a financial gravity check. Tech bros love to claim "this time is different" until a bubble bursts and they realize paying a 100x multiple meant 40 years of hyper-growth was already priced in. Smoothing out ten years of earnings isn't an outdated relic. It’s the only thing that keeps investors from buying the absolute top of a hype cycle.

terminalguy007

That "great company = great investment" is the same thing. For years I filtered for quality — high ROIC, wide moats, durable earnings growth — then paid whatever multiple the market demanded because the business was genuinely exceptional. The returns were mediocre. I was confusing business quality with investment quality. Fama-French data going back to the 1920s consistently shows that the cheapest quintile by P/B outperforms the most expensive by 3-4% annualized over full cycles. Even Buffett's early returns came almost entirely from buying deeply discounted net-nets and cigar butts, not quality compounders. Quality at a full price is just a slow bleed. The second flip was on market timing. I spent years running a cash buffer — raising it when Shiller CAPE went above 30, deploying when it dropped back. DALBAR's annual quantitative analysis of investor behavior shows the average equity fund investor underperforms the S&P by around 3-4% annually, almost entirely from timing decisions: selling into fear, buying into momentum. I was doing exactly that with a spreadsheet and calling it discipline. Now I run a rules-based process: position size by margin of safety, rebalance on a fixed schedule, stay fully deployed. Process over prediction every time.

entitie

>Schiller himself has stated his metric is basically worthless. He's said "As I said, CAPE is useful, but it does not provide a clear guide to the future." \[[Source](https://finance.yahoo.com/news/robert-shiller-interprets-what-the-cape-ratio-says-about-the-market-today-102737135.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAH1s6uq5rB-tQ7l9unwR7AJ-MPm6k_HUcOJnLkqt672yEGGMPrbaXj5fAffquVV2RIarF5it3oXW9TQj-Co8uHMlQ7SIMoLBtAn9sWjjzUT8BbQTueZUycMM5V2rYrywEQfywzOYxI8FfFMUBKrmceOwgtCctaSZU_nQtEXEl3qR)\] >There’s no such thing as “historically low” rates. The friction rates create is 100% dependent on the environment they exist in. If we look at a time series of market and Fed interest rates over time, we can objectively point at times when rates are either low or high compared to the long-run average. If you claim the friction is 100% dependent on the environment they exist in -- a very strong claim -- I welcome a source. >Earnings are are at all time highs That's as much an indication of high inflation as it is an indication of economic strength. >Forward PE is lower today than all 2025 Which shows nothing except perhaps the reversion I've been talking about.

VotedOut

95-99% of the comments in this thread is the same dumbass excuses being used to try to justify that a dumbass bubble is sure to just keep on chugging along for years. >"It can't crash anymore cuz Fed print money, inflation, and dollar devaluation." Yes it can crash when it has already far exceeded the amount of money printing, inflation, and dollar devaluation. Do the fucking math or look at the goddamn ratio charts. [Inflation Adjusted S&P 500](https://www.multpl.com/inflation-adjusted-s-p-500) [US - Total Market Cap Divided by M2 Money Supply](https://en.macromicro.me/collections/34/us-stock-relative/24033/wilshire5000-to-us-m2) Also, multiple S&P 500 valuation charts (almost every one of them) are at or exceeding dotcom bubble levels right now: [CAPE Ratio](https://imgur.com/a/Xvsaos3), [Buffett Indicator](https://i.imgur.com/fN3g97M.jpeg), [Mean Reversion model](https://imgur.com/a/58OwAKs), [Interest Rate model](https://imgur.com/a/iT66lyc), and the [Aggregate Market Value Index Score](https://i.imgur.com/adh7AgO.jpeg) >"It can't crash anymore cuz the rich need to put their money somewhere." Kind of like they "needed" to put their money somewhere in 1929 and 2000? First, the S&P 500, AI stocks, and space stocks aren't the only places to put money. And even if they were, that doesn't stop crashes from happening. Second, just because good buying opportunities may be mostly dried up at the moment, doesn't mean you have to FOMO into over-priced shit. Sometimes the best thing to do is WAIT for a fair price, or even a premium price... but don't pay clown prices. >"But look at the profits of semi-conductors like NVDA and MU, they've exploded! And their P/E ratios still look reasonable now. It's justified. Fair enough on that one. And that's all fine and dandy if you don't look bother to look underneath the surface. But if you DO bother to look underneath the surface, you'll see that (1) This sector is cyclical. (2) It's not sustainable when the money being spent on this shit far exceeds the profits that can and will be made anytime soon in the near future (as evidenced by OpenAI and Anthropic's money burning businesses). This has been covered by others and explained in detail a number of times by other people with working brains, so I won't belabor the point. >\[Insert one-liner low IQ bullshit here\] Further proof that the market is in a bubble when it's mostly brain-dead spam comments like that. Like really... there's no excuse anymore to be posting so much dumbass intellectually lazy trite human slop when you could be posting AI slop instead that at least shows 10x more thought. Right now, the voting machine is winning out against the weighing machine - but that probably won't last. In late stage bubbles (like we're in now), lazy thinking beats out critical thinking - but that won't probably last either.

zoomin1098

Buffett indicator and Shiller CAPE ratio. Compare em to other cool times just for fun.

big_deal

If you examine past stock market data, long term returns (~7-12 year period) are highly correlated with valuation metrics (P/E, CAPE, P/B, P/S) with an Rsq between 0.77 and 0.92. But error in annual return over 10 year period can range from -5% to +9%. Think about that carefully - there's a huge difference between experiencing -5% every year for 10 years and being down 40% overall, and experiencing +9% over 10 years and being up 137%. For the most recent 10 year period, the starting valuation of the SP500 indicated an expected return of around 6.5% per year, but the actual realized return has been 15% per year. So we've averaged 8.5% a year more return than predicted by starting valuation! The result is that valuation levels are even higher now and forward expected returns are even lower, -2.5% a year. However, even though valuation is correlated with forward returns the error range compounded over such a long time period means that it is a terrible market timing indicator. I would urge you to consider valuation as a crude guide to set your expectations, but avoid using it to naively adjust portfolio allocation.

Plenty_Fondant_951

Shiller CAPE ratio higher than it was before the great depression? Meh, that shit only matters for nerds. This market is and will continue to chug along on snorted faery dust

reupped

The current CAPE (p/e conventional measure of market priciness) can be misleading because the top 10 stocks dominate it more than any previous period, while the median stock's PE is much more reasonable.