CAPE

beerion

Yeah, absolutely. I'll note three things. 1. Consider 1996. That wouldn't be considered a lost decade by this measure because stocks were outpacing bonds by 2006 - even though that was straddled by massive underperformance on either side. The question is do we want to define a 1996 starting period as a lost decade? If so, the "rolling window" methodolgy is useful, which is Figure 3. If we do that, stocks fail to beat bonds 30+% of the time on a look-ahead basis. 2. My goal is to eventually see if we can use valuation levels to forecast periods of underperformance. For instance, if CAPE above 30 leads to a rolling window lost decade 50% of the time, that could be very useful. 3. Magnitude of relative performance matters as well. I've actually already put together a [study that forecasts the expected excess returns for stocks vs bonds](https://www.reddit.com/r/SecurityAnalysis/comments/1t40qad/estimating_the_equity_risk_premium/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button) (or implied equity risk premium).

Delicious-Plastic-44

Yup, you definitely missed the rocket. But at least you have a seat on one of the highest US-CAPE ever. That should be comfy

dekusyrup

Pretty easy to break it down. Inflation and dollar devaluation are the same thing. Growth due to speculation can be measured in P/E ratios, which shows CAPE is up about 20% in the past year. GDP growth is about 2.1% over the last year. So the SP500 is up about 28% the last 12 months, 20% is speculation, 4% is inflation/dollar devaluation, 2% is real economic growth. 1.2 x 1.04 * 1.02 = the full 27.3% of the sp500 growth.

FoodCooker62

"bond yields are skyrocketing!" "30 year highest since 2007!"  Nasdaq 2% from all time highs, up more than 25% in less than 2 months. CAPE ratio at near-2000 levels Meme mania market 🤔

SxeySteve

CAPE is near the dot com peak. ~42 today vs. ~44 Dec 1999

arkansaslax

He’s referring to cyclically adjusted PE (CAPE) which was 44 in November 1999 and is almost 42 right now. Higher than it has ever been in the intervening time.

Adventurous_Initial6

A few points: 1. Stocks get their value from the profits the underlying company makes. You can think of it as, if that company doubles in profits, they’re able to pay out twice as many dividends, and as such, its stock should be worth double what it was before. 2. The part talked about less: When the market cap of a company goes up (e.g you see headlines like 10 billion added to NVDA market cap), that’s not a REAL 10 billion dollars created. That’s a calculation of stock price * outstanding shares. And the stock price is essentially the last traded price of the most recent share. What this means is that if there’s a stock (think GameStop in 2021) where the buyers vastly outnumber the sellers in a short timespan, the last traded price will go up significantly and everyone will be green on paper, but when people try to exit, the price suddenly falls back down as quickly as it went up - meaning the “market cap” that you saw at the peak would have been a meaningless number because not everyone is able to get out at that price. Putting these two points together, my conclusion is, not investing in the long term is definitely a mistake because companies tend to grow, and that underlying growth serves as the fundamentals underpinning the stock price. HOWEVER (and this is my own personal opinion), the vast majority of investors today have kind of dismissed the possibility of the market crashing violently (which it’s done many times in the last). This leads to the frenzy type buying that you’ve seen in the last month and a half. It pushes the market cap up, but whether that growth is tied to fundamentals (point 1) or market euphoria (point 2) still remains to be seen. Anyway, nobody can make the decision on when/what to invest in but you. On the one hand, missing out long term is a mistake. On the other hand, many macro valuation indicators (think CAPE ratio) are at/near all time highs, and there’s certainly a risk of a large crash.

lookachoo

Woah, chill dude. I’m not saying sell. I’m saying the story was different 6 years ago so of course people would tell you differently then. And yeah they were wrong. But in reality right now nobody knows where this is going to go, a lot of Data centers are up in the air and we don’t know if they’re actually going to get built or not. For example if you do a DCF analysis on MU the base case value is at $450 where the Bull case is at $7000. It shouldn’t be a surprise that people are hesitant at these values. Lots of people are also hesitant on AI in general. The data centers are also a logistical nightmare to get established and the public hates them. We’re kind of on a teeter totter at the moment. The market as a whole is also extremely high. [CAPE or Shiller’s PE ratio is sitting at 42.18.](https://www.multpl.com/shiller-pe) Just 2 points under the all time high of during the dotcom boom. So just another reason people are hesitant. Everyone heard the same shit then and look what happened. Could it go even higher? We simply don’t know. Is it worth the risk? Depends on what your budget is. Nobody knows where it’s going to go, nobody should be bullied into buying into the FOMO. There’s also a billion other stocks out there to buy that are not at insane unaffordable levels that are ignored and undervalued so who cares if people sell their chip stocks high for a nice profit? Just hold and shut the fuck up

skilliard7

SP500 historical 10 year returns when CAPE >30 is less than 2%.

VotedOut

All you "V" guys are really eager to be bubble exit liquidity aren't ya? Bond yields are ripping higher. And the market is at or above dotcom bubble levels on every valuation metric (CAPE Ratio, Buffett Indicator, Mean Reversion, Market vs. Interest Rates). This is like the worst time in history to buy the "dip".

Aware_Secret_8910

Isn't CAPE above 40 at the same time?

milkplantation

I think this market is completely disconnected from reality and that the concentration risk is very worrisome. Historically, when the CAPE crosses 35, future 10 year annualized real returns hover around zero or trend negative. This market rally is built on thin volume and the smart money seems to be sitting it out. There are so many reasons to be pessimistic. BUT...I think we still have a lot more room to run. The AI trade really won't come under pressure until 2028. The president of the US recognizes this market and the AI trade is his golden goose. There is a lot of money in the system from COVID. I think we'll see a minor correction before the mid terms and then this thing will keep on chugging.

uncsucks

The signs of weakness are flashing red: hot CPI/PPI, oil shock, rising bond rates, consumer sentiment in the toilet, elevated Schiller CAPE, you name it. Only a matter of time

SmackEh

All of them. By several major valuation and momentum measures, the stock market is currently overbought. - Shiller CAPE - Buffett Indicator - Forward P/E (especially mega-cap tech) - etc. But this isn't a popular opinion... Continue to blindly invest.. DCA... bla bla bla

DSCN__034

Got it, thanks. But then it begs the next questions: if not stocks, then where should one allocate capital in a time of expanded Shiller CAPE: the US dollar, Treasuries, gold? For that matter, Are all stocks sectors the same in valuation? And what does history show about Shiller CAPE being used to time the market? I remember this same discussion when the Shiller CAPE was 30 an 35 and 38, yet the stock market is higher. Is there some structural reason why the Shiller CAPE may not be applicable today as when it was devised by Shiller (i.e., more intellectual versus industrial heft in the stock indices, rising profit margins, etc)? I honestly don't know the answers.

DSCN__034

Why would you use the Schiller CAPE and not the nominal PE to figure earnings yield? Just asking.

VotedOut

These same comments again? Time to repost what I posted in the other thread [here](https://www.reddit.com/r/wallstreetbets/comments/1tbjof2/comment/olhhrqm/?context=3): I imagine most of the comments here are going to age horribly. Michael Burry is absolutely right about this, and everyone is just burying their heads in the sand. First of all, there's some bad historical revisionism about Michael Burry here... 1. The 2023 "Sell" Tweet - In March 2023, he backed off his "Sell" tweet from January 2023. As he explains it [HERE](https://x.com/michaeljburry/status/1996768481002639515): >Jan 31, 2023 - I tweet “Sell” Banking crisis ensues and banks fail. There is panic and stocks fall. Mar 13, 2023 - I tweet “This crisis could resolve very quickly. I am not seeing true danger here.” March 30, 2023 - I tweet “I was wrong to say sell.” 2. "Michael Burry is a One-Hit Wonder" - No he's not. There's many other things that Burry got right, some of which (but not all of which) got mentioned in a Reddit comment [HERE](https://www.reddit.com/r/Burryology/comments/1pekast/burry_explaining_the_sell_tweet/). Second of all, the overall S&P 500 is at dotcom bubble level valuations by many objective metrics (charts can be seen [HERE](https://www.currentmarketvaluation.com/)): 1. [CAPE Ratio (Shiller PE Ratio) is at 42x](https://www.multpl.com/shiller-pe) \- 2.3 standard deviations above historical average. 2. Buffett Indicator is 2.5 standard deviations above historical trendline. 3. S&P 500 Mean Reversion is 2.47 standard deviations about historical trendline. 4. S&P 500 valuation relative to interest rates just recently hit 2 standard deviations above historical average. 5. Price-to-sales ratio is 3.2 standard deviations above historical average. These conditions don't occur often, and were present in 2000, and also mostly in 1929 and 2021. Bear markets followed each time. Make all your jokes about "Bears/doomers have called the last 20 of 2 recessions" or whatever, but this combination of valuation metrics is 3 for 3 in "calling" a bear market so far.

lookachoo

Market won’t feel the effect for months or even a year from now. [CAPE is near all time highs though.](https://www.multpl.com/shiller-pe) I see the market making new highs before dropping.

VotedOut

Saving this thread for a year or two later... or maybe even just a month or two later. I imagine most of the comments here are going to age horribly. Michael Burry is absolutely right about this, and everyone is just burying their heads in the sand. First of all, there's some bad historical revisionism about Michael Burry here... 1. The 2023 "Sell" Tweet - In March 2023, he backed off his "Sell" tweet from January 2023. As he explains it [HERE](https://x.com/michaeljburry/status/1996768481002639515): >Jan 31, 2023 - I tweet “Sell” Banking crisis ensues and banks fail. There is panic and stocks fall. Mar 13, 2023 - I tweet “This crisis could resolve very quickly. I am not seeing true danger here.” March 30, 2023 - I tweet “I was wrong to say sell.” 2. "Michael Burry is a One-Hit Wonder" - No he's not. There's many other things that Burry got right, some of which (but not all of which) got mentioned in a Reddit comment [HERE](https://www.reddit.com/r/Burryology/comments/1pekast/burry_explaining_the_sell_tweet/). Second of all, the overall S&P 500 is at dotcom bubble level valuations by many objective metrics (charts can be seen [HERE](https://www.currentmarketvaluation.com/)): 1. [CAPE Ratio (Shiller PE Ratio) is at 42x](https://www.multpl.com/shiller-pe) \- 2.3 standard deviations above historical average. 2. Buffett Indicator is 2.5 standard deviations above historical trendline. 3. S&P 500 Mean Reversion is 2.47 standard deviations about historical trendline. 4. S&P 500 valuation relative to interest rates just recently hit 2 standard deviations above historical average. 5. Price-to-sales ratio is 3.2 standard deviations above historical average. These conditions don't occur often, and were were present in 2000, and also mostly in 1929 and 2021. Bear markets followed each time. Make all your jokes about "Bears/doomers have called the last 20 of 2 recessions" or whatever), but this combination of valuation metrics is 3 for 3 in "calling" a bear market so far.

VotedOut

Bond yields breaking out... No more rate cuts... Inflation breaking out.. Blow-off top looking chart... CAPE ratio over 2 standard deviations overvalued (dot-com bubble levels) Buffett Indicator over 2 standard deviations overvalued (dot-com bubble levels) Mean Reversion over 2 standard deviations overvalued (dot-com bubble levels) And now Interest Rate Model touching 2 standard deviations overvalued too (dot-com bubble levels) ... And meanwhile, everyone here is like... "We V now!"

BiblicalElder

My 4x is admittedly conservative. But one thing we can underestimate is survivorship bias, that is, all the startups that didn't finish, or got acquired. Also, we may be in some kind of bubble. S&P 500 CAPE Shiller PE\* is hot right now: 42 (all time high of 44 back in Nov-Dec 1999). If you used 6x sales, that would be $15 trillion, still in my $2-20 trillion range. 8x would be the top of the range. I tend to use 1 significant digit for estimates. I think it's silly to sweat between 13.2 and 14.8, just '10' (or '9', or '20'). \*PE ratio on avg inflation adjusted earnings of the past 10 years

Delicious_Put_5857

lowest ERP and highest CAPE since 2000, make sure to buy the dip with everyone else who doesnt know what these things mean!

RetiredEarly2018

If one accepts that the market is mostly rational over the long term, one's long term returns from a portfolio depend on how much risk one is willing to take in the shorter term. As a result, the more you try to diversify away risk, the lower your returns in the long term. Yes I have heard about Japan and dotcom, but the ones that mention those are using hindsight bias to pick the top of the relevant market rather than looking across the full market cycle including the bull before the bear. Have you seen any CAPE studies looking at returns for 20 or thirty years?

acrossseasons

Apologies. I come across 100 comments a day referencing indicators that are incorrectly used to support a bias and I find it frustrating. I’m a big believer that investors should make their own decisions based on risk tolerance and objective numbers in the market. Im also a big believer that perma-bears scare off new investors, which is the best way for young people to build wealth and go beyond the middle class. I should probably take a break from stock subreddits Also, the CAPE ratio is a decent indicator that is currently saying the market is overbought. Its not accurate at determining crashes in the short term (1-2years), but is pretty accurate for estimating market returns in the long term (10 years)

acrossseasons

I agree. But to your CAPE ratio point, Shiller himself has said a high CAPE ratio is not a good indicator of an imminent crash. Markets can remain overvalued for years, and while high CAPE ratios often correlate with lower long-term (10-year) returns, they do not accurately predict short-term performance(next 1–2 years). If you believe in the AI buildout I think it’s fine to hold for another 6 months - 2 years depending on your risk tolerance. Personally, I’ll be out by midterms. Most of my AI buildout stocks have run up 100%-300% and by then they’ll probably be higher. If I end up losing out on more gains after midterms I’m fine with that

Delicious_Put_5857

global energy and food crisis with stocks at highest CAPE ever

beerion

Well you specifically called out the Nasdaq 100. >The whole point is that if there’s a bubble it ends up affecting the entire market’s evaluation I'm glad you brought that up. The S&P500 is just going to be the best barometer for "entire market". Annualized returns in the last 3 years of the dotcom bubble were 24.8%. From January of 2023, we're at 20.5%. 1999, alone, was only 20% for the broad market. Guess what TTM is? 30%. How about actual valuations? CAPE at peak of dotcom was 44x. Right now, it's 42x. TTM was 32x vs 32x today. I'm just saying that Nasdaq (however you want to define it) is voluntary inclusion. It happened to be the barometer for "new age" / startup tech in 1999. It most certainly is not that today.

VotedOut

So in other words, your response is: "Nah! Ah!" (with no reasoning for why I'm wrong and you're right). Everything I said there is true and MEANS SOMETHING (though I'll admit that my last 2 paragraphs are controversial and go against consensus, and I'm aware of that). Let's just take even the first part of my post where I mention 3 S&P 500 valuation metrics - the CAPE ratio, Buffett Indicator, and Mean Reversion - all being 2 standard deviations above historical norms right now. Guess when else that happened in history? 1929, 1999/2000, and 2021. Market crashes followed each time. I know "bears/doomers have called 20 of the last 2 recessions" or some shit is a running joke here.... but the combination of those 3 valuation indicators "calling" major market drawdowns has essentially been 3 for 3 so far. And as for individual stocks, the historical record proves that buying large or mega-cap stocks anywhere above 40x+ price-to-sales ratio pretty much always results in a major crash in that stock in the near future that at the very least allows you to avoid a drawdown and buy back in at a lower price.

Competitive_Pop_3286

Right? So the rally runs on longer than any would expect so it actually probably outperforms DCA before the CAPE falls out. I’d be pretty confident that CAPE>30 but falling great underperforms DCA.

PIzzaiolo_Master_510

CAPE is a simplistic tool, one with very limited actual usefulness. While it is educational for beginners to help them think about how earnings streams relate to market values, actual corporate valuation modeling is a quite complex task, as anyone in M&A work or financial reporting at a professional level can explain.

VotedOut

The market is in a tech bubble right now, period. There is so much "this is nothing like 1999 yet" denial in this thread. But for all the subtle differences, there are far more similarities. [CAPE Ratio, Buffett Indicator, and Mean Reversion all 2 standard deviations about historical norms. ](https://www.currentmarketvaluation.com/)(Just like they were in 1999/2000) "BuT iN 1999/2000 tHe CoMpAniEs DiDn'T HaVe ReAl eArniNgs... ToDaY tHeY Do." Stop with that crap. In 1999, there were both companies with real earnings being pumped high (MSFT, INTC, CSCO, etc.) as well as unprofitable trash. And today there are companies with real earnings being pumped high as well as unprofitable trash (space stocks like RKLB/ASTS, quantum computing stocks) trading in large cap territory that make less than $1B in top-line revenues. TSLA, PLTR are still hanging in there so far at crazy valuations. Crypto is still hanging in there even after proving for years over and over that they're mostly grifts. And the melt-ups lately in semiconductor and data center hardware stocks have been undeniable. And then there's the whole circular financing circle-jerk aspect to it that makes much of the reported earnings mostly a fugazi based on inorganic demand. To quote from [Ed Zitron's article](https://www.wheresyoured.at/am-i-meant-to-be-impressed/): > The story of massive AI demand is a lie — a trillion dollars annihilated to create the largest circle jerk of all time.  >Venture capitalists and hyperscalers feed money to OpenAI and Anthropic, so that venture capitalists can feed money to startups to feed to Anthropic and OpenAI, so that Anthropic and OpenAI can feed that money back to hyperscalers, who then feed that money to NVIDIA and buy more GPUs. 

KopOut

That’s the most hilarious part of this post. It beats it even more when you consider he just gave “cash” the Fed funds rate as a return. Bonds pay a higher yield than the Fed funds rate and if you did the buy CAPE under 15 strategy not only would get more interest from the bonds, you would also be automatically selling those bonds near their top as they would be sold after a huge market sell off (where money flees into bonds, driving up their prices). It’s sort of incredible that he proved how superior only buying the index when CAPE is below 15 is to any other strategy. In other words “Timing the market beats time in the market.” But of course everyone on here sees the opposite.

Once_Wise

CAPE of course is not an investment strategy, just the current real S&P price over the average real S&P Earnings over the prior 10 years. It has shown to be a reasonably good statistical estimate of the future 10 year returns, but that is not the same as being a timing strategy, it is just too long term for that. You backtested 12 strategies over 32 years. You have to expect that some will turn out better than others due to chance. I expect that you likely chose those strategies to test, based on some prior observations you made on how well they did vs other techniques. In other words you preselected data that you had already selected, and hence expected to do well over the historical data. This is just a normal thing people do, but it in no way shows that these back tested models will perform similarly in the future. To help you visualize this you should make up 12 random investing strategies and then rank them the same way as you did for your original strategies. You will find that some do much better than others. And since your previous investments strategies were not chose randomly, but based on your past history of evaluating these strategies, you can do the same with the new random ones. Take the best ones and then test them again against a number of new random strategies. Now compare the distribution of results, a histogram of the results, and compare your initial strategies to your random strategies. I think you will be surprised by the results. Just to have fair tests, the number of buy and sell occurrences need to be similar between both sets of tests. One of the things that has been studied hundreds of times in many peer reviewed studies, shows that making even using random models and back testing them can give you some great predictors. But just like your original strategies, they will turn out to be useless on new data going forward. They are just data specific models, chosen by your selection procedure and useful only on the data you have tested it against, not for any future use. Hope this is helpful.

2012DGCL

I'm not sure I'm reading this correctly. CAPE < 15 beat monthly DCA?

boringreddituserid

I see a lot of comments here and on other subreddits about the CAPE being so high. It is a backward looking statistic, taking the prior 10 years PE, inflation adjusted. This might have worked pre-internet age, with slow growing companies. But you have companies growing earnings at rates that would be unheard of in the past. The historical CAPE is about 21, but since 1991 the CAPE has been significantly above that average, excluding about 12 months after the GFC. Take NVDA as an example. 10 years ago NVDA had a market cap of $25B, today it is over $5T with earnings growth to support that growth. If you were to calculate the CAPE for NVDA it would be about 194, the current PE is 43, and the forward PE is 24. Similar with the overall S&P 500 CAPE, trailing PE, and forward PE. I’m not saying that CAPE is outdated, or has no value, but maybe it needs to be adjusted for the information age.

KopOut

I love that you only tested 32 years and that even when you did it and investing at CAPE under 15 was literally the 2nd place strategy behind the perfect timing strategy, you STILL dismissed it. Your backtest proved that over the last 32 years the Best strategy was CAPE investing…

ActuallyFinance

Have youe tried combining CAPE and trend? Here is a backtest I've been working on: https://actuallyfin.github.io/country-cape-backtest/

ValueEquities

thats actually a really intrstng one to run. my guess is it probably underperforms raw DCA over long periods but nowhere near as badly as the stricter cutoffs, just because you'd still be invested most of the time. the damage in the CAPE<=20 strategy came almost entirely from the cash drag not the entry timing itself.

GAV17

That's not really how CAPE based investing works though. The most frequent strategy isn't to stay in cash, it's to rotate to other markets/sectors. For example, the last 2 years those who wanted to avoid high valuations in the US markets would just invest in international stocks or even value stocks in the US market.

ValueEquities

I think his work is solid honestly. high CAPE has historically been a pretty good warning sign for lower long-term real returns. the part I’m more skeptical about is using it as a strict “stay out until valuations normalize” timing system, which the backtest didn’t handle very well.

ValueEquities

fair point on sample size, a handful of CAPE cycles in 32 years isn't a lot to draw conclusions from. the shifting baseline argument is interesting too, maybe 42 is the new normal and comparing to 1950s CAPE is just apples to oranges. but the cash drag problem holds regardless, sitting out has historically cost more than it saved even when valuations were stretched.

Competitive_Pop_3286

I’d be really curious to see CAPE >30 returns vs baseline.

Adventurous_Initial6

CAPE is at 42 right now, not 37. My conclusion from this analysis is that the sample size is too low to do any sort of meaningful analysis (this goes for any cape strategy even the lower value ones) since there have been very few cycles of cape going up and down since 1994. The cape strategies performed both very well and worst depending on the number you picked which seems to imply that the performance is somewhat due to noise. I’d only use cape as an indicator of how overvalued the market is relative to history. Relative to history is the important part - it can’t apply to the future. 42 is extremely high historically, but in 2003, you may have considered 20 very high historically and missed out on some of the biggest rallies. Applied to today, perhaps going forwards, low 40s may be cheap - it’s anyone’s guess.

ValueEquities

you're probably looking at the Shiller CAPE directly from multpl, which is around 40-41 right now. I used a slightly different data source so there’s a small variance, but either way the broader point is the same, valuations are historically very elevated.

IronyElSupremo

P/E is price/earnings as price alone can vary not really telling much about the underlying stock, especially if there’s been splits. CAPE takes earnings (the denominator) and averages it over 10 years, exposed to various economic cycles, to get a more reliable measure. Caveat: it is backwards looking … vs it did predict the ‘07-‘08 crash.

Far_wide

Why are you saying today's CAPE is 37? I think it's closer to[ 41](https://www.gurufocus.com/economic_indicators/56/sp-500-shiller-cape-ratio)

ValueEquities

fair point on the index composition, CAPE is comparing today's nvidia to 2010 nvda which is basically a different company. M2 adjusted CAPE would be an interesting backtest actually, never seen it done properly. but yeah, just keep DCAing seems to be where the data lands every time

ValueEquities

CAPE is basically a way to measure whether the overall stock market looks expensive or cheap compared to history. it compares today’s prices to average company earnings over the last 10 years instead of just one year

Atlantis_Island

Ya I think the CAPE is worth paying attention too, but it might not apply during massive economic disruptions like what we're seeing with AI. For example, why should we care what NVIDIAs earnings were 10 years ago? They made cards for gamers then. Or maybe the CAPE ratio should be compared to the money supply? That might be interesting. CAPE/M2 supply or something. Or maybe we are in for a big crash? I don't know. But your example shows DCA did pretty damn well so that's what I'm gonna keep doing.

LikeAgaveF

I feel dumb. What’s CAPE?

ValueEquities

Basically if the market is above its 10 month average you stay invested, if it falls below you move to cash/T-bills until it recovers back above it. So it’s more of a trend-following system rather than a valuation system like CAPE. Surprisingly it ended up being the only practical strategy that slightly beat normal DCA in the test.

beerion

S&P 500 earnings grew 30% in 1999. Trailing PEs (and CAPE) match between now and then as well. It's not exactly a huge leap to compare the two.

fungi43

The numbers in the post check out — Nasdaq-100 forward P/E was ~60x at the March 2000 peak versus ~24-27x today (depending on the source). But that's the most flattering metric you could pick, and the comparison is misleading for a few reasons: **Forward P/E in 2000 was inflated** by hundreds of unprofitable dot-coms with no earnings to anchor the multiple. Today's Nasdaq-100 is dominated by genuinely profitable mega-caps. So the gap on that one metric overstates how much "safer" today is. **Other valuation lenses tell a different story.** Shiller CAPE is around 38 — second-highest in history, with only 2000 (~44) above it. The Buffett indicator (market cap / GDP) is around 217%, well beyond 2000's peak. Market concentration in the top 5 names is at a 50-year high. None of that matches the "we're nowhere close" framing. **Burry's actual argument isn't about headline P/E** — that's the Redditor's framing, not his. Burry's sharper data point: the top 10 Nasdaq-100 stocks averaged ~784% returns over the past 12 months, beating 1999 (559%) and the 12 months ending March 2000 (622%). That's the most apples-to-apples speculation comparison, and it favors his case. He's also pointing at reflexivity (going up because they've been going up), single-narrative pricing (everything is AI), and the SOX up 65% YTD — psychology, not multiples. The honest synthesis: today's leaders are higher-quality businesses than 2000's. Earnings are real, cash flow is real, the picks-and-shovels demand is real. But concentration, reflexivity, and narrative dependence are arguably more extreme. Both can be true at once. The post wins on "this isn't 1999 valuations on profits"; Burry wins on "this is 1999 *behavior*."

skilliard7

forward PE is a flawed metric because it is based on optimistic estimates and cyclical factors, not real earnings data. SP500 CAPE ratio is currently at 42,it peaked at 44 in December 1999.

VotedOut

There's plenty of facts to support a bearish thesis: S&P 500 CAPE ratio is at 42 now - dotcom bubble levels (dotcom bubble levels) S&P 500 Buffett indicator is 2 standard deviations above historical norms (dotcom bubble levels) S&P 500 Mean reversion is 2 standard deviations above historical norms (dotcom bubble levels) (Sources: [currentmarketvaluation.com](http://currentmarketvaluation.com) and multpl.com) SPY/QQQ showing end-stage bubble vertical line up blow-off top charts (up up up without any pullback, correction, or consolidation) Markets continuing to shrug off all bad news, warning signs, signs of rot underneath the surface, geopolitical concerns, macro concerns, etc. Obvious known scams and grifts such as cryptocurrencies are still being propped up and still haven't fully crashed yet. MOST IMPORTANTLY: [ The bulk of the S&P 500 composition](https://finviz.com/map) is now just a tech company AI data-center build-out circle-jerk. The story of massive AI demand is a lie — a trillion dollars annihilated to create the largest circle jerk of all time. (Read [this](https://www.wheresyoured.at/am-i-meant-to-be-impressed/)). This I think will be the primary cause of the next major crash and pro-longed bear market - when the semiconductor and Mag 7 earnings take a big hit once the AI data-center build-out backfires from being too much too soon. Add to that: all the typical stuff macro-economic styff - Iran conflict, Trump being a psycho who will start other conflicts anytime now, shadow banking, unemployment coming soon, rising cost inflation, end of ZIRP in 2022 now starting to take full effect, national debt crisis, risks in commercial real estate, grifting everywhere being normalized and unpunished, the most evil cartoon supervillains still being kept in power, etc. It's all being swept under the rug... for now. And some examples of individual stocks acting clownishly within the market: Semiconductor stocks (INTC, AMD, MU, etc.) mooning in a vertical line the past month without any real pullback or correction. TSLA trades at 1.6T market cap and 400x P/E even though robotaxis and robots are mostly grifts, and Elon Musk is a known grifter. Unprofitable space companies like ASTS and RKLB are trading at astronomical prices (RKLB at 90x sales and ASTS at 400x sales) for no good reason other than clownery. All things crypto and associated crypto being known grifts and frauds. They should have died long ago. But they haven't. Other individual stocks are trading at ridiculous valuations. Longer term: Unpopular opinion, but I think the era of "just keep DCAing your paycheck into index funds" and "time in the market beats timing the market" that worked for the past 100 years is coming to an end soon. Why? Climate change, that's why. A capitalist system that requires forever compounding earnings growth, compounding population growth, and compounding resource and energy consumption is not sustainable on a finite planet. And even that aside, people will become increasingly pissed off that the money they're "investing" is just being siphoned away by a handful of insatiably greedy wealthy pricks and is increasingly causing cultural rot and decay.

max_strength_placebo

>There isn't a single metric akshually... CAPE ratio is much more accurate than even professionals seem to understand. chart for the US market 1995 to 2020, blue dots show projected 10 year returns based on CAPE ratio while red dots show actual returns. https://www.advisorperspectives.com/images/content_image/data/d2/d2eb1e86ba3492ef907fef2a4da80df1.png

max_strength_placebo

>Do you actually buy the idea that returns will be significantly lower going forward? yes, because I've been through this cycle before. CAPE ratio is *highly* accurate at forecasting returns over the next ~10 years, and investors ignore it at their peril. Looking back from 2035 odds are very, very high we'll see inflation adjusted returns near zero for the overall US market. >If you had to pick a number for the next 30–50 years, I wouldn't, because nobody can predict returns that far out with any accuracy.

skilliard7

I recommend paying off 6.3% mortgage. 10 year treasuries only give 4.4%, so you're getting a nearly 2% higher risk free return just from paying off the mortgage. Based on historical data, it's highly unlikely that the stock market returns more than 6% over the next decade. It might over the next couple years due to momentum, but historically the market averages less than 2% annual returns when CAPE is above 35.

Able-Breadfruit-5981

This is the second-highest CAPE reading in 155 years of data. The only time it's ever been higher was the literal peak of the dot-com bubble.

Fhyzikz

CAPE higher than .com. Don't get caught with your dick in the blender

VotedOut

The market is 2 [standard deviations overvalued ](https://www.currentmarketvaluation.com/)compared to historical trend (by CAPE ratio, Buffett Indicator, Mean Reversion). Historically, whenever this has happened (such 1929, 2021, and now) there has always been a crash and a chance to get in at a lower price and valuation (contrary to what all the "Time in the market beats timing the market" people parrot).

beerion

1920 started with a CAPE ratio of 6 lol. And the 1910s were essentially a lost decade. I continue to believe that incredible investing returns cannot start from peak valuations. That's not to say that the economy and market can't stay strong, but it's just a strange bet to make - the base case, almost by definition, cannot be 15% annualized returns for the next decade.

PragmaticNeighSayer

The problem with ALL metrics is that they can’t tell the future. The Buffet indicator is flawed, Schiller CAPE is better, but both are looking on the rear view. What do earnings from 3 years ago or 10 years ago tell you about earnings 2-3 years from now? When there is a game changer like AI happening right now, which people believe will lead to greatly increased profitability in the future, earnings from 3 years ago are irrelevant. Whether the market is overvalued right now really depends on whether you believe companies will make the profits to justify these valuations or not.

Ok-Piano8789

\>114 brent, >4% 2Y, >5% 30Y, highest CAPE ever they're calling it the goldilocks scenario for stonks

Busy-Possession2891

At 27 with a 40-year investing horizon, entry-point valuations matter less than almost any other variable. Metrics like CAPE do have modest predictive power over 10-year rolling returns, but over 40 years the compounding math of staying invested through multiple cycles dominates any starting-point effect. The honest version: yes, starting at elevated valuations historically produces somewhat lower returns over the first 10 years versus starting at low valuations. That's real. But "somewhat lower for 10 years" across a 40-year investing life is a rounding error relative to the wealth created by compounding. It is not a reason to change strategy. What actually matters at your stage: savings rate and behavioral durability. Maximizing contributions to tax-advantaged accounts now is compounding you never get back. The ETFs you hold are fine. The bigger risk isn't allocation or valuation — it's getting spooked out of the market during the next 30-40% correction and missing the recovery.

CuriousCat511

Look up CAPE Shiller PE. Historically, when it gets as high as it is now, the following decade years performs poorly. It's a "reversion to the mean".

VotedOut

...And we had an internet dotcom bubble too. The Mag 6 may not be at risk of failure, but some of their customers (and some of the companies their investing in) down the chain are. And that would mean the Mag 6's earnings growth likely train-wrecks if they fail or disappoint. I'll just refer you to Ed Zitron's posts... because he goes into this stuff in more detail than I can here. [https://www.wheresyoured.at/](https://www.wheresyoured.at/) BTW, with regards to the overall S&P 500 valuation: Buffett Indicator, CAPE ratio, and Mean Reversion are all 2-standard deviations over-valued above historical trend right now (i.e. - dotcom bubble levels). [https://www.currentmarketvaluation.com/](https://www.currentmarketvaluation.com/)

mahend72

**Key highlights of the S&P 500 at the close of April 27, 2026** The S&P 500 closed at 7,173.91, up 8.83 points (+0.12%) on the day. This marks another record close for the index. The Nasdaq Composite also gained 0.2% and hit a new all-time intraday high, while the Dow slipped about 63 points (−0.13%). **What Drove the Session** * *Iran / Strait of Hormuz tensions*: Gains were capped as stalled U.S.–Iran peace talks and fresh escalation in the Strait of Hormuz pushed oil prices higher. Oil traded around $95–96, up roughly $2 on the day. * *Goldman Sachs raised its oil forecast*: Goldman now expects Brent to average $90/bbl in Q4, up from $80 previously, citing unprecedented Gulf supply disruptions. * *Earnings strength*: Over 85% of S&P 500 companies have beaten EPS expectations this earnings season, according to FactSet. * *Fed watch*: The Fed's April meeting is this week.. likely Jerome Powell's second-to-last as chair, with Kevin Warsh expected to take over in May. Markets are pricing in no rate change. **Notable Stock Movers** * **Qualcomm** surged over 9% on news of a partnership with OpenAI to create smartphone processing chips. * **Intel** continued to push to fresh highs, a day after hitting its first record since August 2000. **Bigger Picture** * The S&P 500 has climbed roughly 8% in April alone and has delivered a total return of 300% over the past decade. * The CAPE ratio sits at 40.1.. a level last seen during the dot-com bubble.. prompting some caution on forward returns. * The weekly trading range is expected between 7,100 and 7,300, with bullish momentum intact but volatility rising. **Sources:** * [https://www.cnbc.com/2026/04/26/stock-market-today-live-updates.html](https://www.cnbc.com/2026/04/26/stock-market-today-live-updates.html) * [https://www.benzinga.com/markets/prediction-markets/26/04/52054194/will-sp-500-open-up-or-down-on-april-27-heres-how-polymarket-traders-lean-as-trump-halts-iran-talks-and-oil-spikes](https://www.benzinga.com/markets/prediction-markets/26/04/52054194/will-sp-500-open-up-or-down-on-april-27-heres-how-polymarket-traders-lean-as-trump-halts-iran-talks-and-oil-spikes) * [https://finance.yahoo.com/markets/stocks/live/stock-market-today-monday-april-27-232226050.html](https://finance.yahoo.com/markets/stocks/live/stock-market-today-monday-april-27-232226050.html)

PurpleReign123

Dude, Your statement “tech which heavily dominates the stock market generated 56% of their profits from outside the USA” is not a cause for celebration, though not many people in the US realise this yet. I know economic conditions in the US are tough now, but other countries are having it even tougher than the US. According to the IMF’s April 2026 projections, US economic growth is projected to be +2.3% and 2.1% respectively in 2026 and 2027. In contrast, the respective figures by IMF for Advanced Economies (excluding US) is -1.4% and -1.3% respectively (yes, negative growth!) The reality of CAPE is going to show up one of these days soon, when some smart money realises the balance of risk is to the downside, especially taking into account inflationary pressures exacerbated by ever growing US Govt debt

Tiny-Art7074

The comment I was replying to was talking specifically about the swr rate over the last 10 years. That comment might have been deleted. The perpetual rate (where all principal is maintained)  was surprisingly high over the last 10 years and I provided a way to verify this.  In theory the safe rate would be higher but it's meaningless over a single 10 year period so I only reported the perpetual rate to get the point across (again, in reply to a comment that might have been deleted). SWR is defined as I described and can be over whatever time period you want to use as long as the time period is specified. 30 year horizons are not technically part of the SWR definition regardless of how common it is to use such periods.   As I was not talking about future SWRs or future projections CAPE ratio is not relevant. I would never recommend a 10% SWR, I'm not Dave Ramsey. 

HokageTsunadeSenju

Comment section smells of Euphoria - CAPE over 40, Buffett Indicator over 260%, BEER Ratio over 1.3, LEI down 5% in LTM, cash balances below 4%, rising credit defaults and falling real wages do matter… At some point, expectations will converge with reality.

HokageTsunadeSenju

Comment section smells of Euphoria - CAPE over 40, Buffett Indicator over 260%, BEER Ratio over 1.3, LEI down 5% in LTM, cash balances below 4%, rising credit defaults and falling real wages don’t matter right? 😂

TaleofTeoCitiez

Generally agree but. Market has not already corrected, we’re actually in risky waters. CAPE is at 40, Buffett indicator at 230%, debt to gdp ratio at ww2 levels. Things were already sus before the Iran War, and the effects of that are about to start taking their toll soon. Sure speed bumps don’t matter, but 30-50% drops do. They don’t happen often, but they do happen…

PoopBreathSmellsBad

The CAPE ratio is a poor reference for the current U.S. stock market. The U.S. market is increasingly dominated by tech and companies that have seen exceptional revenue growth over the last 10 years. It may make sense for companies with stable revenues over extended periods of time, but why would you measure a company like NVDA off the earnings it had 9-10 years ago? There is more to the market than this single reference point.

FrostingOk2692

S&P 500 Shiller CAPE ratio (Cyclically Adjusted Price-to-Earnings) really rolls off the tongue

crowdthepoet

As of mid-April 2026, the S&P 500 Shiller CAPE ratio (Cyclically Adjusted Price-to-Earnings) is extremely elevated, hovering around **36 to 39**

arkansaslax

But what if prices are increasing at a rate faster than and untied to cash flows? The CAPE ratio is over 40 my dude. It’s not that simple.

Ticksdonthavelymph

They are as wrong as is possible. Just like you don’t want all your money in one stock, you also don’t want all your money in one market. You had the right idea with FZLIX. Most investors are grossly over weighted in US equities. And that’s fine in a decade where the S&P outperforms (like the last one), but what about in a decade where it doesn’t? Does the world love the US right now? Is dollar decline (outside short term flight to safety) a macro trend? Is the CAPE rate 40? Is stagflation on the horizon etc? If you also think the long term outlook is a less American world, then why just buy American? Anyway… most investors are either 100% US or 80/20. A smarter more diversified portfolio is like 60/40 for the next decade. I’m extremely pessimistic (and more concerned about maximizing my floor rather than maximizing profit- as I wanna retire in 10yrs) and so I’m 49%US , 45% international, 6% gold. You do you though— but don’t put all your eggs in one basket. 🧺 Good move though with the super low expense funds!!

VeryStableGenius

This will get downvoted I'd put it in BRK-B so that 38% of it is in cash, and Warren Buffet times the market for you. Right now Buffet isn't buying at all. Plus maybe some value funds. Or put some of it into 10,20, or 30 year TIPS (inflation adjusted T-Bonds) which pay 2.66% over inflation (30 year), and wait. If there's a recession, long term rates might fall, and these TIPS would sell at a profit. I think that OP is right to suspect that this is a high risk era, at near-record Shiller P/E (CAPE), and this is not the time to dump a lump sum into it.

AccountOfMyAncestors

B-but But the Iran war But the restricted oil flows causing inflation any day now But the run away AI cap ex But the impending AI mass unemployment But the CAPE ratio over 40 But the rate hikes coming due to oil inflation But China relations in the gutter But no allies anymore, no one trusts the U.S. But the inside trading con man for a leader Calls

VeryStableGenius

It's not the ATH in price; it's the ATH in CAPE and Buffet indicator. It means that the peak might be precarious, and the safety net of fundamental value is far below the current price. In other words, "this market could fall by 40% before it reaches traditional measures of valuation."

VotedOut

Nobody wants to sell right here... But a year from now everyone's going to feel like a retard for not selling clown stocks right here when the 40 CAPE ratio and AI circular financing bubble pops.

Krammsy

True, the tarriff announcements stopped working, then when he invaded VZ and abducted Maduro, the market reaction was surprisingly lack-luster. SCOTUS has made him bullet-proof, and he's shown a willingness to do whatever it takes to move the market in either direction, he can't be prosecuted for anything, literally. When VZ barely worked, he upped the game & attacked Iran, if the weekend Iran announcements stop working, he'll up the severity even more. There comes a point where institutions start invoking caution, atop the CAPE index this gives big money every reason to scale into cash.

Resurgo_DK

Take a look at the CAPE ratio history and what times the peaks coincided with. Then consider the CAPE ratio is maybe only just shy of the Great Depression currently…

strombollimaker545

So the CAPE is not 40 but…. Over 70?

sloanemonroe

Schiller CAPE hit a high of 44.19 at dotcom bubble. Yesterday it was at 40.67. I want to see it go above the dotcom point.

FoodCooker62

CAPE ratio nearing 41 & SPY dividend yield at an all time low but lets keep but pump going 😎 

Bd1ddy82

Is it though? Right before the war the market was unable to durably pass a CAPE ratio of 40. Every time the market hit 40, it pulled back. Literally every time, and it happened about 6 times from December thru February We hit 40 again today. Markets will pull back tomorrow.

KopOut

Do what makes you feel comfortable. I don't like to buy when the S&P 500 is at or near record highs for CAPE and P/S, below the mean for earnings growth, and record lows for earnings yield. There are basically not any measures left that aren't screaming this market is extremely overvalued. As an example, Walmart is approaching a PE of 50 with topline growth FORECASTED for the mid single digits.

saltyhasp

CAPE is still less then 44.19, so your title is miss-leading, but it is getting close to being true.

VotedOut

CLOWN MARKET. Dot-com bubble level CAPE ratio, dot-com bubble level Buffett Indicator, dot-com bubble level Mean Reversion, dot-com bubble level everything.

VotedOut

https://preview.redd.it/l0jtoja61dvg1.png?width=925&format=png&auto=webp&s=0387f176bb8d8e9929941ef9d56f327612034293 CLOWN MARKET. Dot-com bubble level CAPE ratio, dot-com bubble level Buffett Indicator, dot-com bubble level Mean Reversion, dot-com bubble level everything.

skilliard7

Buffett indicator is a flawed metric when you consider profitability has improved over time. CAPE ratios are a better metric. These show the market is very elevated, but not quite at the same level as 2000.

brokoli

CAPE has been higher than historical averages for about the last 20-30 years?? CAPE may statistically explain... like only a part of the next decades returns at best? CAPE basically assumes NVIDIA is still selling gaming video cards... lmao.

Worried_Quarter469

The CAPE ratio is sitting around 36.5–37.8 as of early April 2026 , depending on the source. It peaked higher earlier this year — hitting 39.2 in February . For context, that’s the second-highest reading in history, surpassed only by the dot-com peak of ~44 in 2000 . It’s more than double the long-run median of about 16. At these levels, Shiller’s research implies forward annual returns of roughly 2%

Soft_Walrus_3605

Just a reminder of the Schiller PE Ratio (aka CAPE) https://www.multpl.com/shiller-pe

SSkilledJFK

$580 million in bets on falling oil prices had been placed just 15 minutes before🥭 published his statement on postponing attacks on Iran for talks on March 23, 2026. The White House had even sent a note to employees warning against using nonpublic information on financial markets prior to this. Why send a note if it is not happening at some level? It is now three weeks later. The inner circle is getting significantly richer and richer over this period. You can argue the market has always been rigged, but this magnitude and extent is historical. All out in the open for everyone to see. I also just got done reading about the Shiller CAPE ratio sitting at its highest levels since the ‘99 bubble burst. So will the market continue to be manipulated enough to please the inner circle AND us peasants? Can said MM’s “float” long enough before the bubble burst? Praise be to Allah I guess.

VeryStableGenius

Wait, how does that work? In dollar terms, the SP500 has TTM PE=28 (CAPE almost 40) That seems to be growth oriented (dollar weighted terms) because the historical traditional PE is 18, and value stocks tended to be 15. If we look at PE (not CAPE) over the last decade, it has spent half its time below 22-ish, and half above, so we might regard 22.5 as the new normal, and the market is well above this. So the market as a whole seems *either* to have reconciled itself to lower returns, or become more growth oriented (1/PE-payouts+growth~0.07, to match traditional 7% return).

VeryStableGenius

Can you quantify this? I went to google AI and had it list the changes and their effects. By sector, the losses were 40% in banking in the transition year, 3% in retail and airlines, and 10% in software (but this was a one-time shock because anticipated earnings couldn't be front-loaded, but had to reported later). In the end, it estimates a long term 5% to 8% accounting discount relative to 2007. So the CAPE today might be 37 rather than 40. (I'd wave my arms and argue that companies will find creative accounting methods under the new rules that could cause a partial rebound from the punitive effect of the new rules). The Buffet indicator is unaffected, and stocks are trading at over 2xGDP.

VeryStableGenius

This seems like a very specific and peculiar justification of high PE ratios: there are more growth companies that will eventually generate a lot more profit, but not a whole lot more revenue, so GDP won't grow much. Is this really what the market believes, when it bid the SP500 up to CAPE=40? Where will these extra profits come from, if the overall pie doesn't get bigger? Out of the pockets of fired workers? That's wouldn't be a great economic omen.