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Old 01-24-2016, 06:19 AM
 
427 posts, read 192,094 times
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Hello,

What a nice article!
It would be even better, if they explain what "CAPE Median Strategy" is, and how do people use it.
Does anybody know, please?
Thanks.
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Old 01-24-2016, 06:41 AM
 
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the problem with using anything related to the cape is accounting methods have changed over the years making the numbers not really comparable to past years for purposes of finding that median or average .

while the cape is computed using GAP , GAP itself has been changed through the years so the numbers it generated a few years ago do not coincide with the meaning of the numbers today . .

that is the problem when anyone quotes shillers numbers and says the markets are over valued by a lot in comparison to past shiller numbers . the yardsticks are calibrated differently .
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Old 01-25-2016, 05:44 AM
 
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I don't study any of this info in depth--
I had not read that assessment before---and not saying you are not correct--but

If the CAPE assessment is not as valid in today's market as it was in the past then why are "reputable" sources using it as a measuring in stick for things that are important--not just about withdrawal rate but stock pricing, P/E ration, and other market judgements???
I have read over and over that the market has been overvalued--probably for last year and half--
Is that only a valid assessment if the source is using something besides Schiller???
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Old 01-25-2016, 06:54 AM
 
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there are lots of measures of value for looking at p/e ratio's but trying to compare past cape values with today's numbers is not apples to apples .

accounting methods and calculations have changed through the years .

nor can it be compared to other methods of valuing markets since it has its own set of benchmarks .

the jury is still out as far as the cape ratio predicting future market moves . you have those who believe it does and the other camp who believe it is worthless as a predictor .

CAPE is calculated by taking the S&P 500 and dividing it by the average of ten years worth of earnings. If the ratio is above the long-term average of around 16x, the stock market is considered expensive.

the problem is how earnings are calculated on the s&p 500 has been modified and changed through the years so any comparison in numbers to the past is based on a different set of criteria .

so think of it as me calibrating my own thermometer scale and the world switching to it .

i can tell you that 90 degrees on my scale is very cold and water freezes . but any comparison of degrees on a Fahrenheit thermometer in the past would be useless since 90 degrees used to mean hot . .

so it does not mean the cape is wrong , it only means that any comparison to what was considered over or under valued in the past can no longer be compared accurately

Last edited by mathjak107; 01-25-2016 at 07:17 AM..
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Old 01-25-2016, 08:39 AM
 
Location: SoCal
13,762 posts, read 6,534,991 times
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I thought CAPE is the same or very similar to PE10, if not why not? I'm checking out the book "How to make your retirement money last longer" by Janet Quinn Bryant, my favorite financial author, I think I read the term PE10 in there. I'm just trying to understand better about this subject.
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Old 01-25-2016, 09:22 AM
 
72,537 posts, read 72,428,525 times
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same thing . pe10 refers to the 10 year averaging
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