Warning signs: The Shiller CAPE ratio is a historic high

Though it’s impossible to call market tops, you can be prepared. One of the warning signs right now is that the CAPE is at a record high not seen since the Dot Com bubble in the 2000. If I were you, I’d get my asset allocation right by having a right mix of defensive assets like debt, gold etc.

Some poeople tend to sell everrything and hold cash, which is stupdity. Because the thing about holding cash is that you need get it right 2 times. You need to call the peak and the bottom and even the smartest suck at that.


I cashed out 80% of direct stocks portfolio in Jan itself (keeping MF mostly as is), was expecting sub 13k (not a crash) - but markets have proven to be resilient. The fear due to the recent rise in covid cases has been alleviated by vaccines - and nifty PE is also going down as earnings are catching up.

I’d say Cloudy with a slight chance of rainfall (moderate correction). But no thunders :wink:

This is the problem of going to cash. Assuming somebody went to100%, they’d have lost 20-40%. But this is all hindsight of-course. But the thing is markets go up more than they go down. Best thing for most people is to have a core portfolio with asset allocation and maybe a little of fund, timing startegies in a staellite portfolio.

Bad shit happens when things are easy

CAPE from the dot com bubble and today are incomparable without adjusting for interest rates.
1999-2001 had nominal rates of ~6%. If the dot com bubble were to repeat today, CAPE of 40+ would be the beginning of it

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@RahulKhanna Cool chart btw

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You mean someone who cashed out in Nov?. That thought didnt even cross my mind in Nov. Not because I am a genius ofcourse. When I cashed out in Jan (took a while, I did it painfully slow, very difficult to cash out in highs) , it was mostly to clean up and remove over-diversification, but have not increased Direct Equity since then. So I am still in stasis wrt direct equity investments.

Just towards the end of my selling, markets started to go down well below 14k and I felt like a genius for a short while… Unfortunately or fortunately that misunderstanding was promptly corrected. :sweat_smile:

Robert J. Shiller himself recently said in an interview claiming the current prices make sense and it is not as bad as Shiller CAPE ratio makes it look. Classic rebuttal on his own theory. He went on to come up with a new term ECY (inverse), that keeps interest rate in mind and justifies the current valuations.

On a lighter note, wonder if would return the noble prize for CAPE, or if he is shooting for another on ECY.

Anyhow, the way I see it, all these ratios with their names in it … are just that - ratios / names and at best can be used for valuations. But they are horrible tools for timing the market …

Totally concur with the following -

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