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That is one of the clearest market signals I’ve ever seen. Not about when, precisely — but about the degree of risk. It says to me that it is the most ever, at least going back 120 years. So, to your point that the CAPE ratio will fall as ’08-’09 data drops out–well, yes, somewhat; but looking at the history of these data, are we sure we want to see it fall?

As to whether it was mostly the banks that produced such poor earnings around 2008, I don’t think that is correct. Here are a couple bread-and-butter companies of various other sorts that I chose randomly, giving four years of their earnings-per-share for 2007, ’08, ’09, ’10 in sequence:

Intel: $1.18, 0.92, 0.77, 2.10
Textron: 3.40, 1.29, -0.28, 0.30
Kaman: 2.23, 1.40, 0.97, 1.36
Park-Ohio: 1.82, -10.88, -0.47, 1.29
Lawson Prods.: 1.25, -3.24, -0.32, 0.81
Starbucks: 0.43, 0.21, 0.26, 0.62

There were reasons to sell stocks, for those basing their investing on earnings. To see the Hussman CAPE at the highest level ever, beyond 1929, is something important, IMO.

@Artful: Proverbs’s wisdom simply cannot be overestimated, so well-chosen words. I once had the (stress and) pleasure of “teaching” the book in a Biblical Studies group over a period of a month or so. A tremendous experience I couldn’t forget if I wanted to.

Another different but related issue is the notion that the P/E ratio of the S&P500 is just like the P/E of a single company. It isn’t. So in 2008, several giant banks threw their big earnings losses into the S&P500 averages sending it’s effective P/E sky high. Panic, sell the whole market! That ignored the fact that 400 or so companies in the S&P500 were doing relatively OK.

It’s a bit like General Electric doing quite poorly now, in spite of the fact that they probably have a few divisions that are doing fine. They should probably spin off those divisions as a separate company, except doing so might cause the rest to actually go bankrupt.

Proverbs 22:2
The rich and poor meet together: the LORD is the maker of them all.
Psalm 49:16
Be not thou afraid when one is made rich, when the glory of his house is increased; For when he dieth he shall carry nothing away: his glory shall not descend after him.
Corinthians 13:4
Charity suffereth long, and is kind; charity envieth not; charity vaunteth not itself, is not puffed up,

More here:
https://www.biblestudytools.com/topical-verses/bible-verses-about-greed/

https://www.advisorperspectives.com/images/content_image/data/e0/e0b7d9c525c708f51a1a669a9de17111.png

No years excluded; it all counts. Otherwise, the long-term work is meaningless and correlations shrink.

“this book is almost inexcusably lengthy. For this I must apologize, with the excuse that I did not have time to make it shorter”
? Carroll Quigley, Tragedy and Hope: A History of the World in Our Time

someone slipped up and let him talk… heh…

“For example, I’ve talked about the lower middle class as the backbone of fascism in the future. I think this may happen. The party members of the Nazi Party in Germany were consistently lower middle class. I think that the right-wing movements in this country are pretty generally in this group.”
? Carroll Quigley, Carroll Quigley: Life, Lectures and Collected Writings

They are acting on the writings of the 70s, you guys will be horrified as that moves forwards, as it takes that long to establish from the edifices to the public sphere…

in the 70s, quigly decalred you fascists, and the elite believed the tale that they would be the gods of goodness and make a new world… they will do communism right…

50 years later, your wondering and confused and making things up as to why the left is erroneously calling you fascists.. and nazis.

really?

where were you?

……human beings who are growing up crave sensation and experience. They want contact with other people, moment-to-moment, intimate contact. I’ve discovered, however, that the intimacy really isn’t there. Young people touch each other, often in an almost ritual way; they sleep together, eat together, have sex together. But I don’t see the intimacy. There is a lot of action, of course, but not so much more than in the old days, I believe, because now there is a great deal more talk than action. This group, the lower middle class, it seems to me, holds the key to the future. I think probably they will win out. If they do, they will resolutely defend our organizational structures and artifacts.

They will cling to the automobile, for instance; they will not permit us to adopt more efficient methods of moving people around. They will defend the system very much as it is and, if necessary, they will use all the force they can command.

Eventually they will stop dissent altogether, whether from the intellectuals, the religious, the poor, the people who run the foundations, the Ivy League colleges, all the rest. The colleges are already becoming bureaucratized, anyway. I can’t see the big universities or the foundations as a strong progressive force. The people who run Harvard and the Ford Foundation look more and more like lower-middle-class bureaucrats who pose no threat to the established order because they are prepared to do anything to defend the system.”

? Carroll Quigley, Carroll Quigley: Life, Lectures and Collected Writings

He defined the enemy of the progressives was YOU…

“The basis of social relationships is reciprocity: if you cooperate with others, others will cooperate with you.”
? Carroll Quigley

We’ve now had the one of the longest stock market expansions in many decades, in spite of the historically substandard 1.5% GDP growth rate of the Obama period. So part of the problem is that the “correction” is long overdue.

One of the issues with the Shiller CAPE is that a ten year average necessarily still includes the abysmal corp. earnings of the 2008 and 2009 time period. It won’t be until the end of 2019, when the CAPE will have those negative earnings numbers flushed out of it. That doesn’t negate the likelihood that the market was and maybe still is overvalued, just not as much as CAPE suggests.

Lurch follows the time-honored success of contrarian investing. Move opposite to the herd. I’ve often wondered, have humans inherited some of the genes of herd or pack animals?