{"id":10633,"date":"2014-08-18T01:04:45","date_gmt":"2014-08-18T05:04:45","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=10633"},"modified":"2014-08-18T01:04:45","modified_gmt":"2014-08-18T05:04:45","slug":"under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16-2014-brad-delongs-grasping-reality","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2014\/08\/18\/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16-2014-brad-delongs-grasping-reality\/","title":{"rendered":"Under What Circumstances Should You Worry That the Stock Market Is &#8220;too High&#8221;? | Brad DeLong"},"content":{"rendered":"<p>Brad DeLong discusses Robert Shiller&#8217;s CAPE ratio, a stock-price measure he helped develop:<\/p>\n<blockquote><p>&#8230;.on average, at a ten-year horizon, for any CAPE ratio below 35 the S&amp;P has delivered average real asset returns pretty much outclassing all other major asset classes&#8230;..<\/p><\/blockquote>\n<blockquote><p>Thus you can see why I am relatively unsatisfied with Shiller&#8217;s writing:<\/p>\n<p>    &#8220;In the last century, the CAPE has fluctuated greatly, yet it has consistently reverted to its historical mean&#8211;sometimes taking a while to do so&#8230;.&#8221;<\/p>\n<p>Shiller&#8217;s rhetoric leads us to focus on graphs like this one of the Campbell-Shiller CAPE, and to think that what goes up must&#8211;someday&#8211;come down:<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" width=\"525\" height=\"546\" title=\"CAPE\" alt=\"CAPE\" src=\"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2014\/08\/12849-6a00e551f08003883401a73e036f6d970d-pi.png?resize=525%2C546&#038;ssl=1\" \/><\/p>\n<p>But is there any reason to think that the central tendency of the CAPE today is the same as what it was in the 1880s or the 1950s? There is no unchanging machine buried in the earth for the past 120 years throwing dice to determine the CAPE. It would be much better to say that extreme values of the CAPE are followed by reversion not to but toward the previous historical mean. And dividends and earnings shift too. A much better graph than the CAPE graph is the cumulative reinvested return graph [on a log scale]:<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" width=\"525\" height=\"546\" title=\"Cumulative Reinvested Returns\" alt=\"Cumulative Reinvested Returns\" src=\"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2014\/08\/fd517-6a00e551f08003883401b7c6cdab85970b-pi.png?resize=525%2C546&#038;ssl=1\" \/><\/p>\n<p>It goes way up, and way down, but the dominant feature is not mean reversion but rather exponential growth&#8230;..<\/p><\/blockquote>\n<p>Read more at <a href='http:\/\/delong.typepad.com\/sdj\/2014\/08\/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16.html#more'>Under What Circumstances Should You Worry That the Stock Market Is &quot;too High&quot;? | Brad DeLong<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Brad DeLong discusses Robert Shiller&#8217;s CAPE ratio, a stock-price measure he helped develop: &#8230;.on average, at a ten-year horizon, for any CAPE ratio below 35 the S&amp;P has delivered average real asset returns pretty much outclassing all other major asset classes&#8230;.. Thus you can see why I am relatively unsatisfied with Shiller&#8217;s writing: &#8220;In the &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2014\/08\/18\/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16-2014-brad-delongs-grasping-reality\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Under What Circumstances Should You Worry That the Stock Market Is &#8220;too High&#8221;? | Brad DeLong&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[57,34],"tags":[567,3586],"class_list":["post-10633","post","type-post","status-publish","format-standard","hentry","category-stock-markets","category-us-canada-countries-regions","tag-cape","tag-valuation"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Under What Circumstances Should You Worry That the Stock Market Is &quot;too High&quot;? | Brad DeLong - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Under What Circumstances Should You Worry That the Stock Market Is &quot;too High&quot;? | Brad DeLong - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Brad DeLong discusses Robert Shiller&#8217;s CAPE ratio, a stock-price measure he helped develop: &#8230;.on average, at a ten-year horizon, for any CAPE ratio below 35 the S&amp;P has delivered average real asset returns pretty much outclassing all other major asset classes&#8230;.. Thus you can see why I am relatively unsatisfied with Shiller&#8217;s writing: &#8220;In the &hellip; Continue reading &quot;Under What Circumstances Should You Worry That the Stock Market Is &#8220;too High&#8221;? | Brad DeLong&quot;\" \/>\n<meta property=\"og:url\" content=\"https:\/\/thepatientinvestor.com\/index.php\/2014\/08\/18\/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16-2014-brad-delongs-grasping-reality\/\" \/>\n<meta property=\"og:site_name\" content=\"the patient investor\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/profile.php?id=61572934660810\" \/>\n<meta property=\"article:published_time\" content=\"2014-08-18T05:04:45+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/thepatientinvestor.com\/wp-content\/uploads\/2014\/08\/12849-6a00e551f08003883401a73e036f6d970d-pi.png\" \/>\n<meta name=\"author\" content=\"ColinTwiggs\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"ColinTwiggs\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2014\/08\/18\/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16-2014-brad-delongs-grasping-reality\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/thepatientinvestor.com\/index.php\/2014\/08\/18\/under-what-circumstances-should-you-worry-that-the-stock-market-is-too-high-the-honest-broker-for-the-week-of-august-16-2014-brad-delongs-grasping-reality\/\"},\"author\":{\"name\":\"ColinTwiggs\",\"@id\":\"https:\/\/thepatientinvestor.com\/#\/schema\/person\/cb072791ac83e8bae585007c133d54a5\"},\"headline\":\"Under What Circumstances Should You Worry That the Stock Market Is &#8220;too High&#8221;? 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Bull\/Bear Market The Bull\/Bear indicator remains at 60%, with two of five leading indicators signaling risk-off: Weekly continued claims increased to 1.974 million on June 14, warning that the labor market\u2026","rel":"","context":"In &quot;US &amp; Canada&quot;","block_context":{"text":"US &amp; Canada","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/us-canada-countries-regions\/"},"img":{"alt_text":"Bull\/Bear Market Indicator","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-05-09-us-bull-bear-gauge.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-05-09-us-bull-bear-gauge.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-05-09-us-bull-bear-gauge.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":9043,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/01\/26\/beware-of-the-cape\/","url_meta":{"origin":10633,"position":2},"title":"Beware of the CAPE","author":"ColinTwiggs","date":"January 26, 2014","format":false,"excerpt":"I have just read John Mauldin's warning that the market is overvalued: Not only does today's CAPE of 25.4x suggest a seriously overvalued market, but the rapid multiple expansion of the last few years coupled with sluggish earnings growth suggests that this market is also seriously overbought, as I pointed\u2026","rel":"","context":"In &quot;Stock Markets&quot;","block_context":{"text":"Stock Markets","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/stock-markets\/"},"img":{"alt_text":"CAPE","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":13708,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/01\/26\/beware-of-the-cape-2\/","url_meta":{"origin":10633,"position":3},"title":"Beware of the CAPE","author":"ColinTwiggs","date":"January 26, 2014","format":false,"excerpt":"I have just read John Mauldin's warning that the market is overvalued: Not only does today's CAPE of 25.4x suggest a seriously overvalued market, but the rapid multiple expansion of the last few years coupled with sluggish earnings growth suggests that this market is also seriously overbought, as I pointed\u2026","rel":"","context":"In &quot;Market Insights&quot;","block_context":{"text":"Market Insights","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/market-insights\/"},"img":{"alt_text":"CAPE","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/mauldin-cape.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":13749,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/10\/18\/robert-shillers-cape\/","url_meta":{"origin":10633,"position":4},"title":"Robert Shiller&#8217;s CAPE","author":"ColinTwiggs","date":"October 18, 2014","format":false,"excerpt":"I have long held the view that using Robert Shiller's CAPE to determine whether stocks are under- or over-priced is misleading. Average levels for CAPE have shifted over time, and one cannot rely solely on historic highs and lows as a measure of whether the market is over-bought or over-sold.\u2026","rel":"","context":"In &quot;Market Insights&quot;","block_context":{"text":"Market Insights","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/market-insights\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":63423,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/12\/27\/us-market-snapshot-4\/","url_meta":{"origin":10633,"position":5},"title":"US Market Snapshot","author":"Colin Twiggs","date":"December 27, 2025","format":false,"excerpt":"The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current stock market valuation. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market\u2026","rel":"","context":"In &quot;US &amp; Canada&quot;","block_context":{"text":"US &amp; Canada","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/us-canada-countries-regions\/"},"img":{"alt_text":"Bull\/Bear Market Indicator","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-08-06-us-bull-bear-gauge.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-08-06-us-bull-bear-gauge.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-08-06-us-bull-bear-gauge.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/10633","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=10633"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/10633\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=10633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=10633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=10633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}