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Pragmatic Capitalism

Practical Views on Money & Finance

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Shiller’s CAPE – Is It Really Just B.S.?

In late stage bull market cycles, the inevitable bashing of long term valuation metrics comes to full fruition. In the late 90’s if you were buying shares of Berkshire Hathaway stock it was mocked as “driving Dad’s old Pontiac.” In 2007, valuation metrics were being dismissed because the markets were flush with liquidity and interest rates were low. Today, we once again see repeated arguments as to why “this time is different.”

Yield Spreads & Market Reversions

The “chase for yield” was the desired result by the Federal Reserve when they dropped rates to record lows and announced, in 2010, that supporting asset prices to boost consumer confidence had become a “third mandate.”

Is This The Mania Phase of the Bull Market?

While the current bull market remains “bulletproof” at the moment to geopolitical events, technical deterioration, overbought conditions and extremely complacent conditions; it is worth remembering what was being said during the third phase of the previous two bull markets:

Survey Explains Why Investors Remain “Side Lined”

While many dismiss the impact of the “baby boomer” generation moving into retirement, the reality is likely to be far different. If the current survey is representative of that particular group, the drag on the financial markets and economy over the next decade could be quite substantial.

Historical Market Comparisons Are Meaningless

For now, the “bullish case” remains alive and well. The media will go on berating those heretics who dare to point out the risks that prevail. However, the one simple truth is”this time is indeed different.” When the crash ultimately comes the reasons will be different than they were in the past – only the outcome will remain same.