Set forth below is the text of a comment that I recently posted at another blog entry at this site:
You do not understand what Shiller is saying. Further, he is basically saying you are wrong in this article:
Notice these quotes:
“And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. “We don’t know what it’s going to do,” he says.”
“As for the idea, proffered here by Citigroup’s Tobias Levkovich, that CAPE is flawed because it doesn’t “normalize” for interest rates (as it does for earnings), Shiller says the following: “He’s right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn’t mean the high CAPE isn’t a forecast of bad performance.”
Nobody can understand what anyone is saying so long as there is a Ban on Honest Posting in effect, Anonymous.
How do you know that he is not careful to avoid saying things that upset the Buy-and-Hold Mafia because he has seen what happens to academic researchers who say publicly what they truly believe?
Perhaps Shiller knows what happened to Wade Pfau.
Perhaps there are a lot of Wade Pfaus out there.
Perhaps Shiller could write a book telling about all the threats that were directed at him.
Once you threaten to kill family members of anyone who posts honestly, people hold back.
Saying that high CAPE is a forecast of bad performance is the same thing as saying that long-term timing always works. If you know that you are going to see bad performance, you know that risk is higher and you need to lower your stock allocation to keep your risk profile constant.
You wouldn’t even be posting here if you had confidence that Buy-and-Hold could work. You are scared. If you followed a true research-based strategy, you wouldn’t be scared.
I am going to continue to post honestly.
I naturally wish you all the best that this life has to offer a person regardless of what investing strategies you elect to follow.