The market might have room to run if excluding the bubble period from the calculation of the Shiller p/e is any guide.
So John Hussman, here:
"Excluding the bubble period since mid-1995, the average historical Shiller P/E has actually been less than 15."
That means the bubble period skews the calculation of today's historical average of 16.46 upward by something like 9%. So with a current Shiller p/e of 23.35 which looks backward incorporating bubble-era p/es into its calculation, a discount of 9% yields a truer Shiller p/e presently of something more like 21.25, which could mean there is still considerable upside potential in the market.
Today's Shiller p/e would have to rise to about 26.4 to reflect the old upper range redline of 24 identified by Hussman as a danger zone.
Interestingly, the March 1, 2009 Shiller p/e of 13.32 was therefore more like 12.1, quite the buying opportunity indeed, though nowhere near the 7 identified by Hussman as that rare thing marking the buying opportunity of a lifetime.
I wish I had had the courage to get in in March 2009. The real average annual rate of return in the S&P500 from then to January 2013 has been +19.14%, simply amazing. But as late as May 2010 people like Richard Russell were telling us to get out of debt and get completely liquid because technical analysis was predicting Armageddon was 6 months away. By August he had changed his tune.
Near term I am somewhat less pessimistic than I was, if only because a real blow-off top looks more definable than before. I'm still keeping my powder dry.
Near term I am somewhat less pessimistic than I was, if only because a real blow-off top looks more definable than before. I'm still keeping my powder dry.
