Pricey market can get pricier

The S&P 500's 22% YTD return has been driven almost entirely by multiple expansion rather than higher earnings, says Goldman's David Kostin. That and the fact that the Cyclically Adjusted PE (CAPE) Ratio made famous by now-Nobel-laureate Robert Shiller suggests the index is about 30% overvalued isn't enough to have Kostin forecasting a bear market.

Instead, the music's playing so we dance - he sees a flat S&P through year-end, but has a target of 1,900, or 9% above today's level in 2014.

Kostin's excellent charts: Markets and money flow, Mutual fund flows, Market performance YTD.


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Comments (4)
  • bbro
    , contributor
    Comments (11240) | Send Message
    "That and the fact that the Cyclically Adjusted PE (CAPE) Ratio made famous by now-Nobel-laureate Robert Shiller suggests the index is about 30% overvalued "


    Shiller PE has been above 19.5 since November 1 ,2009 ...the SPY is
    up 82.79% (dividends reinvested) since November 1,2009.....


    the Shiller PE was above 23 during the period from 3/01/03 to 10/01/07...
    SPY was up 81.88% ( dividends reinvested) for that you can see the Shiller PE misses some big up moves


    There are better methods to detect a bear market,,,,despite the Nobel Prize....
    21 Oct 2013, 03:26 PM Reply Like
  • Mattster
    , contributor
    Comments (165) | Send Message
    lol at the highlighted section of Market Performance YTD chart
    21 Oct 2013, 03:59 PM Reply Like
  • Budavar
    , contributor
    Comments (1418) | Send Message
    There is no better proof of the market's extreme vulnerability =
    even a hint of "taper" ending created a near panic.
    The Fed is flooding the system with seductive opium = billions upon billions of cash infusion which can only lead to death or excruciatingly painful withdrawal symptoms. The longer that opium is administered, the more painful/damaging the sad outcome will become.
    Schiller's 30% overvaluation is in the process of becoming a 50% overvaluation, because since his assessment there has been no let up in the supply of opium injected into the market.
    21 Oct 2013, 05:32 PM Reply Like
  • sreimer77
    , contributor
    Comments (242) | Send Message
    It is really sad when we compare the markets to heroin, but the comparison is 100% correct. The government is getting anyone and everyone addicted to the drip and the FED enabling excessive spending by running the printing press's to keep rates at zero. Hey, its other peoples $!. In the end, the withdrawal symptons will be more painful than we've ever experienced. People have become complacent, bulls control the headlines, optimism has hit levels I have not seen since June 2007 and valuation of momentum stocks are reaching 1999 levels in terms of valuations. The FED can't stop the drip, or the government will seize as rates will skyrocket along with the interest payments to service the debt. The only way to stop this is via intervention. This is beginning to occur as China and many other nations have slowed, stopped or starting selling their treasury holdings. Who is going to step in and buy the debt that China has been financing? No one! One day, the Treasury is going to have an auction and no one will be present. And then the withdrawal will kick in, the shakes, cold sweats and thoughts of losing it all.. Panic will follow and blood will spill onto the streets......
    24 Oct 2013, 01:46 PM Reply Like
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