Are we in a bubble?

Do you think we’re in a bubble right now? Shiller P/E ratio is at double its historic average right now (34.5 vs 16.8)…

The only times the Shiller has been over 30 were:

  • 1929 - Then crashed 89%
  • 1997-2000 - Hit high of 44.2 then crashed by over half
  • 2018 - Crashed 19.8%
  • 2020 - Covid related, but still crashed 34% in a month…

Are you rebalancing or moving around assets right now to safer stocks??

Edit - Shiller is the same as CAPE (Cyclically adjusted P/E), essentially the price compared to a 10 year average of inflation adjusted earnings.

I think this chart says a lot…

I think we absolutely are, but its harder to tell when it will burst (and how long to stay in a potential bull market). I know I was too cautious in 17-18 and that hurt my returns a little.

That said, I’m absolutely shifting money from my stocks that have rallied this year to other safer plays like staples ETFs and value type stocks, with a significant dry powder in cash in case we do hit a downturn.

I think that a lot of the same factors that led to this epic and sharp rally over the last 6 months will also be a factor in any downturn (i.e. the crash will be swift and deep).

Another good article laying out a few areas… I think you’re right, might be getting there.

Goldman Sachs isn’t calling it a bubble, but did list 39 stocks that are far above other valuations that they think are risky