The Shiller P/E Ratio

Submitted by Roanman on Thu, 04/08/2010 - 15:30


Professor Robert Shiller (Yale) is probably best known for his book "Irrational Exuberance" and the "Case-Shiller US Home Price Index he developed with Professor Karl Case (Wellesley) .

In his spare time, he came up with the Shiller P/E ratio.

The Shiller P/E ratio is calculated as follows: divide the S&P 500 by the average inflation-adjusted earnings from the previous 10 years.

Got that?

Don't worry about it.

Up is good if you're selling stocks.

Down is good when you're buying.

The chart below was taken from an article at The Daily Reckoning written by Dan Amoss having to do with a speech given March 24, 2010 by Russell Napier of CLSA (no clue) at the CFA Society (Certified Financial Analyst).

Excerpts from this most quotable speech, one of which I've posted below, are all over the place.


The following chart from The Seeker Blog shows the same chart with it's historic average in red.



If you're gonna borrow ..... do it now!!!

Submitted by Roanman on Wed, 04/07/2010 - 07:44


From Barry Habib at Mortgage Success Source


“So the Fed stopped buying Mortgage Backed Securities, and people are wondering if this will affect mortgage rates.

There's been plenty of whistling past the graveyard, guesswork and denial, where so-called experts have been trying to tell us that there will be minimal - if any - change to rates. 

That pipe dream is just nonsense.

During the past fifteen months, the Fed purchased $1.25 Trillion in MBS, which represented 80% of the mortgage market.

Prior to this program, mortgage rates were above 6%.

Now that the Fed program has ended, it's reasonable to assume that mortgage rates will rise back towards those levels…

“Additionally - sovereign debt has come into question. 

Downgrades in the sovereign debt of both Greece and Portugal are a warning to the US that the same can happen here, which would drive the cost of borrowing much higher.

Our government currently spends $1.49 for each $1.00 it brings in. 

Our debt is now 57% of GDP...and rising.

Does anyone really believe that Treasury yields are headed lower?

As Treasury yields move higher from their current levels, mortgage backed security coupon yields will also need to move higher in order for investors to want to purchase them.

“When all the factors are considered - the chances of higher interest rates are a virtual lock.

And anyone in the market to borrow should consider acting sooner rather than later.

With such low rates still in our hands...and all these various factors pointing at the inevitable fact of rates moving higher.”  

Barry Habib, Mortgage Success Source


Too Much Pressure

Submitted by Roanman on Tue, 04/06/2010 - 14:03


I couldn't help myself.

Having spent the appropriate amount of time empathizing with poor Hamid ... (OK that'll do it)

I flew straight to days gone by.

This is Pauline Black, Neol Davies and Compton Amenor on guitars, Desmond Brown on organ, Arthur "Gaps" Hendrickson getting beat up on stage (not really) et. al.

From the 1981 movie Dance Craze

The Selector 

Its gonna work out Hamid, you just gotta trust me on this one.


Pressure Drop

Submitted by Roanman on Tue, 04/06/2010 - 13:57


Now .....

Its getting good to me.

So I start wondering .....

Are there any good performances of Pressure Drop out there?

Imagine my delight.

One last chance to see the great Joe Strummer miss all the notes.

Who cares!!!!!

With Joe Strummer it was never about hitting the notes.

It was about passion.

Joe Strummer and the Mescaleros.

Pressure Drop

(along with Get Down Moses and some other pretty good Clash covers)



Ten Year Treasury Hits 4%

Submitted by Roanman on Tue, 04/06/2010 - 07:45


Four different services hit my mailbox last night with the same headline.

Ten Year Treasury Hits 4%

Putting aside the notion that a 4% yield over the next 10 years lent to anybody (let alone the Federal Government of the United States of America) even approaches a reasonable compensation for risk.

The much referenced "Head and Shoulder" Top is in.

My preference would be for it to go back up and close that gap between about 118.3 and 117.5 and then finish.

As a matter of fact, I believe it will, only because I have come to the conclusion that the notion of randomness in the world is a deception.

I have come to believe that the world is just about as anal and rhythmic as I am (which is pretty damn).

I also believe that the Fed will use every lever to hold rates down.

I'm just not sure it's gonna work.


Savers may not be gasping for income that much longer.

Oh yeah, and P.S.

Did you make that refi application yet?



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