Shiller Ratio has been developed by Robert Shiller a Yale Economics Professor and a recent Nobel Laureate.
Lahore, Pakistan -- (SBWIRE) -- 04/17/2014 -- In an article recently published on Forbes, William Baldwin says that comparing stock earnings tell that market is overvalued by 40% to 50% and the Shiller Ratio is screaming sell. Shiller Ratio has been developed by Robert Shiller a Yale Economics Professor and a recent Nobel Laureate. Shiller Ratio is calculated by looking at the average earnings for S&P 500 Index over a full decade adjusted for inflation. Shiller Ratio divides the price of the index by the earnings number. In 2009, Shiller Ratio was buy and the stocks doubled in price since then. But now the Shiller Ratio is screaming sell according to William Baldwin.
This is what William Baldwin says: “What to do? Go to 100% cash? You probably shouldn’t go that far. But you should lighten up your stock allocation, says James Montier, an asset allocation theorist at the Boston money manager Grantham, Mayo, Van Otterloo, a.k.a. GMO. You should definitely lower your expectations. If you were counting on equities to get you to a comfortable retirement, rethink your finances. GMO didn’t get where it is ($117 billion under management) by making wrong calls, so its projections are worth a look.”
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About William Baldwin
William Baldwin is a Forbes contributor. William Baldwin graduated from Harvard In 1973 and believes that it is hard but not impossible to beat the market.
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