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grimkhor t1_jef3z0n wrote

Shiller PE uses a 10 year trailing PE so when stocks drop in PE it only has a 1/10th influence on their PE but inflation is build in directly so the Shiller PE is high. That's why the Shiller PE is terrible to use for current valuation. It can be used for long term (decades) prediction of future returns e.g. the next 10y market returns might be lower than the last (no need to be negative btw). This can also happen even further in the future so that's why Shiller PE is only useful if you think in decades but as you regards already forgot the beginning of the comment it doesn't really matter img

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DesmondMilesDant OP t1_jefdjua wrote

Yah i totally forgot we have a new bull market so who cares about valuations and what regime we are in. It doesnt matter! 😂

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grimkhor t1_jeffhez wrote

I gave you the reason you asked for. This is not about bull markets or not. It's about that Shiller PE doesn't weight the current valuation very high. If todays market would drop to 0 and no change in inflation so a PE of 0 the Shiller PE would drop from 29 to 26 that's how much a year worth of PE is weighted.

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DesmondMilesDant OP t1_jefgeob wrote

Yah sorry i forgot to thank you for that. 😅 Thank you again sir. Have a great April 2023. 😉

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