A reader asks about the Schiller CAPE ratio

Hi Mr. Stone, I found the following comment on x.com regarding the Shiller CAPE ratio. Do you agree with this analysis?

“Today we reached and are now teetering upon the absolute zenith of the Dot-com bubble.

The Shiller CAPE ratio has just breached heights unseen since that fateful era.
Mind you, the 44 level on the Schiller PE ratio hit was merely a brief, ominous stopover before the indices plunged into a grueling distribution phase, quietly unloading toxic exposure before the floor completely gave way.

Today, the underlying dynamics are far more catastrophic. We are trapped inside an utterly dysfunctional, propped up by mega-cap stocks. Beneath this fragile facade lies a mountain of mind-bending leverage and systemic debt so colossal that it renders the 2008 Great Financial Crisis a period of bullish optimism.

This will not be a mere correction. It will be a reckoning.”

Prima facie, the prices of most assets look historically overstretched. Yes. That’s my conclusion. Professional sports teams that cost $180 million in the late 1990s are selling for $10 billion today. These aren’t just theorized values that are published in Forbes. These are actual transaction values.

Let’s look at the price multiples of residential housing worldwide. The United States looks relatively cheap at about 4x household income. The rest of the Western world sits at as much as 10x, or greater. Who can afford these prices? At first blush, it doesn’t make sense.

If I didn’t know of the conspiracy that we discuss, I would be warning of impending collapse everyday. However, there’s something else going on. There was plenty of opportunity to create a catastrophic and comprehensive asset market collapse across the board during COVID, but everything was resuscitated, and then some.

Sure, in a broad-based measure, measurements such as the CAPE ratio are historically overvalued. But if we take a step back and look at this measure’s performance since the GFC and the implementation of QE and the FED backstopping of every asset class, we see how this ratio has slowly been climbing.

But I ask the reader, does that matter now? Quantitative easing and all of its off shoots and iterations, including the de facto backstopping of all assets, which has enabled the FED to backstop and control the yield curve, has allowed the economy to transform in a compressed amount of time.

Moreover, this current iteration of the monetary and financial system has allowed for the most massive consolidation of wealth and power the world has ever seen going back to Adam and Genesis one man. Why would its engineers want it to end now when the end goals of the Great Reset are so close?

These ruling authorities are greatly pumping up the amount of debt and its concomitant money supply measures. I don’t think they even really care about the inflation anymore, other than to contain it, lest the proles rise up. Based on the behavior and the lack of any bona fide responses, my only conclusion is they intend on blowing it up or having it blown up. Thus, we are observing what we are observing today.

If the bottom 80% of the population in balance sheet wealth are dying a slow death, it doesn’t seem to matter anymore to the authorities.

As long as the Federal Reserve can backstop and control everything, which it has been doing since 2008, all of these newly issued Treasuries act as risk-free collateral and are being used to buy up everything and have been used to generate economic activity.

Moreover, if the asset markets collapse like during COVID, I’m certain the FED would step in and buy trillions more in Treasury debt, contradicting their public narrative of selling off its Treasury holdings. The investing and trading public has been trained over the past 18 years to count on Federal Reserve intervention on an ever-rising scale.

Currently, the Federal Reserve can take its foot off the QE throttle, so to speak, because the elevated asset market prices do the heavy lifting for them, and the growing Treasury pile can be more easily absorbed throughout the economy. But if the asset markets crater, the FED will step in. It’s like bowling with gutter guards in place.

What do I think is going on?

Mark my words, there will be some event in the future that will change things forever. It won’t be like COVID, either. However, the monetary and governing authorities don’t seem to really care about any of the current repercussions, other than paying a lip service.

Personally, I have to conclude that there is some huge secret economic activity that is going on as we speak. It’s the only answer I can make, given the magnificent increases in M2 and public debt generation.

Perhaps the many trillions of dollars in newly minted Treasuries are also being used as collateral to build bunkers and underground hideouts. These ruling authorities thought they could leave the planet by now, but it’s becoming clearer every day that our creator is not allowing us to leave lower Earth orbit.

Thus, I suspect there’s a comprehensive end time contingency plan going on as we speak. Much of the timeline is outlined in the written word. As long as the asset markets levitate like they have been, and it seems the monetary authorities want it that Way, the current set of objectives can continue.

My advice for those looking to get on to the asset market train is simple. Stay the course if you already own the assets, but unless the numbers make sense, I think it’s too late to start.

Stateside, there’s rental housing out there that’s still relatively inexpensive. It’s not everywhere, but if we run the numbers properly, and we look to the past measurements of a particular property as a guide, there’s some housing stock in the states that can still make it go. The rental income is considered passive for IRC purposes, it really is like having a second job.

NVDA is a 5 trillion dollar company. Do I advise buying it now? In any traditional set of measurements, in a pre-QE world, the ratios are in the stratosphere. But for those who already own NVDA, I’m not going to tell them to sell.

The circumstances needed to create the Great Tribulation tableau costs many trillions of dollars and objectives must be achieved in a small amount of time. Maybe it is wormwood, maybe it’s a global war force majeure where missiles strike DC and New York City. Whatever it is, it seems that the ruling authorities know it’s coming.