US CAPE and q chart.
With the publication of the Flow of Funds data up to 31st December, 2012 (on 7th March, 2013) we have updated our calculations for q and CAPE. Over the past year net worth has risen by 7.6%, with the most significant rise being in the value ascribed to real estate (+ 5.9%). Interest-bearing assets have risen by 5.8% while interest-bearing liabilities have risen by 8.2%.HT: Greenbackd who has a nice quick overview of Universa's Mark Spitznagel and Malcolm Gladwell's 2002 piece on Nassim Taleb and the Empirica Fund, Blowing Up.
Both q and CAPE include data for the year ending 31st December, 2012. At that date the S&P 500 was at 1426 and US non-financials were overvalued by 44% according to q and quoted shares, including financials, were overvalued by 52% according to CAPE. (It should be noted that we use geometric rather than arithmetic means in our calculations.)
As at 12th March, 2013 with the S&P 500 at 1552 the overvaluation by the relevant measures was 57% for non-financials and 65% for quoted shares.
Although the overvaluation of the stock market is well short of the extremes reached at the year ends of 1929 and 1999, it has reached the other previous peaks of 1906, 1936 and 1968....MORE
We also looked at Empirica in 2009's "Taleb Makes Hyperinflation Bet and Why You Might Want to Be Skeptical":
Be careful!
The first point to be made is This is NOT a Black Swan bet. Black Swan's by definition come out of the blue. Inflation caused by central bank monetary and government fiscal policy is being debated in the HEADLINES!
Second, and more specific, Mr. Taleb is a better marketer than a money manager. His hedge fund returns were opaque* (which considering his self promotion implies they weren't that hot)....MUCH MORE, most of it not very nice.
