CAPE Fear: Valuation Ratios and Market Timing by Weston Wellington

As broad market indices such as the S&P 500 have set new record highs in recent weeks, many investors have become apprehensive. They fear another major decline is likely to occur and are eager to find strategies that promise to avoid the pain of an extended downturn while preserving the opportunity to profit in up markets.  Many investors think relying on the CAPE ratio—the Cyclically Adjusted Price / Earnings ratio—is a sensible way to improve portfolio results by periodically adjusting equity exposure when the ratio reaches a certain level. In the September 5, 2014 edition of Down to the Wire, Weston Wellington reviews using the CAPE ratio to determine buy and sell indicators for the stock market:   42832_DownToTheWire_ShillerBlog