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Shiller Abandons P E Ratio’s and Does a Roubini

Stock-Markets / Stock Markets 2011 Jan 03, 2011 - 02:02 AM GMT

By: Andrew_Butter


Oh dear, I suppose all good things must come to an end one day. Today, tragically, we must mourn the sad demise of “trailing P/E ratios” as the infallible predictor of the future.

Using long term analysis, Professor Robert Shiller, macromarkets chief economist at Yale University and the co-creator of the S&P/Case-Shiller Home Price Index, told CNBC on Friday that the S&P 500 may reach 1430 by the year 2020.

But now the latest thing is Long-Term-Analysis”!! Mm, that sounds impressive!! I wonder if that’s got anything to do with LTCM, could this be a new direction for the “science” of economics from he who announced that the NASDAQ was a bubble, a week before it popped?

"The problem with the traditional price earnings ratio is that earnings are just too volatile from year to year," Shiller said.

I was quite interested in Shiller abandoning his P/E idea since I’ve had at least one hundred rabidly hostile comments from P/E groupies in response to the “completely lunatic and delusional predictions” that I have made about the S&P 500 over the past two years based on the “Non-Science” of BubbleOmics.

Completely crazy predictions like… “S&P 500 will bottom at 675” (correct), “then rally strongly” (correct) “up to 1,200” (correct) “then there will be a 15% reversal” (correct) “but that won’t last long” (correct). My favourite comment in that regard was “This is the dumbest article I have ever read on Seeking Alpha”!

Shiller (the P/E Guru) Andrew Smithers (the Tobin guru) and Roubini (the Broken-Clock guru), have been saying that the S&P 500 is overvalued since March 2009, the best prediction by far was Roubini’s “Dead-Cat-Sucker-Bounce” on 14th March 2009.

Now all is revealed…1,430 before 2020!!!

WOW…the precision is mind-boggling, no mention of “about” or rounding up to 1,500 or anything like that, although he does cover himself with “may”. So presumably there is a 25% chance that it may NOT reach 1,430 by 2020?

Well here’s what I think; I think the S&P 500 will reach 1,430 before 2014 and it might even reach it next year.

That’s based on analysis of 100 years of data that I did two years ago, and the “valuation model” was developed strictly in accordance with International Valuation Standards.

You can find the latest version of that here:

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe; currently writing a book about BubbleOmics. Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.

© 2010 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Andrew Butter Archive

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