This is a good piece on secular bull/bear markets from Ed Easterling on Barry’s blog.
I had never thought of visualizing the CAPE this way, although our chart on Japan last week was a similar metric…
I went back and picked the biggest bubble in 17 developed countries. Three charts are below.
1 – Peak CAPE value vs. length in time before CAPE went below 17. ie basically how long did it take for the market to get back to “fair value”
2 – Same chart without Japan
Median bubble CAPE was 45, and median time to recover was 3.5 years…Note that the 2000 bubble in the US “recovered” already in the 2008 dump (hit a low of 13 in March 2009). By this metric the secular bear is over, but we are still expensive.
