Are we close to CAPE Fear?

Way back in 1934, Benjamin Graham and David Dodd published a famous financial analysis tome called Security Analysis.  They argued that one-year returns are too volatile to make any informed decision on the future of a firm’s stock price.  It was suggested that using data of five or even ten years to smooth the returns was a far better predictor of a security’s forward-looking price.  If we then fast-forward to the 1980’s, “Stock Prices, Earnings and Expected Dividends” was published by John Campbell and Robert Shiller.  They determined that “a long moving average of real earnings helps to forecast future real dividends” which are correlated with returns on equities.  Shiller would eventually go on to use Graham and Dodd’s analysis as a way to value the stock market.  Shiller and Campbell used market data from both estimated and actual earnings reports from the S&P index and found that the lower the CAPE (cyclically-adjusted price earnings), the higher the investors’ likely return from equities over the following 20 years.

The Government Shutdown: There’s more at stake than just a wall

When the President of the United States opted not to sign into law a bipartisan bill to fund several government agencies (a bill which was overwhelmingly supported in both the House of Representatives and the Senate), the US Government entered a partial shutdown at midnight on the 22nd of December. A government shutdown isn’t a unique event anymore.  Shutdowns go all the way back to President Carter, and the only period in which there wasn’t a shutdown was during the George W Bush Administration.  The current shutdown is the longest in US history.