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Rekenthaler Report

Old Friends

Revisiting the debate over U.S. stock prices, and whether honesty is more than its own reward.

Two Concerns About the Cape Ratio
In yesterday's English edition (registration required) and today's American edition, Financial Times weighs in on the debate between the professors Shiller and Siegel about U.S. stock prices. As previously covered here, Robert Shiller's cyclically adjusted price/earnings ratio (Cape ratio) shows the U.S. stock market to be expensive by 100-year standards. Jeremy Siegel responds that yes, the ratio does, but due to changes in U.S. accounting practices, the first 85 years' worth of data in the chart are noncomparable--and that stocks look acceptably priced by the standards of the past 15 years.

The two editions' articles are not only different, but they differ in their conclusions, although the articles were written by the same author. (And you thought was confusing!)