“Yale University professor (#RobertShiller) born in 1946 looked to the past. His ‘cyclically adjusted price-to-earnings ratio’ is calculated by dividing a share price by the average of the past ten years of earnings adjusted for inflation. If high, the ratio warns of lower returns to say the least.
Shiller added credence to his analysis by calculating his ratio for the US #ShareMarket on a monthly basis back to 1881 – the ratio’s average over these 144 years is 17.29. At the end of October, the ratio stood at 41.20, the highest since 1881 except for when during the #DotcomBubble when it reached 44.19 in 1999.
That means the #Shiller #PEratio is higher than its 31.48 peak before the 1929 crash, when stock values plunged nearly 90 per cent. It’s almost at #DotCom heights from when the #S&P500 Index sagged 49 per cent and the tech-heavy #NasdaqCompositeIndex dived 78 per cent. Other indicators say US #stocks are more overvalued than in 2000.
Such numbers explain why so many, from the #IMF and the #BankOfEngland to even #tech #CEOs, talk of a US #StockBubble, as do #investors. A survey in October found a record 54 per cent of global fund managers (who each manage more than US$400 billion) think #ArtificialIntelligence stocks are in a bubble.”
Still questioning the AI investment bubble talk?
#finance / #prudence / #AIWinter <https://spectator.com.au/2025/11/beware-an-ai-stock-bust/>