Take Note: The Decline In Equities Has Barely Started

This version of the original article, by Mish Shedlock, has been edited* here by munKNEE.com for length (…) and clarity ([ ]) to provide a fast & easy read.  For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE bi-weekly Market Intelligence Report newsletter (see sample here)

Decline Barely Started

Despite the rout, the S&P is just barely down for the year.

Expect a “Lost Decade”

Why?

The Shiller PE Ratio also known as “CAPE”, the Cyclically Adjusted Price-Earnings Ratio, is in the stratosphere. It’s not a timing mechanism, rather it’s a warning mechanism.

The main idea is that earnings are mean reverting [and], on that basis, stocks are more overvalued than any time other than the DotCom era. That [being said, this] is misleading. In 2000 there were many sectors that were extremely cheap. Energy was a standout buy then. So were retail and financials. It’s difficult to find any undervalued sectors now other than gold.

A Financial Crisis Coming

(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.}

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