Predicting 15 of the Past 4 Stock Market Crashes

I am referring, of course, to the current hand wringing over the price/equity (PE) ratio.

While the number is concerning, using this statistic as a a hard limit is on its face financially absurd.

Usually when numbers shoot higher on Wall Street, it is a reason for celebration.

That is not how Jonas Goltermann, the chief markets economist at Capital Economics, feels when he looks at one of the most feared charts on the stock market: the Shiller price-to-earnings (PE) ratio.

“That’s obviously a bit worrying,” he says after seeing the metric on track to end the month at its highest level since August 2000.

The Shiller PE ratio, a closely watched fear gauge on Wall Street, may sound esoteric, but it has become one of the most important numbers in the world – and one you should care about.

For all intents and purposes, it is the canary in the coal mine for global financial crashes.

To be clear, I do believe that we are headed to a crash, and that this crash is coming because the entire facade of our current financial market is a fraud. (The AI bubble)

What I do not believe is that this obsession with PE ratios is a useful diagnostic tool.