Subject: Re: OT: S&P versus T-Bills?
Just not actionable in the sense of telling you whether the market is going to go up or down next.
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Yup. But that's exactly the information that we want to know. So all high CAPE tells us is that the expected future returns for the next many years will probably be lower than average. It doesn't tell us what to do, just what to expect.

The direction of the market's next move may be what you want to know, but it shouldn't be. That's not what's important for a long term portfolio, nor is it something you're ever going to have in any case. The information that you should want to know is how much will the business(es) you're considering buying be earning in the next decade or so, per dollar invested today. Conveniently, that's not nearly so difficult to assess.

However, as it happens CAPE is indeed telling you something very specifically actionable at the moment: do not buy the broad US market now to hold for the next 5-10 years. Unless you are happy with the expectation of a very low rate of return. You might get lucky, we might see bubble valuations at the end dates, but that's not exactly a reliable investment strategy. When you hear hoofbeats expect horses, not zebras.

I don't know what the future will bring, but for whatever it's worth, since 1995 purchases of the S&P 500 at valuations similar to today's based on smoothed real earnings have led to forward real total returns in the subsequent 7 years averaging about inflation + 1%/year. Unless I have a reason to expect something different, which I don't, that makes a good central expectation. In fact that may be unrepresentatively optimistic, considering (a) smoothed earnings have been unusually above trend lately (the basis of the valuation) and (b) the gradual trend of rising valuation multiples which has been implicitly included in the average past return.

Jim