The S&P 500 Could Fall By 63%

A few weeks ago, I covered the latest offering from GMO’s James Montier and Matt Kadnar, who pointed out that the S&P 500 bubble is now trading at its second or third (depending on which measure you use) most expensive level in history.

Using the Shiller P/E, which normalizes earnings from their current value to an approximate trend using a 10-year moving average, the only times’ equities have been more expensive were 1929 and 1999. Meanwhile, according to the Hussman P/E, named after its creator John Hussman, which seeks to provide more accurate reading than the Shiller P/E by normalizing 10-year average earnings to peak earnings,  the market is currently in its second most expensive period in history. Only in 1999...