March 28, 2018, 4:06 p.m.


Recent stock market declines undermine the "boom" narrative that was ubiquitous in January. For much of 2017, value investors interpreted elevated CAPE as bad omen for U.S. Stock investors - and as a signal to diversify outside the U.S.

To the degree that stock values are determined by earnings (and concomitant dividends), high CAPE levels should concern "value" traders, and excite covered call sellers and put option buyers. The connection between the change in real dividends and the change is CAPE is worth exploring in this regards. Here's a look at the relationship between the log of CAPE and the log of Real Dividends: