Barry Ritholtz, from The Big Picture, points out today on Bloomberg that Enterprise Value / EBITDA has the best track record of forecasting forward markets. Looking market wide EV/EBITDA shows that the market is about fairly valued so future gains should be about average, in the 8 to 10% area. This is in contrast to other ratio’s which show an overvalued market.

In regards to CAPE, the metric misses a couple of key points. ROE for technology companies are completely different than old line business. They simply do not require the investment that traditional old-line businesses did. Second, the cost of being an investor today is a fraction of what it used to be.