After we published Doug Short's essay on the market's inflation-adjusted long-term PE ratio, one reader asked whether Doug had also calculated the PE using the "alternate CPI."

(Some folks think the alternate CPI, which reflects how the government used to calculate inflation, better represents the rate at which the value of our money is being destroyed.)

Well, Doug was listening. And for those who prefer the alternate CPI, the news is good. Stocks are modestly cheap on that measure! (They're at fair value on the regular one.)

Here's the 10-year smoothed PE for the past century using the regular CPI. On this measure, stocks are just over their long-term average.

And here's the same period using the alternate CPI. On this measure, stocks are modestly cheap!

Don't miss Doug's explanation of why the 10-year PE is much more useful than the one-year PE >

See dshort.com for more excellent charts and analysis >