The level of stock markets differs widely across countries. And right now, the United States is leading the world. What everyone wants to know is why — and whether its stock market’s current level is justified. We can get a simple intuitive measure of the differences between countries by looking at price-earnings ratios. I have long advocated the cyclically adjusted price-earnings (CAPE) ratio that John Campbell (now at Harvard University) and I developed 30 years ago. The CAPE ratio is the real (inflation-adjusted) price of a share divided by a 10-year average of real earnings per share. Barclays Bank in London compiles the CAPE ratios for 26 countries (I consult for Barclays on its products related to the CAPE ratio). As of Dec. 29, the CAPE ratio is highest for the U.S. Let’s consider what these ratios mean. Ownership of stock represents a long-term claim on a company’s earnings, which the company can pay to the owners of shares as dividends or reinvest to provide the shareholders more dividends in the future. A share in a company is not just a claim on next year’s earnings, or on earnings the year after that. Successful companies last for decades, even centuriesvia