Shiller PE10 nearing nosebleed territory?
- William Million
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Re: Shiller PE10 nearing nosebleed territory?
Someday the market will drop significantly and the PE10 crowd will suddenly feel vindicated (after having lost money for years by believing in a discredited valuation measure)
- Maynard F. Speer
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Re: Shiller PE10 nearing nosebleed territory?
You mean if they'd moved into long-term treasuries as soon as the US market looked overvalued?William Million wrote:after having lost money for years by believing in a discredited valuation measure
Or they'd just bought-and-held cheap regions instead of expensive ones?
Yes ... Quite tragic really ...
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
Mr. Speer, can you explain "Global CAPE" in your chart?
- zaboomafoozarg
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Re: Shiller PE10 nearing nosebleed territory?
Do you know if there were any financial instruments available which followed the global CAPE as shown during the chart's time period? Or is it one which would have required a Do-It-Yourself approach?Maynard F. Speer wrote:Or they'd just bought-and-held cheap regions instead of expensive ones?
Yes ... Quite tragic really ...
One would think that if a fund was available which actually captured those returns displayed in the graph, it would be touted to no end on the internet and other forms of media. That hasn't been the case in everything I've seen though.
Also it worked exceedingly well from the late 90's to late 00's, but in the timeframe I have invested (starting in 2007) it appears to have performed similarly to the overall market. Maybe it will start differentiating again in the near future.
- Maynard F. Speer
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Re: Shiller PE10 nearing nosebleed territory?
Absolutely - it's one of Meb Faber's examples (from the book Global Value)Desert wrote:Mr. Speer, can you explain "Global CAPE" in your chart?
Once a year you buy-and-hold the cheapest 25% of countries by CAPE ratio (perhaps holding between 8 and 12 ETFs, rebalancing annually)
So right now you'd probably be holding countries like Russia, Hungary, Brazil, Czech, Portugal, Poland, Turkey, Austria, Italy, Spain
Not dissimilar to how investors like Jim Rogers invest: buy what no one wants and hope that in 10-15 years things look a little better ... Certainly a very long-term strategy, and often a volatile and painful one
For example I bought Italy at the start of the year and it's up 15%; but I bought Turkey and it's down 26% ... Russia's been all over the place, up 40% this year at once point, but down about 20% if you'd bought in 2014
There may also be better implementations of the strategy - for example combining CAPE with something non-cyclical, such as Price/Sales; and adding a momentum filter: buy on positive Relative Strength, Sell on negative (so you avoid falling knives and hold onto winners for longer)
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
Your second graph is interesting in that it show there was essentially no value (pun intended! ) in using CAPE to time the US market over that time period. It did reduce volatility nicely, but return is what puts food on the table.Maynard F. Speer wrote:You mean if they'd moved into long-term treasuries as soon as the US market looked overvalued?William Million wrote:after having lost money for years by believing in a discredited valuation measure
Or they'd just bought-and-held cheap regions instead of expensive ones?
Yes ... Quite tragic really ...
I don't think the idea is entirely crazy, but there are some challenges. First, any 8th grader with 30 minutes of training in Excel can find a method for market timing that worked in the past. But there are very few examples of real people who have made this or other tactical asset allocation schemes work in real time. In practice it has turned out to be quite difficult. Moreover, it takes a level of belief in the face of poor performance to stick to such a plan long enough for it to pan out even if you are right in the long term - few people have the fortitude. Not sure I do, though I have shown the fortitude for buy and hold, which history has shown even that simple plan is beyond many to implement consistently.
I would also think that to do this well you would need at the very least to consider stock valuation in the context of the relative valuations of the competing assets, such as bonds and real estate. Looking at stocks in a vacuum seems unwise.
I personally am going to take a pass - I can get where I am going without the inherent risks of trying to be clever. Plus in the short run momentum seems to be more important and at my age it is unclear I have "the long run" to make this work (P/E10 seems most predictive out around the 20 year time frame). But anyone who wants to give it a try I wish the best.
Last edited by Rodc on Sat Aug 22, 2015 6:18 pm, edited 1 time in total.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
Re: Shiller PE10 nearing nosebleed territory?
Thanks. I'm a big fan of value investing in general, but value is hard to find in developed countries these days, it appears. I'll look into Global CAPE. I assume one would end up holding a cheap country for many years in some cases, before it recovers. Are you using the strategy for just a slice of your equity holdings?
- Maynard F. Speer
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Re: Shiller PE10 nearing nosebleed territory?
There's only one fund I know of today following it, and it's Cambria's GVAL ETF - which has only been around about a yearzaboomafoozarg wrote:Do you know if there were any financial instruments available which followed the global CAPE as shown during the chart's time period? Or is it one which would have required a Do-It-Yourself approach?
One would think that if a fund was available which actually captured those returns displayed in the graph, it would be touted to no end on the internet and other forms of media. That hasn't been the case in everything I've seen though.
Also it worked exceedingly well from the late 90's to late 00's, but in the timeframe I have invested (starting in 2007) it appears to have performed similarly to the overall market. Maybe it will start differentiating again in the near future.
You've always had contrarian investors, like Jim Rogers and Mark Yusko, who buy what's on sale, with very long investing horizons, but it's not the kind of product most retail investors would want
The media (and most of us) are very obsessed with the short-term, and with this kind of strategy you should expect 10-15 year periods of underperformance as par for course - because you're buying things the market expects to be problematic over at least 3-5 years ... There also may be more investor-friendly strategies - e.g. Barclays CAPE ETN uses CAPE ratios to invest in cheap sectors (rather than regions) but adds a simple momentum filter to avoid falling knives and time the trades a little neater
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
And don't forget Bill Miller. Many retail investors thought he was the bomb, until well, he blew up.You've always had contrarian investors, like Jim Rogers and Mark Yusko, who buy what's on sale, with very long investing horizons, but it's not the kind of product most retail investors would want
I am sure he does not count though.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
- Maynard F. Speer
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- Joined: Wed Mar 18, 2015 10:31 am
Re: Shiller PE10 nearing nosebleed territory?
It shouldn't really be used for market timing (but re: the timing example - let's see where the US index is after the next correction!)Rodc wrote:Your second graph is interesting in that it show there was essentially no value (pun intended! ) in using CAPE to time the US market over that time period.
I don't think the idea is entirely crazy, but there are some challenges. First, any 8th grader with 30 minutes of training in Excel can find a method for market timing that worked in the past. But there are very few examples of real people who have made this or other tactical asset allocation schemes work in real time. In practice it has turned out to be quite difficult. Moreover, it takes a level of belief in the face of poor performance to stick to such a plan long enough for it to pan out even if you are right in the long term - few people have the fortitude. Not sure I do, though I have shown the fortitude for buy and hold, which history has shown even that simple plan is beyond many to implement consistently.
I would also think that to do this well you would need at the very least to consider stock valuation in the context of the relative valuations of the competing assets, such as bonds and real estate. Looking at stocks in a vacuum seems unwise.
I personally am going to take a pass - I can get where I am going without the inherent risks of trying to be clever. Plus in the short run momentum seems to be more important and at my age it is unclear I have "the long run" to make this work (P/E10 seems most predictive out around the 20 year time frame). But anyone who wants to give it a try I wish the best.
It may be useful for timing at extremes (such as a CAPE over 30) when combined with something like momentum (e.g. the S&P 500's price is below its 300 day moving average) .. If both those situations are true, it may be sensible from a risk-management point of view to move to cash or bonds
But really it's just a tool for estimating asset class returns ... So if US stocks look expensive, and have historically only returned (say) 2% annually from here, you might consider a slightly higher allocation to foreign stocks (where CAPE ratios are lower)
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
I may have misunderstood. I thought you were advocating something more.Maynard F. Speer wrote:It shouldn't really be used for market timing (but re: the timing example - let's see where the US index is after the next correction!)Rodc wrote:Your second graph is interesting in that it show there was essentially no value (pun intended! ) in using CAPE to time the US market over that time period.
I don't think the idea is entirely crazy, but there are some challenges. First, any 8th grader with 30 minutes of training in Excel can find a method for market timing that worked in the past. But there are very few examples of real people who have made this or other tactical asset allocation schemes work in real time. In practice it has turned out to be quite difficult. Moreover, it takes a level of belief in the face of poor performance to stick to such a plan long enough for it to pan out even if you are right in the long term - few people have the fortitude. Not sure I do, though I have shown the fortitude for buy and hold, which history has shown even that simple plan is beyond many to implement consistently.
I would also think that to do this well you would need at the very least to consider stock valuation in the context of the relative valuations of the competing assets, such as bonds and real estate. Looking at stocks in a vacuum seems unwise.
I personally am going to take a pass - I can get where I am going without the inherent risks of trying to be clever. Plus in the short run momentum seems to be more important and at my age it is unclear I have "the long run" to make this work (P/E10 seems most predictive out around the 20 year time frame). But anyone who wants to give it a try I wish the best.
It may be useful for timing at extremes (such as a CAPE over 30) when combined with something like momentum (e.g. the S&P 500's price is below its 300 day moving average) .. If both those situations are true, it may be sensible from a risk-management point of view to move to cash or bonds
But really it's just a tool for estimating asset class returns ... So if US stocks look expensive, and have historically only returned (say) 2% annually from here, you might consider a slightly higher allocation to foreign stocks (where CAPE ratios are lower)
I think paying attention to valuations makes some sense. Might be useful for example in setting an initial income from a portfolio when you retire, to a point. If P/E10 is low you might hope for solid future returns but it would not be prudent to push your luck very far because in the short term things might not go your way and then even if the market turned favorable you may own too few shares to recover. If P/E10 is really high when you retire you might choose to take a smaller than average percentage out and if very high you likely have more in your portfolio due to the run up (provided it is driven by high price and not low earnings) so even a modest percentage would get you a decent income.
Nothing wrong with moving some money from high P/E10 to low P/E10 (say US to International), especially if driven by P. I do that from time to time - I call it rebalancing. Not sure I would advocate doing so in the extreme. I looked at regular old rebalancing vs over- rebalancing (stock bond, not US vs International stocks) in a look the livesoft's Really Bad Day rebalancing strategy - did not make a meaningful difference over the 23 years of data I had at hand. That said, it may make a meaningful difference over some other period. I'd be a little surprise if it make a big difference very often - rebalancing simply does not move very much money. So, "slightly higher allocation to foreign" when CAPE suggests that is a good move, sure, but slight movements are not likely to materially effect one's retirement.
Last edited by Rodc on Sat Aug 22, 2015 6:38 pm, edited 1 time in total.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
- Maynard F. Speer
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Re: Shiller PE10 nearing nosebleed territory?
Oh yeah, I mean Russia could easily be down there for the next 10-15 years, and the market could conceivably go to 0% (which it has done before) ... So diversifying would be very important, and on balance you'd hope for more winners than losers over a period of 15 years (a simple climb up the risk/reward ladder)Desert wrote:Thanks. I'm a big fan of value investing in general, but value is hard to find in developed countries these days, it appears. I'll look into Global CAPE. I assume one would end up holding a cheap country for many years in some cases, before it recovers. Are you using the strategy for just a slice of your equity holdings?
I think Meb Faber has about 20-25% of his own portfolio in global value strategies - but I don't follow anything that systematic ... At the moment I've got 5% of my portfolio I call 'Opportunities' - and that's where I buy-and-hold cheap regions where there's a good investment case - so I've got Eastern Europe, South Korea and Italy at the moment
But I use valuations in general across all my portfolio, and my personal favourite metric is the PEG ratio
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
- Maynard F. Speer
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Re: Shiller PE10 nearing nosebleed territory?
I don't know a great deal about how he invested .. But knowing how value tends to work, I'd expect 10-15 year periods of underperformance - but then sometimes with these funds the mistake is (obviously) getting too largeRodc wrote:And don't forget Bill Miller. Many retail investors thought he was the bomb, until well, he blew up.You've always had contrarian investors, like Jim Rogers and Mark Yusko, who buy what's on sale, with very long investing horizons, but it's not the kind of product most retail investors would want
I am sure he does not count though.
RenTech's Medallion fund is still making 70% annual returns (before fees), but their larger public funds struggle to beat the index .. So that can be a huge factor
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
- Maynard F. Speer
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- Joined: Wed Mar 18, 2015 10:31 am
Re: Shiller PE10 nearing nosebleed territory?
Well the simple rule I started out with was to buy cheap .. I'm usually fairly pessimistic about market returns, but buying cheap is something you've at least got some control over (and I think perhaps a lot of bad market behaviour comes from control freaks trying to convince themselves they're not control freaks)Rodc wrote:I may have misunderstood. I thought you were advocating something more.Maynard F. Speer wrote:It shouldn't really be used for market timing (but re: the timing example - let's see where the US index is after the next correction!)Rodc wrote:Your second graph is interesting in that it show there was essentially no value (pun intended! ) in using CAPE to time the US market over that time period.
I don't think the idea is entirely crazy, but there are some challenges. First, any 8th grader with 30 minutes of training in Excel can find a method for market timing that worked in the past. But there are very few examples of real people who have made this or other tactical asset allocation schemes work in real time. In practice it has turned out to be quite difficult. Moreover, it takes a level of belief in the face of poor performance to stick to such a plan long enough for it to pan out even if you are right in the long term - few people have the fortitude. Not sure I do, though I have shown the fortitude for buy and hold, which history has shown even that simple plan is beyond many to implement consistently.
I would also think that to do this well you would need at the very least to consider stock valuation in the context of the relative valuations of the competing assets, such as bonds and real estate. Looking at stocks in a vacuum seems unwise.
I personally am going to take a pass - I can get where I am going without the inherent risks of trying to be clever. Plus in the short run momentum seems to be more important and at my age it is unclear I have "the long run" to make this work (P/E10 seems most predictive out around the 20 year time frame). But anyone who wants to give it a try I wish the best.
It may be useful for timing at extremes (such as a CAPE over 30) when combined with something like momentum (e.g. the S&P 500's price is below its 300 day moving average) .. If both those situations are true, it may be sensible from a risk-management point of view to move to cash or bonds
But really it's just a tool for estimating asset class returns ... So if US stocks look expensive, and have historically only returned (say) 2% annually from here, you might consider a slightly higher allocation to foreign stocks (where CAPE ratios are lower)
I think paying attention to valuations makes some sense. Might be useful for example in setting an initial income from a portfolio when you retire, to a point. If P/E10 is low you might hope for solid future returns but it would not be prudent to push your luck very far because in the short term things might not go your way and then even if the market turned favorable you may own too few shares to recover. If P/E10 is really high when you retire you might choose to take a smaller than average percentage out and if very high you likely have more in your portfolio due to the run up (provided it is driven by high price and not low earnings) so even a modest percentage would get you a decent income.
Nothing wrong with moving some money from high P/E10 to low P/E10 (say US to International), especially if driven by P. I do that from time to time - I call it rebalancing. Not sure I would advocate doing so in the extreme. I looked at regular old rebalancing vs over- rebalancing (stock bond, not US vs International stocks) in a look the livesoft's Really Bad Day rebalancing strategy - did not make a meaningful difference over the 23 years of data I had at hand. That said, it may make a meaningful difference over some other period. I'd be a little surprise if it make a big difference very often - rebalancing simply does not move very much money. So, "slightly higher allocation to foreign" when CAPE suggests that is a good move, sure, but slight movements are not likely to materially effect one's retirement.
But I think of it primarily as risk management .. If something's on very high valuations with low forecast growth, I think it becomes vulnerable to market corrections, so I'd usually want to reduce exposure - I actually sold out of a few positions in May and June this year (including China)
At the same time I've got a maximum risk tolerance for holding regions like Russia, no matter how cheap they are .. I suppose I'd say there's a sensible middle-ground, where you don't hold too many significantly over or undervalued assets, and it can perhaps help steer you away from the more emotionally driven mistakes of the market
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
This is a top-down approach. You first select the markets (countries).zaboomafoozarg wrote:Do you know if there were any financial instruments available which followed the global CAPE as shown during the chart's time period? Or is it one which would have required a Do-It-Yourself approach?Maynard F. Speer wrote:Or they'd just bought-and-held cheap regions instead of expensive ones?
Yes ... Quite tragic really ...
One would think that if a fund was available which actually captured those returns displayed in the graph, it would be touted to no end on the internet and other forms of media. That hasn't been the case in everything I've seen though.
Also it worked exceedingly well from the late 90's to late 00's, but in the timeframe I have invested (starting in 2007) it appears to have performed similarly to the overall market. Maybe it will start differentiating again in the near future.
I'm quite sure that many managers of global funds adopt similar strategies.
It's just the case US investors are not accustomed to invest in global funds.
In another post I quoted Keppler Assoiates, NY which manages global funds for Non-US investors (see the two 'Global Advantage Funds').
Strategy:
The factsheets of the two funds (DV and EM) show that both funds strongly outperformed in some years but over the last 20 years the funds matched the performance of the related global index (which is an acievement given that the fees exceed 1,25% and 1,50%).Much of our work concerns country selection models. Our research has shown that over 3- to 5-year periods national equity markets tend to oscillate around equilibrium value levels. These values can be determined approximately through in-depth analyses of the underlying fundamentals. By entering markets when they sell at a discount to their intrinsic value and exiting them when they sell at a premium, it is possible to achieve higher returns than by following a buy-and-hold strategy.
...
The country allocation process tends towards equal weighting of markets (subject to liquidity)...
BTW, the company claimed to have back-tested the strategy and it had generated huge outperformance.
prior username: hafis50
Re: Shiller PE10 nearing nosebleed territory?
Check out "The forgotten man" by Shlaes for more on this double-dip depression.JoMoney wrote:
...Note the rise and drop around 1937... several years after the crash was looking like a recovery.
70% Global Stocks / 30% Bonds
- Maynard F. Speer
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- Joined: Wed Mar 18, 2015 10:31 am
Re: Shiller PE10 nearing nosebleed territory?
It's difficult for retail funds to follow strategies like this .. Considering the media considers a fund to have failed after 5 years of underperformance, it would be hard to hold onto investorshafius500 wrote:This is a top-down approach. You first select the markets (countries).
I'm quite sure that many managers of global funds adopt similar strategies.
It's just the case US investors are not accustomed to invest in global funds.
In another post I quoted Keppler Assoiates, NY which manages global funds for Non-US investors (see the two 'Global Advantage Funds').
Strategy:Much of our work concerns country selection models. Our research has shown that over 3- to 5-year periods national equity markets tend to oscillate around equilibrium value levels. These values can be determined approximately through in-depth analyses of the underlying fundamentals. By entering markets when they sell at a discount to their intrinsic value and exiting them when they sell at a premium, it is possible to achieve higher returns than by following a buy-and-hold strategy.
...
The country allocation process tends towards equal weighting of markets (subject to liquidity)...
If they've found a 3-5 year equilibrium, it's probably more practical for retail investors, but unlikely to be the same deep value approach (CAPE's mean reversion period is usually closer to 15 years) ... I'd also imagine any investor experienced enough to follow such an approach would be avoiding 1.5% fund fees
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
I didn't want to argue that such strategies won't work.Maynard F. Speer wrote:It's difficult for retail funds to follow strategies like this .. Considering the media considers a fund to have failed after 5 years of underperformance, it would be hard to hold onto investorshafius500 wrote:This is a top-down approach. You first select the markets (countries).
I'm quite sure that many managers of global funds adopt similar strategies.
It's just the case US investors are not accustomed to invest in global funds.
In another post I quoted Keppler Assoiates, NY which manages global funds for Non-US investors (see the two 'Global Advantage Funds').
Strategy:Much of our work concerns country selection models. Our research has shown that over 3- to 5-year periods national equity markets tend to oscillate around equilibrium value levels. These values can be determined approximately through in-depth analyses of the underlying fundamentals. By entering markets when they sell at a discount to their intrinsic value and exiting them when they sell at a premium, it is possible to achieve higher returns than by following a buy-and-hold strategy.
...
The country allocation process tends towards equal weighting of markets (subject to liquidity)...
If they've found a 3-5 year equilibrium, it's probably more practical for retail investors, but unlikely to be the same deep value approach (CAPE's mean reversion period is usually closer to 15 years) ... I'd also imagine any investor experienced enough to follow such an approach would be avoiding 1.5% fund fees
In fact, the Keppler fund that only invests in developed markets had strongly outperfomed the MSCI World Value index and its sector (global large value) from 1993 through ca. 2007 (similar results for the fund that invests in the EM).
Morningstar:
10000 Euros invested in 1993 grew to 48000 € in the fund, 37000 € in the index and 33000 € in the sector average in ca. 2007.
And an investor who bought the fund in 1993 would have beaten the index and the sector most of the time.
Perhaps the strategy underperformed recently because the 'risk' showed up. Probably we will never know.
"If we believe such strategies can be successful, why don't we see more outperforming funds ?"
- Fund companies may have incentives to limit tracking-error.
- Such portfolios may be too scary for many potential investors. Therefore, such funds are not offered.
- Traditional funds may be over-diversified. They do not invest only in the best ideas.
Although the fund is 'diversified' (currently it holds more than 200 securites), the fund underperformed the MSCI World Index by more than 9 percentage points and its sector (global large value) by more than 11 percentage points in some years
(Morningstar, 2008-14).
Despite the high number of shares it was different from the index and sector.
Some people claim that somebody who owns 50 (domestic) stocks does not need to add other (foreign) stocks because this wouldn't increase diversification.
This example proves that you can hold 200 stocks which are invested in roughly one dozen of countries and perform very differently from the market.
prior username: hafis50
- Maynard F. Speer
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Re: Shiller PE10 nearing nosebleed territory?
Oh absolutely ... For me it's that there are some very tidy theories in finance - which make decisions seem fairly black & white - but which perhaps rely too heavily on the average performance of mutual funds for proofhafius500 wrote:I didn't want to argue that such strategies won't work.
In fact, the Keppler fund that only invests in developed markets had strongly outperfomed the MSCI World Value index and its sector (global large value) from 1993 through ca. 2007 (similar results for the fund that invests in the EM).
Morningstar:
10000 Euros invested in 1993 grew to 48000 € in the fund, 37000 € in the index and 33000 € in the sector average in ca. 2007.
And an investor who bought the fund in 1993 would have beaten the index and the sector most of the time.
Perhaps the strategy underperformed recently because the 'risk' showed up. Probably we will never know.
"If we believe such strategies can be successful, why don't we see more outperforming funds ?"
- Fund companies may have incentives to limit tracking-error.
- Such portfolios may be too scary for many potential investors. Therefore, such funds are not offered.
- Traditional funds may be over-diversified. They do not invest only in the best ideas.
Although the fund is 'diversified' (currently it holds more than 200 securites), the fund underperformed the MSCI World Index by more than 9 percentage points and its sector (global large value) by more than 11 percentage points in some years
(Morningstar, 2008-14).
Despite the high number of shares it was different from the index and sector.
Some people claim that somebody who owns 50 (domestic) stocks does not need to add other (foreign) stocks because this wouldn't increase diversification.
This example proves that you can hold 200 stocks which are invested in roughly one dozen of countries and perform very differently from the market.
What the ideal fund or ETF really needs to do is track the market with slightly lower volatility and slightly higher returns - those are the funds fund platforms and IFAs can easily recommend .. Warren Buffett calls it the "institutional imperative", it's been called the "short-term performance derby" - and it seems like a much harder feat to pull off, involving much more active trading and correct short-term sector bets
Those look like interesting funds - I notice the Emerging fund has quite a bit in Taiwan and Malaysia, which I don't think look very cheap .. Of course if you just invested in cheap EM, it would be dominated by Eastern Europe and Brazil, and performance would look fairly nightmarish! So I imagine there may be some imperative to avoid a pure value play
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
The question thouh is did the when did the markets get overvalued. 20 looks like a reasonable number now.Maynard F. Speer wrote:You mean if they'd moved into long-term treasuries as soon as the US market looked overvalued?William Million wrote:after having lost money for years by believing in a discredited valuation measure
Or they'd just bought-and-held cheap regions instead of expensive ones?
Yes ... Quite tragic really ...
In 2015 the historical pe10 since 1920 is 17
in 1990 it was 14
If your cut off was 20 in 1990, today that would be about 24. If you factor in accounting rules changes it would be 30. It is easy to come up with the magic numbers when you can look back (look at how selling when the PE10 crosses 27 and going 100% stocks for 5 years the year after you cross the 35% loss from peak also works out very well. It is easy to laugh at that strategy when you realize the it is based solely on avoiding 1929-31, 2000-2002, and 2008)
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Re: Shiller PE10 nearing nosebleed territory?
I wouldn't call it a strategy - more of a response to the criticism that you'd have missed out by not investing in overvalued US markets over this period (and who knows where we'll be after the next correction)randomguy wrote:The question thouh is did the when did the markets get overvalued. 20 looks like a reasonable number now.
In 2015 the historical pe10 since 1920 is 17
in 1990 it was 14
If your cut off was 20 in 1990, today that would be about 24. If you factor in accounting rules changes it would be 30. It is easy to come up with the magic numbers when you can look back (look at how selling when the PE10 crosses 27 and going 100% stocks for 5 years the year after you cross the 35% loss from peak also works out very well. It is easy to laugh at that strategy when you realize the it is based solely on avoiding 1929-31, 2000-2002, and 2008)
But anyway it's an imperfect measure, so any arbitrary cut-off from 16 to 26 would probably work just fine
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
Re: Shiller PE10 nearing nosebleed territory?
Wrong.Maynard F. Speer wrote:But anyway it's an imperfect measure, so any arbitrary cut-off from 16 to 26 would probably work just fine
Re: Shiller PE10 nearing nosebleed territory?
I think he's right. It is an imperfect measure, and whether or not something will "work" depends on what the goal is that it's supposed to being working towards... and it might do that (but I'm willing to bet there are thousands of other methodologies that would also "work", and probably ones that are easier to implement and lower cost and maybe lower risk too...)HomerJ wrote:Wrong.Maynard F. Speer wrote:But anyway it's an imperfect measure, so any arbitrary cut-off from 16 to 26 would probably work just fine
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham