Robert Shiller

  • 10 Mar
    How The CAPE Ratio Can Give You An Investing Edge

    How The CAPE Ratio Can Give You An Investing Edge

    • The CAPE ratio shows when something is cheap or expensive and is much more precise than the PE ratio.
    • The S&P 500 is 74% overvalued and will result in negative 10-year returns according to the CAPE ratio and history.
    • However, there is plenty that can be done to improve your returns.

    Introduction

    Whether you’re a long-term investor or a trader, something that gives you a clue on the long-term trend around a security or sector is always very useful. Such a ratio was developed by Yale professor Robert Shiller and he didn’t get a Nobel prize for nothing, the CAPE ratio really works.

    Today, I’ll describe it, show how it can be used, and analyze its past performance. More →

  • 13 Oct
    How To Spot The Big Trends Of The Future

    How To Spot The Big Trends Of The Future

    • In the short term, the market is heavily influenced by new information and noise.
    • In the long term, there are clear trends that can give you an edge to beat the market.
    • We’ll discuss a few trends that are clear but that will take time to develop.

    Introduction

    Some argue that the market is efficient and prices always reflect available information. The Efficient Market Hypothesis (EMH) was developed by Chicago School of Economics Professor Eugene Fama who was also awarded a Nobel prize for his findings in 2013. Implications of the EMH are that it is impossible to beat the market consistently on a risk-adjusted basis since market prices only react to new information or changes in discount rates. More →

  • 08 Jun
    Is Your Portfolio “Irrational Exuberance” Proof?

    Is Your Portfolio “Irrational Exuberance” Proof?

    • There are a few tools to test if the market is in “irrational exuberance.”
    • There are indications that the current market is irrational, but history shows that 100% returns are still possible.
    • The stock market is still risky, so an appropriate premium should be expected.

    Introduction

    “Irrational exuberance” is a phrase first used by former FED chairman Alan Greenspan in his December 5, 1996 speech. His intention was to question whether low inflation should imply “higher prices for stocks and other earnings assets,” and to assess the risks of such a market by asking “how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” Let’s not forget here that Japan is still in the same prolonged contraction mentioned by Greenspan in 1996. More →

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