Here is a link to a Daily Mail article dated Sept. 2014, that shows an example of a global CAPE strategy using single country ETFs. Meb Faber has done a lot of work on this principle.
It is probably too complicated for most investors.
http://www.dailymail.co.uk/money/investing/article-2738966/How-use-CAPE-beat-market-global-CAPE-values.html

Hi Bee,
Thank you for reading and replying to my post.
Our family portfolio does indeed have many more components than are reflected in the simplified forecasting tool that I proposed. The portfolio includes Foreign Developed Equities, Emerging Market units, REITs, Commodity holdings, and government TIP positions. It is much more diversified than my simple model might suggest.
To respond to a second question that you asked, if a foreign equivalent to Shiller’s CAPE formulation exists, I am not familiar with it. Sorry, I can’t help in that area.
The issue you raised with regard to the inclusion of more investment categories to complete the forecasting tool is very pertinent. That’s why I started and ended my submittal by referencing Einstein’s simplicity caution. The utility of the forecasting tool can be corrupted by over simplification. That danger is real.
Probably no final answer exists. Much depends on the accuracy, the load that the simplified tool is expected to carry. My target goal was dominated by simplicity considerations, and I was prepared to sacrifice some accuracy. Although I did not do a formal analysis, I did scan the historical returns for other sub-group categories. Yes, they depart from US Equities and Bonds, but not that dramatically over the long haul.
For my purposes, I concluded that ignoring these other categories would not compromise the model too drastically. Also, finding simple ways to project returns for these categories (if they exist) is a daunting challenge that I was not prepared to accept. Complexity would quickly multiply. So I punted.
I’m in the diversified marketplace regardless of the model projections. I’ve mostly used it as a tool to dampen the overly optimistic expectations of bushytailed new investors. I try to balance expectations with real world likelihoods.
Although US Equities are likely to deliver muted returns over the next few years, I am not convinced that non-US positions will do much better. In many ways, global problems are as complex, interactive, and deep as those we face. A butterfly flaps its wings in New York, and the world feels its amplified effects. That’s just me talking glittering generalities. I surely am not an expert on the prospects of the global marketplace.
Best Wishes.

@MJG,
Do you invest only in US-centric (CAPE) investments? I would think a diversified portfolio should also have a good slug of non - US investments. A globally diversified portfolio might fair quite well over the next ten years.
Maybe the next ten years will be less about US - CAPE weightings and more about being diversified globally.
Is there Global CAPE data available to compare Schiller's CAPE?
Thanks for your thread.

Hi Guys,
The saying that “Everything should be made as simple as possible, but not simpler” is often but not universally attributed to Albert Einstein.
Regardless of who actually made that pithy proclamation, it is especially applicable when making investment forecasts. Uncertainty dominates any forecasting, and complexity only increases the odds of introducing extraneous and erroneous factors.
I particularly favor a short and simple set of rules when forecasting longer-term market returns. I am not in any way motivated to travel to Chicago to attend a Morningstar convention where invited experts offer no more illuminating projections than I can painlessly glean from these simple rules.
What is my simple rule set? For the equity portion of my portfolio, I use a 10-year equity returns correlation that deploys the Bob Shiller Cyclically Adjusted Price to Earnings ratio (CAPE) as the entry parameter. Its current value is about 26; its historical mean value is roughly 17. So, today, the equity marketplace has a cautionary higher than normal risk level.
Future equity returns are negatively correlated with CAPE. A correlation that I like projects the following 10-year annual real returns (inflation subtracted) of 11%, 8%, 5%, 3%, and 1% as CAPE groupings increase from below10, 10 to 15, 15 to 20, 20 to 25, and greater than 25, respectively. These 5 groupings project a sad story for the current CAPE level. Please take note: This table is the primary insight and tool.
Above a CAPE of 30, equity returns have been historically negative for the upcoming 10 year period. One reason I like the above correlation is the timeframe balance of its components. Both CAPE and the equity market returns forecast are for a 10-year time horizon.
Projecting the next 10-year bond return likelihood is an even easier task. Simply use the current yield of the 10-year treasury bond. If you are a more aggressive corporate bond holder, you might consider adding 0.8% to the government value.
Given today’s market conditions and the S&P 500 CAPE valuation, I anticipate an equity annual real return of 1.0%, and a bond return of 2.5% (mix of treasury and corporate holdings) over the next 10-year time horizon.
Add another 2.5% for inflation. I presently expect a 60/40 equity/bond mixed portfolio to generate an actual return of 0.6 X 1.0 + 0.4 X 2.5 + 2..5 (inflation) = 4.1% annual average actual return for the next 10 years. Given the crudeness of the analyses, the projection is 4% annually. Quoting anything more accurate is misleading.
If you are a neophyte investor and expecting a portfolio return that is north of 8% annually over the upcoming 10 years, forget-about-it. It is not now in the cards given the present high value of CAPE. Naturally, these forecasts change as the input parameters get revised.
Well, this forecast is not rocket science and it did not need a visit to the Morningstar clambake. It has taken a complex forecasting problem and has simplified to allow a rapid and respectable estimate that does not depart too radically from those made by the professionals with their complex computer models. That complexity adds little.
Returning to the Einstein quote, I hope my approach has not crossed the overly simplified boundary. I also hope that a few MFO members find this simple forecasting tool useful. I realize that many MFO members use similar simplified methods in making their own projections. I thank these members for their patience with this submittal.
Best Regards.

Okay, I admit it, I skimmed the rest of the article. I think Gross has got ETFs all wrong when he writes:

That an ETF can satisfy redemption with underlying bonds or shares, only raises the nightmare possibility of a disillusioned and uninformed public throwing in the towel once again after they receive thousands of individual odd lot pieces under such circumstances.

That may aptly describe the "escape valve" for mutual funds, but not for ETFs. The "disillusioned and uninformed public" can sell their ETF shares only on the open market. They can't redeem their shares like Authorized Participants (AP) can. And APs know that they will get a gazillion pieces; that's what they get when they redeem ETF shares under all market conditions. That's the way ETFs are designed to work.
If the market went into free fall, I suspect there would be no telling whether market prices would lag NAV (i.e. fall less slowly, which would normally cause APs to buy, not redeem ETF blocks from the sponsor), or whether the market prices would be falling faster than the underlying NAVs.
My uninformed speculation is that even in the latter case, APs would not be redeeming shares. Normally, when market price is below ETF NAV, an AP will buy the "discount" ETF, redeem it for its components, sell those components on the open market, and pocket the spread. But if those components are falling rapidly in price, the AP might not be able to unload them before they dropped below even the discount price at which the AP obtained them. So the APs might just sit on their hands.
Maybe there are regulations requiring participation. Or maybe APs really do try to catch falling knives. I'm interested in any other facts or thoughts on how ETFs might function in a market meltdown.

Likely for 18-24 months.
Grantham's argument is two-fold: asset class bubbles occur when valuations exceed their historic norms by two standard deviations but high valuations alone don't cause bubbles to pop; you need a trigger. Right now, US stocks are about 1.6 standard deviations high, measured by either Tobin's Q or Schiller CAPE. If you chart the rising valuations, the inflation is pretty steady. It likely won't cross over the "two sigma" line until around the time of the Presidential election. At that point, we'd be set up for a 60% repricing of stocks. In the interim, don't discount your run-of-the-mill 10-15% hiccups.
He is not, he argues, pessimistic. It's just that the rest of us are irrationally optimistic.
The most interesting element of his talk centered on the distortions introduced by the Fed. Publicly traded corporations are posting record profit margins; rather than reinvesting that cash (capital expenditures / capex are at historic low levels), they're buying back overpriced company shares to reward current shareholders. The buybacks are also being funded by low interest debt issuance. Private firms are continuing to commit large amounts of money to capex. That's contributing to the high profit margins, since firms aren't trying to arbitrage their competitors' high profits away by competing for business in those sectors (which would require capex). They're luxuriating in their own cash flows and distributing it straight to executives and other shareholders. The fund managers who are heavily exposed to the energy sector point to a collapsing E&P infrastructure as old rigs retire but few new ones (and few new ships and pipelines and refineries) are funded.
David

Yeah, a lot of great fund people escaped mention. Mary Jo White cannot get her own team on the same page, let alone stop campaign coffers from influencing how politicians in Washington vote on fiduciary matters. Their comment that "requiring bank, insurance, and brokerage houses to accept fiduciary responsibility for clients would hurt individual investors" is laughable. But somehow this position will carry the day.

What a joke. How can you take this list seriously when Professor Snowball doesn't even get an honorable mention.

But he's in good company. T. Rowe Price escaped mention too.

@kevindow- I can see your point, but I have to wonder about the general landscape now out there. When my wife and I were young, we were predisposed to be savers, which is probably one of the most important factors in the whole puzzle. But there was a great dearth of resources from which to "continuously increase ... knowledge of everything financial." Lou Rukeyser's Wall Street Week was one of the few resources available, but even they could not cover the entire financial landscape, nor did they attempt to.
After a few abortive attempts to try stuff on our own, we came across an adviser who, of course, steered us into front loaded American funds. I made it quite clear to the adviser that I didn't like that load, but he justified it on the grounds that he was providing a service, would be available for help and consultation, and also needed to make a living.
He also pointed out that the ongoing American Fund ERs were significantly lower than competing products, and over time, would thus amortize the load. I grudgingly agreed, and used the American Funds exposure to ask lots and lots of questions, and the adviser was very good at explaining the realities of various financial products. An important part of my discussion here is that there were not nearly as many such products available at that time, so things were a lot simpler.
In summary, with a dearth of educational opportunity, an adviser turned out to be a good thing for us. Using that as a stepping stone, we eventually buttressed our American Funds exposure with lots of other no-load stuff from different sources.
Now, of course, it's a completely different situation, as you observe: "Watch WSW, On the Money and NBR on TV. Read Money, Kiplinger, and the WSJ. Take advantage of the M* Classroom." Certainly good advice there (although you might also have mentioned MFO!). But I do wonder if with the huge number of different types of investment vehicles now available it might not still be advisable to have an initial setup with a financial adviser just to get started, and begin the learning process from there. As we discuss here on a regular basis, there are so many financial products out there which are of questionable merit that it might well be difficult for a young person to avoid some of those traps on their own, especially as they are getting started. Once they get their feet wet with something reasonable, and are able to see how that performs (or doesn't), they will have a good platform to begin their own education, as you have noted. Of course a problem with this approach would be finding an appropriate financial adviser, but then that issue is forever with us.

Hi Guys,
Returns are intimately tied to when you leave the investment starting gate. Nobody can consistently predict returns for the next few years. Both GMO and John Hussman have launched signals warning that the Shiller cyclically adjusted price-to-earnings (CAPE) ratio is uncomfortably high. They imply the likelihood of a near-term downturn.
Indeed if that is the case, the question is how to prepare? I sure don’t have a definite answer. Any answer is likely to be closely coupled to an individual’s specific timeframe, his wealth, his risk profile, and his short-term/long-term need tradeoffs. But history can provide some guidelines to help scope the problem.
Here is a Link to a nice chart from the Wrapmanager site that displays the S&P 500 pricing history since 1900:
http://www.wrapmanager.com/wealth-management-blog/did-the-sp-500-reach-all-time-highs-is-there-a-cause-for-concern
Note that the chart also marks off P/E ratios at critical turning points in the S&P’s storied history.
As LewisBraham suggests with his post, when the investment battle is exactly joined directly influences annual returns. Some starting dates are especially disastrous. But over time, the historical record demonstrates that even poor starts have been integrated away by the rising tide. Over the very long haul, the precise starting date is not all that significant.
Here is a Link to a nifty calculator that yields S&P 500 returns with and without dividends reinvested for any input starting and end date. The calculator is from a “Don’t Quit Your Day Job” website:
http://dqydj.net/sp-500-return-calculator/
The calculations can be easily completed both with and without inflation adjustments.
For example, if an investor had the misfortune to invest immediately before the 1929 Crash, his annual return to this month would have been 9.69% with dividends reinvested. If he had been prescient enough to have delayed that initial entry date until April of 1932, his annual return would be at the 11.37% level.
For those of us old enough to have initiated our investment program immediately after WW II, our annual return would have been 11.01%, again with dividends reinvested. If we have been in the S&P 500 Index over the last 30 years, our reward would have been 10.99%. When you leave the starting gate matters a little, but the returns are impressive regardless of the precise timing.
I hope you visit the websites that I referenced, and that you find them helpful.
Best Wishes.

FYI: The definition of floccinaucinihilipilification is the estimation of something as valueless. It is rarely
used (for obvious reasons) and encountered primarily as an example of one of the longest words in
the English language. I have been waiting for just the right occasion to employ this word, and I finally
found it: Little deserves my use of floccinaucinihilipilification so much as relying on the historical
average of the Shiller CAPE 10 to determine whether stocks are undervalued or overvalued. It can’t
be used to time the market, despite the advice of the gurus who rely on this metric.
Regards,
Ted
http://www.advisorperspectives.com/newsletters15/25-are-grantham-and-hussman-correct-about-valuations.php

@chip Thanks for the clarification. I looked more carefully today and found that I can drag the Great Owl tables to scroll through them. However, there's no way to scroll through the MM tables - even when I switch to landscape, the table gets cut off at the start of the 20 year return column.

Just IMO & confirm the following with any Firm you inquire to want to Hire:
First of all as for buying any Ins. Products? Get at least a 2nd and 3rd Opinon, preferably from your own Ins. Agent and be very skeptical .. They are the #2 most Profitable Sales Item for Businesses. many pay 10% Commission to the Agent selling them.. and another 1% yr thereafter.. Thus why they push them so much ! I tell them, If I want an Insurance agent I'll use the one I have for over 20+ yrs thank you..
After Serving the Financial Industry ( and Several Firms , Including RJ ) thru my Limo business in Both Chicao and Boston for over 30 yrs and now Retired..
1- Understand, if they are a Franchise Business that like other Franchises, are Controlled and guided by the Franchisor ( Corp Office) and while may give individual Offices/Franchises some leaway, so that Your Investing your $ into Individual running is, at best 33% True, the other 66% is Controled by what Corp. Says they have to follow..
2- They are no Different in running their franchise type Office any Differently that a Mutual Fund store or EJ, etc.. They all have guidelines to adhear too by " Corporate".. and Depending on your account size, you may get a new Apprentice to one of the Senior Partners running that Office/Franchise.. but, all being Supervised by The Owenrs & Corporate..
3-Your 'Assigned Advisor Will Come and Go , Don't expect them to be with you ForeverMore.. and depending on your Account Size, their Replacement can be one of the Senior to New staff taking your account over, but again, Under the Guidence of the Franchise Owner(s) and 'Corporate'..
4- and you would be wise to be Frank with them, upfront and in informing them, while you have to disclose All your Assets to Determine your Investing plans, your only going to give them either (a) Their Min. Amt. Required to Open an Account or (b) a max of 25%, whichever is less for at least the 1st 3-5 yrs and/or until They Prove themselves Worthy to trust them with More of your hard Earned $.. " Talk is cheap, actions tell you who they really are and only time will prove that, right? "
5- As for these Message Board, always expect that at least 75% or more advisors have good intentions and are very Experienced and Manage their Own $ and don't use WMF's and thus have No Knowledge of what they could have Been & having one do at least 50% of their Decisions..
And , Like you do when evaluating Mutual Funds & Investment Mgmtn. Firms, unless they are willing to Share where their $ has been for the past 7,10 & 15 yrs to back themselves Up?
I'd be very skeptical of following their Suggestions and Advice where to Put your $..
DYOR and then Get In Person Advice from people you Know that have been as or more Successfull doing what you have and want to do , then wait at least 3 mos., before Investing or making any changes with your $ .
6-Personally? I WOULD Recommend RJ if at least 1 of the Min of 3 WMF you want to Ck into and be honest with them all upfront .. of what your doing, ( Comparison Shopping)
and if you have Portfolio's? Bring or send them copies of their history and performance to Let them Know your not Some Rookie at this investing Game.. as well as Informing them your Law Firm that does Family ( & Co.) Business and a CPA firm that does your Taxes and other things will also have to sign off using them as well..
Do you have a Law Firm and CPA firm ? If not? Why not? my CPA firm I've used for over 20+ yrs ( and Now in Retirement ) ave about $500 yr to do my taxes..= Chump change and never been Audited and to me, that is my #1 Priority doing taxes..( I've Been audited in my early yrs in my business and its a Nightmare! )
If the CPA Firm you use has a Good Reputation with IRS? It can make a Big Difference..
Inclosing> I've Owned some of RJ Stock for yrs now and Only because, they were ( and still are) the Financial firm of the Owners of the Limo Co. I was with .. Then again, they Opened up an account with them to get them as a Co. Client to serve them and other Wealthy Clients & Co.'s they have.. And that stock has been Free $ to me for yrs and the only reason I kept it and let it ride on its own.. I think its about 5% of my Tot Assets as of last yr.. And Opptimistically? Will also be Passed Onto my Heirs and up to them wether to Cash it in or keep it ..They, all being Richer than I ever was at their age and their nice Over paid Jobs and Pensions, don't need the $.. Both Living in the "Beverly Hills of the Midwest" ( NorthShore or Chicago).. and R Yuppies as well ! ( and their Neighborhoods/Assoc. Don't allow owners to Mow their own lawns, it all is done by the Assoc. Landscapers ! Its Disgusting ! ;-)
Hope that helps! ;-0)

Hi Old Joe,
Thank you for commenting on Davidrmoran’s submittal. It would have completely escaped my notice since I had mentally closed this MFO Discussion exchange.
The request to identify my investment lessons learned and from whom over six decades of financial accumulation is simply not a doable task, even if I wanted to accept the assignment. Sorry, I have no intention to reply to this unrealistic and unnecessary request.
I learn and unlearn every single day; it’s a continuous process. I learn daily from my wife, and from our friends and neighbors. I learn from MFOers, and that even includes Davidrmoran. In his last post, he endorsed John Waggoner as a financial writer, and then noted that Waggoner is retiring from his USA Today job. I did not know that he was leaving his USA engagement.
I too like John Waggoner’s financial wisdom. I have read his material for decades and will continue to do so with his new career adjustment. I believe that both Tom Lauricella and John Waggoner generate splendid columns and have an admirable work ethic. I trust both of them, and do not hesitate recommending them to both neophyte and seasoned investors.
I wish both them well in the next phase of their illustrious careers.
As an aside, I really liked your posting on the Unions topic. It is extremely well written and thoughtful. Nice work!
Best Wishes.

"No assumptions are necessary. Jim Stack is directing his advice to all investors: to you, to me, to MFOers, and to his legion of loyal followers."
---
Wow - If Stack's advice is to be taken seriously would his vision than not become a self-fulfilling prophecy?
Here's why: If all investors decided to ratchet-down their equity exposure by 10-15% based on Stack's forecast, equity valuations would than adjust downwards to reflect the new reality. In fact, they might well over-shoot on the downside.
I haven't learned a thing from this thread. There are hundreds of bright people like Stack whose views are worth reading. We can learn from all of them. None deserve the attention Stack seems to be receiving here. I got a lot more out of JohnC's thread on "bullish" or "bearish" as I was able to identify different types of investors (here at MFO) with the varying outlooks offered - and none of the views were served up as sacrosanct.
There's another issue here which seems to have largely escaped discussion. That's this whole notion of trying to time markets. Yes - Stack is merely advocating "reducing exposure". To me, that's a cute way of saying: try to time markets. And I think that's terrible advice for younger investors attempting to grow a retirement nest egg. For "oldsters" (probably the predominant group on this board) who have already accumulated a nest egg, timing makes a bit more sense from a defensive point of view, but is still a "dicey" (a begrudging nod to Vegas) proposition - the benefits of which are highly dependent upon both the investor's temperament and goals as well as a whole host of unknowns.

@jlev, thanks for the MFO writeup, I know I must have read it because I read every word of every commentary but I just didn't remember it.
I've been watching MOAT for years and while I'm impressed with the "idea" behind it I'm less convinced about M*'s fair value process. It seems to me they make big changes too often (for instance I think they were very far behind the eight ball on energy) and then they seem to be all over the place with their moat definitions. I'll give them credit for having a decent record but I'm just worried they'll find a way to screw it up over time.
@00BY, thanks also for the mention of IVAL. The MFO writeup provided the full context of their overall strategy. I agree with you that it appears more aggressive. In fact, with a portfolio focused far more on Japan than Europe it actually seems a bit more like the momentum version that's supposed to come later this year. My general impression from the CAPE information I look at every once in a while is that Japan is overvalued in general terms, but apparently they're finding a lot of value there.

No, no, MJG. You can squirm, doubletalk and evade all day long, but here's the straight facts, in correct sequence:
First, you said: "The planned Bay Bridge section will be a huge success and will be a lasting example of American engineering expertise for a century or more."
To which I replied: "it is evident that your commentary is completely divorced from reality."
Then, you said: Thanks for the Bay Bridge update. Obviously I knew nothing about its status or current crop of deficiencies.
I then noted the parallel with your "No, no!" diatribe against David Moran, in which you viciously castigated him for responding to you with insufficient accuracy.
Causing you to ask: "For reasons that escape me, you assume that I should be conversant with happenings in San Francisco. Why?"
To which I answered: "Pretty straightforward: In response to my observation that "I'll leave the engineering to the designers of our new Bay Bridge section" you INITIATED a commentary which strongly suggested that you were conversant with our current engineering fiasco."
You now say that "My comments represented general "good practice" engineering policy, especially after that Tacoma bridge collapse" in a pathetic attempt to re-color your earlier comments. It's quite obvious that you are applying two completely different standards to your comments, and the comments of others.

"For reasons that escape me, you assume that I should be conversant with happenings in San Francisco. Why?"
Pretty straightforward: In response to my observation that "I'll leave the engineering to the designers of our new Bay Bridge section" you INITIATED a commentary which strongly suggested that you were conversant with our current engineering fiasco. Remember that? It was only a few hours ago, after all.
Mostly Just Gas. Of course you're not repentant; your self-biased double-standard allows you that luxury. By the way, in contradiction to your speculation regarding "psyches" I kinda like my "Zebra stripes", and honestly don't consider you to be any sort of credible threat.

Hi Old Joe,
Well I guess I was wrong again with my overly optimistic hope that a Zebra would change its stripes. In your case, I suppose that will never happen.
Yes, I did send a truculent reply to a feeble response on my Broken Window submittal. In that tepid response, the sender admitted that his comments just might be off target with “point taken, thanks; I will try to respond with something thoughtful…. “. I thought that was an vague admission, and my heated posting followed. The issue was dead until you just referenced it.
You only posted selected parts of my posting. Here is the entirety of it:
“No, no! Your brief concession that you touted an inappropriate Broken Window reference doesn’t answer the muster call. It didn’t sound the trumpet; it was barely a whisper.
In your reply posting on this matter you predicted that I would not even read your reference. Well you were wrong; I did.
Apparently you posted that Link without reading it yourself. The very first paragraph in your referenced article clearly identifies it as a social policing initiative, and not one that addresses economic theory issues.
In your initial response to me you said : “This entry is thorough, if you're genuinely interested in the complex subject, which somehow I bet is not really the case…”. Well I was "genuinely" interested enough to access your article. Given its unsuitable character, I suspect you yourself never did even casually examine it. That’s shamefully dishonest.
Your creditability is shot; it is done and it is your own doing. Based on this present experience, any checking of your references is a grand time sinkhole. I will not play that wasteful game. Please don’t bother to now search for seemingly applicable counter references. You would be wasting your precious time.
I am not a devoted Austrian economics conscript. I am also not a committed Keynesian follower. Both economic schools have something to offer, but are circumstance dependent. Both are right sometimes and wrong sometimes. Krugman is right sometimes and wrong sometimes. Economics is not a hard science. What worked economically yesterday might be a complete failure today.
I never intended to get embroiled in an economic theory food fight here. It’s sloppy slogging, and surely will not be fully explored on a website designed to exchange mutual fund data and ideas. My contribution to this food fight ends now.
Apparently, other MFOers are prepared to pickup the gauntlet. Good luck to all. This debate has little chance of any meaningful resolution.”
That’s the end of my submittal. What aroused my anger most was the charge that I would not read the included reference and that I was not genuinely interested. I did and I was.
For reasons that escape me, you assume that I should be conversant with happenings in San Francisco. Why? I have visited New York city and Baltimore more recently, and still never consider reading the Baltimore Sun newspaper.
At the time of your original posting that introduced the Bay Bridge example, you did not provide references relative to its many problems, or even to hint at them. Later you do.
Indeed, I have high publishing standards. I do fact-check most, but not all, of what I quote in my informational sections. I try to clearly delineate between my opinions and the general information that I provide. If inadvertent errors are made in the general information sections, I urge folks to alert me. I will correct them. Bad stuff happens.
Sometimes my opinions run counter to others on MFO. I don’t understand why that rattles some folks as much as it does, unless they are only seeking what behaviorist call a Conformation Bias. If that’s the case, I’m the wrong guy to read. The solution is simplicity itself: just avoid my postings completely. My postings must be more dangerous to a few individual’s psyches than I intend. I’m not repentant.
Best Wishes.

FYI: As soon as the program becomes available for free, early tomorrow, I will link it.
Regards,
Ted
May 7, 2015
Dear WEALTHTRACK Subscriber,
Federal Reserve Chairwoman Janet Yellen caused a bit of a stir in an interview Wednesday when she commented that “equity market valuations at this point generally are quite high.”
It wasn’t exactly an “irrational exuberance” speech, a la Alan Greenspan in 1996, but pundits were quick to point out that his observation was about four years early, as the markets continued to rally until the March 2000 peak.
The market is expensive historically, based on several longer term measures including one of our favorites, the CAPE ratio, or Cyclically Adjusted Price Earnings ratio, created by frequent WEALTHTRACK guest, Nobel Prize winning economist Robert Shiller.
The CAPE, which is figured by taking the current price for the S&P 500, divided by the average of S&P earnings over the last ten years, adjusted for inflation, is currently around 27. That is well above its 20th century average of about 15.
Fed Chairman Yellen isn’t the only one concerned about stock market levels, professional investors are too.
According to a recent survey from State Street Global Advisors, of over 400 institutional investors worldwide, 63% of them increased their stock exposure over the last six months, but 53% wish they could decrease it and would if they had a more attractive alternative. Talk about conflicted!
Plus, 57% expect a market correction of between 10 and 20% in the next 12 months!
Normally investors could turn to bonds for income and protection, but with bond yields near record lows, they are no longer a viable option.
According to this week’s guest, Clifford Asness, both stocks and bonds are more expensive now than they have been in 90% of market history. Asness is Founder, Managing Principal and Chief Investment Officer at AQR Capital Management.
AQR stands for Applied Quantitative Research, which they use in a number of strategies.
Founded in 1998, AQR, now a global investment management firm, oversees more than 130 billion dollars in hedge funds, mutual funds and a diversified collection of investment strategies, from traditional long-only ones to multiple alternative approaches. I asked Asness how unusual it was for both stocks and bonds to be this expensive at the same time and what investors should be doing in response.
If you’d like to see the show before it airs, it is available to our PREMIUM subscribers right now. We also have an EXTRA interview with Asness, about his new venture with London Business School, available exclusively on our website.
If you have comments or questions, please connect with us via Facebook or Twitter.
Have a great weekend and make the week ahead a profitable and productive one.
Best Regards,
Consuelo