Meb Faber on CAPE

[Mr Vacuum]

Interesting post, and there are many links at the bottom in which he previously wrote about using CAPE to find value and increase forward returns. With so much ink given to slicing and dicing stocks or not and even momentum around here, I'm surprised there isn't more discussion of hunting bargains for the stock portion of the PP. Kbg proposed a related timing system a while back, but it got almost no response.

At least during accumulation it seems simple to set a valuation rule and buy cheaper assets with higher expected returns, e.g. international or emerging markets right now instead of U.S. total stock market or small cap. If you only do this with new cash, you never have to check and move whole positions. We insist on bargain hunting everywhere else in life. Why not with stocks when there's so much to choose from?

[ochotona]

I am taking Meb's hint and buying emerging market ETF shares for my taxable brokerage account, buy and hold, except maybe sometimes some tax loss harvesting,

Listen to this episode of his podcast (which is great):

http://mebfaber.com/2016/06/29/podcast- ... right-now/

[JayT]

I am taking Meb's hint and buying emerging market ETF shares for my taxable brokerage account, buy and hold, except maybe sometimes some tax loss harvesting,

I have done the same and one factor (of possibly many ) that can throw a wrench into this is the US interest rates. If interest rates go up, then it will be a double-whammy for the emerging market ETF: 1. Due to dollar strengthening, the ETF will go down nominally. 2. Additionally, capital fleeing the emerging markets (to head for the US) will decrease the value of stocks in emerging markets, which will also driven down the ETF value.