Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market by Faber Mebane

Author:Faber, Mebane [Faber, Mebane]
Language: eng
Format: epub
Tags: BUSINESS & ECONOMICS/Investments & Securities
Publisher: The Idea Farm
Published: 2014-03-16T22:00:00+00:00

Source: Global Financial Data.

We examined all the countries on a yearly basis since 1980, CAPE ratio levels, and future returns. The sample includes approximately 10 countries in 1980, 20 in 1990, 30 by 2000, and 44 by 2010. The results are in the table below and largely confirm the US data. Buy low, sell high.

FIGURE 19 - 10-YEAR CAPE RATIO LEVELS AND FUTURE AVERAGE REAL COMPOUND RETURNS, 1980 – 2013

Source: Global Financial Data, Morningstar. Index returns are for illustrative purposes only. Indices are unmanaged, and an investor cannot invest directly in an index. Past performance is no guarantee of future results.

We found that most CAPE ratios averaged around 15-20, bottomed out around 7, and maxed out around 45. A few countries’ stocks markets made the United States bubble in the late 1990’s look pathetic in comparison, like Japan reaching a value of nearly 100 in 1989. The red values in the chart above are where global markets stood at the end of 2013. Both foreign indexes have CAPE ratios around 15, with foreign developed at 16 and foreign emerging at 15.

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