How To Profit From The Shiller CAPE Ratio
Jeff Miller | Jul 11, 2013 01:42AM ET
Regular readers know that I am a skeptic when it comes to the Shiller CAPE ratio approach to market valuation. I am delighted to report that I have discovered how to profit handsomely from Prof. Shiller's method. There is nothing like a convert!
Background
I have reviewed the Shiller method on several occasions, usually challenging the assumptions and conclusions.
Initial Complaints
In January of 2011 I explained that while I liked Shiller, I found here .
This is much stronger than the usual application of the Shiller method. The key is for investors to buy the sectors that are showing relative value on the CAPE method. At the time of the webinar, this included industrials, consumer staples, health care, and technology. The method was discarding financials, which might actually be wrong.
The selected sectors are exactly the ones I have been recommending, except that I like financials as well. The main difference is that I have selected key stocks in these sectors instead of the Barclay's ETFs.
I am delighted that Prof. Shiller and I now agree on the best investment plan! I am not holding my breath while waiting for Hussman and Smithers to join us. They are missing out, as are those slavishly waiting for another CAPE "buy" signal for the overall market.
Meanwhile, here are the results for CAPE since the launch:
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