Global Valuation Updates!

January 04, 2018

Quick housekeeping…

First, we hope you guys love the new redesign!  If you ever need any help you can ping [email protected].

Second, the archives have been totally rebuilt – there are so many gems in the library now it should be much easier to find what you’re looking for.

Lastly, don’t forget it’s easy to get a free subscription!

If you send me an email with a link or attachment to a piece you think readers would love, and I use the piece, I will happily give you $100 off your subscription.  This is worth a free quarter of the Farm at current levels.

Send all emails to [email protected] with “RESEARCH” in the subject line.

Now onto the Quarterly CAPE Ratio Updates!  

After another monster year of performance in 2017, many countries are still quite cheap.  But some countries are expensive too…let’s go right to the stats!

Median CAPE Ratio: 18.625% most expensive: 27.3 (U.S. in this bucket)25% cheapest 12.6

Average of Foreign Developed 21Average of Foreign Emerging 17

We’ve mentioned this a lot in the past but bears repeating.  We use the MSCI Investable Market Indices below, but MSCI also calculates their Standard Indices too.  IMI includes more companies and in general is more representative of the entire market.  It really makes no difference for any of the countries except the very smallest ones, such as Greece and Egypt.  For both series the CAPE ratios are almost always near identical, with one glaring exception – again, Greece, which depending on the series you use has a CAPE ratio of -7 or 2.

So, this is one reason we have always used a valuation composite across the variables below.  If one is giving a screwy result, or perhaps a market has a structural bias to one variable, we want to average it out.  So, in this case Greece is cheapest on CAPD, CAPB, and CAPCF, just not on CAPE.

The cheap stuff is still dominated by Europe…but some other names have been creeping in over the past year…

MSCI Investable Market Indices

SECTORS

Good investing,Meb Fabertheideafarm.com