Early Retirement Extreme Forums

http://www.starcapital.de/research/stockmarketvaluation

It has a world map overlaid with the Cape ratio (10 year price/earnings), Price/Earnings, Price/Cashflow, Price/Sales, Dividend Yield, Price/Book, and relative strength for 26/52 weeks.

Thanks. I was just thinking about going to look for something like this or to create it myself if I had too. I like to take a look at these stats every 3-4 months and adjust where my new money is going, if necessary. I wish I could find a map or table that updated every month or so.

Looks cool, but how do you use it? Buying up the blue countries and avoiding the red ones?

In my ignorance of this tool I bought a Danish index fund (number 40 and very last and very red on the country list), but is has gone up 10% since I bought it about 3 months ago which is truly better than most ...?

CAPE and Star Capital's rankings have decent correlation with returns over the next 10-20 years. No predictive power for a time period on the order of 3 months.

Thanks, but this then means that Denmark is doomed within the next 10 to 20 years? I better get out of here ...

No, high valuations don't spell doom. However, they strongly suggest lower than historic returns as long as they remain elevated (ROIC is low if cost of capital is really high). Whether that happens via a crash and then a trip back up again (compare to the US from 2000 to 2008 ... or 2008 to 2016) or whether it's just years and years of inflation adjusted sideways action (see US from 1900 to 1950) are both possible trajectories.

Historically Denmark has actually been an outlier, in that it has done relatively well even after high starting valuations, with lower than average (vs. other countries) correlation between starting CAPE and subsequent 10-15 year returns. So if you want to look on the bright side, you can see here that high valuations in Denmark have still resulted in decent returns in the past.

Of course keep in mind that past performance is no guarantee of future returns, and also that this data only covers about 37 years.

http://www.starcapital.de/files/publika ... imling.pdf

Thank you both of you, it is enlightening to contemplate on your wisdom.

@Eureka - More here https://www.gmo.com/docs/default-source ... letter.pdf (2016Q4, read now, the link changes every quarter).

In their "Hell" scenario (long-run ~0% real returns from permanently elevated valuations), there would be no such thing as a Trinity 4% rule. Instead people would need to accumulate enough expense-years to match their remaining life expectancy and then need to invest it to just hang on to the purchasing value/prevent it from being inflated away.

A 25-year old in that case would no longer aim for 25x expenses (US Trinity 4%-rule) out of either being an optimist or failing to understand where "4%" comes from; nor would they aim for 33x expenses (global historic 3% real) out of presuming some level of investment acumen. Instead, a 25yo would need to aim for 60x expenses given an 85yr life expectancy. A 50-year old would need 35x, etc.

I wonder if there's an easy way of comparing these relative valuations to each countries rate of return on debt to get some idea of a country specific equity risk premium. It'd be interesting to see how much extra return these individual country stock markets are offering vs their safest investment over a similar investment term (using the 10 year yield on government bonds or something like that). That might help in comparing the level of risk to return being offered by these countries.

@BlueNote - Such a comparison will be polluted by the tax codes which regulate the dominant investors in the respective countries. (If foreigners hold a large portion of the debt, for example, the tax or pension system of the foreign nation will have influence.)

Your ratio would be internal to the country. As an international investor, exchange rates are the primary variable. This factor can be hedged.

I found a correlation calculator. This can help with risk management.

https://www.buyupside.com/calculators/s ... ninput.php

The Asset Class Dashboard show which assets are performing far better or worse than normal. Potentially useful since performance usually reverts to the mean.

https://russellinvestments.com/us/insig ... -dashboard

Edit: Any cool tools for crypto are also welcome here.