- Tapa blanda: 80 páginas
- Editor: Mebane Faber; Edición: 1 (17 de marzo de 2014)
- Idioma: Inglés
- ISBN-10: 0988679914
- ISBN-13: 978-0988679917
- Valoración media de los clientes: 4 opiniones de clientes
- Clasificación en los más vendidos de Amazon: nº1.764 en Libros en idiomas extranjeros (Ver el Top 100 en Libros en idiomas extranjeros)
Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market (Inglés) Tapa blanda – 17 mar 2014
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Investment bubbles and speculative manias have existed for as long as humans have been involved in markets. Is it possible for investors to identify emerging bubbles and then profit from their inflation? Likewise, can investors avoid the bursting of these bubbles, and the extreme volatility and losses found in their aftermath to survive to invest another day? Over 70 years ago, Benjamin Graham and David Dodd proposed valuing stocks with earnings smoothed across multiple years. Robert Shiller later popularized this method with his version of the cyclically adjusted price-to-earnings (CAPE) ratio in the late 1990s and correctly issued a timely warning of poor stock returns to follow in the coming years. We apply this valuation metric across more than 40 foreign markets and find it both practical and useful. Indeed, we witness even greater examples of bubbles and busts abroad than in the United States. We then create a trading system to build global stock portfolios, and find significant outperformance by selecting markets based on relative and absolute valuation.
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Meb Faber, co-founder and CIO of Cambria Investment Fund, reviews the usability of a measure designed by Robert Shiller, Nobel Laureate, to time Markets: CAPE (Cyclically Adjusted Price-to-Earnings ratio). Mr. Faber reviews pros and cons of the ratio and reaches some conclusions:
a) Given that humans tend to over-react to valuations in Financial Markets (either if they are too low or too high), we need to incorporate in our investment decisions some kind of objective tool.
b) Using the CAPE ratio we can “objectively” determine if a certain market is over or undervalued. Mr. Faber determines that US Market seems to be expensive and proposes US investors to shunt a portion of their wealth into other more undervalued markets.
c) As always, we could be wrong (at the end of the day, we are basing our decisions on past data). Diversification helps us to avoid huge errors. We should develop a portfolio of undervalued countries and, maybe, short overvalued countries.
From a statistical point of view, the strategy works. Have a look at the book for further details!
I liked the book, short and to the point. It is similar to Mr. Faber’s previous book, “Shareholder yield”, that I also recommend. Some possible extensions that I would like to see would be:
a) Everything is considered in dollar terms. Although in some part of the book the author states that the results are more or less the same in local currencies (real terms), I would still like to see how much comes from currency appreciation.
b) Maybe, a reasonable extension would be to apply Magic Formula or other value to screener to low CAPE countries.
Basically, it used CAPE (aka PE Shiller or PE10) and analyzes mean and median values, so you can get a clue of the over/undervaluation degree in a market.
I like a lot this kind of short books, which go straight to the point and provide simple and useful ideas. Although these ideas aren't a big deal, they help to improve your returns.
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The conceit of the book is straightforward: introduce CAPE and then suggest using it to decide when to enter and exit national markets. (e.g. "CAPE says Greece is undervalued so buy a Greek index")
Faber does a good job of surveying CAPE and several of the recent papers arguing over its flaws. And he has some interesting charts showing "all" countries ranked by CAPE. (Well, all the countries that he can get CAPE data for, at least.)
To be fair to Faber, he says this isn't for short-term tactical allocations. He suggests a large basket of countries (10+), only reconstituting the index every year, and expecting it to take about 10-years to show out-performance. Here's where the book could have been a bit better. Because essentially he's suggesting you either invest in Cambria Global Value ETF or handroll a similar ETF yourself. And I don't think he does enough to show what possible returns for such an investment strategy would look like in real life.
All you really get is Figure 26, which shows CAGR, Volatility, Max Drawdown, and the Sharpe Ratio for a "Top 25% CAPE with Filter" from 1980-2013. I'm not expecting him to estimate losses due to taxes or trading costs. But what does turnover look like? How many years does this underperform a market-cap weighted index? What do 1-, 3-, and 5-year returns look like? How about just a chart showing annual returns for that 33-year period?
Unlike many pundits, Faber puts his money where his mouth is. Well, at least he puts other people's money where his mouth is: he's created an index fund based on this book. I give him credit for that. The problem is that the returns haven't been very impressive. Yes, it has only been 2-years and Faber suggests a timespan of 10-years might be the right one to consider. But GVAL is -9.56% since inception. It is doing dramatically worse than VXUS, a market-weighted international index. But that's exactly the kind of tracking issue I think the book should have spent more time on.
Small peeve: the author cites many papers by GMO, which are difficult/impossible to find. GMO seems to have either taken them off the web or put them behind some signup form or something.
My take on Cambria, and Meb individually, is that they are an investment company that is constantly striving for optimum, risk-adjusted value. With the Global Value strategy in particular, Meb explores the most reliable valuation metrics, such as CAPE (or P/E 10), and applies that metric across the globe, so the study includes both domestic and foreign markets, and emerging markets as well. What Meb found, using back-testing analysis, is that more cheaply valued, single-country markets exhibit significantly higher growth when measured from a multi-year perspective – so at least 3-5 years out. From a scientific point of view, this is hardly a surprise. I suspected this is exactly what Cambria expected to see and, as it turned out, there was an approximately 50% increase (~ 15% vs 10% for EAFE) in return over periods longer than 20 years (1980-2013) when comparing the cheapest 25% countries vs. a total world index based on the back-tested analysis.
You might be thinking, well that sounds reasonable enough, but from an application standpoint, how would the individual investor be able to afford, let alone manage, buying 100 or so stocks in only the cheapest 25% countries of the world? On your own, such a feat would probably range somewhere between very cost prohibitive to outright unfeasible. But again, this is where Cambria has you covered. They appear to have concurrently launched an ETF (GVAL) with the release of this book, that appears to execute the exact strategies discussed in this book. And even better yet, the expense for this ETF is very reasonable (0.69% annual) given the unique nature of the investment strategy.
Personally, I have been waiting for years for someone to develop an index based strategy that would apply the CAPE ratio from a global perspective in order to invest in only the cheapest countries, rather than all of them (which would also include the most expensive ones). And when one considers that total index funds/ETFs tend to use a market-cap weighted approach, then on average the total index will always be top heavy with more expensive countries. With Global Value, however, now you have both the strategy and data to back up expected alpha-like return, and an easy, cost effective means to deploy the strategy (GVAL).