As One Door Closes, Another Opens

01.12.2016 • The Economy

By Tim Price – London Investment Alert (Great Britain) – 

It may have survived up to 638 assassination attempts by the ham-fisted CIA, but in the end the political juggernaut that is 2016 managed to claim the scalp of the loathsome dictator Fidel Castro too, just as it has overturned the established consensus throughout the developed world.

Next stop is Italy, which may well reject Matteo Renzi’s referendum on Sunday and send the EU into its next political shock. There is no need to agonise about the death-throes of the eurozone when there are perfectly attractive investible markets elsewhere.

The pertinent point is that one requires a degree of guts to pursue them. Japan is a clear example. Within my own global “value” fund, the VT Price Value Portfolio, we have a roughly 40% allocation to Japan, our single largest country allocation. Here’s why.

Most fund managers cleave closely to a benchmark or index. The most popular global equity benchmark is the MSCI Global Equity Index, which allocates approximately 60% just to the US stockmarket.

But the US stockmarket happens also to be one of the most expensive on the planet. Its ten-year cyclically adjusted price/earnings ratio (the so-called Shiller p/e ratio or Cape ratio) stands at over 27 times. In other words, if you are buying the S&P 500 index today, you are paying $27 for just $1 of earnings.

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