Shiller PE Market Timing Model

As old readers will know by now that I am a great fan of the Shiller PE as a valuation metric to decipher whether the market is cheap or expensive. I am a value investor at heart and also a bit of an idealist.

The markets are expensive if one looks at the Shiller PE from a historic perspective. Here is a look at Shiller with a slight nuance as the Crestmont P/E Ratio (for now lets assume they are the same)
Crestmont-PE-with-SP-Composite

One of the big challenges for value investors is that they can get in or out a market way too early. This is something I have done all too often and have the emotional scars to bare testimony.

Somehow my trusted Shiller PE Market Timer seems to do a better job in eliminating my torturous contrarian suffering and still outperforms. Here the model is still long the market despite the Shiller PE being its only indicator generating buy or sell signals. This model has performed going back all the way to 1870.

2015-02-16_1101

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