Summary of A CAPE Crusader

A Defence Against the Dark Arts


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A CAPE Crusader summary
Alternative price/earnings measures aren’t always better than traditional analytics.


7 Overall

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Investing has never seemed so confusing. A scant few years ago, investors could just balance the ratio of bonds and stocks in their portfolios to their desired risk level, include some geographic and industry diversity, and maybe spice up the mix with some well-chosen commodities and derivatives. Now, markets rise with bad news and fall with good news, except when they don’t. While getAbstract never offers investment advice, it recommends this paper’s methodical approach to assessing new thinking on valuations and expected returns. Any new valuation scheme faces two queries: Is the old one really broken and is the new one really better?

In this summary, you will learn

  • Why market watchers disagree on price/earnings metrics
  • Why alternatives are no more reassuring
  • What analyses suggest about future returns


Stockbrokers – practitioners of the title’s “dark arts” – frequently question the methodology of traditional valuation measures and offer other, presumably better, metrics, which support their tendency to cast the market as undervalued. The Shiller Cyclically Adjusted P/E ratio (CAPE), which compares...
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About the Author

James Montier, former co-head of Global Strategy at Société Générale, is with the investment management firm GMO. His books include The Little Book of Behavioral Investing.

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