( Part 1, Part 2)

In part two, we looked at stock market inefficiencies and how the Shiller PE allows us to spot them.  Now that we know there’s inefficiency, the question becomes how to grab some of that cash for ourselves.  In other words, we need to figure out how to be a contrarian and profit from the hordes of people consistently mis-pricing the S&P.

The only problem here is that actually taking a contrary position, in the right way, at the right time, is not easy.  Everyone thinks they’re a contrarian, but by definition only a few people actually are.   It’s not immediately obvious how best to go about it, so I’m going to suggest some options, look at their pros and cons, and then finally settle on one of the components of our speculative portfolio. Continue reading →

If you’re a long term reader of this blog, you may be aware that I’m anti-investment.  It’s not so much that I’m opposed to the concept, but I do not believe any of the typical investments in the first world (roughly: stocks, investment grade bonds and real estate) are likely to fare well over the next decade or three.  If you haven’t read the linked article above, I suggest you do so – the rest of what I’m going to say here won’t make much sense if you haven’t.  Similarly, you need to understand how I use the terms “investing” and “speculating”, since there is some diversity in how they’re used and we need to be on the same page.

Now, I’m well aware that the majority of people reading this blog do not share my negative opinion on investment or have never really considered the subject.  That’s OK.  I’m not necessarily trying to convince you.  I just want to expose you to a different way of thinking about your long term financial security – one that is not dependent on the end-game performance of any financial instrument or macroeconomic factor. Continue reading →