Germany

Another day, another late-night Greek rescue. James Mackintosh, investment editor, unravels the myths, eyes the investment opportunities and explains why Germany must accept Greece must fully write off its debt.

James Mackintosh

Even after the extraordinary summer rally in European equities, strategists continue to punt European shares as cheap, and so worth buying. Unfortunately, it’s more complicated than that.

The sell-side analysts pushing the idea are too numerous to list, but one of the better argued cases is that presented by the cyclically-adjusted price-earnings ratio (CAPE), which averages profits over 10 years in an attempt to eliminate the effects of the economic cycle.

Paul Jackson at Societe Generale has some nice charts showing Europe looks cheap, and demonstrating the use of one derivative of CAPE, the cyclically-adjusted dividend yield.

CAPE vs its average Read more