It's no secret that Robert Shiller considers American stocks to be expensive. For years, he has been pointing out that his preferred valuation metric, the cyclically adjusted price-earnings (CAPE) ratio, suggests an anomalous level of overvaluation for U.S. equities.
Yet it is striking to note what this style of analysis would instruct investors to buy instead.
While the U.S. has the highest CAPE ratio, "the lowest CAPE ratio of the 26 countries [analyzed] is Russia," Shiller said Tuesday on CNBC's "Trading Nation."
The Yale professor of economics and Nobel laureate added that "I'm thinking about" investing in Russia "when [the ratio] is this low."
The cyclically adjusted price-earnings ratio, which Shiller helped to develop and popularize, compares the current level of a given index to the last 10 years of earnings reported by the companies within that index, adjusted for inflation.
The idea is to consider corporate earnings power across the breadth of the business cycle, rather than to simply look at what earnings have been over the past year or are expected to be in the next year.
The ratio has shown for some time that American stocks are overvalued. At this point, Shiller's data show that the CAPE ratio for the U.S. currently comes in at nearly 31, which is higher than ever before save for the dot-com bubble and a brief period in 1929.
Some, most notably Wharton professor of finance and perennial Shiller sparring partner Jeremy Siegel, have taken issue with the conclusions Shiller takes from the CAPE's current level.
Meanwhile, while insisting that U.S. stocks are indeed overvalued, even Shiller readily acknowledges that long-term valuation measures make poor short-term market timing tools.
"I don't really want to encourage people too much to put a lot into the most expensive market in the world, but I wouldn't pull it all out either," he said Tuesday.
Yet he would certainly encourage investors to consider committing more money abroad.
"Europe is generally low, the U.K. is low, and they're great countries, so why not. Why would you put all of your money in the U.S.?"
As far as Russia goes — with its tantalizing sub-7 CAPE ratio, according to the most recently available data from Siblis Research – Shiller adds that he's "not going to advocate" investing there.
"I might do a little Russia, but I haven't yet," he said.
The VanEck Vectors Russia ETF is up 3 percent this year, but has tumbled 29 percent over the past three years, with the decline in energy prices serving as a serious drag.