The Capital Asset Pricing Model (CAPM) is one of the fundamental models of modern financial theory. The basic idea is that an asset’s correlation to the overall market is one factor in determining it’s expected rate of return. For example, you might think that housing construction companies perform pro-cyclically while bankruptcy law firms perform countercyclically. Since countercyclical assets are desirable from a risk perspective, pro-cyclical assets must have a higher rate of return to justify their riskiness.

But the other advantage to holding countercyclical assets besides their risk profile is that they allow you to invest after a crash in the procyclical assets. If housing and U.S. equities tank simultaneously, it will create one of the best buying opportunities in 50 years. But who will have any money to take advantage of it? Only those people who held countercyclical assets.

So if you are like me and you believe that domestic equities are overvalued, you want to hold assets that will allow you to take advantage of a possible decline. So what do you hold? A healthy combination of cash, hard assets (gold?), and dividend producing stocks will put you in a perfect position to buy when nobody else can. And you’ll make a killing.