You can often turn a profit by betting against the big money. It isn't as smart as it thinks it is.

So where is that money sitting right now? According to the latest Bank of America Merrill Lynch survey, big institutional money managers around the world are now loaded up to the gunwales in real estate investment trusts (or REITS). They also have plenty of money in bonds, cash, emerging markets, and U.S. equities.

Meanwhile, they are underweight in Japanese stocks, European stocks, commodities -- and banking stocks pretty much everywhere.

Japan is now the least favored market, displacing Europe. Investment managers have tiptoed back into European stocks in the past couple of months, on growing hopes that the European Central Bank and other policymakers will take stronger action to address the debt crisis. (Of course, we've all been hoping that for about three years.)

Where does this leave the private investor?

Japan is cheap. No one wants to own it. The market trades for less than 0.5 times sales, and 11 times forecast earnings. (Those earnings are probably understated too, as Japanese firms are usually thought to err on the side of caution in their guidance.) It's been cheap for a long time, and may remain so for a long time still to come. But in due course good value should prevail.

Money managers' biggest worry is that the yen, which has skyrocketed in recent years and is near record highs, is overvalued and is set to fall sooner or later against the dollar. If that happens, gains investors see on Japanese stocks may be lost on the exchange rate.

The simplest solution is to own the WisdomTree Japan Hedged Equity fund (DXJ), a low-cost exchange-traded fund that invests across the board in Japanese stocks and then hedges the exchange-rate exposure back into dollars. What this means in layman's terms is that your investment should rise and fall with the Tokyo stock index, regardless of what happens to the yen.

European stocks are also reasonably priced these days, though not as much as they were a few months ago. FactSet puts Western European markets at 11 times forecast earnings; that's up from less than 10 times a few months ago, but it's still very low by historical standards.

Meanwhile, U.S. stocks -- except the banks -- remain in favor with money managers. That probably makes them less attractive on a long-term view, although of course everyone's opinion may differ. Fund shop GMO still sees healthy returns from emerging markets and developed international stocks, and from "high quality" U.S. blue chips such as Johnson & Johnson, Coca-Cola and Pfizer. But GMO predicts that if you buy a random selection of U.S. large caps or small caps, over the next seven years you will probably end up earning nothing whatsoever after accounting for inflation.