I think the most important for the valueinvestor - in terms of macro or "general market stuff" is to identify key risks, imbalances, that will eventually
need to correct. We don't need to try to make money on this, as the most difficult part would be the timing issue - but we need to be aware, so we don't
loose money by the unravelling effect. Where do you guys see the major issues right now?
I think, regarding the corporate profit margin discussion, that this is a key issue going forward. I am not totally convinced, that we will return to the
6% of GDP as Hussmann et. al. are saying; yet what I could see coming is, that commodity prices start rising again, and that this will push up the
costs (along with rising labour costs in EM) and that it cannot be fully rolled over on the topline. The reason I am saying this, is that a lot of money
has exited the commodities space since the peak in 2010/11 and with the current path taken by the FED, I don't think that the bonds may rise soon,
but that it eventually will lift the commodities...this could then also be the trigger for the feds tightening, since it has always been rising inflationary
pressures, that induced them to tighten. Stocks may peak even before that, if profit margins fall.
The question obviously here is, whether the commodities are still in a bull market - regarding the fundamentals of supply/demand. While a lot of
investment has been done especially in the run-up to 2008, and to some extent after it, I still don't see the major "oversupply" killer, that is
supposed to turn this into a long term bear market. It all depends on the chinese side, on their credit bubble, whether they keep growing an demanding stuff.
So, as 1999/2000 was a p/e bubble, 2007 was a housing/credit/leverage bubble, now we don't have the credit/bubble conditions yet - we might have
a peak in corporate profits. Also, we must take into account that the deleveraging has started, and eventually also the government will have to
start to balance - slowly, and this environment will mean slower growth ahead. Specifically, the FED will keep interest rates low - below inflation, or at
least below nominal growth, to accomplish the deleveraging, by slowly transferring the wealth from the creditors into the debtors.