Kupotea

I think you’ve pretty much summed up the breakneck rise in desirable real estate globally. People constantly ask who can afford to live in places like Hong Kong, Vancouver, NYC and the answer is the rich can. It’s less about living there though and more about preserving wealth.

Agreed with the assertion that the index itself has become sort of its own fund or even asset class. I’m not sure this is an entirely new phenomenon. You’ve always had the cycle of an underperforming sector gets beaten down, funds that focus in that sector are forced to redeem and it gets beaten down some more until the next up cycle. This is just an interesting situation where momentum/large cap is riding the hot hand and value/small cap is out. Eventually the S&P 500 becomes so overbought that it underperforms other indexes and investing factors. Then you get outflows and maybe some mean reversion. I think passive indexing will remain the dominant investment strategy you’ll just see those passive flows moving into other geographies and factors.

There’s no money chasing small cap value (it’s all gone to passive large cap) so if a company beats expectations no one notices. Without price discovery you need to find companies willing to initiate large buybacks if you want to get paid. In the meantime, the most overvalued components of the S&P continue to attract ever larger inflows.

North American Construction Group would be my pick. It’s cyclical though and that turns a lot of potential investors off. I think most of the successful consolidators at one point fit the criteria of small cap growth.

Strongly agree with this. I’ve been cautious all year as global (ex US) growth has decelerated and the FED put up a good show of higher for longer interest rates. It made other central bankers reluctant to cut because of the fx implications. I thought there was a real chance that powell would go through with it but clearly today they’ve signaled otherwise. Now we can get a big round of global easing and all those beaten down value and industrial stocks can rip higher. Merry Christmas

Price drives narrative and timeframes matter. In 2022 it was clear to everyone that rates had to go up and that would lead to slower growth (likely a recession) and lower valuations so the market tanked. The recession didn’t materalize because of excess savings accumulated during covid which meant a resilient consumer. Now we’re back close to all time highs, no excess savings, multiple contracting sectors and many marginal firms are going to struggle to roll over debt at current rates. Was the drop in 2022 justified? Does any of this matter in the long run? I’m not personally the buy and hold forever type. I’ve yet to find a company where I feel confident what the earnings will be like 10 years from now. I know Buffet and others have done this to great success but I personally lack the conviction. I feel far more confident in finding cheap businesses with a catalyst or looking through a trough to normalized earnings. That means for certain investments i need to have some sense of where we are in the business cycle. It’s not easy but it’s also not easy to find great business that will compound for decades. There isn’t one true investment style and i find it a little funny how much energy some people are devoting to tell others the right way to invest.

TLT and March puts on QQQ.

Not to mention that with the rapid decrease in headline CPI you have real yields soaring. Hard to see how this doesn’t cascade into a credit crunch unless the FED does an about face soon.

Large buys of SU, CVE, VET, TCW, NE, STNE. Counterintuitive market reaction and I think there's a good chance the recession sensitive/inflation trades rally hard over the next few months.

I don’t think you need a recession for stocks to perform poorly again this year. Lets assume the economy keeps chugging along which by all indications it has to date, where do long term treasury yields go? What’s a fair risk premium for equities if the 10 year yields 4-5%? Look at how copper is reacting with China reopening. Do oil prices stay subdued with low inventories and a global economy moving forward at full strength? How do you convince an entire cohort of retirees to come back to the workforce? There are compelling arguments that the economy remains strong. There are also indicators that we get a recession sometime in H2. I have yet to see a convincing argument that long term rates should be inverted without a corresponding hit to earnings.

I think there are two very important reasons for sticky inflation: 1) Tight labour markets due to baby boomers retiring. 2) A long period of underinvestment in commodities + ESG concerns. Hard to see anything resembling deflation unless you solve for those structural issues.

If this is the case, I continue to think coal producers with exposure to Newcastle pricing are the biggest beneficiaries. Local nat gas suppliers are going to see those heady profits taxed away.

I think it’s pretty much impossible to forecast a market bottom but it’s a lot easier to read existing market sentiment and general positioning. We just went through a 10+ year bull market with a classic bubble blow off. For the most part investors still have an overweighted allocation to equities. The narrative is changing to a recession without a quick FED bailout. There’s plenty of reasons for more fear and selling pressure. Whether that makes sense or not in the long run doesn’t matter because short term sentiment is what matters. One day we’ll run out of sellers and the market will start to climb on bad news and that will be the bottom. I don’t think it’s the worst thing in the world to have a pulse on the market and a macro viewpoint as long as that view remains fluid.

Anyone else think the top is in for yields? At least until we get the next round of aggressive QE...

Up 26% YTD. Mostly well timed entries and exits into various energy related stocks. Currently 50% invested and 50% in cash. This year has been a completely different approach than buy and hold which I've stuck to in the past. I've held the mindset all year that the general trend is down and have tended to only stick my neck out there for obvious opportunities then sold at the first sign of weakness. I'm still torn between greed in relation to structural commodity shortages and the fear of a global recession.