Market Disconnect is One of the Craziest I've Seen in 23 Years!

[lessthaniv]

Upgrades making there way into the news wires 

[modiva]

Most financial analysts tend to make safe calls by following crowds and markets.  Very few make the right calls.  While these upgrades are certainly encouraging, they are safe.  In this era of zero interest rates, most financial firms are trading over 1.5x book value.  It is not a surprise that not single analyst calls target of CAD 1125 or USD 900.   That's what it should be trading now at ~BV USD600*1.5.   Markets obviously discount based on perceptions and past history but a >50% discount is too steep.  Agree with @Parsad that this is craziest disconnect. 

 

Edited August 4, 2021 by modiva

[TwoCitiesCapital]

56 minutes ago, modiva said:

Most financial analysts tend to make safe calls by following crowds and markets.  Very few make the right calls.  While these upgrades are certainly encouraging, they are safe.  In this era of zero interest rates, most financial firms are trading over 1.5x book value.  It is not a surprise that not single analyst calls target of CAD 1125 or USD 900.   That's what it should be trading now at ~BV USD600*1.5.   Markets obviously discount based on perceptions and past history but a >50% discount is too steep.  Agree with @Parsad that this is craziest disconnect. 

 

 

Agreed w/ everything except the expectation for 1.5x. I think we could get there in an environment where interest rates were sustainably rising and there was a decent market for insurance, but I don't think we get there in a near-zero interest rate environment. 

 

I would be a seller at prices of most of my position above 1.25x my estimation of adjusted book value. At this point that is roughly ~$850/share so we've got a long ways to go and I expect that the BV will be improving along the way.

 

And who knows - maybe by that point I've changed my mind on disinflation/rates. An outlook of higher interest rates would make me more comfortable holding at 1.25x to realize those higher future earnings, but we'll have to wait and see then. As for now, I see no reason to believe the "lower for longer" trade isn't still in effect with the stimulus taking us on a temporary hiatus.

Edited August 4, 2021 by TwoCitiesCapital

[ERICOPOLY]

1 hour ago, lessthaniv said:

Upgrades making there way into the news wires 

 

It's pretty dumb for the market to respond to upgrades from analysts whom the market was already ignoring in the first place. 

Edited August 4, 2021 by ERICOPOLY

[TwoCitiesCapital]

On 7/26/2021 at 11:36 PM, TwoCitiesCapital said:

 

The pop will come approximately 2 days after they announce phenomenal earnings - as it has the last few times they've had great earnings. 

 

Has been shocking how predictably it has repeated this behavior. 

 

I stand corrected. 4 days after announcing phenomenal earnings. After today's 4% pop - we're now up ~8% from the pre-earnings prices. 

Edited August 4, 2021 by TwoCitiesCapital

[maplevalue]

Obviously it pops a few days after earnings since the market is waiting for the COBF Fairfax 2021 thread analysis before transacting.

 

 

[Parsad]

1 minute ago, maplevalue said:

Obviously it pops a few days after earnings since the market is waiting for the COBF Fairfax 2021 thread analysis before transacting.

 

 

 

+1!  You guys had to wake up the analysts.  Cheers!

[TwoCitiesCapital]

12 hours ago, maplevalue said:

Obviously it pops a few days after earnings since the market is waiting for the COBF Fairfax 2021 thread analysis before transacting.

 

 

 

Lol - if they'd been reading this forum, they'd have known to load up at prices 10+% ago and that the earnings were going to be momentous. 

[FairFacts]

Public holiday in Canada on Monday. The analysts were all in holiday mode on Friday and its only dawning on them now how good things look.....

[Xerxes]

Come on guys, Canada is not just made of Ontario and BC etc and the in-betweens.

Monday was not a holiday in Quebec where I reside.

 

 

[FairFacts]

Xeres, no offence intended. The Market was closed on Monday/

[Xerxes]

No worries, i was just poking