Pages

Tuesday, December 29, 2020

Dave Collum: 2020 Year In Review

 Link:

Imagine, if you will, a man wakes up from a year-long induced coma—a long hauler of a higher order—to a world gone mad. During his slumber, the President of the United States was impeached for colluding with the Russians using a dossier prepared by his political opponents, themselves colluding with the FBI, intelligence agencies, and the Russians. 

A pandemic that may have emanated from a Chinese virology laboratory swept the globe killing millions and is still on the loose. A controlled demolition of the global economy forced hundreds of millions into unemployment in a matter of weeks. Metropolitan hotels plummeted to 10% occupancy. The 10% of the global economy corresponding to hospitality and tourism had been smashed on the shoals and was foundering. 

The Federal Reserve has been buying junk corporate bonds in total desperation. A social movement of monumental proportions swept the US and the world, triggering months of rioting and looting while mayors, frozen in the headlights, were unable to fathom an appropriate response. The rise of neo-Marxism on college campuses and beyond had become palpable. 

The most contentious election in US history pitted the undeniably polarizing and irascible Donald Trump against the DNC A-Team including a 76-year-old showing early signs of dementia paired with a sassy neo-Marxist grifter with an undetectable moral compass. 

Many have lost faith in the fairness of the election as challenges hit the courts. Peering through the virus-induced brain fog the man sees CNBC playing on the TV with the scrolling Chiron stating, “S&P up 12% year to date. Nasdaq soars 36%.” 

The man has entered The Twilight Zone.

Taylor Collins: Commodities And Market Rotation

 Link:

Commodity prices and performance of many resource-related stocks have been picking up recently. In addition to this, many of the wildly popular, most-talked about tech/growth stocks now seem to be going sideways and/or sputtering altogether. If we go back just a few months to July of this year, NASDAQ was up almost 20% YTD, and we've all probably heard about the record IPO filings and insane valuations on many of those stocks (something we've discussed previously). 

It appears that we are witnessing a market rotation out of tech/growth and into value, and I believe this is just getting started.

There is a great saying from the historian James Grant, "Progress is cumulative in science and engineering,  but cyclical in finance." We will revisit this idea later, but for now let's take a look at a few indicators of commodity prices since the COVID correction back in March.


Sunday, December 27, 2020

Chris Mayer: A Tale of Bubbles Past

 Link:

Winter invites reflection. As I look back on the year, I am sure I am not alone in thinking 2020 has been unlike anything I’ve ever experienced. But in the stock market, at least, I do have a certain feeling of déjà vu.

In the course of cleaning out a section of my office -- something I have to do every once in a while or risk burial by books and paper -- I came across a stack of old magazines that make my point.

This magazine was called Technology Investor and it debuted -- I am not making this up -- in March of 2000. As you may know, that was the peak of the great tech bubble. The magazine had an eye-catching cover, as you can see.

The NASDAQ peaked on March 10, 2000. It was a Friday. And the close was 5,048.62. Then the party ended. The NASDAQ didn’t bottom until October 2002, after it lost 78% of its value.

Saturday, December 26, 2020

Charlie Munger: How to Identify a Resilient Economic Moat

 Link:

When considering a company's investment potential, according to Warren Buffett (Trades, Portfolio), it is critical to determine whether it has "a moat around it with a very valuable castle in the middle." While such a moat can take different forms, its function is the same: protecting the company from competitive threats.

"Moats have been breached time after time. Imagine the Eastman Chemical Company going broke. Imagine all these great department stores being on the edge of extinction. Imagine all those monopoly newspapers going down. Look at the strength of the American auto industry compared to what it was, say in 1950. I think the moats are disappearing rapidly. I mean the old classical moats. I think it's probably a natural part of the modern economic system, as in old moats stop working."

"Berkshire owns the Burlington Northern railroad. You can hardly think of a more old-fashioned business than a railroad business. It's an excellent asset. Who is going to create another trunk railroad? We made that a success, not by conquering change but by avoiding it. It helps to have a position that almost can't be taken away by technology. How else will you haul goods across the land, from Los Angeles to Chicago?"

Friday, December 25, 2020

Sam Zell: The Single Greatest Risk' Facing Americans Could Hit Within Decade

 Link:

“The single greatest risk that we are dealing with today is the loss of the U.S. dollar as the reserve currency,” Sam Zell, the founder and chairman of Equity Group Investments said in recent RealVision interview.

“If we keep doing what we are doing right now, I think it is 10 or 15 years away,” he was quoted by MarketWatch as saying.

“A 25% reduction in our standard of living” could take place if the dollar loses its reserve status, which he says is a very real possibility, he said.

“Unlimited debt and irresponsible activity don’t lead to positive outcomes,” the billionaire real-estate mogul added. “That’s a disastrous kind of scenario.”




Wednesday, December 23, 2020

Charlie Munger: CalTech interview 14. December 2020



 
Charlie Munger appeared for the first time since January on a public interview with Caltech faculty.


Crescat Capital: December Research Letter The End Game

 Link:

Markets are cyclical. Today, stocks trade at record high valuations while commodities are historically undervalued in relation. The setup is in place for a macro pivot in the relative performance of these two asset classes. Comparable conditions were present with the 1972 Nifty Fifty and 2000 Dotcom bubbles as we show in the chart below.

As capital seeks to redeploy towards the highest growth and lowest valuation opportunities, we expect analytically minded investors will soon be rotating, if not stampeding, out of expensive deflation-era growth equities and fixed income securities and into cheap hard assets, creating a reversal in the 30-year declining trend of money velocity.

Today’s Modern Monetary Theory world with its double barreled fiscal and monetary stimulus is crashing head on with an accumulation of years of declining investment in the basic industries such as materials, energy, and agriculture. In our analysis, the “end game” for the Fed’s twin asset bubbles in stocks and bonds is inflation. We can already see it developing on the commodity front.

Monday, December 21, 2020

Taylor Collins: Mind Blowing Valuations – Tesla, AirBnB, DoorDash

 Link:

The stock market, and in particular, stocks popular among millennial “Robinhood traders” (who have never had the privilege of experiencing a deflating bubble) have been all the rage lately.

It’s fascinating to see companies like Tesla being added to the S & P 500, when it took 16 years for the company to even turn an annual profit. What’s even more astonishing is the enormous market capitalization of Tesla (and similar companies we’ll look at), when compared with their senior and more established competitors.

Tesla’s market cap currently stands at $658 billion ($659 billion if rounding up), beating out Warren Buffett’s Berkshire Hathaway by roughly $133 billion. This is incredible considering Tesla only has a global market share of 1% for passenger vehicles. The chart below illustrates how Tesla’s market cap exceeds the combined market cap of the world’s biggest auto makers – keep in mind Tesla has added 80 billion to their market cap since this chart:

Sunday, December 20, 2020

Frank Holmes: Bitcoin Cracks Record High Due To Institutional Buying

 Link:

This week the Federal Reserve left interest rates near zero and committed to continue its bond-buying program until “substantial progress” has been made regarding employment and inflation. Initial jobless claims increased for the second straight week, hitting 885,000 in the week ended December 12—the most since early September.

I was floored to see just how much the Fed is buying—and will continue to buy—each month. The central bank is gobbling up as much $120 billion of debt, split between $80 billion of Treasuries and $40 billion of mortgage-backed securities (MBS).

The size of the Fed’s balance sheet now stands at a staggering $7.36 trillion, or 34% of gross domestic product (GDP).

Saturday, December 19, 2020

MacroVoices #250 Kyle Bass: Commodity Bull Market, Inflation & Singapore

 Link:

All-time highs despite the pandemic – are we shifting into a new paradigm?

Impending inflation and how to trade it 

Is gold still the best hedge against fiat debasement?

Is the bond bull market finally done and are we headed toward negative yield?

Negative yields in Europe – will this recover as inflation begins?

How will Biden administration change the macro outlook?

Implications of electrification of the economy

Will Singapore be replacing Hong Kong as the financial center in Asia?

Perspectives on crypto currencies

Thursday, December 17, 2020

Jesse Felder: Find The Courage To Act

 Link:

A few months ago I wrote Master The Art Of Doing Nothing, in which I argued that, while it may be the most difficult thing for an investor to do, the vast majority of the time an investor should simply do nothing at all. Truly wonderful opportunities don’t come around very often but having the patience to wait for them is what separates the best investors on the planet from the rest.

However, it’s not only the waiting that is critical to success; it is also the courage to act when the time arises. Aside from being too active, another major mistake investors make is simply being too timid, or becoming too comfortable with doing nothing at all and this can be just as costly if not even more so. As Warren Buffett has said, mistakes of omission, or failing to act, have cost him far more than mistakes of commission, or acting when he shouldn’t have.

Tuesday, December 15, 2020

Crescat Capital November Performance Update

 Link:

Surrounded by speculative excess everywhere, our short positions in select hyper-overvalued US equities remain key tactical holdings in Crescat’s Global Macro and Long/Short funds. November’s market move appears to be a last gasp for stocks, which are suspiciously out of sync, with the downturn in the business cycle already in progress. In our view, investor positioning is historically imbalanced based on a composite of indicators:

-The put to call ratio for US stocks just hit its lowest level since 2000

-Options volume has surged to its highest on record

-21.6% of all call options were bought by small traders, the largest level since the tech bubble

-Median short interest for the S&P 500 has plunged to 17-year lows

-We now have the largest percent of S&P 500 members above their 200-day moving average in 7 years

-Market sentiment, measured by the Investor’s Intelligence, is at its highest level since just prior to the Volmageddon shock in 2018.

-According to SentimenTrader, for the 1st time in 15 years, 60% of their indicators are showing an excessive amount of optimism, the highest reading yet.

Monday, December 14, 2020

Mohnish Pabrai Shares Insights on Identifying 10 to 100-Baggers - Part 1

 Link:

Renowned value investor Mohnish Pabrai (Trades, Portfolio) recently gave a lecture for the Fall 2020 Value Investing Course at Peking University's Guanghua School of Management. During the lecture, Pabrai shared his insights on how to spot 10 to 100-baggers, which he calls the holy grail of investing. Pabrai also held a question-and-answer session after the lecture in which he answered questions from students and sit-in audience. 

Sunday, December 13, 2020

Jim Rogers: Market crash coming? Jim Rogers says not yet; invest in these 'hated' assets


There’s simply too much money injected into the monetary system by central banks to allow a sizeable bear market to take place soon, said Jim Rogers, investor and chairman of Rogers Holdings.

“Many stocks in the U.S. are down in 2020. There are a few stocks that are going through the roof every day. Some parts of the U.S. market are developing a beginning of a bubble, but many parts of the markets are not, that’s why I suspect [this rally] is going to go on for a while,” Rogers said.


Friday, December 11, 2020

Frank Holmes: Still Plenty of Gas in the Base Metal Rally Tank

 Link:

Industrial metals are well on their way to being among the top performers of 2020, supported by red hot demand from China and global supply concerns.

As of today, the MSCI Industrial Metals Index—which tracks the price of copper, nickel, aluminum and more—was up 21.4% year-to-date, just below the index of precious metals, up 21.9%. The broader S&P GSCI, which measures metals as well as agricultural and energy-related commodities, was underwater by nearly 10%.

I believe the rally is only getting started, and we could see ever higher asset prices in 2021, for a couple of significant reasons.

Number one, President-elect Joe Biden plans to make infrastructure one of his top priorities soon after taking office next month. Proposals have the U.S. spending as much as $2 trillion not only to improve roads, bridges and seaports but also beef up the EV sector, add charging stations, convert school buses to zero emissions and more.

Tuesday, December 8, 2020

Horizon Kinetics: Two Assessments of Energy: ‘The Market’ and Contrarian (fact-based) Investing

 Link:

Today we’re talking about energy. Not exclusively, but mostly. Specifically because many of you have been asking about how the fossil fuel divestment movement and green energy initiatives will impact the energy sector – more frequent questions, and more alarmed. Ifwe don’t address this, there might not be the mind space to hear anything else. The fear isthat there will be such a drastic collapse of oil and gas use, or that, as some have suggested, fossil fuel use will be non-existent by the year 2035, that it will create a permanent failure among energystocks; stranded assets, and all of that.

We see the investment reality entirely differently; entirely. The imminent danger is not the collapse of fossil fuel use; the imminent danger is an oil supply shortage and oil price shock. 

Monday, December 7, 2020

Frank Holmes: Dr. Copper Gives the Economy a Clean Bill of Health

 Link:

“Dr. Copper,” so named for the metal’s ubiquitous use in many different applications, has been ripping higher since its 52-week low in March, thanks to a number of factors including promising economic data. Copper rose 12.24% in November, its best month in four years. Today it was trading as high as $3.52 per pound, or $7,679 per ton, its highest level since March 2013.

The rally is due in large part to higher demand from manufacturers in the U.S., China and eurozone. For the month of November, the IHS U.S. Manufacturing PMI hit 56.7, up significantly from 53.4 in October. The month-to-month increase was the sharpest since September 2014, according to IHS Markit.

Sunday, December 6, 2020

Howard Marks: Prospective Returns Are Low on Everything.’ Howard Marks Outlines Investment Opportunities, Risks

 Link:

Barron’s: What’s the biggest question we’ll face when the Covid-19 pandemic winds down?

Howard Marks: The rate at which we’ll return—and the extent to which we’ll return—to our prior behavior. My guess is we’ll go a good bit of the way back to what used to be business, or life, as usual. For the most part, life won’t be fundamentally changed. The things that you or I now would consider out of the question, like going to the movies, a sporting event, or a party, will become commonplace again once the disease is under control.

You’re not a stock picker, but do parts of the stock market look appealing?

On the other hand, when you look at the nontech companies, there are a lot of areas where business models are severely challenged by the pandemic and other trends. If you can find among those companies some where the reality isn’t going to be as bad as the expectation, then you can make money in those holdings. It is all a matter of looking for situations where the merits are underestimated by investors.

Saturday, December 5, 2020

Smarter Markets - Robert Friedland: Envisioning commodities graded & traded on how responsibly they're produced

 Link:

Billionaire Canadian financier Robert Friedland headlines the inaugural episode of Smarter Markets, and shares a vision of commodities being graded based on how responsibly they were produced with regard to ESG priorities, thus allowing free market price discovery to determine a market premium to reward responsible producers of metals and other commodities which have historically had an adverse environmental impact. 

Robert goes on to share his vision for how a distributed ledger (blockchain) could be used to hold commodity producers to account and assure buyers of commodities that they've received the full and true details of how those commodities were produced.

Also discussed is the metals that will be needed for the proposed energy transiton.


Wednesday, December 2, 2020

Ronald Stöferle: Inflation special report

 Link:

Our special report on inflation is finally out. Inflation is quickly becoming one of the main topics of due to the events which have especially unfolded this year. A whole arranges of topics and factors play into it, and we took the time to unpack them all. 

Every regime has its paradigm. For the past 40 years it has been a deflationary paradigm. Inflation was to be killed and this can be seen in many articles and publications. The symbol was the defeat of stagflation in the early 80s. All of this has now undoubtedly turned to inflation.