A certain swarthy, recently-embearded Englishman from the investment fund world noted yesterday (in a private, unshareable blog post that I certainly can't access oh no) that the present broad market weakness might simply be the result of "allocation season", and that it'll be done after next week. So I guess we can just take our summer positions now.
He also noted the rise in the belly of the Treasury curve is good for banks. And Josh Brown said the banks already are trading at a dismal P/E, so I guess that's the place to go for the next few months? The NASDAQ is already popping its little biotech & 3D bubble, so that's probably done.
Anyway, here's some news:
Crossing Wall Street - there's no such thing as value. It's probably been beaten into your skull already, if you're a value-investing gold mining person. Still, let's quote:
I’ll let you in on a little secret: there’s no such thing as value. There’s no magic value gnome hiding underneath each stock. Instead, there’s only price.In other words: quit trying to catch falling knives.
Value is a fiction, but a highly useful one. It’s an excellent way for us to think about a stock.
Telling us that a stock is below its value doesn’t tell us much. What if the stock’s value falls? Or what if the price/value gap grows wider? The price/value dichotomy is further complicated by the fact that price itself can impact value. For example, an elevated share price can make it easier for a company to raise money.
With any investment analysis, your constants are most likely highly contextual, and as a result, they’ll do a poor job of predicting out-of-sample results. That doesn’t bother me so much, and it’s also why I don’t much care for price targets. For all their sophistication, valuation models aren’t reality. They’re merely a blurry and highly conditional image of reality.
The proper job of an analyst is to judge possible outcomes and their impact. Value is a tool, but it must always be seen within the context of if/then scenarios. Too often, modelers become enthralled by their model and don’t look at what the underlying message is.
Bespoke - rotation into emerging markets. I don't see why you should. They're fucked. You could make a case that they're oversold, that their fortunes haven't reversed as fast as the market thinks they have; but this shouldn't be a bottom in EMs unless something is really different this time around.
Mining.com - coking coal crashes calamitously. Two takeaways: Frik Els obviously reads this blog religiously, and supply is increasing while miners are all operating at a loss already. Thus the secular bear market in commodities continues.
Huffington Post - GOP lawmakers want to ban online gambling because it takes money away from Sheldon Adelson's casinos. You thought this crony corruption only happened in third-world backwaters? Well, it does!