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Thursday, February 23, 2017

Peter Boockvar on euphoria or not


Ritholtz - what would John Templeton think? This was the part that really tweaked my interest:

We know that the amount of Bulls in the weekly Investors Intelligence survey have only been seen a few times over the past few decades. They currently total 61.2 vs 61.8 last week. Bears are a microscopic 17.5. I’m no technician and only use overbought/oversold metrics as a background message fully understanding that when extreme in one direction, it can get more so but we are really, really stretched. The 14 day RSI in the NDX yesterday closed at 84.7, the highest since January 1992. It was 84.2 in January 2000. The index is up 11 out of 12 days and that down day totaled 1.7 pts. The technology sector within the S&P 500 is up 14 days in a row.

Valuations don’t matter until they do and certainly haven’t mattered for a while but we can’t deny the fact of where stocks are trading relative to other historical peaks.

Much of the ebullience is being driven by hopes over a large cut in the corporate tax rate. To put numbers to this, the Bloomberg US exchange market capitalization has increased by $2.5 Trillion since the day of the election. According to the CBO estimate, the US will take in $320 Billion in fiscal year 2017 in TOTAL corporate income taxes. Thus, if the entire corporate tax was eliminated, we’ve priced that in by 8 times and some of those corporations are privately held.

Then again, have all the Republicans who stayed out of the market thru 8 years of Balrog HUSSEIN Taxbongo bought in yet? You have to know how much money is still to enter the market before you can call a top.

Personally, I'm looking more and more at CIE.TO for an ex-US developed market story. It's regained its losses from 2015 and seems to want to break to a new high. Europe (and Japan, meh) may be moribund, but that would hopefully also mean they're trading at a very low P/E compared to the US.

I'll have to check it further.


3 comments:

  1. Why prefer CIE.TO (developed fundamentals) to CWO.TO (emerging fundamentals)?
    CWO.TO has put in a new 5 year high and CIE.TO not.
    YTD performance has been better.
    Plus CWO.TO has gone sideways for the last five years, so probably offers better value.

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    1. Never saw that ETF before, and I actually wasn't considering EMs because they only really do well when DMs are in a secular bear.

      Pros for CWO: decent dividend. It's outperforming EEM so it must have a better investment strategy; I'd be interested in looking at the country-level data and largest holdings to see what they're up to.

      Cons: Relatively illiquid compared to CIE.to. It's an EM fund, and they can go sideways for a decade.

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    2. Also, though sure this is *very* tangential, EM economies will suffer if DM-world anti-immigrant populism increases, because remittances are a huge part of EM GDP.

      Though on the other side of that, South-South trade should increase if there is DM isolationism on the horizon.

      Anyway, the EM/DM political-economic cycle is a big consideration for me. I don't see much good EM news ex-China anymore.

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