MM 14 December 2020
Quotes
Rick Rule's rules to remember
“The cure for low prices is low prices.”
“If inevitable is true, imminent is not.”
“If the price of something has to go up and can go up, it will go up.”
“The old with less time on earth is more patient with than when young. It’s called experience”
“Predictions tell you a lot more about the predictor and not so much about the future.”
“Once the measure becomes the target, it ceases to be a measure.”
Science
How our confidence influence our perception versus reality: stay humble
On the need for creative thinking
On design thinking
Want to be rich? You need either talent, good Investing, inheritance or luck
Focus on your strengths
Never waste a good crisis
Don't plan, prepare
Imperfectionism > Perfectionism over time and provided you use imperfections as a source of progress
Markets & Macro news
Money, money, money, it’s a rich men’s world
Enjoy while it lasts
Beware of the money illusion
Higher prices = lower yields = lower forward returns
Highest cyclically adjusted PE since 1920s bubble
A few drivers (money supply and vaccine + stimulus hopes) mean that the internals of the system are highly correlated. The system is fragile
Sentiment is elevated
Hedge funds now all in or acting as leveraged low beta play
Share of loss making IPOs not seen since last internet bubble
Bond vigilantes are no longer allowed to do their job. After Portugal, another PIIGS is reporting negative yields for the first time history!
Yet, the US yield curve says recovery is around the corner
As industrial surveys rebound, so do yields (money spent, is not saved)
They can afford it
Inflation prospects is why small cap value is starting to outperform big cap growth
But perhaps, the most striking illustration of this is that the Japanese stock market is now outperforming the US despite the weakness of the USD versus the Japanese Yen (JPY). Japan looks great as it would also benefit from USD strength.. a win/win
US dollar weakness has further to go in the short term and most likely for the next seven years
Emerging Markets have responded favourably to this
The ECB is is trying its best with another EUR 500bn salvo to curb Euro appreciation
This is why in Europe, the correlation between bond yield and cyclical/growth has stopped working
Indeed, European consumer is feeling better and Europe does follow China with a six months lag
Someone’s debt is another’s wealth? Well, not if the borrower can’t pay…Time for a reset
Hard Brexit increasingly likely despite another week of negotiations
Misunderstandings between the British and Europeans explained
UK still attracting HK residents it seems
Themes, Sectors & Corporate news
Big themes in tech for 2021 according to Gartner
Following the money trail: Deals in immunology is a theme:
European Asset managers are lobbying for a level playing field after Brexit
Would you rather own Tesla or Peugeot-Fiat?
Tesla has mass appeal but would lose money without carbon credits. However, it raises money from its high stock price. The last USD 5bn was taken from gullible robin-hooders. How can Tesla be worth so much when the entire auto industry is worth USD 2tn?
Peugeot-Fiat merger on the other hand has a quasi debt free balance sheet and will generate at least EUR 6-7bn of free cash flow a year for a market capitalization of EUR 22bn.
Fight against CO2 will see the form of higher costs charged to businesses
Uranium stocks on the move (big move in the juniors this morning in Australia). No wonder: there is a major short squeeze underway
Can you be a bull on gold and a cyclical bull? Not really, but some think so
all about negative real yields
But base metals may have more to offer in the short term
Nickel is particularly interesting because of concentration of supply, recent export bans by Indonesia and growing demand from battery sector. Eramet ?
Copper is indeed saying that electrification theme is a major support for such metals
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