Tag Archives: Real Assets

Easy Money and Finding Future Returns

Cheapest (EV/EBIT) lagging for almost a decade! Why?
Perhaps, because the market is bifurcated especially between assets and financial assets. Why?
Declining interest rates helped by the Fed purchasing bonds (expanding their balance sheet) enables bond sellers and those receiving the Fed’s money created from thin air to putchase financial assets. What is happening but forgotten?
Depressed commodity prices have reduced capex and exploration funding to replace reserves which will INEVITABLY lead to a supply shortage–higher prices will ration supply.
Oil stocks are estimated to be about 4% of the index vs. 16% a decade ago.
Investors flee commodities. Most investors chase performance or follow momentum.
Equities in mining and materials have been in an epic bear market as a result.
The price of the current SPY implies weak future returns.
The future is unknowable, but the best places to look for FUTURE returns can be the most hated, unloved sectors. However, contrarianism won’t pay off unless you see an improving rate of change in the supply/demand fundamentals for the underlying commodities or marginally improving financial performance for companies that you are studying for investment. Really bad to less bad is where you see change on the margin.

Where to Search

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helped by ultra-easy-money

us-dollar-cover

selling-stock-insiders

buying-stocks

us-dollar-divergencegold-open-interest-dec-4-2016Specs liquidating at a furious pace in gold.   US Dollar on the cover of the Economist, insider selling in stocks–all lend support to real asset undervaluation.

Who wants gold?

gold-oi

dow-vs-fiatThe Dow in dollar terms (yellow) and the Dow in gold terms.

Remember that you don’t have a good contrarian trade UNLESS this happens: