To The Moon

A quick highlight/refresher — the below table is from “How to Use Value Signals for Global Equities“. It highlights how to think in 2-dimensions when it comes to stockmarket returns and valuations.Most commentators talk about the absolute return and risk situation (is the market overvalued vs history? is the outlook for stocks to go up or down?) — but fewer speak about relative risk and return (how does this asset/sector/stock compare to that asset/market? will this one outperform vs that one? what other information can we decipher from this relative performance trend?).When it comes to sector analysis like what we looked at today, relative valuations and relative returns can not only highlight interesting opportunities (e.g. REITs as an alternative hedge/defensive position), but also give

Despite boasting a dividend yield thrice that of the index, REIT total returns (i.e. including dividends reinvested) have lagged significantly behind vs stocks.Since peaking in 2007, REITs have basically been in an 18-year relative bear market vs the S&P500 $.SPX(.SPX)$ — placing them at a 24-year low vs stocks, and marking a major deviation from the long-term up-trend.REITs last suffered such underperformance in the late-80’s/early-90’s in the wake of the commercial real estate bust, and then again falling behind in the late-90’s as the dot com bubble frenzy saw this “old-economy” sector shunned.But history rhymes, we just saw 10-15% drawdown in commercial real estate following the 2022/23 rates and inflation shock (the drawdown is more than

China GoldI noticed a couple of things last week: first the gold price in CNY made a new all-time high; second — the gold $Gold - main 2502(GCmain)$ price in China has been moving in lockstep with Chinese government bonds.This stands in contrast to the breakdown in the US real yield vs gold price relationship, and gives further nod to the point that China/EM have been in the driver’s seat of the gold price (both in terms of the geopolitics and reserves diversification aspect, but also on the macro/markets side of things).Gold vs TIPSAs noted, the past link between gold and TIPS real yields broke down in 2022. Warren Pies of 3Fourteen Research comments: “two broad conclusions: 1) Central banks driving the run, 2) This is secular bull market beh

Learnings and conclusions from this week’s charts:The pause in financial conditions tightening helped stocks rally.Semiconductors’ market cap weighting reached an all-time high.Mag7 corporate bond yields are almost on par with Treasuries.Credit & Equity markets are extreme expensive, complacent.Passive index investors are all-in on tech, light on defense.Overall, in the short-term the pause in financial conditions tightening has helped stocks rally off oversold levels —perhaps along with some renewed optimism on what the year ahead might bring, and golden age, AI etc. But I think we need to remain on guard and on-watch with regards to financial conditions; a resumption in tightening will risk triggering off some of the significant vulnerabilities building up in markets (which I have do

This week I covered the following topics/ideas:1. GSV vs ULG: Bullish global/small/value vs US/large/growth on increasingly extreme cheap relative value (and supportive emerging macro scenario), awaiting turn in technicals to raise conviction.2. China Equities: Remain bullish given improving macro and cheap absolute +relative valuations, bearish on the bonds though (and hence bullish Chinese stock/bond ratio).3. EM Equities: Remain bullish EM equities as EM ex-China pulls their weight and EM ex-Asia remains significantly cheap, meanwhile sentiment remains skeptical and allocations well below average.4. EM Fixed Income: Remain bullish given investor skepticism, turn in technicals, cheap valuations, and favorable policy path (likewise for EMFX), but wary of inflation resurgence risk.5. Front

As noted, the setup I just outlined above if it comes to pass will present near and pressing upside risk to inflation… and that will come at a time where global growth reacceleration risk is starting to become a reality + as the chart below shows the Great Disinflation has stalled.I don’t think we get a repeat in magnitude of the 2021/22 surge in inflation, but we are clearly into the higher-for-longer rate of inflation timeline, and that’s going to have important implications for the path of monetary policy, bond yields, and ultimately both yield sensitive assets and the stockmarket as a whole if things end up getting disruptive.So I am advocating a cautious stance on equities given they are so overvalued, a cautiously optimistic stance on bonds (they are cheap), and a highly bullish stan

Commodities have become a forgotten asset class — they fell into a cyclical bear market after peaking back in 2022, and with other assets faring much better I guess it kind of makes sense that investors have begun to ignore this corner of the market.But things are changing and it’s time to remember commodities, because commodities will remember us!First, straight into the chart: it shows the historical seasonal pattern of commodity prices (diversified GSCI Light-energy index) and WTI crude oil $Micro WTI Crude Oil - main 2503(MCLmain)$ .More to the point: it’s showing a seasonal tendency for strength in H1 for commodities — this is a big deal for a couple of reasons...And before you go on about the fallibility of seasonality (and it is fallib

This week I covered the following topics/ideas:1. China Macro: The cyclical outlook for China is turning up as stimulus measures announced last year (and likely more to come) helped earnings revisions, property prices, and PMI data into recovery mode.2. Commodities: Bullish commodities on improving technicals, intermarkets, sentiment, macro, valuations (albeit waiting to see a breakout of that major trading range).3. Commodity Equities: Bullish global commodity equities on improving technicals, improved commodity price outlook, supportive valuations, and potential inflation risk hedging aspect.4. Oil & Energy Stocks: Bullish crude oil price outlook as technicals improve, supply vs demand outlook remains supportive, and Trump 2.0 brings mixed bag with clear upside risk.5. Agri/Grains: C

Initial breakout in Gold $Gold - main 2502(GCmain)$ , surge in Silver $Silver - main 2503(SImain)$ shorts (squeeze coming?), Deep Value in Gold Miners, and a look at who Holds the most Gold...Breakout?Legendary Technical Analyst Peter L Brandt highlights the recent bullish developments in gold (initial breakout of triangle formation). However, he later outlined elsewhere a couple of possible warning signs (e.g. the “Millenium Effect“, and the futures/spot premium spike), so it’s not necessarily going to be a straightforward path.Silver ShortsElsewhere, SubuTrade highlights the spike in short interest in Silver ETF (SLV) — and notes with regards to the initial bottom in bonds; “a bond market rally

Earnings Share of Super Sectors:  staying with the topic of earnings and percentage shares, this chart shows the earnings share/weight of the 3 core “super sectors” of the S&P 500 $.SPX(.SPX)$ . And there are some very interesting cyclical and structural themes here.First, I’ve grouped the main GICS sectors into “super sectors” to reflect previous changes in sector classifications and economic/market realities. They are: Defensives = Utilities, Consumer Staples, Healthcare; Tech (+tech related) = Information Technology, Communication Services (~45% Facebook $Meta Platforms, Inc.(META)$ & Google $Alphabet(GOOG)$