Value hasnt worked since GFC because the markets have moved based on policy (Monetary first and Fiscal recently), not based on corporate/macro fundamentals. This is an "intervened" market where organic price discovery has been pretty much dead for years, so no wonder value principles have greatly underperformed the benchmark.
Profit growth has been coming mostly from growth stocks. Value companies in legacy industries haven’t done well on a fundamental level. Even if you account for differences in valuation, while the gap gets significantly smaller, growth has fundamentally outperformed. If the underlying reasons are systematic and longterm is unclear. It can definitely reverse again. But so far globalization and network effects have benefited the new economy while hurting old business models.
@@niklas46810 absolutely, but the point I am trying to make is that growth ever since GFC has been coming mostly from tech and not from, say, industrials or financials, is because of policy (ZIRP, QE, fiscal stimis, etc) instead of actual economic/corporate fundamentals. For example: one of hottest asset classes since GFC has been Private Equity, which has beneffited enormously from liquidity, cheap leverage, etc, and that has allowed the Ubers and AirBnBs to sustain absurd valuations regardless of poor fundamentals (zero profits for years on and on).
you forgot to take interest rate into consideration. When interest rates get as low as possible, berkshire has lost its edge due to its inherent cost of reinsurance income as float. however, when rate goes up, Buffet would regain the advantage.
But this is also to say that there is a valuation gap that's persisting and so you either believe that eventually that gets arbitraged away and things mean revert or this is like a permanent structure. But if you understand the current circumstance there should be a way to position for it.
I have been read through The convexity Haven by Harley Bassman over 10 years. It would be interesting to have him on the show instead of some traders risk for high leveraged beta with unpredictable risk.
What if you knew: (1) the U.S. Government is the sole creator of the U.S. Dollar, (2) the U.S. Government created/spent $649 billion of its own brand new U.S. Dollars in August 2024, (3) we, the people, got to keep (a surplus) $350 billion of those U.S. Dollars, (4) eventually every U.S. Dollar created/spent ends up in the financial sector, (5) the stock market is within the financial sector… Where do you think, for example, the S&P will be by December 2024/January 2025 (without the onset of world war 3, global pandemic, or asteroid hit, of course 😉)? Is that information an edge?
@@mervynman6303 I don’t understand your question. Could you be specific? In general, stock market expansion stops when Government spending/U.S. Dollar creation stops.
But doesn't efficient market hypothesis really tell you that alpha doesn't actually exist and it's merely undiscovered factors at play. And if a hedge fund finds that type of factor eventually that gets arbitraged away over time.
Value premium must exist in an efficient market. We know the market isn’t perfect, but is damn good. There is absolutely no basis in logic to believe that the expected value premium is dead. Btw… value hasn’t materialized IN THE US (not globally) for the last TWENTY years (not 30). Size and value premiums have been realized literally everywhere else on earth over the last 20 years
Personally I like hearing people say we have a permanent new structure and the old rules don't apply because that's usually when some of the best opportunities arise. Kind of like if people said we have a permanently new high plateau, we all know what that would mean too
@@abbottmd Also then the opposite must be true and we have a growth premium. Can I know short value and go long growth? I dont think that's gonna hold up...
![BLACK BAG - Official Trailer [HD] - Only in Theaters March 14](http://i.ytimg.com/vi/Du0Xp8WX_7I/mqdefault.jpg)
Value hasnt worked since GFC because the markets have moved based on policy (Monetary first and Fiscal recently), not based on corporate/macro fundamentals. This is an "intervened" market where organic price discovery has been pretty much dead for years, so no wonder value principles have greatly underperformed the benchmark.
Profit growth has been coming mostly from growth stocks. Value companies in legacy industries haven’t done well on a fundamental level.
Even if you account for differences in valuation, while the gap gets significantly smaller, growth has fundamentally outperformed.
If the underlying reasons are systematic and longterm is unclear. It can definitely reverse again. But so far globalization and network effects have benefited the new economy while hurting old business models.
@@niklas46810 absolutely, but the point I am trying to make is that growth ever since GFC has been coming mostly from tech and not from, say, industrials or financials, is because of policy (ZIRP, QE, fiscal stimis, etc) instead of actual economic/corporate fundamentals.
For example: one of hottest asset classes since GFC has been Private Equity, which has beneffited enormously from liquidity, cheap leverage, etc, and that has allowed the Ubers and AirBnBs to sustain absurd valuations regardless of poor fundamentals (zero profits for years on and on).
you forgot to take interest rate into consideration. When interest rates get as low as possible, berkshire has lost its edge due to its inherent cost of reinsurance income as float. however, when rate goes up, Buffet would regain the advantage.
But this is also to say that there is a valuation gap that's persisting and so you either believe that eventually that gets arbitraged away and things mean revert or this is like a permanent structure. But if you understand the current circumstance there should be a way to position for it.
I have been read through The convexity Haven by Harley Bassman over 10 years. It would be interesting to have him on the show instead of some traders risk for high leveraged beta with unpredictable risk.
What if you knew:
(1) the U.S. Government is the sole creator of the U.S. Dollar,
(2) the U.S. Government created/spent $649 billion of its own brand new U.S. Dollars in August 2024,
(3) we, the people, got to keep (a surplus) $350 billion of those U.S. Dollars,
(4) eventually every U.S. Dollar created/spent ends up in the financial sector,
(5) the stock market is within the financial sector…
Where do you think, for example, the S&P will be by December 2024/January 2025 (without the onset of world war 3, global pandemic, or asteroid hit, of course 😉)?
Is that information an edge?
When will the stock market expansion stop though? it cannot grow forever despite new dollars creation
@@mervynman6303 I don’t understand your question. Could you be specific? In general, stock market expansion stops when Government spending/U.S. Dollar creation stops.
"You can't have your cake and eat it too" Unless it's Shrodinger's cake ?
But doesn't efficient market hypothesis really tell you that alpha doesn't actually exist and it's merely undiscovered factors at play. And if a hedge fund finds that type of factor eventually that gets arbitraged away over time.
Value premium must exist in an efficient market.
We know the market isn’t perfect, but is damn good.
There is absolutely no basis in logic to believe that the expected value premium is dead.
Btw… value hasn’t materialized IN THE US (not globally) for the last TWENTY years (not 30).
Size and value premiums have been realized literally everywhere else on earth over the last 20 years
Personally I like hearing people say we have a permanent new structure and the old rules don't apply because that's usually when some of the best opportunities arise. Kind of like if people said we have a permanently new high plateau, we all know what that would mean too
@@abbottmd Also then the opposite must be true and we have a growth premium. Can I know short value and go long growth? I dont think that's gonna hold up...
So over an hour, you are essentially saying you’re trying to find a money glitch with creative math. Please say that in the beginning
A.I. is hot ; as it brings a new era of de-regulation...