1/ New market update, borrowing a concept from @MikeArrieta: blizzard, winter, or ice age.
- what data says about market returns after 35% drawdown
- small value's historic position
- quality so far in this bear market
- fear and hope
canvas.osam.com/Commentary/Blo…
- what data says about market returns after 35% drawdown
- small value's historic position
- quality so far in this bear market
- fear and hope
canvas.osam.com/Commentary/Blo…
@MikeArrieta 2/ In this market, we feel our "integrated equity" approach to valuing indexes is most appropriate.
IE is defined as all capital retained and reinvested by companies, properly adjusted for inflation. It changes slowly.
Relative to Jan 1st, 10-yr expected returns have changed
IE is defined as all capital retained and reinvested by companies, properly adjusted for inflation. It changes slowly.
Relative to Jan 1st, 10-yr expected returns have changed
@MikeArrieta 3/ Small cap value has reached rare territory relative to large growth (broken record, I know). After similar spreads, the forward 10-year return spread for SCV vs. LG has been enormous.
These spreads could widen more. No one knows. But you can drive a truck through the gap.
These spreads could widen more. No one knows. But you can drive a truck through the gap.
@MikeArrieta 4/ Quality factors, especially earnings growth and financial strength, have worked really well during this drawdown, but value has been beaten up badly.
@MikeArrieta 5/ Lots of investors, though, are fed up with data. Their questions is more existential: is this volatility blizzard part of a normal winter, or instead is it a new economic and market ice age?
I understand the question. No one operating in markets has a global pandemic.
I understand the question. No one operating in markets has a global pandemic.
@MikeArrieta 6/ I've been re-reading Frank Herbert's Dune during sleepless nights. Everyone knows the quote "fear is the mind killer," and it is. Fear freezes.
But soon after that quote appears another, equally important one: "hope clouds observation."
But soon after that quote appears another, equally important one: "hope clouds observation."
@MikeArrieta 7/ Fear is the mind-killer but hope alone is insufficient. We must quickly embrace reality and then seek to improve it. We must focus on the things in our control that we can make go up as prices go down, that we can improve as things devolve.
8/ These updates are hard to write in face of great uncertainty. I don't know what is going to happen. But I'm an optimist and believe the human response will eventually beat this menace.
We are taking every health precaution, and will try to do our very small part for investors
We are taking every health precaution, and will try to do our very small part for investors
