It was just 9 months ago, when risk assets were collapsing and many on here were hoping the authorities would just shut down the markets! Back then, $ cash was king and nobody was rooting for an alternative monetary system.
Fast forward to today, the sentiment is so different!
Many investors call gold/silver and bitcoin/crypto 'safe haven' assets. Their view isn't consistent with reality.
These are 'risk assets' and over the past 10+ years, during periods of turmoil, they have *declined* in value!
During the month, I sold out of a few of my over-extended, richly valued companies and bought shares in a few rapidly growing, more reasonably valued companies....
After the GFC, central banks embarked on a massive QE program + back then, investors got really spooked about the coming high inflation (which never materialised).
Inflation hedges peaked in Sept '11 and then tanked.
Many now once again positioned for high inflation.
Most of the world is currently dealing with a massive debt overhang and this is deflationary. Furthermore, the ongoing technological innovation is also deflationary.
QE only increases the commercial banks' reserves with the Fed and this in itself is *not* inflationary.
QE does impact investor sentiment and has shown to inflate asset prices.
Interesting that both gold + silver peaked a few months ago and so far, they haven't broken out to new highs.
Wonder what'll happen to gold/silver/crypto if high inflation doesn't materialise in '21?
i) TINA - when most of the economy was in lockdown, SaaS was one of the industries which was still growing
ii) Fund managers sold the risky stocks and piled into SaaS to protect capital/show performance
When the economy reopens...
... capital will go back to the beaten down cyclicals which were crushed by the pandemic (this process has already begun) and at some point, valuations for the entire market will normalise.
Finally, when Fed stops buying assets, high multiple names may be especially vulnerable.
In spring/summer/autumn, when I suggested we were in a young bull market, most were still unsure and fearful. Many hot growth stocks were also way lower.
Over the past 4-6 weeks, sentiment has become euphoric, many IPOs have tripled in a matter of weeks, $ABNB has doubled...
...in a day, $DASH has almost doubled in a day, dozens of IPOs/SPACs have come to market, 20yr olds have put up hundreds of videos on TikTok and YouTube recommending hyper growth stocks, people I know have given up their jobs to become day traders and valuations have risen a LOT!
So, the situation has changed quite a lot and I'd be crazy not to recognise these changes.
To be clear, I am not suggesting the party must end tomorrow. If history is any guide, the show will probably go on until the Fed keeps expanding its balance sheet.
The best long-term investment returns are generated when an unloved (almost hated) asset or sector comes out of a decade long bear-market.
US stocks in '82 or '13
Commodities in '00
EMs in '03
The dogs of the past decade likely to do well over the next 10-15 years.
By the time a story is fully understood, its usually too late.
Investors loved US stocks in the late 60s, they loved commodities in the late 70s, they loved Japan in the late 80s, they loved TMT in the late 90s and they loved commodities/EMs in late 00s.
How did that turn out?
A number of the shiny/growth stocks have tripled or even quadrupled since March!
The question to ask is "have their operating results tripled or quadrupled over that period"?
NO, they haven't. These stocks have rallied due to COVID fear and multi-expansion. Worth remembering.