12 Years of VP vs Noise

Sharing the ideas and experiences that have influenced our work

Revisiting the anatomy of a bubble

Jeremy Grantham's recent piece, Let the wild rumpus begin, argued that the US is in its 4th "superbubble" of the last 100 years and is in its final stages.  This inspired us to refresh our bubble framework (below, taken from our 2017 blog post).  Many valuation...

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Global savings glut: structural headwinds for yields

Google trend searches for “savings glut” shows the surge of interest in the 2000s and waning interest ever since (left chart below). This is matched by the peaking of global imbalances during the GFC and the subsequent fall (right chart below). We track the magnitude...

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Lessons from whaling history for oil today

The fossil fuel narrative has understandably focused on the death blow coming from electric vehicles and renewable energy.  However, the history of whaling shows that one should keep an open mind. The death of Yankee Whaling is not the whole story on technological...

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Gold divergences

Gold has been diverging from macro and market data.  Our macro-driven gold price indicator (a fair value forecast based on macro inputs like the DXY, yields and CPI) has jumped as higher inflation overcomes the negative impact of the strong USD. Source: Bloomberg,...

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Cyclical headwinds vs structural tailwinds

It's difficult to know how to invest with building liquidity and growth headwinds while structural trends remain positive.  For equities, one of the simple regime indicators we use tracks moving average crossovers on S&P 500 earnings.  Whenever the 10-week moving...

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Rotating market leadership

Market leaders tend to rotate after a recession and enjoy a multi-year period of outperformance. The GFC ushered in a decade of real asset underperformance vs financial assets (proxied by commodities vs bonds), which has reversed after the lockdown recessions. Source:...

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The bullwhip effect in action

The bullwhip effect describes how a small change in end customer demand amplifies disruptions upstream through the supply chain.  This helps to explain much of today's global supply chain disruptions, where we see excessive new orders from purchasing managers to...

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Structural tailwinds for US homebuilders

The 2010s marked a lost decade for US homebuilding.  The number of homebuilders declined 50% between 2007 and 2012 in the US, and the GFC caused a massive hole in personal savings and equity, meaning that fewer people could afford a home.  This drove a shift towards...

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Lessons from past market tops

We looked at 3 major tops (1929, 1973 and 2000) suggests tops are immediately preceded by 1) sustained monetary policy tightening and 2) divergence of surging bubble stocks vs the average stock moving sideways/falling. 2021 has been characterized by late-cycle markets...

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