12 Years of VP vs Noise
Sharing the ideas and experiences that have influenced our work
The Big Short (Reports)
Variant Perception aspires to be right 100% of the time, but when we miss a call, we don't camouflage it. Because we produce reports that are short and direct, there is no place to hide incorrect calls. It is tempting to write lengthy reports, which give you room to...
Gold lessons from the 1970s
The long-term case for gold remains intact. The ratio of total US M1 (adjusted for the recent savings deposit re-classification) to gold has continued to surge higher, showing the underlying trend remains bullish. A bullish long-term trend does not mean things move in...
Housing: the inflation dog yet to bark
Following on from our recent posts on inflation risks, we dug into what specific components could drive inflation higher. Housing represents an outsized component, comprising 31% of headline CPI and 40% of core CPI in the US. The below chart plots the top CPI...
Working in a small business
"One thing that I’ve learned from being a parent and working at small businesses is the importance of sleep. I remember after our first daughter was born, I was getting very little sleep like all new parents. I was going about my normal routine during the day and...
The Ghost of Arthur Burns
Following the FOMC meeting last week and Fed officials speeches this week, the message to markets is clear: currently high inflation is transitory. We invert the problem and ask: what if it's not transitory and what might this look like? Stephen Roach, who served on...
Capital Gains Tax: announcement effects and sector rotation
President Biden's 2022 fiscal budget includes proposals for a 39.6% (43.4% with surtax) top long-term capital gains tax rate (in the US long-term capital gains apply on investments owned for 12 months or longer). We don't know what the final bill will look like, but...
12 Years of VP
“We set up Variant Perception to solve our own investing needs. Most investment strategy and economic research we read was highly idiosyncratic and dependent on a guru or some strategist with a crystal ball. While they occasionally got some big calls right, they...
How Inflation Swindles the Equity Investor
Following on from our post last week about the concept of equity duration, it's a great time to revisit Warren Buffett's evergreen piece on inflation vs equities. The chart below shows in nominal terms the S&P 500 did okay through the 1970s, but investors lost...
The Importance of Equity Duration
We have seen much commentary that if US 10y yields go back to 2.5% or 3.0%, then equity markets suffer. We prefer a different way to looking at the problem. The key is what inflation is doing alongside any move in nominal yields. The below chart shows the % of the...