Journal to portfolio afterlife

[portfolioafterlife]

Source: Mai and Pukthuanthong (2021).

Compare the last 30 to 40 years since the 1980s with the past and you will find that:
Recessions have become much rarer. Before the Federal Reserve was established and central banks managed monetary policy in developed countries, we used to have a recession every 3 to 5 years. Now, we tend to have one every 10 years or so. Epidemics have become incredibly rare. So much so that until 2020 we all but forgot about them as a potential risk. Wars have remained a staple of world politics with periodic flareups at times.

Take a step back and count your blessings

Normally, Friday posts are about the funny and quirky side of economics, but today I want to take a step back and reflect on how good we have it.

klementoninvesting.substack.com

 

[portfolioafterlife]

https://1icz9g2sdfe31jz0lglwdu48-wpengine.netdna-ssl.com/wp-content/uploads/2015/01/Walter-Schloss-16-Rules-to-Make-Money-in-Stock-Market.pdf

 

[portfolioafterlife]

Consumers are being squeezed by negative real wage growth and inflation at 40-year highs. As a result, consumer sentiment is declining, and personal consumption habits are changing as people struggle to help make ends meet.

Summary:

• Falling consumer sentiment.
• Crushing inflation.
• Declining real wages.
• Savings are being drawn down rapidly.
• Credit card usage is soaring.
• Mortgage cash-out refinancing is not economical.
• Fiscal stimulus is unlikely.

Excepting a sharp decline in inflation or a gap higher in wages, it appears the consumer is in a bind. 70% of the economy is tied to the fate of the consumer. Such does not mean a recession is probable, but given the consumer’s predicament, we must assume it’s a distinct possibility.

The Consumer is Getting Squeezed - RIA

Consumers, accounting for nearly 70% of GDP, are slipping behind and their means to consume are dwindling. Recession odds are increasing.

realinvestmentadvice.com

 

[portfolioafterlife]

As shown below, the AAII investor allocation to stocks, bonds, and cash tells the story. Despite AAII investor sentiment at very bearish levels, the allocation to equities remains very high while bonds and cash remain low. Interestingly, seemingly terrified investors are still unwilling to sell for the “fear of missing out.”

Investors Are Terrified, So Why Aren't' They Selling? - RIA

Investors are terrified. Despite the selloff this year, negative sentiment, and concerns of a bear market, no one is selling.

realinvestmentadvice.com

 

[portfolioafterlife]

Anche l’inflazione è un’epidemia globale. Come il Covid, tuttavia, il
contagio da inflazione produce esiti diversi. Per un gruppo di paesi ha la
gravità di una polmonite. Parliamo di Stati Uniti, Regno Unito ed eurozona.
Larry Summers, nel suo ultimo studio pubblicato nei giorni scorsi, ricalcola
l’inflazione di oggi utilizzando i metodi di rilevazione degli anni Settanta e
ne conclude che abbiamo raggiunto, se non superato, i livelli di allora.

https://www.kairospartners.com/wp-content/uploads/2022/06/rn-20220609.pdf

J. "John" Williams di Shadow Government Statistics (www.ShadowStats.com) sostiene la stessa tesi.

 

[portfolioafterlife]

People who are extremely successful in business or investing tend to think of themselves as more skilled and hard working than the average person. No doubt they are on some level, but the more extreme their success, the greater the role luck plays in achieving it.

Extremely Successful? Extremely Lucky!

What’s more critical to investing success: luck or skill?

blogs.cfainstitute.org

 

[portfolioafterlife]

The damage wrought by our fascination with short-term performance is a toxic combination of two behavioural impulses– narrative fallacy and extrapolation. Narrative fallacy is our propensity to create stories and seemingly coherent explanations for random events; a means of forging order from noise. Extrapolation is our tendency to believe that recent trends will persist.

The problem with extolling short-term performance as evidence of skill (rather than fortunate exposure to a prevailing trend) is what happens when conditions change. If we say that our process leads to consistently good short-term outcomes, what do we say when short-term outcomes are consistently bad?

When performance is strong it is because of ‘process’, when it’s weak it is because of ‘markets’.

Short-Term Performance is Everything

Two years ago value investing was dead, now it is the obvious approach to adopt in the current environment. What has changed? Short-term performance. There are more captivating rationales but under…

behaviouralinvestment.com

 

[portfolioafterlife]

Exhibit 3 compares the current Value-Growth spread to its historical level.

Value’s 15% differential for the first four months of 2022 was not only visibly above average, it’s at the 98th percentile of all such spreads in our historical data.

The fact that a data point is high in its historical distribution doesn’t mean that next month’s observation can’t be equally high, or higher. There’s no guarantee, for that matter, that the distribution is stable, and that the next observation won’t surpass the previous all-time record. That said, history suggests that the torrid outperformance of Value is unlikely to continue, at least in the short term, and that the next big move in the Value-Growth differential is more likely to be down than up.

The resurgence of value has accelerated | TEBI

The resurgence of value has been one of the biggest stories of 2022 so far. But will that trend continue? Crais Lazzara has been looking for clues.

www.evidenceinvestor.com

 

[portfolioafterlife]

E' informazione o disinformazione? L'Ucraina sta vincendo la guerra?

Kiev, '10mila soldati ucraini uccisi da inizio guerra' - Ultima ora - Ansa.it

Circa 10.000 soldati ucraini sono morti dall'inizio dell'invasione russa il 24 febbraio. Lo ha reso noto Oleksiy Arestovich, consigliere del presidente ucraino Volodymyr Zelensky, citato dalla Dpa. (ANSA)

www.ansa.it

Kiev, 'da inizio guerra uccisi 32.050 soldati russi' - Europa - Ansa.it

Le forze armate ucraine hanno "ucciso circa 32.050 soldati russi" dall'inizio della guerra lo scorso 24 febbraio, di cui "150 nelle ultime 24 ore". Lo ha riferito lo stato maggiore delle forze armate ucraine su Facebook, secondo Ukrinform. (ANSA)

www.ansa.it

 

[portfolioafterlife]