Thursday, October 22, 2009

Value Investing Congress

I always enjoy my trips to New York City. I really like the city and enjoy all the activity that seems to never stop. I also really enjoy being isolated in a small Texas town not hearing all the market yip yap that is shared in conversations over dinner, happy hours, and sporting events among all the investing professionals. The yip yap on this trip was very informative however.

The trip can be split up into two parts. I got their early to spend part of the weekend with friends who are investing professionals in the industry. This group of people was not tied to the Value Investing Congress. The second part of the trip was of course the Congress.

The first part helped me realize what is going on in the markets. Wall St. seems to be in a fervor about the dollar (at least the group I was talking to). Nothing matters fundamentally because the dollar is going to the toilet. We are drowning in oil? Oil supplies doesn't matter, should buy more oil because the dollar is going down. Amazon at 60x earnings? Well it better than owning dollars. It is a mad rush out of holding dollars because the dollar is going to zero. So the thinking goes. These guys didn't seem to be able to see another scenario, like the Euro crashing causing a mad rush to dollars. Who knows, to me the dollar seems to need a dramatic move down to find a bottom but it sure seems like the dollar trade is the like the equity trade in March. Everyone is so sure it is going down. It is weird. Looked at it, in this light, the stock market and commodity markets are going up because the end of the world is close. Isn't that backwards?

The Value Investing Congress was much different. Remember most of these guys are not macro guys but bottom up stock pickers. Still, this conference was notable for two things. It had more macro discussion than any previous Value Investing Congress I had ever attended. Also, it was the most bearish I had ever attended. First to the macro, alot of discussion on commodities (specifically gold), economic environment, and sovereign stability. Here though, there was a general liking of commodities but a general disliking of stocks. There were equity bears everywhere!! Now the Value Investing Congress is supposed to be the contrarians so this bearish view, which lines up very closely with mine, should be a comfort. However, I remember the November 2007 conference being very bullish. So it actually makes me nervous there were so many bears.

One thing that ties the groups together however was the views on the economy. Those buying equities and commodities think the economic rebound is a joke. Once again they are buying because the U.S. currency is coming to an end. The investors at the conference seemed to generally believe the economy is going to get much worse with a second dip in housing and increasing interest rates. Equity markets will fall and possibly fall hard.

I continue to fight this market even as Amazon after a "good" earnings report will be trading at 60x earnings instead of 50x earnings but maybe the first group is right. Dollar crashing and equities go to infinity. Either way the economy recovery is a joke, a very bad joke. Today jobless claims disappointed (really a bad number), average unemployment rate hits all time record high at six months, hotel occupancy rates are setting lows, apartment rents are plunging, and the percentage of employee separations labeled as permanent are a record high since data has been kept since 1970 (and this new record blew away the old record, it isn't even close). That is just economic data today.

So maybe those buying equities and commodities preparing for the end of the world, or the end of the dollar are right. One thing is sure, if something happens worldwide to drive investors back to the dollar, watch out, the equity markets have a hage air pocket underneath them. That is what happened in 1987.


Bart said...

Kaspar -

An earlier post referenced Mark Sellers recent letter. Would you be kind enough to forward a copy?

Much appreciated and keep up the great posting.

Market Seer said...

sure....I need an email address though?

Bart said...

of course, thx.

much appreciated.