Where Have all the Mergers Gone?

One argument against a top in equities is the lack of M&A.  Below are a few charts from IMAA:

 

 

figure_announced mergers & acquisitions (worldwide) (1)

 

figure_announced mergers & acquisitions (united states of america)

 

 

Launched!

Link to press release here.

 

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The New House of Money

Steve Drobny, author of the great books Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets and The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money just put out a new one: The New House of Money.  Check it out, it’s free.

1st interview: Kyle Bass 

The US is the Most Expensive Stock Market in the World

Out of 44 developed and emerging markets in the world, the US stock market is the most expensive on a 10 Year PE ratio basis with a value of 25 (CAPE).  If you include frontier markets, the US is the most expensive out of 55 markets with the one exception of Sri Lanka.

Now, the US isn’t in a bubble, nor does this mean it must crash or even go down.  What it does mean, is that the rest of the world is much cheaper and US returns should be muted for the next 5-10 years.  AND it means the biggest weighting in all of the global market cap portfolios (50%) is the most expensive market.   Be forewarned!

 

Next Tuesday

A preview of what is coming next Tuesday!

 

 

fyld

 

Bitcoin vs. South Seas Stock

This is just for fun, I have no idea if or when the bitcoin train will ever get derailed.  You could compare this to any speculation that has gone parabolic, I just like ones that are over 200 years old.

Chart 1 is actual bitcoin and South Sea Stock values plotted with SS peak lined up with current BC data.

Chart 2 takes the last 8 months and lines them up with similar starting points.

Granted I’m violating my #1 rule of charting but these are more fun to look at on a non log basis…

Chart 3 is the most important, and it shows what happens after a bubble pops.  Namely, a 90% loss for those who bought at the top.  Now, I know many of you believe bitcoin will go to $1,000,000, but as a speculation (and to be clear this IS a speculation) you have to be at least be prepared for this to happen.  Do you have an exit plan?  Will you stick with it?  Or will you be like so many before you that ride a speculation all the way down?

At least think about it.  

(Last note – one very common characteristic of bubbles is no talk of downside.  And that is all I am hearing with bitcoin today, rarely do you hear of anyone talking about the possibility of it going back to 100 or less.)

I will will you with a little Kurt Vonnegut, from Galapagos, circa 1985:

The thing was, though: When James Wait got there, a worldwide financial crisis, a sudden revision of human opinions as to the value of money and stocks and bonds and mortgages and so on, bits of paper, had ruined the tourist business not only in Ecuador, but practically everywhere…Ecuador, after all, like the Galapagos Islands, was mostly lava and ash, and so could not begin to feed its nine million people. It was bankrupt, and so could no longer buy food from countries with plenty of topsoil, so the seaport of Guayaquil was idle, and the people were beginning to starve to death…Neighboring Peru and Columbia were bankrupt, too…Mexico and Chile and Brazil and Argentina were likewise bankrupt – and Indonesia and the Philippines and Pakistan and India and Thailand and and Italy and Ireland and Belgium and Turkey. Whole nations were suddenly in the same situation as the San Mateo, unable to buy with their paper money and coins, or their written promises to pay later, even the barest essentials. ..They were suddenly saying to people with nothing but paper representations of wealth, “Wake up, you idiots! Whatever made you think paper was so valuable?”

The financial crisis, was simply the latest in a series of murderous twentieth century catastrophes which had originated entirely in human brains. From the violence people were doing to themselves and each other, and to all other living things, for that matter, a visitor from another planet might have assumed that the environment had gone haywire, and that people were in such a frenzy because Nature was about to kill them all.

But the planet a million years ago was as moist and nourishing as it is today – and unique, in that respect, in the entire Milky Way. All that had changed was people’s opinion of the place.”

 

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Small Caps, Cheap or Expensive?

It always surprises me when people have not heard of The Leuthold Group.  (Maybe because they are based in MN?!)

They put out some great research so check out their site!  Below on small cap valuationsScreen Shot 2013-11-13 at 9.37.57 AM Screen Shot 2013-11-13 at 9.38.49 AM:

 

 

 

Screenshots from Tactical Backtester

Almost done cobbling together this backtester, aiming to send it out later this week.  A few screenshots below from the current model…

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In addition to the regular benefits of subscribing to The Idea Farm, which include 2-3 research reports each week as well as free copies of my new books, we have another cool new feature coming!

I’m going to make a simple asset allocation backtest Excel sheet available to the readers of The Idea Farm.   (Below are some screenshots.) The goal is to have a buy and hold and tactical backtester available that will let you backtest allocations and strategies to the early 1970s. I was going to do it as a website but want to see what sort of interest there is first…so, let me know what you think…probably send it out before Thanksgiving…

 
So, sign up this week to The Idea Farm so as not to miss out!  
 



The Investment Brief

It is good to see people tackling our 5 Million Dollar Ideas in FinTech.  Below is one such example, and I’ve talked the founder into letting my readers have a free three month subscription.  See below:

 

  1. Download The Investment Brief app for free from the Apple app store.
  2. Once downloaded, open up The Investment Brief, where they will see a yellow subscribe button.
  3. Click this button and from the dropdown list select “Current Subscribers”.
  4. Type in 3freebrief and press select.
  5. They will now have complementary access to the magazine for 3 months.

Supply and Demand

Same amount of money chasing reduced supply = PE multiple expansion.

Nice piece from Barron’s this wknd.

 

Screen Shot 2013-11-24 at 1.45.44 PM

 

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