What caught my eye this week.
You know the big things you grapple with as a kid – where does space end, what happened to your hamster when he went to sleep and never woke up, and why would anyone ever kiss anyone ever EVER yuck?
Well I find the graph below from asset manager GMO [1] similarly perplexing.
GMO has charted the valuation of energy and mining stocks compared to the S&P 500. The graphic shows that the relative valuation of such stocks is at an historic low:
Just look at that thing! It’s enough to make abandon passive investing, fire up Freetrade [2], and get to work being contrarian, right?1 [3]
Before you do: a moment.
GMO puts forward resource equities as a value opportunity and inflation hedge, but of course there are two ways for such extreme divergences to be corrected.
And watching your diehard gold/oil/mining bug mate getting rich when such shares soar is by far the least painful.
Because this is a comparative chart, and the other way for the ratio to return towards its average is for the wider S&P 500 to plunge in price.
Which today mostly means a tech crash.
Yet technology shares are expensive for a reason. We’re living in a 90% economy world where millions of our fellow citizens are afraid to even leave their homes. Each day tech wins more long-term mind-share and revenues at a rate not seen in the previous 100 years.
Or maybe not – not sustainably, anyway?
Ponder, ponder, ponder.
Have a great weekend!
From Monevator
Stocks and shares ISAs: everything you need to know – Monevator [4]
Put 150 years into your retirement calculator and smoke it – Monevator [5]
From the archive-ator: Day three in the Big Brexit House – Monevator [6]
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2 [7]
UK economy continued to recover in July – BBC [8]
House prices soar to record highs, despite Covid-19 – Guardian [9]
Pension freedoms age to rise to 57: how could it impact you? Which [10]
Record gold prices create insurance headaches for vault keepers – MSN [11]
Silicon Valley’s new stock exchange is open for business – Protocol [12]
Government bond yields have already given us so much – GMO [1]
Products and services
Post Office and AA credit card accounts transferred to Norwegian company – Guardian [13]
Starling Bank implements negative rates for high balance Euro accounts – ThisIsMoney [14]
Tandem and Asda cashback credit cards close: what are the alternatives? – Which [15]
Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade [2]
New rules introduced for shared ownership schemes – ThisIsMoney [16]
Roboadvisers make slow progress gaining ground with investors [Search result] – FT [17]
1,200-year old Anglo-Saxon coin could sell for £80,000 – ThisIsMoney [18]
Homes for sale with an orchard [Gallery] – Guardian [19]
Comment and opinion
Save like a pessimist, invest like an optimist – Morgan Housel [20]
More: Q&A with Morgan Housel – Part 1 [21] and Part 2 [22] at Abnormal Returns
Do you really need to buy a property right now? [Search result] – FT [23]
Business – Indeedably [24]
Is China the closest thing to investing normality right now? [Search result] – FT [25]
An endless responsibility – The Reformed Broker [26]
Terry Smith can’t market time. You think you can? – Evidence-based Investor [27]
#1 money lessons from Morningstar’s long-time staffers – Morningstar [28]
Upside-down markets: profits, inflation, and equity valuation in fiscal policy regimes [Nerdy] – OSAM [29]
Naughty corner: Active antics
Watch out for wide divergences between growth and value – Verdad [30]
China investment trusts come of age – IT Investor [31]
How Reddit’s option traders started a snowball that pushed tech stocks higher – Bloomberg via MSN [32]
More: The option-fueled crowded trade in large cap tech – The Aleph blog [33]
Selling Xaar: Why heavy R&D and high cyclicality are not a good mix – UK Value Investor [34]
Now Buffett’s Berkshire Hathaway is buying a tech IPO – MarketWatch [35]
“Tech = unoriginal, lazy, consensus, etc” – Investing brosef [36] [h/t Abnormal Returns [37]]
Hedge funds are feeling bullish… about themselves – Institutional Investor [38]
Politics and the pandemic
UK’s new lockdown limits could knock V-shaped recovery for six – ThisIsMoney [39]
Sweden claims ‘vindication’ over anti-lockdown policy as Covid cases hit new low – The Week [40]
More: Anders Tegnell and the Swedish Covid experiment [Free read] – FT [41]
They never officially had Covid. Months later they’re living in hell – Wired [42]
Could wearing a mask help foster low-dose Covid-19 immunity? – PopSci [43]
What’s changed? – Barry Ritholz [44]
Brexit: EU ultimatum to UK over withdrawal deal changes – BBC [45]
UK [at last] signs its first major post-Brexit trade deal, with Japan – BBC [46]
Kindle book bargains
How Innovation Works by Matt Ridley – £1.99 on Kindle [47]
The Deficit Myth: Modern Monetary Theory by Stephanie Kelton – £0.99 on Kindle [48]
How to Get Rich by Felix Dennis – £0.99 on Kindle [49]
Bitcoin Billionaires: A True Story of Genius, Betrayal and Redemption by Ben Mezrich – £0.99 on Kindle [50]
Off our beat
The WEIRDest people in the world – The Atlantic [51]
New Zealand’s ‘brain gain’ boost – BBC [52]
UK mathematician wins richest prize in academia – Guardian [53]
Life after 2020: finding the track – Haystack [54]
Why we all need philosophy [Very long] – Mark Manson [55]
The little cards that tell US police to go easy on the bearer [Couple of weeks old; unbelievable] – Vice [56]
And finally…
“To get why investors sell out at the bottom of a bear market you don’t need to study the math of expected future returns; you need to think about the agony of looking at your family and wondering if your investments are imperiling their future.”
– Morgan Housel, The Psychology of Money [57]
Like these links? Subscribe [58] to get them every Friday!
- Note: That’s an affiliate link to Freetrade. Sign up and we both get a free share. [↩ [63]]
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [64]]