Ferg's Finds

This is a short weekly email that covers a few things I’ve found interesting during the week.

Article

Kopernik Global Investors: Jacoby Transfers an interesting mix of investment insights and philosophy.

Podcast/Video

I haven’t listened to Lyn for a while, and this reminded me why I should: MacroVoices #386 Lyn Alden: Energy, Inflation & much more

Quote

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury.”

-Alexander Fraser Tytler

Tweet

This was a great thread.

Charts

These are charts from Lyn Alden’s presentation. I love how Lyn creates these charts to illustrate what the P/E should be doing (normal) vs. what it is actually doing.

Something I'm Pondering

I’m pondering what happens when the big indexes eventually need to rebalance?

I was reading this report from Horizon Kinetics Under the Hood, and it struck me that if the S&P 500 wants to rebalance towards sectors that are outperforming due to structurally higher inflation, there could be a large air pocket before active investors are willing to step in and buy the top 10.

Why? Well, apart from valuations being a bit egregious, active flows have been decimated, and what’s left of active will probably be focused on the stuff outperforming (that indexes have to rebalance towards).

This could return the current PE ratio to a ‘normal’ PE ratio (multiple compression).

When might this occur?

My guess would be when energy runs again and inflation with it.

I hope you’re all having a great weekend.

Cheers,

Ferg 

P.S. If you’re interested in my story and why I started this Substack, you can read the story here.