Ferg's Finds

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

Article(s)

Horizon Kinetics: 2nd Quarter 2025 Commentary

I particularly enjoyed this section: Has Indexation Even Worked? (The Numbers Are In) And Ways to Escape It.

Indexation does not recognize qualitative attributes like valuation, since that is subjective and the realm of active management. Only descriptive statistics, like market cap, trading volume, industry sector, and price volatility determine index eligibility. There is no concept of excessive valuation: As more money enters the ETF, the ETF buys more of whatever’s already in it. If that’s not well enough known, it’s at least implicitly accepted. By the same token (see clever token reference below)—in fact, by charter—ETFs officially reject, cannot allow, scarcity. It’s not merely that they exclude securities of insufficient market value and trading liquidity; that’s a lesser issue. Rather, they invite any volume of new money into the index, constantly issuing new ETF shares. If they don’t, they’re not functioning ETFs, they’re closed to net new money.

The opposite of scarce real assets is growth/momentum wrapped in layers of financial engineering…

Take MicroStrategy, which is an expensive Bitcoin ETF and has six leveraged ETFs itself.

Podcast/Video(s)

Tony Deden almost never does interviews, and I only just found this one: 212 Tony Deden - Master Value Investor

The all time great interview with him was with Grant Williams seven years ago for anyone who hasn’t watched it: Modern-Day Asset Management Business w/ Anthony Deden

Quote(s)

"Progress is cumulative in science and engineering, but cyclical in finance."

-James Grant

Tweet/notes

This feels like a big deal and ties into my view: The Coming Asian Boom.

India and China are partners, not rivals, Modi and Xi say.

Modi is in China for the first time in seven years to attend a two-day meeting of the Shanghai Cooperation Organisation regional security bloc, along with Russian President Vladimir Putin and leaders from Iran, Pakistan and four Central Asian states in a show of Global South solidarity.

Charts

I’m no economist, but things don’t look great on the US job front.

I touched on it in my recent piece (Portfolio Speed Run), that the US finds itself in a precarious spot with record high tax receipts, low unemployment, and a growing deficit…

Something I'm Pondering

I’m pondering how early we are in the rotation via ratios.

Gold miners via GDX ETF would have to go up 9.5x relative to the current ratio with the tech sector (XLK ETF) to return to the peak October 2011 ratio.

Metals & Mining via XME ETF is similar, would have to go up 8.7x relative to the current ratio with the tech sector (XLK ETF) to return to the peak October 2011 ratio.

The Energy Sector via XLE ETF would have to go up by 6.7x relative to the current ratio with the tech sector (XLK ETF) to return to the peak October 2011 ratio.

The craziest ratio has to be Oil & Gas Equipment & Services via XES ETF (it is equal weighted), which would have to go up 62.7x relative to the current ratio with the tech sector (XLK ETF) to get back to the prior peak in the ratio on July 18th 2011.

Cheers,

Ferg

P.S. I recently put together this free post, which outlines my Rules of Thumb for how I approach the markets.