TradeSmith Daily

June 2020

The Fourth Great Bubble in a 51-Year Investment Career

June 22, 2020John Banks

Jeremy Grantham thinks we are witnessing the “fourth great bubble” of his investment career. This matters because of what Grantham did over the course of that career, and how long it has lasted. Grantham entered the money management business in 1969, using a “quantitative value” strategy long before Wall Street knew what that meant. Grantham himself called it “dopey value,” although the results were not dopey at all. His firm would buy stocks based on fundamental factors like discounted price-to-book,

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The Factors Behind a Potential “Lost Decade” for Stocks

June 23, 2020John Banks

Bridgewater Associates — one of the most successful hedge funds in the world by dollar volume of profits since 1975 — is warning of a potential “lost decade” for stocks. “Globalization, perhaps the largest driver of developed-world profitability over the past few decades, has already peaked,” said Bridgewater analysts in a June 16 note to clients, as reported by Bloomberg. “Now the U.S.-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains,” they

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July 2020

Opting Out of State-Directed Capitalism

July 2, 2020John Banks

“Turn on, tune in, drop out” was a counterculture phrase from the 1960s. Perhaps it is time to revive it. The thing to “turn on” in 2020 is awareness of Bitcoin… So that one can “tune in” to a digital store of value… And then “drop out,” or rather opt out, of state-directed capitalism. Make no mistake, state-directed capitalism is the new thing. We saw confirmation of this on July 1, when the U.S. government bought nearly 30% of a

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When a Bounce is Not a “V” (2020 versus 2009 and 1982)

July 6, 2020John Banks

On July 2, the June 2020 U.S. jobs report was released. Nonfarm payrolls jumped by 4.8 million, the largest monthly gain in U.S. history, when a gain of only 2.9 million jobs was expected. The outsized beat of economists’ expectations was seen as bullish for stocks, at least initially. A larger than expected decline in the unemployment rate, to 11.1%, was also seen as bullish. But there is a problem here, and it has to do with starting points. You

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Jim Rogers is Dead Wrong about Bitcoin

July 8, 2020John Banks

When it comes to Bitcoin, Jim Rogers is sorely misinformed. To be clear, Rogers deserves great respect as a macro investor. As a co-founder of the Quantum Fund along with George Soros, Rogers had one of the greatest performance runs of all time. In the 1990s, he wrote an incredible book called Investment Biker. The book chronicles a two-person trip around the world by motorcycle, with the trip doubling as an investment tour. In the book, Rogers decides whether or

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How Silicon Valley Engineered a Retail Trading Mania

July 13, 2020John Banks

2020 will be remembered for kicking off a global pandemic. But it will also be remembered for a market mania, driven to a surprising degree by bored sports gamblers, millennials taking a flyer with stimulus checks, and day-trading retail investors new to markets overall. We know the Federal Reserve provided psychological support (through an implied promise to support markets no matter what). And we know the U.S. government provided fiscal support, what one might call “helicopter money,” via the first

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Boom-Time Memories of a Bust Gone By

July 15, 2020John Banks

Try to guess the visionary entrepreneur we are thinking of based on the following clues: He is especially fond of the letter “X,” including it in things he has named. His net worth — at valuation in the tens of billions — put him on among the top 10 richest people on the planet. He once vowed to take the mantle of “world’s richest man.” He is a flamboyant showman who sells dreams — and has a global army of

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Bank Earnings Confirm What We Already Knew (About the U.S. Economy and Federal Reserve)

July 16, 2020John Banks

Earnings season is underway, and we heard from some of the largest U.S. banks this week. The reporting confirms what we already knew: There is no V-shaped recovery whatsoever, and the Federal Reserve is doing a lot for Wall Street (though not Main Street). Among the four banks we heard from — Goldman Sachs, JPMorgan Chase, Citigroup, and Wells Fargo — performance ranged from excellent to terrible, and the deciding factor was trading-desk activity. That is to say, if the

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