Drudge on the doom of the stock market

Most times I have no idea where things are going in the macro sense – speculating is entertainment but I don’t find I have superior insights on the matter. However, it is important to read the market psychology and when non-financial media start to comment on financial happenings, more often than not it is a contrarian indication:

I find this paranoia regarding Trump, China, recessions, etc., to be very alarmist. I’m pretty sure at this stage in the economic cycle that we are due for an economic purge sometime – there’s a lot of excess out there (does anybody seriously think Beyond Meat is worth a third of Tyson Foods?). Instead, we have a very low interest environment, with short term interest rates likely to head lower over the next year, and it all brings you to the fundamental question:

What else are you going to invest in?

Clearly as real rates go negative (let’s not get into the scenario where nominal rates go negative!), institutions have found safe passage in gold.

But, as Buffett says, there isn’t much economic value to storing a bunch of yellow metal in a fort somewhere. Where are you going to find a return?

You can put money in a BBB or A-rated bond and get your 340bps, but that isn’t going to be enough.

Real estate gives a yield (on rent) but even REITs have their yields compressed, and in Canada, you have commercial property cap rates that are getting ridiculously low (mid single digits). The favourite residential REIT of most retail (TSX: CAR.UN) gives out a whopping 270bps in distribution yield. Looks expensive (unless if real estate continues to rise).

What’s left if you actually want a return?

There’s only one game in town – equities.

There’s a lot of old-school value out there that’s really getting hammered in anticipation of this recession.