How Bad Could It Get?
The leading investment strategies of the day are:
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The university investment model, currently emphasizing non-marketable investments, which I pioneered but which has now become too crowded.
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Momentum investing, in which you or your algorithm buy whatever seems to be going up.
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Indexing, also a form of momentum investing because most index funds are capitalization weighted.
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Risk Parity, which tries to realize equity like returns from fixed income through leverage, although this has faded after the 2022 debacle.
For some time we have had a Momentum Market, both in stocks and some commodities. What had gone up has continued to go up, in some cases a lot. Despite exceptions, especially in recent weeks, it has now become commonplace for large companies ($10 billion or more market capitalization) to enjoy price to sales ratios of 20-97x sales.
There are many examples of momentum driven, manic markets: the years leading up to 1929, 1973, 2000, and 2022. Not all stocks were expensive, but the momentum stars were hyper-expensive.
Then as now, corporate executives were selling. The executives may not be selling directly to their own shareholder “bosses,” but given the high level of company share repurchases, the net effect may be
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LewRockwell.com is a libertarian website that publishes articles, essays, and blog posts advocating for minimal government, free markets, and individual liberty. The site was founded by Lew Rockwell, an American libertarian political commentator, activist, and former congressional staffer. The website often features content that is critical of mainstream politics, state intervention, and foreign policy, among other topics. It is a platform frequently used to disseminate Austrian economics, a school of economic thought that is popular among some libertarians.