What caught my eye this week.
You know the big things you grapple with as a kid – where does space end, what happened to your hamster when he went to sleep and never woke up, and why would anyone ever kiss anyone ever EVER yuck?
Well I find the graph below from asset manager GMO similarly perplexing.
GMO has charted the valuation of energy and mining stocks compared to the S&P 500. The graphic shows that the relative valuation of such stocks is at an historic low:
Before you do: a moment.
GMO puts forward resource equities as a value opportunity and inflation hedge, but of course there are two ways for such extreme divergences to be corrected.
And watching your diehard gold/oil/mining bug mate getting rich when such shares soar is by far the least painful.
Because this is a comparative chart, and the other way for the ratio to return towards its average is for the wider S&P 500 to plunge in price.
Which today mostly means a tech crash.
Yet technology shares are expensive for a reason. We’re living in a 90% economy world where millions of our fellow citizens are afraid to even leave their homes. Each day tech wins more long-term mind-share and revenues at a rate not seen in the previous 100 years.
Or maybe not – not sustainably, anyway?
Ponder, ponder, ponder.
Have a great weekend!
Stocks and shares ISAs: everything you need to know – Monevator
Put 150 years into your retirement calculator and smoke it – Monevator
From the archive-ator: Day three in the Big Brexit House – Monevator
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2
UK economy continued to recover in July – BBC
House prices soar to record highs, despite Covid-19 – Guardian
Pension freedoms age to rise to 57: how could it impact you? Which
Record gold prices create insurance headaches for vault keepers – MSN
Silicon Valley’s new stock exchange is open for business – Protocol
Government bond yields have already given us so much – GMO
Products and services
Post Office and AA credit card accounts transferred to Norwegian company – Guardian
Starling Bank implements negative rates for high balance Euro accounts – ThisIsMoney
Tandem and Asda cashback credit cards close: what are the alternatives? – Which
Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade
New rules introduced for shared ownership schemes – ThisIsMoney
Roboadvisers make slow progress gaining ground with investors [Search result] – FT
1,200-year old Anglo-Saxon coin could sell for £80,000 – ThisIsMoney
Homes for sale with an orchard [Gallery] – Guardian
Comment and opinion
Save like a pessimist, invest like an optimist – Morgan Housel
Do you really need to buy a property right now? [Search result] – FT
Business – Indeedably
Is China the closest thing to investing normality right now? [Search result] – FT
An endless responsibility – The Reformed Broker
Terry Smith can’t market time. You think you can? – Evidence-based Investor
#1 money lessons from Morningstar’s long-time staffers – Morningstar
Upside-down markets: profits, inflation, and equity valuation in fiscal policy regimes [Nerdy] – OSAM
Naughty corner: Active antics
Watch out for wide divergences between growth and value – Verdad
China investment trusts come of age – IT Investor
How Reddit’s option traders started a snowball that pushed tech stocks higher – Bloomberg via MSN
More: The option-fueled crowded trade in large cap tech – The Aleph blog
Selling Xaar: Why heavy R&D and high cyclicality are not a good mix – UK Value Investor
Now Buffett’s Berkshire Hathaway is buying a tech IPO – MarketWatch
Hedge funds are feeling bullish… about themselves – Institutional Investor
Politics and the pandemic
UK’s new lockdown limits could knock V-shaped recovery for six – ThisIsMoney
Sweden claims ‘vindication’ over anti-lockdown policy as Covid cases hit new low – The Week
More: Anders Tegnell and the Swedish Covid experiment [Free read] – FT
They never officially had Covid. Months later they’re living in hell – Wired
Could wearing a mask help foster low-dose Covid-19 immunity? – PopSci
What’s changed? – Barry Ritholz
Brexit: EU ultimatum to UK over withdrawal deal changes – BBC
UK [at last] signs its first major post-Brexit trade deal, with Japan – BBC
Kindle book bargains
How Innovation Works by Matt Ridley – £0.99 on Kindle
The Deficit Myth: Modern Monetary Theory by Stephanie Kelton – £0.99 on Kindle
How to Get Rich by Felix Dennis – £0.99 on Kindle
Bitcoin Billionaires: A True Story of Genius, Betrayal and Redemption by Ben Mezrich – £0.99 on Kindle
Off our beat
The WEIRDest people in the world – The Atlantic
New Zealand’s ‘brain gain’ boost – BBC
UK mathematician wins richest prize in academia – Guardian
Life after 2020: finding the track – Haystack
Why we all need philosophy [Very long] – Mark Manson
The little cards that tell US police to go easy on the bearer [Couple of weeks old; unbelievable] – Vice
“To get why investors sell out at the bottom of a bear market you don’t need to study the math of expected future returns; you need to think about the agony of looking at your family and wondering if your investments are imperiling their future.”
– Morgan Housel, The Psychology of Money
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