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:

Just look at that thing! It’s enough to make abandon passive investing, fire up Freetrade, and get to work being contrarian, right?¹

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!

From Monevator

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

News

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

More: Q&A with Morgan Housel – Part 1 and Part 2 at Abnormal Returns

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

“Tech = unoriginal, lazy, consensus, etc” – Investing brosef [h/t Abnormal Returns]

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

And finally…

“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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