FRANCE IS THE NEW GREECE
The following headline from Europe grabbed our eyeballs a few days ago:
A few key excerpts from the article:
France’s borrowing costs have risen above those of Greece for the first time, as investors fret that Michel Barnier’s government could fail to pass a belt-tightening budget.
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Thursday’s moves underscore how investors are reclassifying Paris as one of the Eurozone’s riskier borrowers.
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Greek bond yields have also fallen markedly as the country’s economy has recovered since its bailout during the 2012 crisis. Last year, Athens’ credit rating was lifted to investment grade for the first time.
Funny how the tables have turned. Not that long ago, Greece was widely considered the most toxic in the world (as far as capital markets go, anyway). Just look at those bond yields at the height of the Euro crisis (courtesy of ZeroHedge).
But that’s now a thing in the past. Unbeknownst to most investors, Greek stocks have been on a tear recently, as you can see in the below chart of the Athens stock market and Greek small caps.
But let’s not kid ourselves. As you can also see from the chart, Greek stocks are also a lesson in patience.
You could have perfectly nailed the bottom in 2012, but you could have been forgiven for not reading the fine print that fast forward to 2017 (five years later), you would have little (or nothing rather) to show for your patience.
However, from 2017 onwards, a basket of small cap stocks randomly chosen by a monkey would be up almost 5x. And even if you had settled for large caps, you would have performed more or less in line with the S&P 500.
Good things truly take time.
Today, Greek stocks are still very attractively priced. In an Insider Newsletter issue a few weeks ago, we highlighted a Greek “cash-cow” type stock in the oil and gas sector that’s sitting on a P/E of 3x and paying an 8% dividend. How do you say “not too shabby” in Greek?
A CONTRARIAN’S WET DREAM?
Speaking of patience, who would’ve guessed that since the turn of the century gold has outperformed both the S&P 500 as well as tech stocks (as well as bonds and real estate)?
One would think that — especially with prices hovering around record highs right now (and in multiple currencies) — people would be all over gold, especially in today’s increasingly fracturing world.
But the reality is that most investors simply couldn’t care less. Adam Taggart (@menlobear) shared some observations below, and they line up with what we’re seeing in the markets — namely, there is still very little participation by institutions and almost nothing from retail.
Gold & silver investors might find this interesting:
I just got off the phone with a veteran gold dealer/shop owner.
Despite gold rising to an all-time high this year & silver’s recent surge to $35/oz, he’s not seeing any boost in buying enthusiasm from the general public Premiums on PMs are low right now due to this lackluster demand In fact, his customers are net sellers.
He says the only movement he’s seen is that maybe the ratio earlier this year of 5 sellers for every 1 buyer has now decreased to 3 sellers to 1 buyer.
These sellers mostly fall into the following categories:
1) bitter folks who bought back in 2012 who have been waiting to get back to even (nominally)
2) “loose hand” investors who have enjoyed a nice short-term return & simply want to pocket the profit
3) people who need the money. So, if the bull market indeed runs higher from here, he thinks we’re still in the early innings of it.
The general buying public doesn’t get involved until the final inning or two…and he doesn’t see us as anywhere near that.
Currently his store has few customers per day and most transactions are done by appointment. He contrasts this with the early 1980s gold run when he’d arrive at the shop to find a line outside the door stretching around the block. In those days, he’d had to let the sellers in first, so that he’d then have inventory for the buyers to purchase!
By extension, practically nobody is looking at (or buying) gold mining stocks. They are trading well below their 2011 peaks, while gold is 50% higher (and if you want to see a tragedy of a chart, we dare you to look at the VanEck Junior Gold Miners ETF).
Meanwhile, gold miners are printing cash right now, with margins soaring to record levels.
We could be missing something, but this seems like a contrarian investor’s wet dream.
BLOODY BANKS
Having bought shares of Japanese banks in Insider many years ago as a play on rising rates (and they were dirt cheap to begin with), the following “internal policy” from one of Japan’s regional banks caught our attention.
According to CNBC:
The origins of this pledge trace back to the Thirty-seventh National Bank, Shikoku Bank’s predecessor, where employees were required to sign and stamp such oaths in blood. The bank views the practice as a symbol of ethical conduct and societal responsibility, preserving it as a cherished legacy.
We can’t help but wonder if the topic of employee churn ever comes up in job interviews?
This also reminds us of what the late Charlie Munger said about incentives — “show me the incentives, and I’ll show you the outcome.”
To contrast the above, the below meme feels very apropos.
Going back to Japanese banks…
If our memory serves us well, we bought them around 2017 and sold in 2019 with nothing to show for after two years. And take a look at what happened since we hit the “eject” button…
As we like to say, in investing, waiting is the hardest part.
WORLD OUT OF WHACK
Years ago, Chris used to write a post series called “World Out of Whack,” highlighting the headscratchers in the markets. Seeing this kind of stuff makes us think it might be worth bringing it back to life.
One is a meme coin with no practical utility… and the other sells 4.4 million cars per year.
As the saying goes, “markets can remain irrational longer than you can remain solvent.” As if to prove that point, since that graphic was created, Dogecoin’s market cap increased by another $10 billion (to $58 billion)… and it hasn’t even hit its old peaks yet.
LONG STUFF, SHORT…
Circling back to precious metals (and other “stuff” as we call it around here), this T-shirt sums up a good chunk of our investing philosophy.
You can check out all our merch here.
Have a great week!
