Bull… or Bear?

You may have seen the press of popular opinion talking about this year’s rally in tech stocks.

Here’s what it looks like on the chart:

But when you take a closer look, you realise the rally in the Nasdaq this year is not broad based. It is essentially being powered higher by a relative few stocks (we covered that a few weeks ago), while the rest have hardly budged since the start of the year.

Take a look at what’s known as the New Highs-New Lows Index (the cumulative index of the number of stocks making 52 week highs less 52 week lows), which has been trending down since late 2021 and is lower YTD.

This isn’t bullish. The fact that fewer and fewer stocks are rallying to new highs suggests that the bear market is alive and well and that this year’s rally in the Nasdaq is a sucker rally.

And this isn’t limited only to the Nasdaq, by the way.

The NYSE is very much the same. The strength since October last year simply isn’t broad based, at least not typically what you would see at the start of a bull market.

Now, you might be thinking, “Enough with the theory, already. How can I make money with this information?

Here are our two practical takeaways from all this:

  1. It looks like we are still in a bear market, where the next big move for the major market indices is down… or at best we are in for a long period of the market going nowhere but with a lot of +/-20% moves, so index tracking probably isn’t going to be a very rewarding strategy.
  2. Investments should be REALLY focused on markets/sectors/stocks that are offering great value and where the earnings outlook is positive for the next five years (if you’re a long-time reader, this won’t be news for you as this is precisely what we do in Insider).

We believe that we are in a bear market not unlike the dot-com bear market of 2000-2003, where the Nasdaq did fall some 75% during this time. At the same time, if you had invested in out-of-favour small cap value stocks (much like what we are investing in today, albeit with an energy bias), then you would have come out with a profit.

Small cap value stocks were up 18% in the face of the Nasdaq being down 75% over the period, which is simply huge.


Speaking of small cap value stocks…

We came across the following post from Callum Thomas, who highlighted the jaw-dropping discrepancy between global small cap value stocks and US stocks:

The worst vs the best: what happens when you take the intersection of the cheapest parts of global equities and map its performance against the most expensive part?

I originally put this chart together because I had independently found deep relative-value (i.e. one cheap vs the other expensive) in each of: small caps vs large caps, value vs growth, and Global ex-US equities vs USA.

These valuation gaps arose from more than a decade of underperformance (as the combined chart below shows) hence my quip at the start — this basically being a comparison of the worst vs the best parts of global equities.

But cycle-noticers will recognize an apparent pattern in the chart: ~decadal cycles of under/out-performance… and it sure looks like the line in this chart is in the process of bottoming; potentially opening up a decade of travel in the other direction (which would be consistent with the relative value case I mentioned).

So definitely an interesting chart for the long-term minded and value-oriented global equity investors out there (if there are any left!).

If history is anything to go by, global small cap value stocks are bottoming out (if they haven’t bottomed out already) and are in for a multi-year long run.


Feels like a lifetime ago, when — back in February 2020 — we started warning that lockdowns will bring about inflation and shortages. Fast forward to today, and this pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things “transitory”.

Ever heard the saying that a car loses half its value the moment you drive it off the lot? Well, according to this anecdote from Insider member Tom, that’s no longer the case:

Since the money printers went into overdrive back in 2020 every time I’ve taken my truck in for service I’ve asked the hypothetical to the dealer, “what would you give me for it” to track how things are changing. So for a 2017 Dodge Ram 1500 basic spec relatively low milage, it’s gone from being worth around 22k in mid to late 2020 to them offering me 27.5k today. If my maths is right that makes a 25% increase for a supposedly depreciating lump of pig iron that simply needs to get me from a to b!

Another member, Marc, chimed in:

I bought a new Toyota Camry hybrid in June 2020, which I imported from Germany, as I do not have to pay the German VAT and just pay the lower Swiss VAT rate and customs duty. The car is the most basic model in terms of features, as I have small kids and I do not want to make a big fuss about a car. I paid CHF 31,000 total including the hotel where I stayed a couple days. The retail price in Germany was 29,999 Euros. The car is worth between CHF 27,930 and CHF 29,996, as the screenshot below shows. The CHF has appreciated against the Euro, so the range would be 29,108.64 – 31,261.83 Euros.

We truly live in a topsy-turvy world.


We shared an excellent thread from @oldbooksguy in the most recent Insider Newsletter issue. It is entirely relevant to where we are today and as such, we’re sharing it with you as well here.

Here’s an excerpt:

Ancient Rome was the world’s most powerful empire for 500 years

At its height, Rome boasted of roads, public baths, and much else that was close to miraculous for the rest of the planet

Then came the Great Fall…

What happened has lessons for the world TODAY

You can (and should) read the entire thread here.


Some “inflationary” humour to get this week started…

Have a great one!


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