$6 TRILLION & GROWING

Issue #35

$6 TRILLION:

No I am not talking about Tesla, we’ll get to that in a minute!

Central Banks continue to flood the global markets with liquidity. The Bank of Japan, the European Central Bank and the Federal Reserve of the United States have added over $6 Trillion of capital to the markets. See the chart below courtesy of the talented bond managers at Payden & Rygel.

Martin Zweig used to say, “Don’t fight the Fed”.

As I said in the July 1, 2019 MacroCrunch if Martin Zweig were alive today he would say “Don’t fight the Fed, the Bank of Japan, the European Central Bank, the People’s Bank of China and the Swiss National Bank!”. If you haven’t read his book “Winning on Wall Street” you should, it’s a classic.

Gold has also been on a tear, bottoming on Marc 16th and pretty much rallying inline with the central banks policy of easy money / credit.

https://www.tradingview.com/x/zlO1cvOH/

TESLA:

Public Safety Announcement: Beware of Robinhood daytrading millenials?

According to Bloomberg 10,000 day traders an hour were buying shares in Tesla on Monday July 13, 2020. Hmmm….. kind of sounds like E-Trade circa 1999?

From Bloomberg “Almost 40,000 Robinhood accounts added shares of the automaker during a single four-hour span on Monday, according to website Robintrack.net, which compiles data on the investing platform that’s much beloved by day trading millennials”.

https://www.tradingview.com/x/XAwCbQQG/

Also from Bloomberg “All told this year, Tesla’s market cap has surged by $202 billion, pushing Elon Musk past Warren Buffett in rankings of the world’s wealthiest people and burning shorts who have as much as $20 billion in bets the stock will fall. The stock is trading at 166 times estimated earnings over the next year, 20 times book value and seven times sales”.


VALUE vs. GROWTH:

Compare the above to Berkshire Hathaway (BRKA), Warren Buffett’s investment vehicle and the gold standard of value investing. BRKA is trading at 20 times estimated earnings over the next year, 1.24 times book value and 2 times sales.

Below is a chart of value versus growth, I’ll let you draw your own conclusions!


PODCAST:

Grant's Current Yield Podcast: An old school interview between Jim Grant and Peter Warburton, founder and director of U.K.-based consultancy Economic Perspectives Ltd, where they discuss the outlook for inflation.

Invest Like the Best: A new school interview between Patrick O'Shaughnessy and Charlie Songhurst, the former head of strategy at Microsoft and a prolific investor who personally invested in nearly 500 companies throughout his career. A lot of great lessons for aspiring angel investors. (Hat tip to Howard Lindzon for highlighting this interview in his daily letter!)


I hope you enjoyed the letter and as always feel free to share it with friends and colleagues. If you are interested in startups you can join over 750 other backers that follow my syndicate here.

Be well and stay safe. - Sean Bill / MacroCrunch