It’s the 16th of August & you’re up 16% from the June lows


You’re worried it’s a bear market rally but want to retain some equity exposure so call your friendly macro strategist for advice

Where should I hide?

Real Estate – They’re not making it anymore, right?

(oh dear, I knew this was a bad idea)

And it provides a yield that we all need in this inflationary environment

Yes, but American Tower, the giant in that sector, has an enterprise value of $150bn, only has revenue of $10bn, pays out all their income, and trades on a yield of less than 3% – not much help when inflation is 9%

Well, yes, but…

Real Estate outperformed when the dot com bubble burst and I’m hearing popping so I think it’s a good place to hide

Ok, anything else?

Yes, Utilities

I know the stock market is a “dark place” right now, but we all need to keep the lights on, right?

But are we sure THEY can keep the lights on because:
-none of those companies generate any free cash flow,
-they all have massive debt burdens from the CAPEX spent on transitioning to a new energy environment,
-coal and nat gas are cost inputs and
-they face bad debts if their customers can’t afford their bills

Hey, don’t shoot the messenger

Don’t worry, messengers are usually safe (unless they’re macro guys who simply go with what worked last time..)

Anyway, utilities also outperformed when the wheels came off in 2000

Anything I need to stay away from?

Yes, Energy


Absolutely, look what happened during the pandemic recession

that sector got “drilled”,

“went up in smoke”

ok, messengers are no longer safe

But that’s a single data point & no one moved during Covid, not even outdoors, hardly comparable to now

Besides, those companies are “pumping” cash flow and if they’re
giving most of it to shareholders, shouldn’t I be a shareholder?

No chance


What about banks?

Are you insane?

Terrible businesses


But everyone thinks Apple’s a great business yet they don’t even know how many iPhone 11s they’re going to sell next month

Whereas retail banks with mortgage books have amazing earnings visibility

Don’t you mean iPhone 14s?

Do I? Pretty much the same phone

Well just wait until the recession hits the banks

Oh, so you think people will rather buy a phone that’s no different from the last 3, instead of paying their mortgage?

Sorry have to rush – other clients need my market views, let’s catch up on the 6th of October


I told you it was a bear market rally

(disbelief) Did you, I thought it was me telling you that

Anyway, what happened?

MSCI World was down 11.8%

Energy up 3.5% (only sector that was)
Finance down 10% (outperformed by 1.8% – 2nd prize)
Utilities down 14%
Real Estate down 18% (the worst large sector)


Moral of the story –

Just invest sensibly and not based on last time’s playbook – markets are never the same or simple

Oh and be careful who you pay to listen to..

Source: Bloomberg

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