Structurally, the markets function because there are multiple independent actors buying and selling assets and setting prices. This price discoverability is an essential element of well functioning market. Imagine now that investors stop dealing in individual assets altogether, and instead buy a basket of goods, with no thought or regard to what is included in… [Read More]
Macro View and World Events - How will these Affect Your Investments?
As value investors, we like to believe that most investment decisions should be based on the individual stock's investment merits. We think that whatever may be happening in the larger global or macro economic context, while interesting, ultimately has very little bearing on our investment results.
The classic value investing process starts with finding the intrinsic value of a stock and checking the stock price against this value. We take into account the individual security risk, determine the portfolio sizing, and establish the margin of safety we require. Then we invest (or not). Eventually, the stock reaches its fair value or our exit price, at which time we sell and book our profits
I agree with this process. However, it is worthwhile to keep an eye on the major global and macro economic trends and events for the following 2 reasons
- Trigger for Undervaluation: Markets go up and down all the time in reaction to political or other events. Ultimately, investors are human and as humans, they are ruled by emotions. Most financial decisions made in the market are not rational - they are a product of fear and emotion. Value investors wait for irrationality to take hold in the market as they tend to bring up many wonderful investment opportunities
- Catalyst for Value Realization: Do you think infrastructure stocks would do well if the US congress passes a massive infrastructure spending bill? Underinvestment in any given sector may have depressed the valuations for the stocks in that sector. These stocks are just waiting for the right moment to realize the value for the investors who were smart enough to anticipate some future event.
Traditionally, investments based on these ideas are termed as Macro and Event Driven investments. They are not necessarily value investing. However, at Value Stock Guide, we include many macro and event driven investment ideas in our value investing process.
You will find here Value Stock Guide's review of major world and economic events driving the markets and the investment outlook.
It’s almost been a year since the UK made a majority decision to leave the European Union. Now that it has been confirmed that the Conservatives will continue to govern the country, the process of Brexit can well and truly begin. Over the past year, there has been much speculation as to how Brexit will… [Read More]
New OPEC Oil Agreement Changes Every Thing First time in 8 years OPEC has come together and agreed to a reduction in production by 750,000 bpd. This is remarkable for the Saudi and Iranians to come together. While the deal may unravel, it seems unlikely. Saudi Arabia in particular bought themselves some time in the last… [Read More]
Britain’s decision to exit the European Union has profound implications for the global economic structure. But how does this impact you as an investor? Let’s take a look at how the global business may be affected and how you may want to reposition your investments to take advantage of the changes or at the very… [Read More]
Deflation is a rare occurrence. However, given the state of the global economy and a general prevailing sense that Europe may be slipping into deflation, many investors are concerned about the possibility and wondering about a deflation investment strategy. Deflation refers to a situation where general levels of prices for goods and services in the… [Read More]
I spent the morning of Dec 24 talking to the nice folks at Benzinga on their Pre-Market show. The interview was about me and VSG and also has some of my thoughts on the market now and crystal ball for 2015. Enjoy Hope you are enjoying the holidays and a Very Happy New Year!
In 2006, the North Dakota Bakken production was 5240 barrels per day. Today, it produces 1.1 Million barrels per day. With the Keystone pipeline approval being delayed, 75% of the North Dakota oil is transported to the refineries in Nova Scotia and Texas over the rails and the oil transported by the tank cars has… [Read More]
The current administration has placed a priority on developing renewable energy industry in the United States. As is the case with any substitution product, the adoption hinges on the ultimate cost to the consumers. For the producers, it is often a catch-22 situation. To be competitive in the market, they need to build up scale… [Read More]
One of the simplest methods of understanding the current financial market is through analysis of market indexes and comparing their values to past reference points like the 52 week high and the 52 week low. Many investors have had their eye on these market indexes lately, confused about why they seem to be doing so… [Read More]
Macro changes to economic circumstances are a significant driver of the flow of money throughout the globe. As economic information is released to market participants and investors absorb new information their wiliness to commit capital to specific areas changes. Global macro changes can cause specific influences to certain securities such as currency pairs, sovereign debt,… [Read More]