There is still some smart people that believe in that CAPE method and similar mindsets. I actually got in an argument on twitter with Mebane Faber recently about that. I explained to him why that made no sense, he never made any real counter-point and just blocked me instead. Its almost uncanny, the people that bring backward looking indicators are, in the majority of cases, people that are not involved with equity markets (they are not equity analysts, equity investors, equity PMs, etc). If they were, looking so much at the past and not to the future would give them a weird feeling, that weird feeling only goes away when they look at the present and future
With regards to ICOs, I have been changing my mind on it. After getting more experience and knowledge with regards to angel investing and VC, it seems to me that ICOs right now make little to no sense. This is a comparisson table I build that could contain some flaws but overall i think it reflects well the differences
The big issue is that when VCs give $10m-$20m (what a typical ICO can raise) in an equity invesment (tipically a Series A or B) they have so many requirements that 95%+ of ICOs would not be able to meet. These requirements would involve traction, team quality, absence of red flags etc etc. Like Calacanis says, you just cant give that kind of money to people that havent earned the right to have it. The incentives are just terrible for them to screw you over through theft, flat out laziness, etc etc. On Serias As or Bs, the owners will still have 60-70% of the business and usually will have to prove that they keep costs under control, will have to meet VCs in person to prove that their are not sleezy etc. With ICOs none of this happens. As a result, the ICO itself is the exit for the person behind it. All they have to do is to keep paying himself a salary for years and live a pretty good life, regardless of delivering a product or not There might be some good ICOs, but the VCs are closing them in private rounds and they dont even make it to ICO stage. As a result, the amount of adverse selection in the space right now is huge. Personal honesty for the founders is pretty much everything and how would you be able to tell how honest someone is by just looking at a linkedin and watching an AMA on youtube? The best VCs in the world insist on personal meetings, thats because most of communication is not verbal, its subcommunicated through body language, tonality, timing etc. As a result, making money off ICOs is just too difficult. As least if you are an investor. As speculative plays they are simply levered plays on BTC, so I rather to that than to buy ICOs (that is, increase BTC exposure as a% of a portfolio)
So as an invesment, I think they make little to no sense but as an speculation I think they are just inferior to the alternative which is: If someone has 2% on BTC and 1% in ICOs in their portfolio, its probably better to just have 4% on BTC rather than any in the ICOs. That way you get that extra 'leverage' without all that adverse selection/security risk/operational risk I still got some alt coins and ICOs but I have been taking advantage of this market rip to decrease those positions and convert it to BTC, at least partially.
This is similar to the Dalio principle that instead of buying illiquid alternatives to an investment (say private equity, instead of public stocks) its better to leverage up on its liquid brother/sister (ES futures for instance). He did some backtests on that and that's how Risk Parity was born. I havent seen the numbers in that but I tend to think it makes sense to do it. In this case its just a nobrainer to apply this rule especially when you consider the risks involved with ICOs and some alt coins. Security in the crypto space is everything and the more developers a coin has, the less likely it is to have security flaws (which can render the coin worthless overnight). A lot of new coins have just a handful of unproven developers vs BTC which has several highly competent developers with long histories, which can be checked in Github. Plus BTC itself has been around for longer, so it likely has much less flaws. Its probably the most read code in the crypto space, so there are a lot of eyes trying to find flaws in it. Alt coins can produce much bigger gains but they require an special type of expertise for analysis. Very deep knowledge of cryptography, the code, etc. I dont have such expertise, nor I think 99% of people in this space has so its a very hard game to play
If I lived in San Francisco and could meet with ICO founders and could see the great deals first (instead of last, like its happening right now), I would consider going into ICOs big time. But I dont have that option, so they at this point, I just consider them high beta plays on BTC. Owning them and owning 2x the amount in BTC should be pretty similar but I would prefer the latter due to better liquidity, less risk and less due dilligence required
https://www.bloomberg.com/news/arti...campaign=socialflow-organic&utm_medium=social "Investors ought to get bearish on U.S. stocks not when the curve is bear flattening or the 2s10s spread turns negative, but rather when the opposite trend is in effect, writes Mayank Seksaria, head of macro strategy and research at Macro Risk Advisors. That’s bull steepening, in which short-term yields fall faster than long-term yields as the market prices in monetary stimulus to compensate for a downturn in growth." "In fact, the two-year forward returns for the S&P 500 Index after the curve inverts have actually been positive, on average, over the past 40 years. The strategist attributes this phenomenon to the substantial lags between when the spread turns negative and the onset of a recession, a "late-cycle period" for equities. Meanwhile, an investor who shorted the S&P 500 Index when the curve is in bull-steepening stretches and was long at all other times vastly outperformed an investor who bought and held the benchmark U.S. equity gauge throughout the entire period." So, acc to this article, one should bail out of stocks when short-term yields are actually falling relative to long-term ones, as the market starts to price in rate cuts to deal with the weaking economy. Rather than when the curve inverts “The yield curve inversion signal is overhyped as a timing tool,”’ Seksaria concluded. Indeed
The yield curve inversion isn't a signal of anything, but then neither is a bull steepening... The whole idea of the curve being some sort of a significant indicator of anything is bollox.
Baidu is up over 5% in today's trading. The stock has recovered from recent lows, which occurred because of tariff concerns spurred by recent political rhetoric between the US and China. Baidu, the largest Internet search engine in China, has transformed from a mobile-centric to an AI-focused (artificial intelligence) company. AI is the future technology. Another bull case.