I see this “Death of Value (investing)” article published by a Goldman Sachs strategist as being rather important, so please read it. I happen to be one of those Value Investors the author refers to. In my case, I combine my corporate fundamental analysis and macroeconomic studies with Technical Analysis — yes Kyle I do — just not in the way most people do. But, mostly I’m a value-based investor.
As readers know, I believe conventional TA has been waylaid by computer algorithms that have been programmed to game TS-based traders, and the algos are winning — mostly because these are owned by central banks who have unlimited funds and are operated, for the most part, by Fed and Treasury bankers JP Morgan and Goldman Sachs. These algos came to prominence after the 2008 market crash when central banks had to shore up the global financial system, and of course replace those funds over many years, taking it from you and me, a bit at a time, which is why the market has been mostly bullish since then.
I miss the old days when conventional TA was a necessary part of a trader’s repertoire. Nowadays, everybody seems to think it’s ok to “buy the dip”. It is until it isn’t. So, today I still use trend and cycle analysis but at points of extreme motion in market trading, as for example during a cycle reversal that could terminate a lengthy trend — the point where the majority of traders are either euphoric (buying more at the top, thinking they are winners), or woeful (selling out at or near the bottom, thinking they’ve lost everything). We call these people momo traders, the kind that HB&B has been ripping off, little by little, as I say.
I’m doing that today with Oilers and Dr. Copper because most traders there are distraught. We can all feel their pain.
So, yes, I’m a value-based investor with a TA twist. Like Buffett, I like to buy something at extreme lows; but, unlike Buffett, I try to sell into extreme strength because my job, like most of yours, is to trade securities, not buy companies like he does on behalf of Berkshire Hathaway.
Buffett, you may have heard, says there is a reason his company is holding so much cash today. Simply put, the valuations are not there in the size of deal he’s looking for, so he’ll sit on cash until after the monster crash so many people today are talking up as coming soon. His patience will be rewarded. Three years after the market has crashed and started to recover, I believe his Berkshire Hathaway company might very well be the world’s largest market cap stock.
And, as I see it, Goldman Sachs has made more terrible calls on the market than any of the members of Humongous Bank & Broker (HB&B), so they ought to be wary of disrespecting value-based investors. In fact, in not too many years, I believe their Death of Value article will be seen as one more piece of swill they fed to market pigs, simply more words to get the majority of you to buy momentum, something their bosses (i.e., the central banks) can reverse in a heartbeat.
The last time Goldman Sachs crashed and burned, two years after their Chairman and CEO Hank Paulson had left to pump up the market to a blow off top fed by momentum investors in his role as US Secretary of the Treasury, it was that same value investor Warren Buffett who had the $5 billion in cash ready to keep GS in the game. Maybe this Goldman Sachs strategist is also too quick to forget the $2 billion profit Buffett earned from that urgently needed “crisis” investment.
After the next crash, I believe value investing and active portfolio management will return to favour. That should be the case today, but unfortunately too many people are listening to the likes of Goldman Sachs and JP Morgan and betting their stake on passive index funds.
Studying market history is important. Maybe some of you are too young to recall Y2K and the Internet Craze of 1999-2000. Yes, it was Goldman Sachs that underwrote the majority of the Internet deals at the time and two years later at least half were bankrupt.
For Goldman Sachs, what goes around always seems to come around.