Big Week For Equities As Earnings Outshine Jobs Report

“Over the short run, the market is a voting machine. Over the long run, it is a weighing machine.” - Ben Graham

Most people go to high school and are concerned with their social life. It is quite natural at that age, as fitting in and having lots of friends is important to a young person. Being accepted by the popular group plummets in value once you leave high school. In fact, you learn pretty quickly nobody cares who was popular at XYZ school in the middle of some town.

However, the popularity issue is something that does play a part of the world in other areas. Clearly, fashion trends are affected by popularity. Travel patterns and schedules, other than in the Coronavirus period, are influenced by popularity. Betting odds on sporting events is greatly impacted by popularity in the form of money flows. The most obvious place where popularity can play a role in outcomes is political elections. I hear there is a big one coming up in November, by the way. Clearly, popularity is a subject which remains pertinent. Along those lines, we turn to the investment universe and to see how popularity applies there as well.

Over the last fifty years, hydrocarbons were one of the best investments you could have made, but markets only care about the here and now. What have you done for me lately? More importantly, how do things look for the next five to ten years? One does not have to look very closely at the energy area to understand that carbon-based energy investments have terrible results over the last decade.

An increasingly influential group in the investment world is based on the acronym ESG, which stands for environment, social, and governance. The environment piece is rooted in the idea that the world must transition from carbon based energy to renewables (wind, solar, geothermal, nuclear, hydrogen). As an example, Blackrock’s CEO is Larry Fink, and he is the head of an organization which oversees 6.5 trillion dollars of assets. Note the t for trillion. Mr. Fink is a leading advocate for the transition away from carbon based energy, and has been writing about its impact on investment choices over the last few years. In some ways, this is the investment world’s version of high school popularity.

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Disclaimer: Thanks for reading the blog this week and if you have any questions or comments, please email me at Y H & C Investments, Yale Bock, and the family of Yale Bock ...

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Robert Capasso 1 month ago Member's comment

Enjoyed this, thanks.