E Tuesday Talk: Of Rice And Rain

Wheat, Rice, Agriculture, It'S Raining

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Despite the setbacks in Europe due to continued lockdowns and slow vaccination rollouts Jill Mislinski writing in World Markets Update: April 19, 2021 surprises us with charts that show both the CAC and the DAX leading the pack on a year to date basis. 

"All eight indexes on our world watch list posted gains through April 19, 2021. The top performer is France's CAC 40 with a gain of 13.43%, Germany's DAXK is in second is with a gain of 11.27% and our own S&P 500 is in third with a gain of 11.43%. Coming in last is China's Shanghai with a gain of 0.13%.

Here are all eight world indexes in 2021 and the associated table sorted by YTD."

Mislinski also includes historical charts of world indices from 2009, 2007 and 2000 to date.

In a TalkMarkets Editor's Choice column entitled Why The Riskiest Stocks Have Been Vastly Outperforming Safe Ones contributor Yuval Taylor draws some interesting charts and conclusions which will leave readers with plenty of food for thought. Taylor starts out with the following daunting proposition:

"Let’s say you believed that the higher the risk, the higher the reward. Let’s say you loved taking risks. Let’s say you participated in all the Red Bull–sponsored extreme sporting events you could, and you watched those you couldn’t participate in. And you drank their sodas like water, regardless of any health risks. What kinds of stocks would you buy?"

So that's the kind of market we're in? Taylor continues:

"A Red Bull investor would look for the following in a stock:

  1. Value. Extremely underpriced or extremely overpriced stocks. Those are definitely the riskiest.
  2. Growth. Stocks whose growth is high but far from certain. Again, definitely the riskiest.
  3. Stability. The most unstable stocks possible.
  4. Quality. Low-quality stocks. No question there.
  5. Sentiment. Stocks with huge changes in sentiment; stocks which investors can’t make up their minds about; stocks that are either flying under the radar or are heavily shorted.
  6. Momentum. Total mean reversion! Stocks with negative momentum. Beaten-down stocks that are barely hanging on.
  7. Size. Tiny stocks, low-priced stocks."

blue and white can beside clear drinking glass with yellow liquid

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So how does this all stack up? You might be surprised. Contrarian investing, perhaps, but I've got to give a cheer to Taylor for his wet and novel analysis.

"Check out the following charts:

Red Bull Investing charts

The left-hand charts are for these factors between January 1999 and April Fools’, 2020, a few days after the market hit bottom. The right-hand charts are for the most recent four quarters, 4/1/2020 to 4/1/2021. Let’s focus on the right-hand charts for a moment.

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William K. 1 month ago Member's comment

The very wise advice given to gamblers has been " Do not gamble more than you can afford to lose", and this rather obviously applies to stocks as well. And the other, equally as wise advice, ha been to not gamble with borrowed money. So in the stock markets they call it "leverage" so a to make it sound less dangerous.

The really interesting part of the whole thing is that some folks do quite well even as they go in the opposite direction, gambling far more than they can afford to lose, and doing it all with borrowed (leveraged) funds. That is a puzzle that I have no hint of solving. And a game that I have chosen to not play. I may occasionally wager, but I never ever gamble.

David Marshall 1 month ago Contributor's comment

A wise wager is better than a brash bet, though Yuval Taylor presented a contrarian analysis 🧐

Robert Capasso 1 month ago Member's comment

I thought Yuval Taylor made some excellent points.