Comments
Transcript
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DWVery interesting!
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NFOutstanding interview from someone with a deep level understanding of factors and the impact of Econ environments on factor returns.
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TPMore succinctly, the Fed never allowed institutions to fail that should've failed, and by cutting to zero has yet again suppressed volatility. This results in zombie companies, and select index stocks being supremely over-valued. Not a big surprise that diversification is dead, given that everything is trading off the massive monetary injections of the fed, or is too "dead" to trade in a worthwhile manner. I have zero sympathy for HFT, so I'm not exactly sad that the purveyors of "mirage" liquidity are having a hard time, including their quantitative cousins.
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MGNice job but I have a lingering question in that what happens to value if the 10 year for example reaches the zero bound? Granted we may eventually get some form of yield curve control but at such a depressed level, and assuming we don't see NIRP in the US wouldnt this be the perfect signal to look for to rotate from growth to value??
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DPGreat analysis! It would be interesting to see how the correlation changed with regard to nominal vs real rate or spread changes. Would a low growth but high inflation environment change this correlation? I think that a true growth story in the economy would bring back value but I'm not convinced that a low growth high inflation environment, which would cause an increase in rate spreads, would be positive for value stocks vs growth stocks.
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ELThese are interesting correlations. I am a bit surprised that share buybacks did not come up since those are highly correlated to bond issuance in the value category.
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RJ100% great discussion and, unlike the current rate spread indication, this discussion is true value!!
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ASIt all goes back to Value needing reflation and growth given its current sector composition; lots of oversupplied industries, and structurally challenged businesses like banking (no wonder value needs a steeper yield curve!).
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MDThanks Max and Joseph. Enjoyed this - very interesting.