Old Fashioned Analysis In An Index World

Featuring Michael Lewitt

Michael Lewitt author of The Credit Strategist brings back a fresh dose of reality to markets which have become flooded with misallocated capital from ETF indexication and where funds seems to have lost the ability to do old-fashioned balance sheet analysis.

Published on
13 June, 2017
US Economy, Investment Framework, Credit Market
52 minutes
Asset class
Real Estate, Equities, Bonds/Rates/Credit


  • EF

    Erik F.

    15 4 2018 00:51

    0       0

    "Income statement is fake news." Fantastic!

  • PB

    Pieter B.

    23 6 2017 04:05

    0       0

    Fantastic interview! Thanks a lot.

  • HK

    H K.

    20 6 2017 21:25

    0       0

    As this topic is discussed with all the stock picking advocates: Why do people continue to allocate more and more into passive vehicles instead of the old fashioned stock picking / balance-sheet reading guys? Because the vast majority (before and for sure after costs) does not beat the index anyway (tons of studies on that). The longer the time horizon the smaller the number. And the chance you pick the one who does and stick with him/her is tiny. Hence, in my opinion it makes perfect sense to focus and spend resources on allocation decisions (if I want to express active views), but expressing those passively. It might be the ignorant decision but at the moment ex ante the one with higher expected return, i.e. at least I receive the market return for sure.
    Does 'dumb' passive money with no focus on intrinsic value lead to distortions in the long run (and even now already)? I strongly believe and see that it does but until the vast majority outperforms (and arithmetically that is impossible), I rather stick with passive vehicles for the time being. I would be willing to pay for someone who can benefit from those distortions - talking about long only, delta 1 stock picking here.

  • TT

    Thomas T.

    20 6 2017 06:51

    1       0

    Doesn't go to Europe or a concert. He is obviously talking BS.

  • CM

    Chris M.

    16 6 2017 03:10

    1       0

    Enjoyed this interview. Couple of interesting tips on buys and liked his conversation about how he trades.

  • JW

    JP W.

    16 6 2017 01:16

    2       2

    Seritage was mentioned by Monish Pabrai (would be great if RV could get an interview with Pabrai). I didn't really find much new information in this interview, more of the same and very broad response

  • GG

    Gerald G.

    15 6 2017 21:09

    3       0

    I'm going to love watching all the "thumbs down" I get for my rant. It only verifies the denial that has become a fundanmental part of the American psyche over the past decade.

  • GG

    Gerald G.

    15 6 2017 17:18

    8       7

    There is NOTHING worse than listening to an interview with someone who thinks they are smarter than they are. The reason Trump was elected was NOT because the elite failed the common people. He was elected because the average idiot still believes there is a way to avoid paying for excesses that led up to 2007 and they are desperate for a way out of the mess Americans created for themselves. All the Fed has accomplished with their interventions during (and since) the crisis was to defer payment for these excesses into the future. Now, instead of accepting the inevitable hardship that will have to come before any real progress can be made, Americans are still looking for a way way out. This is what "moral hazard" looks like and once trapped in this cycle there is no way out. There is no way out because the willfully blind arrogance that led people to believe that "moral hazard" was some kind abstraction to be ignored when convenient is now even more deeply entrenched. Listening to Levitt talk about Trump as though he's some kind of genius shows just how deeply the self delusion goes. Sure, Trump is a genius but, it's not because he has the formula to save the day, it's because he is capitalizing the ignorance, stupidity and arrogance that has taken hold of American society.
    BTW, ETF's are also NOT the problem... they are another symptom of "moral hazard". The Fed's interventions have convinced everyone that they will not allow the markets to correct and, if markets only go up, why bother picking stocks? The very fabric of Capitalism is being distorted and, IMO, is in the process of being destroyed. Again, this is what "moral hazard" looks like. You've brought it on yourself fools!.

  • HJ

    Harry J.

    15 6 2017 14:53

    0       0

    Ok I sold vrx.
    I'm sick about the loss

  • BB

    Bob B.

    14 6 2017 17:44

    0       0

    What sis the Sears spinoff he was talking about Sarataj??

  • VK

    Vladimir K.

    14 6 2017 15:52

    1       0

    I didn't quite get what is his options strategy. He sells ATM straddles on SP500 and "hedges them in the same way". how is that? He buys puts? LEAPs?Buys calls? turns straddles into Iron Condors?

  • BB

    Bob B.

    14 6 2017 11:16

    0       0

    So how do Tesla and Amazon compare there were many critics of Amazon back just a few short years ago

  • JL

    Jacob L.

    14 6 2017 11:13

    5       5

    I'll be the odd man out here and perhaps overly harsh but I expected more substance, less emotion and more openess to the fact that he could be wrong about stuff.

    For someone who is a numbers guy, how can one say the markets should drop based on a terrorist attack by some delusion individual? Afraid to go to Europe because of that? Well, if one TRULY is a numbers guy it would make a ton more sense to fear getting shot in the US and driving (anywhere in the world) than dying in a terrorist attack where the deaths are infinitely smaller. Not a view I'd expect from an analyst.

    As for Tesla how about just a tiny bit of openess to the possibility that they will grow into the valuation? It is a very binary story and they may very well fail to live up to expectations and I'd bet on it as the more likely scenario too but to write off the other view as simply immoral "sellers of stock" rather than giving people creditfor actually believing the model 3 and the gigafactory will be the game changer is a bit over the top for me.

  • JV

    Jason V.

    14 6 2017 10:09

    4       0

    A real privilege to listen in on that conversation. An intelligent, well-informed and vastly experienced investor, telling it like it is. Refreshing, educational and enjoyable. Another excellent interview.

  • JG

    James G.

    14 6 2017 10:01

    7       2

    The reason why ETF's are attracting massive investment flows is because of their low fee structure in a low return environment relative to active fund management. The unintended consequence of this is deeply overvalued large cap stocks that have benefited from indiscriminate ETF purchases.
    Dont look at this as a disaster, just a wonderful market anomaly to exploit by shorting using long term deep out the money puts on those names. Ridiculous implied volatility levels makes this trade even cheaper to execute.

  • CH

    Craig H.

    14 6 2017 09:20

    0       0

    Many of the interviews raise the issue of passive investing e.g. ETF's and it makes a lot of sense, but I recently read a piece on Central Bank intervention through covertly buying shares to prop up the markets. The article is by David Haggith at The Great Recession Blog and titled "Is The Central Bank’s Rigged Stock Market Ready To Crash On Schedule?" Very very thought provoking.

  • CH

    Calvin H.

    14 6 2017 03:30

    2       0

    Good interview..I am anti-Hillary but am surprised he thinks Trump is so smart. Also Opiates are problem, but if you want to connect the dots ... try this https://www.youtube.com/watch?v=CvNGpdPdQCk&app=desktop

  • BC

    Brian C.

    14 6 2017 01:38

    7       0

    I agree with almost everything this very smart gentleman says. That being said I would never step in front of a freight train i.e. would not short Tesla. I certainly wouldn't buy the stock. This thing could run much further than I have funds to keep a short position.

  • ES

    Edward S.

    13 6 2017 22:50

    0       0

    Pretty sure CIM is over book.. But great interview anyways!

  • WM

    Will M.

    13 6 2017 22:42

    2       1

    Excellent interview. His newsletter is great. Love his credit experience and generally agree with all his views. Currently considering moving into the 3rd Friday Fund. Don't follow Sure Money though as it feels a bit pushy and repetitive.

  • CP

    Chris P.

    13 6 2017 20:59

    20       0

    One of the best interviews yet-- Michael is unusually insightful, and can distill the current investment climate like few others. What I find depressing are the number of people who feel compelled to comment on every guest's politics. When I listen to a person this smart and clear thinking, that hardly seems relevant. Furthermore, why would you want to offend a guest who is openly sharing his thoughts and ideas. Needless to say, this applies to whether the guest is conservative or liberal.

  • AH

    Andreas H.

    13 6 2017 20:31

    1       1

    Good luck with a TSLA Short, I also do not think, that Tesla is a great value play, but shorting? The pain trade is up, for Tesla, for the market, the squese has just began...

  • RA

    Robert A.

    13 6 2017 20:05

    5       1

    While I don't always agree with Michael's outspoken Political views I am a satisfied investor in his conservatively managed Option Stategy Hedge Fund (that is actually hedged). There are 3 things that help me sleep well with Michael's stewardship of my money; I don't worry about "style drift" with Michael, Michael is a real Credit heavyweight and there is no one better to invest the cash collateral mandatory holdings required by the Fund structure, and finally, and most importantly to me----there are and will be times when a strategy will breakdown and fail to work as anticipated due to a plethora of unkown factors---and when THAT happens I am confident that Michael will figure it out early on, shut the fund down, return capital to the investors and await the next opportunity.

  • LA

    Linda A.

    13 6 2017 19:30

    10       0

    Love Credit Strategist - he is rational and a realist. We are in this epic bubble caused by criminal bankers. I don't know how this will end. The Dow went from 6,666 to 21,300 -what an epic run while devaluing our dollar, robbing savers, creating distortions, rigging the silver/gold mkts, ruining the economy (retail businesses, states- Puerto Rico, Illinois - more to come) all in an effort to prop up banks. Man, I am so angry that we have actually taken funds out of the banking system. The block chain may be the doomsday for a majority of banks. Take action people & become your own central banker.

  • HJ

    Harry J.

    13 6 2017 17:21

    2       0

    This works. Now what do the older folks in Florida do for current yield?
    Waiting for a rebound in yields seems to be a fools errand.
    By the time yields return their funds could be depleted.

  • MA

    Matt A.

    13 6 2017 17:04

    5       0

    Combining the views explained here on Tesla with the latest episode of RV's podcast Adventures in Finance, I think we are gearing up for a real downturn in autos and especially Tesla. Add compounding effects like self-driving technology to the picture along with generational changes such as the indifference in owning a car and things start to look very glum.

  • MN

    Mark N.

    13 6 2017 16:49

    1       0

    Not fond of the new camera angle, I'd like to see the interviewer more often...

    ...though I'm sure Grant likes the new angle. ;-)

  • SS

    Sam S.

    13 6 2017 15:56

    10       0

    Now that was a candid humble yet confident interview. Well done. Great ideas, conviction and a number of basic principles that will be validated in the future. Love his comments on Trump, Baltimore, Illinois. Thank you!

  • EF

    E F.

    13 6 2017 15:52

    5       0

    never underestimate the amount of hipsters out there

  • EH

    Eric H.

    13 6 2017 15:49

    2       0

    good interview and funny guy. great stuff!

  • MP

    Michael P.

    13 6 2017 15:40

    4       0

    Good insight broken down well.

  • TM

    The-First-James M.

    13 6 2017 15:11

    6       0

    Just wish Michael had never got involved with Agora...

  • MS

    Mark S.

    13 6 2017 14:40

    11       12

    Solid interview from someone who has a clear understanding of the markets and the risks due to massive debt overhang and central bank control. Unfortunately his recent writings have suffered because of his Pro-Trump political ranting.

  • GB

    Grant B.

    13 6 2017 14:10

    12       0

    High quality. Great insights simply explained.