What the Past Can Teach Us: Record Valuations, Rock Bottom Interest Rates & Bull Market Peaks

Surviving a Bear Market

Legendary writer and investor Dennis Gartman is fond of saying that the person who loses the least money in bear markets wins. KCR does not believe we can time the market. Yet we do believe a cursory review of stock prices can help those who may want to begin preparing for a bear market. As our bear traders post showed – the damage of drawdowns should not be underestimated.

KCR has written a vast amount of research around stocks priced for the impossible. The most egregious examples are those stocks that violate the Sun Microsystems quote, which made the importance of valuation painfully obvious. We have also cautioned against engaging in what we believe is rank stock speculation.

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In October of 1928, The Sunday Courier And Journal of Evansville Indiana published the below graphic and the text on their front page. The article admonished investors in blunt language. “Don’t be deceived by statements that are preposterous…Don’t trust the lying promises of get rich quick advertisers.” When it comes to surviving a bear market, KCR believes this advice is as important today as in 1928!

October of 1928 The Sunday Courier And Journal of Evansville Indiana

Source: Newspapers.com, “Feeding the Hippopotamus,” The Evansville Courier, October 14th 1928[1]

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The Best Investments during a Bear Market are Often the Ones you Do Not Make!

To reiterate: KCR is not trying to time markets, nor are we making a market call.  We are simply acknowledging that the combination of soaring geopolitical tensions and soaring oil prices is  suboptimal, with equities at record valuations and fixed income offering limited returns and significant risk.

The first chart below shows…

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  1. As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade.  If you are looking for simple, concentrated, low turnover, and tax efficient model portfolios we would like to talk with you.  KCR also offers a wide range of easy-to-use but sophisticated tools.  Our toolkits can help identify mispriced stocks with the best and worst risk/reward characteristics, estimate a stock’s duration and warn you when a company is engaging in low-quality accounting. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices.
  2. Kailash Capital Research, LLC ’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias.  L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded.

The topics discussed in this article are aimed at seasoned professionals, as such, we have included some extra reading for anyone seeking out more information related to the topics above.

  1. Click the following to read more about Asset Allocation Definition, What To Do in a Bear Market

[1] Source: Newspapers.com,  “Feeding the Hippopotamus,” The Evansville Courier, October 14th 1928

Disclaimer

The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital Research, LLC and its affiliates (collectively, “Kailash Capital Research, LLC ”) shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital Research, LLC . In preparing the information, data, analyses, and opinions presented herein, Kailash Capital Research, LLC has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital Research, LLC , however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives. Kailash Capital Research, LLC and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction. © 2021 Kailash Capital Research, LLC – All rights reserved.

Nothing herein shall limit or restrict the right of affiliates of Kailash Capital Research, LLC to perform investment management or advisory services for any other persons or entities. Furthermore, nothing herein shall limit or restrict affiliates of Kailash Capital Research, LLC from buying, selling or trading securities or other investments for their own accounts or for the accounts of their clients. Affiliates of Kailash Capital Research, LLC may at any time have, acquire, increase, decrease or dispose of the securities or other investments referenced in this publication. Kailash Capital Research, LLC shall have no obligation to recommend securities or investments in this publication as result of its affiliates’ investment activities for their own accounts or for the accounts of their clients.

March 18, 2022 |

Categories: Quick Takes

| Authors: , ,  and 

March 18, 2022

Categories: Quick Takes

Authors: , ,  and 

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