Now It's Time to Perform: Earnings vs Value Cycle

Now It's Time to Perform: Earnings vs Value Cycle

Now, as we go through the transition of earnings,
As the S&P 500's trailing EPS improves in the future,
Valuations that have already gone up need to be justified.

Given that the trailing EPS is 23 times and the leading EPS is 21 times, it is absolutely necessary.

Right or not, the market is reflecting soft landing.

The recession may be coming soon,
Valuation expands first in '23,
In year 24, earnings (EPS) will recover,
It looks like the beginning to the middle of the business cycle.

If you look at chart 1, the timing of the expansion of PER and the recovery of EPS at the same time occurs
It appears early in the recovery cycle or in the middle of the soft landing,
It's almost invisible in the second half of the cycle.

If you look at soft landing in 1966, 1984, 1995, 2016,
All of the above situations came from the middle of the cycle.

2 The atmosphere in the second half of the current cycle is not just a recession,
Can we go back to the middle of the tea cycle?

Did the pandemic and its many fiscal policies break the traditional business cycle debate?

The driving force behind the game is
Did we move from the 'monetary' policy to the 'fiscal' policy?

Or are AI and Mag7 grabbing and dragging their hair?

Even if the situation is good or bad, the market is always
Ask us a question. Magazine cover indicator

You've probably seen a lot of this Economist's cover.

But why is it getting so much attention,
What's the point of this,
I'll see how you can use it

[A specific argument is a good indicator]

If you're looking at the investment board, you're looking at forecasters and the financial media
for a particular asset
You can see it saying positively or negatively.

And if you look at it enough, it's intuitively
I feel that those remarks are a contrarian indicator of the trend.

For example,
Celebrities advocate for certain assets,
(In 2007, Gisele wanted to be paid in euros)
An artist uncle talks about Danta on Chuseok,
The magazine has a strong argument on the cover for a particular asset.

2) "The end of the crude oil era"

[But this argument is not reliable]

The problem with the so-called human indicators is the size of the sample, the confirmation bias, and so on
You have a choice.

If you're always a stock crash theorist,
You always see a lot of evidence that it's a high point.

If you think the tech stocks are bubbles,
There is always too much confidence in the technology.

People who write some newsletters, or briefers
They are incredibly good at finding evidence that fits their already formed claims.
Even though I've been getting it wrong for years.

Subjective evidence is also vulnerable to apophenia.
In other words, they are vulnerable to the nature of people who want to find patterns everywhere.

This is a far-flung example of putting the Beatles' career into the market.
It's surprisingly fitting.

[Framework based on experience]

In summary, [XX indicators] are too important to ignore,
Because they are already influenced by their arguments, they are less reliable to accept as they are.

Therefore, we need to take a systematic approach to determine whether these indicators are predictable.

The "Magazine Cover Indicator" is what investors know,

If there's a theme of a particular person or market on the cover of a magazine,
It means that the trend of the theme or the assets associated with it will soon end.

In other words, if you do the opposite of the magazine cover, you'll make money.

Two famous examples are as follows.
One was Businessweek's 1979 low titled "Death of Stock."
The other was the headline "Drowning from Oil" by The Economist on the cover from the 1999 oil price low.

In the case of figures,
Jeff Bezos was named the Person of the Year just before the Tech bubble in 2000,
Just before Russia's economic collapse in 2007, President Putin was named the Person of the Year.

The premise of this indicator is that the trend is long overdue for a reporter or editor to put market trends, companies, countries, people, and themes on the cover.

There is a high probability that position and psychology have already been reflected in it.

In other words, by the time the reporter talked about a trend, most of the trend was already in progress.

You have to move like crazy until you're on the cover of a magazine,
Therefore, at the moment it was on the cover, it was already overbought or overbought.

It's in a huge category called "mean regression."
These include Madden's curse, stadium curse, jinx.

If something soars above average,
It's bound to come back eventually.