Thursday, January 15, 2015

Horizon Kinetics Fourth Quarter Market Commentary

Worth reading [pdf]. These guys are actually bearish on the indexes. Over the past few decades, equities benefited from falling interest rates (not repeatable), falling corporate tax rate, and rising P/E ratio.

Their way to play it is to own less liquid stuff that's cheaper and not in ETFs (mainly due to insider ownership). They've published commentaries on their major holdings: AN, DWA, HHC, JAH, PAH, SHLD, STRZA, WEN, LB, BAM, IEP, LYV, TPL, etc.

I like the original thinking, but I don't like a strategy that consists of losing less money than everybody else, which I think is what will happen to them in a bear market.

Just goes to show how hard it is for people to keep their powder dry, institutionally speaking.

1 comment:

George C said...

Interesting article. However, it seems to me that the majority of active managers followed the crowd (which is why so many of them can't beat the crowd), which caused bubbles in various sectors (internet, nifty fifty, etc) at various times. The only difference now is that the managers (and their fees) have been cut out of the loop. Eventually, the ETF bubble will burst too.

The article did make me think (realize?) that the Euro is basically an ETF of European currencies. An investor can't buy just a French currency, just like an ETF can't buy just KO. Not sure what that means, but I think it's interesting...