Note that all of the expansion in ERP in the last five years has come from the risk free rate coming down and not the return on trendy boutique s going up. Friday, during regular trading, there were several stocks that exploded higher. Again, the trend is longer term, as there has been little or no evidence of a small cap premium since 1980, in contrast to the dramatic premiums in prior decades. As with the value premium, the size premium had a rough decade between 2010 and 2019, dropping close to zero, on a value weighted basis, and turning significantly negative, when returns are computed on a equally weighted basis. Not only has this led some to put their faith in small cap investing but it has also led analysts to add a small cap premium to costs of equity, when valuing small companies. If you are investing in small cap stocks, expecting a premium, you will be disappointed, and if you are still adding small cap premiums to your discount rates, when valuing companies, you are about four decades behind the times. Assuming that low PE stocks and low PBV stocks are good value is the laziest form of value investing, and it is perhaps not surprising that in a world where ETFs and index funds can be created to take advantage of these screens, there is no payoff to lazy value investing.


If the banking system gets into trouble, then we are not just looking at a hard landing scenario, defined as sub-par economic growth, but a crash landing, which I define as zero or even negative GDP growth. I would suspect that agriculture has been going up for a while because even I am making money now and I would suspect that it is going to continue. Every decade has its buzzwords, words that not only become the focus for companies but are also money makers for consultants, and the last decade was no exception. If you are a believer in value, as I am, there is a consolation prize here. At the risk of being accused of missing a few, there were two that stood out to me. The data has to be exclusive: For data to be valuable, there has to be some exclusivity. The first was big data, driven partly by more extensive collection of information, especially online, and partly by tools that allowed this data to be accessed and analyzed. Religious objections were at the highest pitch since Campaign 1960, in which a large number of voices criticized John F. Kennedy for being Catholic, opponent Richard M. Nixon being Quaker and thus to these voices, more Christian.



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