In their latest episode of the VALUE: After Hours Podcast, Brewster Taylor, and Carlisle discussed Waiting For Low Valuations And Buybacks. Here’s an excerpt from the episode:
Tobias: This general stock market malaise that we’re in– You’re usually pretty optimistic.
Bill: Going to zero.
Tobias: This is my optimistic take.
Jake: [laughs] Yeah. That’s [unintelligible [00:34:01] take.
Tobias: My optimistic take is that we’re done by the end of Q3 beginning of Q4. That’s what I’ve been saying for a little while, because I thought from the February 2021 top, which is what I’m imagining actually occurred, not the January 2022 top. That would be roll forward 18 months gets us to end of Q3-
Tobias: -beginning of Q4.
Jake: Always the dangerous time, right?
Tobias: Yeah, it’s not a good date, is it?
Bill: Hmm. I’m not optimistic.
Bill: I’m just not.
Jake: You think lower for longer?
Bill: I think if you want to be fairly confident in the companies that you own performing moderately well, you got to have low valuations of buybacks.
Bill: I think betting on liquidity support here is a tough bet. It will probably come back at some point and some of these beaten-up things will no doubt rip, but I don’t know how long it’s going to be.
Jake: You have been reading my July report before I wrote it?
Bill: I have not.
Jake: Oh, okay.
Tobias: Yeah, I like cheap and buybacks. I know that it’s very past. Maybe it’s becoming more fashionable. But all this long-term like Shiller Cape, whatever, it doesn’t matter which one you choose Tobin’s Q or Buffett’s one. They also are very, very valid.
Tobias: Yeah, still. The corollary to that overvaluation if you prefer not to have those terms is that it’s just a lower return like where you buy now, you have a return string that comes out at a market level analysis. It breaks down a little bit when you’ve got companies like Google, and Microsoft, and all those companies being top of the index, because they earn so much on so little assets.
Bill: Tell you what, FX is going to be a bitch this quarter. The dollar has been strong.
Tobias: So strong.
Jake: Yeah, I’ll be interested to see what–
Bill: I don’t know how it looks, but–
Jake: What looks like actual made profit margins in a way.
Bill: Yeah, I think I may be very surprised to see what comes back. I’d be like, “Oh, I knew multinationals are fun to own when things are stable, but now, not so much.”
Jake: The dollar sucks. I need to be earning another currencies.
Bill: That’s right.
Tobias: The weird thing has been that though, we’ve had this– Chinese water torture all year long that just dripped lower, but we still really haven’t seen any fear. We haven’t seen that. Value Stock Geek says, “Need the VIX over 30.” That’s what I think. There’s no panic. There’s been no blog. We’ve seen lots of crypto blow ups. Crypto–
Bill: You know Greed was real low for a minute. We were at extreme fear for a while.
Tobias: Yeah. We haven’t had that Lehman moment yet.
Bill: I don’t know that we get there this time. Maybe.
Tobias: Call down the thunder mate.
Jake: Yeah. That’s the word.
Tobias: I think it’s inevitable. There’s just strain underneath that you don’t see until it blows up.
Bill: Yeah, maybe.
Tobias: But crypto hedge fund, three hours, the list goes missing.
Bill: No crypto.
Tobias: If you’ve got the keys to this–
Bill: What does Choffstein think. Choffstein knows more about crypto than we’ll ever know.
Tobias: [laughs] I don’t know. What is it that makes up something systemic? It’s weird to me that there’s some– The crypto seems to be quite a lot of money in there and there’ve been three very high-profile blobs and nothing sort of–
Jake: Wasn’t that always one of the question marks was how much cross correlation, and cross ownership, and cross leverage is baked into that whole pie?
Tobias: There must be some.
Jake: Well, I think we’re seeing that. That’s where contagion comes from is counterparties not coming up with liquidity when you demand it.
Tobias: Usually, there’d some bank by now going down, but I guess, the banks have– Because they were unable to get into it, they’ve avoided it all.
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