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June 22, 2020
Market. P/E multiples are near record highs. Look at the last bull market. The S&P increased 16% annualized. There were some strong tail winds that don’t exist now. The market will probably be lack-lustre for several years. 40% of the upside in the last bull market was from multiple expansion. 25% of the gains were from pre-tax profit margin expansion. There were tax breaks contributing 10%. None of the factors contributing to these exist now. Consolidators should do well going forward. The economic pie is not going to grow that much. Disruptors should also do well. Both are taking more of a pie that is not growing.
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Market. P/E multiples are near record highs. Look at the last bull market. The S&P increased 16% annualized. There were some strong tail winds that don’t exist now. The market will probably be lack-lustre for several years. 40% of the upside in the last bull market was from multiple expansion. 25% of the gains were from pre-tax profit margin expansion. There were tax breaks contributing 10%. None of the factors contributing to these exist now. Consolidators should do well going forward. The economic pie is not going to grow that much. Disruptors should also do well. Both are taking more of a pie that is not growing.
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COMMENT
June 22, 2020
Collateralized Loan Obligations. They are similar to sub-prime securities causing the financial crisis. They are low quality debt. When a recession or downturn occurs, these could suddenly find their ratings go down and prolong the recession. Look for banks that have long term track records and are conservatively managed and Canadian banks do this.
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Collateralized Loan Obligations. They are similar to sub-prime securities causing the financial crisis. They are low quality debt. When a recession or downturn occurs, these could suddenly find their ratings go down and prolong the recession. Look for banks that have long term track records and are conservatively managed and Canadian banks do this.