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Mean reversion. It’s a phrase we hear a lot from fixed income and equity investors, novice and pro alike. Bond spreads many times are described as being tight or wide. Equity markets are called cheap or expensive. All based upon how far above or below a particular metric is from its historical average. The implication being that at some point in the future there will be movement toward the average, the long term average. This is the genesis of the value investor.
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“…this time seems very, very different.”
– Jeremy Grantham, one of the most noteworthy value investors
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“This time” being the current extended bull market we find ourselves in. Before dismissing Mr. Grantham, readily recall he was right about three prior bubbles. His calls on Japan, the DotCom industry, and the housing debacle were spot on. Now he seems to have obtained an intuitive grasp of reality. The reasoning, the earning power of US multinationals, political influence of large corporations, the increased regulatory burden imposed on smaller firms, globalization, and “durable decline in interest rates.”
There is ample evidence to support Mr. Grantham’s claim of “different,” this time around. Higher profit margins, higher PE’s, the lack of investor “euphoria,” and unfavorable demographics all support the claim. Other factors don’t. The courage to break rank by Mr. Grantham is quite impressive and he’s probably on to something. Globalization and technology have been persistent game changers. Let’s hope he has conviction about the new world. Let’s also hope that it is different this time, because if it’s not the means have a long reversion.
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SCI Highlights
No Grid Payouts!
Don’t forget…
Management Fee’s do not go to grid. You keep 100% of the payout (after 40bps platform fee).
Quarterly Re-Balance
The Salt Creek quarterly re-balance cycle will begin shortly. If there are any cash management issues please let us know so we can make the appropriate adjustments before the rebalance.
New SCI Advisor Portal
Keep an eye out for the launch of the new Salt Creek Advisor Portal. Lot’s of new features for you to use:
- Model Performance
- My Contacts
- Add Contact
- Document Management
- Riskalyze
- eMoney
- Forms / Agreements
- Marketing Library
- Service Requests
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