In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed.

While markets have certainly been on a tear this year, due to massive amounts of Federal Stimulus, it has been an advance solely on valuation expansion. While the decline in 2020 earnings was no surprise given the pandemic, earnings were already declining in 2019. The chart shows this in the return attribution of the S&P 500.

Overpaying For Earnings

Such is not a new phenomenon. Since 2009, sales per share, what happens at the top of the income statement, has cumulatively grown by just 43% through Q3-2020. It is hard to justify bidding up stocks by 400% based on meager revenue growth. So, Wall Street created metrics like “Operating Earnings” to provide justification. The problem with “Operating Earnings” is they are heavily “fudged” to create a more optimistic picture…CLICK for complete article

The investing universe has labeled millennials many things: lazy, entitled, narcissistic among other unflattering terms. They have also been accused of being highly risk-averse, preferring flashy investments like crypto over slow-n-steady ones like stocks and bonds.

While some of those platitudes are plain wrong (many millennial stock picks have been handily trouncing the markets), others appear spot on.

And now a survey has established that an overwhelming majority of millennial investors actually prefer bitcoin over gold as the superior safe haven.

A recent global survey by deVere,  one of the world’s largest independent financial advisory and fintech organisations, has revealed that millennials really do prefer bitcoin to gold as a safe-haven asset.

The revelation comes just a week after the world’s largest cryptocurrency touched an all-time high of $19,864.

Digital gold

In the deVere survey, more than two-thirds (67%) of the 700+ millennial respondents said that they think Bitcoin simply is a better safe haven compared to gold.

According to de Vere: “From Ancient Egypt onwards gold has always had immense value and has long been revered as the ultimate safe-haven. It’s always been a go-to asset in times of political, social and economic uncertainty as it is expected to retain its value or even grow in value when other assets fall, therefore enabling investors to reduce their exposure to losses. But, as this survey reveals, Bitcoin could be dethroned within a generation as millennials and younger investors, who are so-called ‘digital natives’, believe it competes better against gold as a safe-haven asset.” CLICK for complete article

We have recently written a couple of posts about the “exuberance” that has invaded the market since the election. Such is often seen near short- to intermediate-term peaks in markets as investors go “all-in” without a net.

It was on December 5th, 1996, during a televised speech, that Fed Chairman Alan Greenspan stated:

“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”

It is an interesting point that the U.S. has sustained low rates of inflation combined with monetary and fiscal stimulus, which have lowered risk premiums, leading to an inflation of asset prices.