Here is a look at Warren Buffett’s latest move, Euphoric Land, plus gold and silver.
Euphoric Land
August 31 (King World News) – Peter Boockvar: The Citi Panic/Euphoria index continue to get deeper into Euphoric land. To a point where it is almost now 3 times the level of the Euphoric threshold of .41. Call this ultra extreme bullishness and while it will only matter when it does, it usually eventually does.
Warren Buffett’s Latest Move
Warren Buffett didn’t just get long Japan, he expressed his value credentials at the same time. ITOCHU is trading at 9.5x expected earnings and has a dividend yield of 3.2%. Marubeni is trading at 8.8x earnings with a dividend yield of 2.4%. Mitsubishi has a 9.3X LTM P/E ratio and a 16x forward with a 5.3% yield. Mitsui is trading at 13x forward with a yield of 4.2%. Sumitomo is trading at 9x last 12 months and 9.3x 2022 expected earnings (they are expected to lose money in fiscal yr 2021). It has a dividend yield of 5.1%.
This is true value investing and one of the benefits of Abenomics was the focus on shareholder value and corporate governance. I’m long Japan as well so I welcome the focus on Japan as an area of value and maybe there is still hope for us value investors. Notwithstanding decades of monetary easing, near zero rates, massive QE and the purchases of equity ETF’s, the Nikkei still remains 40% below its 1989 closing peak…
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With respect to the inflation conversation highlighted by Powell’s comments last week, the US 10 yr inflation breakeven is riding a 6 day winning streak, closing Friday up another 3 bps to 1.78%, 2 bps from matching the highest level since May 2019. There will be a real interesting situation if longer term nominal yields start to take catch up. Today they are higher with the 10 yr at .74%, up 2 bps and the 30 yr is at 1.52-.53%, up 2 bps, both at two month highs.
Gold & Silver
Ole Hansen, Head of Commodity Strategy at Saxo Bank: Spot Gold & Spot Silver start the week near a two-week high after Fed Chair Powell said nothing last week to hurt the current bullish narrative. Bloomberg reports that the Ohio Police and Fire Pension Fund have joined Warren Buffett’s recent move into gold. It has approved a 5% allocation to gold to help diversify and to hedge against inflation. The big question remains how many funds will follow over the coming months, thereby potentially creating an additional layer of support. Renewed weakness in real yields and a softer dollar helping to underpin the markets this Monday with the overall range for gold still between $1900/oz and $2015/oz. Silver meanwhile continues to challenge $28 resistance which potentially could see it challenge Gold/Silver (ratio) support at 69.40.
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We Are Headed For A 2nd Global Collapse
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