Bulls Versus Bears

Bulls Versus Bears

Update: 2022-05-13
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On today’s show we’re talking about market valuation and the narrative that investors attach to prices. The daily headlines are about the latest stock market bloodbath.


We hear terms like bullish and bearish. Some people I know have earned the nickname perma-bear to somehow denote that they are biased towards pessimism.


The first part of this year has resulted in a tremendous amount of paper wealth destruction in the stock market and in the crypto currency market.


I simply don’t buy into the notion of bullish or bearish as a label that I would attach to myself.


Think about it this way. Imagine if you had a one ounce gold coin. If you wanted to trade that gold coin for two half ounce gold coins, that would be a fair trade. If you traded that one ounce gold coin for five 0.25 ounce gold coins you would be turning a profit of a 0.25 ounce of gold. In that trading scenario the frame of reference is ounces of gold and you either trade for a profitable amount of gold, a neutral amount of gold, or a losing amount of gold. It’s simple math. 1+1=2. 5-4=1. These are all within the grasp of any second grade student who understands addition and subtraction.


In today’s market, I’m seeing many cases where a single family home is selling for a substantial premium over what it costs to construct a replacement of that home. That valuation doesn’t make sense to me.


I want to see valuations grounded in tangible hard math that is grounded in a rationale. That rationale should be based exclusively on what the last trade price was. Too many markets are relying on the last trade price as the benchmark and for that reason we see words like bubbles being thrown around.


Does that make me a bull or a bear? I think neither narrative applies. I’m just pushing for a simpler time when value could be tied back to something tangible, rather than an arbitrary story.

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Bulls Versus Bears

Bulls Versus Bears

Victor Menasce