Alec Hogg shares his rational perspective on Tesla, Buffett’s surprise move into gold and touches on his discussion with investment fundi Piet Viljoen. – Jarryd Neves
By Alec Hogg
Among the advantages of a lengthy career in a single sector is historical context. For me, that has meant a front row seat to the 1980 gold boom, the great market bubbles and crashes of 1987 and 1997/1998; the Nasdaq meltdown of 2000 and, of course, the Global Financial Crisis of 2008/9. With plenty of smaller tidal waves in between.
___STEADY_PAYWALL___
These experiences have given me a rather crude tool of monitoring retail investor behaviour to project the market’s likely future. When unit trusts were the only game in town it was easier. Their in- and outflows were an excellent barometer. Simply apply the law of negative correlation and follow the smart money out when the dumb money came in. Because through the ages, when small guys start buying, professionals leave.
Read also: Why Tesla, a once-popular short, powered up stock exchange – Wall Street Journal
After low cost ETFs creamed their more expensive predecessors, the unit trust indicator disappeared. So now we need look more broadly. I do this by following retail buying behaviour in their most loved stocks. Right now what that shows is cause for alarm bells to ring in the US stock market. On the other hand, the long and badly neglected JSE counters offers a contrarian’s equivalent of the rare dripping roast.
On the Rational Radio webinar yesterday, veteran money manager Piet Viljoen articulated this far better than I’m doing here. He offered JSE-listed Bowler Metcalf as an example – its share price is half covered by cash reserves, with a single year’s normalised profit equivalent of the other half. Across the Atlantic, last night retail favourite Tesla surged another 11% while Warren Buffett’s endorsement sent Barrick up 12% at one point. Clear signs for those paying attention.
Read also: Buffett buys gold; places bet on SA mining heavyweight Bristow – Wall Street Journal
