Book reviews

Book mentions for The Best Investment Writing vol 2.

Evaluations not justified by low interest rates – In “The Best Investment Writing – Volume 2”, published by Harriman House, Kevin Smith, Otavio Costa and Nils Jenson of Crescat Capital compared the values of the CAPE on the US stock calculated by Shiller with the level of interest rates, concluding that US equity should correct by about 50% to return to near historical valuations, against the current level of 10-year Treasury rates. The extent of the correction remains similar if the analysis is performed by replacing the CPI inflation with the TreThe fiction of deleveraging – There is a consensus that one of the main components of the 2008 financial crisis was due to the excessive level of indebtedness, however the data referring to the US market show that the overall leverage has increased further and is positioned at historic highs . The economic cycles are driven by credit, as can be deduced from the correlation between leverage and the S & P 500 index. It is easy to hypothesise that this correlation will be unchanged in the future and that, based on the new highs achieved, the credit cycle can be reversed, with repercussions. negative for the main asset classes.asury yield.

The market does not compensate for risks – A study published by the US investment bank Piper Jaffray further clarifies how debt growth ends with periods of recession and highlights the correlation between the spread of high yield bonds and the overall debt level of non-financial companies has failed in correspondence with the expansive maneuvers of central banks. The current spread, equal to about 4%, was present between 2005 and 2007 with a level of debt on GDP of 39%, while today the indebtedness is more than 45%. This despite the weight of high-yield bonds has risen from around 15% in 2003 to the current 30% of the global bond market and high-yield issues account for almost 45% of new placements, compared to 12% – 15% of previous speculative cycles of 2000 and 2007, as recalled by Maurizio Novelli, Portfolio Manager of the Lemanik Global Strategy Fund. Even the equity sector is not adequately remunerating the risk. Based on the performance of the S & P 500 index between 1937 and 2017, with the price / earning ratio of around 21, at 10 years yields would be well below the historical