Dumping Tech - Rotating Into Value - This Time IS Different...

Just looking at this, we can probably come to our conclusion pretty quickly as to why the FTSE is such an underperformer...

Financials, consumer staples and materials are the top three sectors in the index...

Information Technology only makes up 1.37% of the index...

The second lowest sector by market capitalisation.

Ridiculous.

 European Opening Calls:#FTSE 6685 +0.82%#DAX 13989 +0.49%#CAC 5822 +0.68%#AEX 661 +1.13%#MIB 23173 +0.90%#IBEX 8363 +0.91%#OMX 2059 +0.49%#STOXX 3696 +0.71%#IGOpeningCall— IGSquawk (@IGSquawk) March 8, 2021 

Something’s happening to value stocks. They’re recovering.

But the nagging question remains: Is this anything more than noise?

Value endured a poor post-crisis decade followed by an apocalyptically bad two years, which ended in the pandemic.

The period has been punctuated by false dawn after false dawn.

First of all, the recovery so far is real and spectacular. As of Friday’s close, Bloomberg’s measure of pure value return had regained everything it lost during the pandemic selloff.

Looking at the longer term, February was the best month for value compared to growth, among the large-cap stocks of the U.S. Russell 1000, since March of 2001, when the market was still dealing with the impact of the dot-com crash. That has continued into the current month — but boy is there a long way to go before value makes up all the ground it has lost:

The following chart shows the performance of a range of U.S. factors during February, as measured by Andrew Lapthorne of Societe Generale SA:

Low quality — companies with terrible balance sheets — did best last month, as the risk of widespread insolvencies retreated. Value (low price to book) appears only ninth on Lapthorne’s list. Why?

Value factors are not necessarily the winners on an absolute basis here. Yes, relatively they will do well as bond-proxies and growth stocks de-rate, but courtesy of the rally seen so far, many recovery names are no longer cheap, or their earnings are still depressed. So, while the low price to book factor is doing well, stocks with high PE s are also doing well, which is why the Value factor is not performing quite as strongly as you might expect.

 2) makes ACA plans much more affordable, provides $27 billion in rental assistance, improves the left's prospects for winning progressive reforms at the local level by leaving states in better fiscal health than they were pre-pandemic, and cuts poverty in the U.S. by one-third...— Eric Levitz (@EricLevitz) March 6, 2021 

 FUNDSTRAT: “the latest @IHME_UW forecast no longer sees a Wave 4 in March/April ..

.. latest forecast shows daily cases/infections to drop 50% by early April 2021

.. fall to near zero by May 2021

“.. essentially a near obliteration of COVID-19 from the US.” @fundstrat pic.twitter.com/smFOUoPH4f— Carl Quintanilla (@carlquintanilla) March 8, 2021 

 Our daily update is published. States reported 1.2 million tests, 41k cases, 40,212 hospitalized COVID-19 patients, and 839 deaths. This is our final day of data collection after a very long year. pic.twitter.com/fKDkp3iL03— The COVID Tracking Project (@COVID19Tracking) March 8, 2021 

 Expecting an influx of tourists for this weeks UST auctions. Just FYI we don't care about the 3yr it's all about 10s and 30s on Wed, Thurs— Ed Bradford (@Fullcarry) March 7, 2021 

 Thursday would be the worst, unless Fed does something about SLR by that time.— Barton (@Barton_options) March 8, 2021 

The trap, then, is that creators can get hooked on creating these.

Buyers with a sunk cost get hooked on making the prices go up, and with creators and buyers are now hooked in a cycle, with all of us up paying the lifetime of costs associated with an unregulated system that consumes vast amounts of precious energy for no other purpose than to create some scarce digital tokens.

I wrote a book about digital cash twenty years ago.

This is precisely the sort of cool project and economic curiosity that I want to be excited about.

But, alas, I can see the trap and I wanted to speak up with clarity.