Paul Krugman on Substack
The Economic Excuse Industry is Booming

There is a line of thinking that the current small-caps (SCs) are different from those of the past.
Many companies are remaining private for much longer - several are unicorns. Money from private-equity and venture-capital is easy. There are few public reporting obligations. What's not to like?
Many mutual fund firms (Fido, etc) are also able to tap into the private-equity market.
Private companies have another problem - some are just too big for 100% public IPOs, so those few that do the IPOs do it for only 10-20%, and then their insiders wait to unload the rest later gradually (if they can).
At the same time, good SCs that grew graduated into MCs/LCs.
So, what remains is a bad SC bunch with some 35-40% of R2000 operating at loss. The OP chart is for better SP SC 600.
Many SCs cannot access the bond market, so they rely on bank-loans.
SCs may have become like a dwindling pond without refreshing supply.
30-yr charts don't capture this shift.
Repeated failed SC rallies have only frustrated the investors.
While I have a small position in SCs, I hesitate to load up the truck because this time may be different (for SCs). Total market etf VTI is 72% LC, 20% MC, 8% SC. The global total market etf VT is even more lopsided with 74% LC, 19% MC, 6% SC (so, the LC tilt isn't just a US issue, but a global issue).

It is to see negative correlation between bonds to stocks at work today. Investment grade bonds did well. Short tern junk bonds lost a bit.
The 10 years treasury fell 10 bps.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202503
Future market for tomorrow is down again.
https://finviz.com/futures.ashx

In addition to Brandes International SC (BISAX), mentioned above, BIEAX (Brandes International Value) has clocked 18.23% for 3 years and 13.78% for 5 years. Since 2023, the clone of BIEAX, BINV, has pretty much matched its performance. I'm hoping the time-worn predictions about the return of SCs and international stocks may yet bear fruit.
FWIIW, I have committed money to Brandes, but they have yet to invite me to La Jolla for coffee. At least Disciplined Growth Investors sent me a spiffy box of candies, a welcome display of Midwestern niceness.

https://finviz.com/groups.ashx
The 1 month performance of Consumer Cyclicals - 13.56% is the only sector worse off than Tech -12%. Communication svcs are down -9.76%.
Consumer Defensive and Real Estate are both essentially flat, Utilities and Energy down less than -3%.
Tech led this bull market, and tech is taking a hit. The rest of the market is muted, for now.

For SP500, the break below 200-dMA was UGLY today.
Nasdaq Comp, R2000 and DJ Transports were already below 200-dMA.
Only DJIA remains at 200-dMA - it may follow others this week.
% stocks above 50-dMA remain negative (comparing with Friday).
$NYA50R, NYSE %Above 50-dMA 34.91% (negative)
$SPXA50R, SP500 %Above 50-dMA 43.20% (negative)

There was a good bounce at the index level in the last hour, akin to prior washout days but at individual stock level I did not notice desperation during the day. So, is today a short term bottom? What would make the retail crowd comfortable not to keep bailing until the 18th?

The cancellation of Tariff Theater?
Elon Musk retiring from government service to tend to his sinking car company and exploding rockets?

Temptations: "Ball Of Confusion."

https://youtu.be/D5P7x4vh_ts
just providing a cleaner link. Easy for me to do on my computer (not so easy on my phone.)

The Temps were so great and talented. They had it all! I much prefer their earlier Motown soul sound over their 70s disco sound.

For SP500, the break below 200-dMA was UGLY today.
Nasdaq Comp, R2000 and DJ Transports were already below 200-dMA.
Only DJIA remains at 200-dMA - it may follow others this week.
% stocks above 50-dMA remain negative (comparing with Friday).
$NYA50R, NYSE %Above 50-dMA 34.91% (negative)
$SPXA50R, SP500 %Above 50-dMA 43.20% (negative)

There was a good bounce at the index level in the last hour, akin to prior washout days but at individual stock level I did not notice widespread desperation during the day. So, is today a short term bottom? What would make the retail crowd comfortable not to keep bailing until the 18th?

Temptations: "Ball Of Confusion."

https://youtu.be/D5P7x4vh_ts
just providing a cleaner link. Easy for me to do on my computer (not so easy on my phone.)

For SP500, the break below 200-dMA was UGLY today.
Nasdaq Comp, R2000 and DJ Transports were already below 200-dMA.
Only DJIA remains at 200-dMA - it may follow others this week.
% stocks above 50-dMA remain negative (comparing with Friday).
$NYA50R, NYSE %Above 50-dMA 34.91% (negative)
$SPXA50R, SP500 %Above 50-dMA 43.20% (negative)

Temptations: "Ball Of Confusion."

A bit of perspective on valuations also from the WSJ - By Spencer Jakab, Markets A.M. newsletter.
"Wouldn’t it be great if there were some way to quantify exuberance? At market extremes there can be. Speaking in 2002, Sun Microsystems CEO Scott McNealy was brutally honest about how dumb it was for investors to buy his company’s stock at the peak:
Two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?
And Sun was cheap compared with Cisco Systems, which fetched as much as 38 times sales and briefly became the world’s most valuable company. There have been many comparisons with Nvidia, which recently won and lost that crown. The AI chipmaker fetched as much as 56 times sales last year. In January it lost more market value in one day than Cisco was worth at its peak.
McNealy’s take is forehead-slappingly obvious in hindsight, but don’t buy or sell stocks on that measure alone. Outside of semiconductors, a sector inflated by Nvidia, one of the highest sales multiples back in January could be found in out-of-favor biotechnology companies. Many have little to no revenue but lots of promise.
At the other end of the spectrum are food retailers, which typically trade around one-third times sales. As much as people complain about grocery prices, supermarkets earn paltry profit margins.
A company that’s very profitable like Nvidia can still look reasonable on a price-to-earnings multiple. “Look” is the key word since it’s been in business for decades and its operating margin has quadrupled recently—a hard thing to sustain, as Cisco and Sun both learned.
Even simpler numbers might have given us pause. Two months ago Nvidia was worth as much as the entire German and French stock markets combined and twice as much as all U.S. energy stocks.
What were we thinking?"

Following are excerpts from a current report in The Wall Street Journal:

A new round of recession fears rattled markets Monday, sending the Dow Jones Industrial Average down more than 1000 points and eroding Wall Street consensus that U.S. stocks would be among this year’s biggest winners.
Many investors had anticipated that American exceptionalism—the perceived advantages the U.S. has over other countries, such as its economic strength and technological innovations—would help drive another year of robust stock gains.
But worries about a trade war, signs of flagging growth and splinters in the artificial-intelligence trade have taken some of the shine off that optimism. President Trump over the weekend refused to rule out a recession this year, setting off a fresh wave of declines in U.S. stocks. The S&P 500 fell 3%, while tech-heavy Nasdaq Composite lost more than 4.5%. Bank stocks slid, along with shares of smaller companies perceived to be sensitive to the economy. Bonds rallied.
The S&P 500 fell 3.1% last week, wiping out its postelection gains and pushing it into the red for 2025, a rare stint of underperformance versus many global peers. The Nasdaq Composite entered correction territory, a drop of 10% or more from its recent high.

Good one @Mark. BTW - TSLA off 15% today and down 55% since mid-December. Breaks my heart.
Wonder if they’re giving them away free yet? :)

Added a bit across-the-board to my 7 CEF collection (in equal amounts). That took cash from 12.5% down to 12.0% Interestingly, utilities and some real estate funds are up today.

https://www.sec.gov/Archives/edgar/data/1318342/000139834425005240/fp0092563-1_497.htm
497 1 fp0092563-1_497.htm
West Loop Realty Fund
Class A Shares (Ticker Symbol: REIAX)
Class C Shares (Ticker Symbol: REICX)
Class T Shares (Ticker Symbol: REIDX)
Institutional Class Shares (Ticker Symbol: REIIX)
A series of Investment Managers Series Trust (the “Trust”)
Supplement dated March 10, 2025 to the currently effective
Summary Prospectus, Prospectus and Statement of Additional Information.
The Board of Trustees of the Trust has approved a Plan of Liquidation for the West Loop Realty Fund (the “Fund”). The Plan of Liquidation authorizes the termination, liquidation and dissolution of the Fund. In order to perform such liquidation, effective immediately, the Fund is closed to all new investment.
The Fund will be liquidated on or about April 18, 2025 (the “Liquidation Date”), and shareholders may redeem their shares until the Liquidation Date. On or promptly after the Liquidation Date, the Fund will make a liquidating distribution to its remaining shareholders equal to each shareholder’s proportionate interest in the net assets of the Fund, in complete redemption and cancellation of the Fund’s shares held by the shareholder, and the Fund will be dissolved. Any liquidation proceeds paid to a shareholder should generally be treated as received in exchange for shares and will therefore generally give rise to a capital gain or loss depending on the shareholder’s tax basis. Shareholders (including but not limited to shareholders holding shares through tax-deferred accounts) should contact their tax advisers to discuss the income tax consequences of the liquidation. Under certain circumstances, liquidation proceeds may be subject to withholding taxes.
In anticipation of the liquidation of the Fund, Chilton Capital Management LLC, the Fund’s sub-advisor, may manage the Fund in a manner intended to facilitate its orderly liquidation, such as by raising cash or making investments in other highly liquid assets. As a result, during this time, all or a portion of the Fund may not be invested in a manner consistent with its stated investment strategies, which may prevent the Fund from achieving its investment objective.
Please contact the Fund at 1-800-207-7108 if you have any questions or need assistance.
Please file this Supplement with your records.

In the March issue I'd mentioned the wisdom of diversifying about from domestic large growth. (Down 4.4% in the first four hours of the day, March 10 with all of the growth categories down 10+ percentage in three months.) Leuthold shared two bits of information today. First, they had decreased and are continuing to decrease their equity exposure. As of this morning (3/10), it hovers around 50% in their tactical portfolios. And (2) since the data since 1995, valuations for small caps at this level correlate with 14% annual returns over the next five years.
Quick screen for global and US small caps, ex-growth. Year-to-date, the winners have been Cambria Global Value ETF (up 17%), Brandes ISC (up 13.8%), Oakmark ISC (up 13%), Kopernik Global All-Cap (up 12.7%) and Dimensional International SCV ETF (up 12%). The best purely domestic SC funds are Aegis Value (up 5.3% and Longleaf SC (up 3.8%).

How can you invest intelligently when this is what you are dealing with. (From Josh Moon on Reddit.)
"Attention: We will be having tariffs. Not this week though. We are having tariffs next week. But not on trucks. And also you'll need to answer five questions at your federal job. Except for some of you. Actually, none of you have to answer. And the tariffs are back on starting tomorrow, no take-backs. The tarrifs are canceled for one month. You all have to answer the five questions. Well maybe not all. Also we're going to sell 500 pieces of property like for real. We're not sure about 500, maybe only 350. Forget it, we can't decide about the properties. The tariffs are coming back. Have you answered the five questions? You don't have to. Would you like to buy some properties? Also if you've been fired and know anything about landing planes or diseases, you need to come back. Additionally, if you have thoughts on how to lower egg prices or inflation, please just put them as the five answers. Or don't. Hope this clears things up."
Sincerely,
Your Co-Predident

Through February (seems like years ago), a look at regional ETFs:


Will add new unique Display period to MFOP and coin it: Trump 2.0. Will start November 2024. End current month or until there is a new president.

The BB article speculated on what the bond market might be saying about the economy. That’s all as far as I can see. As far as making investment changes due to some macro call like this, I would not do it. But I’m not a momentum investor.
Wouldn’t a recession’s impact on investments depend on how deep it was? How long it lasted? And also vary by country and region? Severity would likely be impacted by the response of central banks and fiscal policymakers. Some equities might rise during a recession. High quality bonds should outperform. And based on history, stock markets begin recovering several months before a recession technically ends.
I’d never buy or sell anything based on premonition of immediate recession. Do have a little extra dry powder and would keep an eye out for potential bargains should the economy cool off. Sometimes in severe downturns (like ‘08) I have slowly rotated from more conservative funds into more aggressive. But that’s a tactic reserved only for the darkest hours. You can’t anticipate something like that in advance.
From today’s WSJ:
”A new trading week has done little to calm investors’ nerves. Stock futures and Treasury yields are both falling. President Trump over the weekend refused to rule out the U.S. economy entering a recession this year, telling Fox News there will be a “period of transition because what we’re doing is very big.” Trump’s TV appearance followed a turbulent week in markets, with concerns growing about how the administration's unpredictable tariff policies could affect U.S. growth. The S&P 500 finished Friday with a 3.1% weekly drop, its biggest such decline in six months.”