The Dash to Trash
April 24, 2006
Today we deal with trash. This week's piece is not only regarding the problems with "trash investments" itself but investors' dash towards it! My good friend and fellow writer, James Montier, takes a long look at the market and probes it in search of value. In his article, James walks us through the valuation of different equity classes and the investor sentiment currently surrounding them.
For those who are unacquainted with Mr. Montier, he serves as the Director of Global Strategy at Dresdner Kleinwort Watterstein, a London and Frankfurt based investment bank. He is also a prolific writer and author of the book "Behavioral Finance - Insights into Irrational Minds and Markets."
In his article "The Dash to Trash," James explains how investors have embraced junk and shunned value, causing mispriced valuations with respect to small and large cap equities. Furthermore, he goes on to explore why people not only flock to trash, but why they are willing to pay up for it. Such stocks often lead to little more than volatility and, eventually, poor performance. I hope that you will enjoy this article and maybe, just maybe find some new meaning in the old quote, "One man's trash is another man's treasure."
John Mauldin, Editor
Outside the Box
subscribers@mauldineconomics.com
The Dash to Trash
Investors seem to be displaying signs of pure fearlessness. Perhaps they see themselves as high-wire walkers, bravely showing their skill to the breath-holding crowd. To us they look more like Wile E. Coyote, running in thin air before looking down and realizing they have nothing to support them, and succumbing to the inevitable gravity check.
Our fear and greed index continues to remain at extreme risk-loving…