From budding trends to mature industries, Novem Group works hard to stay abreast of developing news.

Here’s what caught our eyes this week:

Bill Miller’s 2Q Letter

A legendary investor who has shown an ability to own different types of investments. Value, growth, turn-arounds, secular winners, bitcoin… the list goes on.

  • Many investors are holding cash on the sidelines or waiting to buy a dip… Miller remains fully invested.

The tough part of calling bubbles…“What is a bit curious about the bears predicting an “epic market crash” is that we had one only 15 months ago.”

  • “there is nothing inconsistent about expecting further big gains in asset prices that are already fundamentally overvalued.” -Anatole Kaletsky

Perhaps inflation won’t be that bad?

  • Inflation of ~5% in 2021 is already well-discounted. Prices will have to continue rising at these rates in order to overshoot the Federal Reserve’s 2% target.

Irrational Investor Expectations

  • One of the hardest things in our industry is managing investor expectations.

“A recent study by Natixis Investment Managers found that US investors think they can earn 17.5% above inflation per year for the next 10 years.”

  • Wow. I’ll take the under.

George Soros: Remarks delivered at the Festival of Economics

Soros views bubbles through the lens of Reflexivity.

Economics is a social science, not a hard science. The decisions of individuals (who are biased, flawed, and possess limited knowledge).

Reflexivity is the feedback loop between participant’s views and reality. “reality is not something independently given; it is contingent on the participants’ views and decision.”


  • “bubbles are not a purely psychological phenomenon. They have two components: a trend that prevails in reality and a misinterpretation of that trend. A bubble can develop when the feedback is initially positive in the sense that both the trend and its biased interpretation are mutually reinforced.”
  • With stocks, I think this fly-wheel effect is pushed further. Investors bid up a stock, which creates more momentum, attracts more investors, etc. But a high stock price is an asset for a company too and can improve the underlying fundamentals. I can think of two separate instances where I saw this happen:
    1. Most recently, AMC Entertainment Holdings (AMC) took advantage of its “meme stock” status and raised capital, thus shoring up the balance sheet.
    2. To the downside, in early 2016, oil and gas E&P share prices were in free-fall. Shorts were pushing so hard that in some cases companies were busting covenants on their loans that required them to maintain a certain leverage ratios. As shares plummeted and equity shrank, debt accounted for more and more of the companies’ capital structure, making the picture appear worse than it actually was.

At the time of his speech – the EU was facing a major banking crisis that threatened to pull the world in to a “double-dip” recession after the global financial crisis. As we now know, the political bubble of the European Union did not pop

Unemployment and Labor Force Participation

With the economy roaring back to life, generous unemployment insurance (UI) packages are now coming under scrutiny. The idea is that unemployment benefits are so generous that they are keeping many people from finding gainful employment. This is contributing to a labor shortage which is constraining many small businesses, especially with seasonal businesses in full swing.

From JP Morgan Guide to the Markets: there are now over 9 million open jobs.

JOLTS Job Openings

Currently about 14 mil adults are receiving unemployment benefits.

This survey by Morning Consult is the first piece I’ve come across that has taken a swing in attempting to quantify the issue.

Morning Consult, a well-regarded polling and intelligence company, did a survey of 5,000 US adults.

  • “Only 20% of UI recipients who previously worked full time and 28% of workers who previously worked part-time indicated the money they receive from unemployment benefits does a better job of covering their basic expenses than the income they earned from working prior to receiving unemployment benefits.”
    • This suggests that most UI recipients would be better off working rather than on UI.
  • “Unemployment insurance benefits reduced the number of accepted job offers by an estimated 1.84 million over the course of the pandemic”
    • Adding 1.84 million workers would help, but is no panacea for +9 million open jobs

This also lines up with Fed data.

  • Civilian Labor force is currently ~161 million people. The participation rate has dropped from 63% pre-pandemic to ~61.75% currently. This implies about 2 million fewer people are working which lines up pretty well with Morning Consult’s estimate of 1.8 million workers dropping out due to generous UI benefits.
  • But again, US businesses need +9 million workers! Ending UI and getting people back into the labor force is not a finish line.
  • Expect a tight labor market to continue!

FRED Labor Force Participation Rate

Michael McIntyre and the production of ordering wine at a restaurant

One of my favorite comedians… enjoy

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