Some good reads for your weekend:
If you missed this post last Monday:
The complementarity is clear, significant and fundamentally sound. The Rule of 20 valuation analysis provides the fundamental risk/reward equation while the 120 Yield Spread adds the momentum input from the economic and monetary trends. With simple, objective readings, investors can manage their equity exposure on the basis of both value and momentum according to their own individual risk profile.
BlackRock Investment produced an excellent report on current investment conditions (click on link to get the 20-page pdf):
The bottom line on valuations: We have picked the low hanging fruit and are now high up on an increasingly shaky ladder, reaching for the remainder. It is an accident waiting to happen—unless we occasionally take a few steps back to make sure the ladder is well balanced.
EM equity valuations are generally cheap, relative to both developed market stocks and their own history. Yet these metrics can be deceptive. Average valuations are dragged down by Chinese banks and Russian stocks. Free cash flow yields have been well below the average earnings yield. This is a key indicator as many EM companies are poor stewards of capital and tend to over-invest. Hopes for more (public) shareholder-friendly policies are often dashed. Bottom line: Company selection is key.
And this infographic from Bloomberg: