Second-round effects on their way.
Will this be the trigger for non-exporters to relatively outperform?
What is likely to happen is that large money which has moved into the obvious largecap exporters will reconsider their position or move into smaller domestic demand focused names.
The trouble with doing that with a lot of money, though, is that as you move down in liquidity, you need to spread your money over more stocks, and you need to scramble and find out about smaller stocks.
Therefore, if there is any such move, the likely effect will be outperformance of mid-caps which are featured in indexes.
Other interesting stuff today from the FT:
1. “Dr Copper vs the world” – basically saying that stocks are high because of a reach for yield, which is obvious, but once it is featured prominently in a newspaper it is arguably an indication of some kind of final stage, where participants allocate more and more to things which look robust, and they only look robust because of the money that went in before them. The key, I think, is volatility. Once vol goes up, and it will, there will be a reverse cascade. I believe that we are piling ever more grains of sand onto a “steady-looking” sand-pile.
Also, can we stop the “stocks up on economic optimism” headlines, now that even journalists know that the optimism is squarely focused on money printing?
2. Elsewhere, “Tough times for mines in S Africa” – precious metal mines are closing in S Africa because “50% of the industry is loss-making or marginal at the moment” – according to a Senior Exec at the S Africa Chamber of Mines. And, this is even before the upcoming round of wage negotiations which will push up costs further. This kind of news is almost always a strong invitation to look into any sector, and I have been researching precious metal stocks lately – ugly, ugly, ugly – but that ugliness is the reason for bullishness – same reason as why you buy corn when farmers are going bust.
3. Finally, there is a piece on why speaking more than one language is good (The multilingual dividend). It says that it is good to be multilingual because you can empathize with more people and talk to people in another office in your large organization, but companies are not hiring enough multilingual people because the relevant skills are becoming rarer.
I think that, other than giving you the ability to read and/or translate Japanese financials, the ability to know another language adds the most value to stuff which is already high-value. It would be hugely valuable if Mr Obama could speak Japanese and Chinese, and if his counterparts could speak English. Being able to read/translate Japanese financial information is significantly less value-adding, and being a numbered cubicle warrior in a large company makes the language skills worth little if anything.
Speaking in generalities about “hiring more multilingual employees” is like singing to a moose – if you want real benefits in your organization from multilingualism, you need to dig deep into the value you are adding and how closer communication with (or understanding of) your counterparties will help in that.
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