We agree with our friends at Cornell about the need to deviate from what many of us spend time learning in business school – fundamental analysis. James Mackintosh echoed this view in his column in the FT yesterday. Correlations across sectors and asset classes are very high. When the bulls charge the bears hibernate, as we’ve seen this week. People are investing in binary bets on geopolitical events. That is a complex game. Take Europe – Sure, there is a plan to have a plan, but who will make the plan? The Troika, Merkel or Sha?uble? This is an Organizational Behavior - Financial Economics mishmash case study nightmare.
On the brighter side (or is it?), earnings season is here, and it may be time for some of us to put our fundamental hats on. Now, the bets will be about seemingly manageable events that concern entities with discernable organizational structures, products and financial statements (at least when it comes to non-financials). Some opportunities have crept up over the last few days. Among the companies which have reported Q3 earnings so far, there have been many more positive surprises than negative ones. Take a look:
Correlations among securities, while remaining high, may start reverting back down toward normalcy, and there may be some opportunities to use our expensive education over the next few weeks. Hopefully, we can take some respite from speculating about the final acts of the drama unfolding across the Atlantic.
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