Global risk appetite dropped to “panic” levels for the first time since January 2012, according to Credit Suisse’s Global Risk Appetite Index (article published on 10/2/2015).
The index reached panic state around the onset of the 2008 financial crisis, after the Sept. 11, 2001 attacks on the U.S., during the dotcom bubble and after Black Monday in 1987.
That (panic territory) came as investors feared a sharp slowdown in China’s economy and a collapse in commodity prices.
But here’s for the good news: panic equals buying opportunities. The Credit Suisse analysts said panic usually is an overreaction to short-term events, providing a chance to buy risky assets at a cheaper price.
By Sara Sjolin (Marketwatch)
The concept of buying stocks that appear to be undervalued by the market was pioneered almost a century ago by author and professor Benjamin Graham, who lit a torch that’s been carried by the likes of Warren Buffett, Seth Klarman, David Einhorn and many others.
Using indexes of “pure value” and “pure growth” stocks in the S&P 500, the difficulty for value-oriented investors is easy to see this year. The pure growth stocks have returned more than 1 percent including dividends, outperforming value stocks by 9 percentage points.
Seth Klarman’s $28.5 billion Baupost Group it had posted a 1.4 percent loss in the second quarter and was close to flat for the year.
David Einhorn’s Greenlight Capital was down 17 percent in 2015 as of the end of last month
Warren Buffett’s Berkshire Hathaway shares are currently down 13 percent year to date.
Value investors often operate under the mantra of staying true to your thesis and riding out times of hardship like this with confidence that your picks will eventually deliver. But as the losses pile up, it’s looking like it will be a harder and harder mantra for investors in these funds to stomach as the wisdom of the managers is called into question.
By Michael P Regan (Bloomberg)