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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (44867)	10/7/2011 3:38:23 PM
From: Spekulatius	Respond to of 78644

>>There is certainly more than the correlation between the dollar affecting commodity prices, as I am sure you know.<< I a fear driven environment (like Oct 2008 and to a less extend August 20110 various asset classes become much more correlated or anti-correlation. Yen up AUD down is a classical correlation. Basic material and energy prices become correlated with currencies like AUD, stocks become correlated around the world in different market and to energy prices like crude. That is why some say that value investing does not work in a fear driven environment and for the most part they are correct, imo. However even in a bear market, when stock prices go down overall but in a more controlled manner, dispersion sets in and stocks become less correlated, since investors weigh the individual fundamentals that become clearer (even though they often become worse too). Then value investing starts to work again. It works even better when the market turns it it become really clear what is temporarily impaired and who has permanently been impacted. The financials post Y2009 are a good example as permanent impaired stocks like BAC, C HIG never even came close to their pre-crises levels while many industrials were reaching Y2007 or at least came close. I expect the same to happen now but at this point it's hard to determine the permanent impaired business.