It shows how various financial assets (down the rows) react to the changing economic cycle (columns) as measured by the ISM Manufacturing Composite Index.
It covers the period 1995 – 2019.
Right now we are above 50 on the ISM index (59.9) but trending down.
Interesting take on Shiller’s cyclically adjusted price earnings ratio (CAPE).
The analysis argues that one should be using today’s tax rate and adjusting for buybacks.
This leads to a CAPE 2.0 of 28x – far below the current CAPE of 38x and nowhere near the Dotcom peak.
This is the “basic” version and for those interested there is a more advanced (and more controversial) version that results in “the last 20 years go from being an expensive aberration to a typical investment period“.
Mergers and acquisitions (M&A) activity has spiked to 12% of market cap in the UK, double the global average.
This is driven by cheapness of UK listed firms, stabilisation post Brexit, and record private equity dry powder.
Interestingly this spike is driven by a larger number of deals (25) when compared to the previous spike in 2015 (where mega deals for SAB Miller and BG Group dominated).
It is well documented that the Warren Buffett indicator, which measures equity market cap as a ratio of GDP, is at an all time high, surpassing the dotcom boom.
It is less well documented that the ratio of profits to GDP is also strong and has been trending up.
Who reaps the majority of the rewards from venture backed companies – VC or public markets?
“Over the last decade when measured in terms of total dollars of value creation accruing to pre- and post-IPO investors: post-IPO investor gains have often been substantial.“
Of the 165 IPOs analysed – the vast majority had a large share of value accrue to public markets (blue region).
There are some exceptions (red region), and some shared (yellow region).
