I am very critical of chear-squad investors. So perhaps I should...

I am very critical of chear-squad investors. So perhaps I should ask myself whether or not, when it comes to PTM, I have become one.

However, from my perspective, it seems that there are currently a number of factors, that are currently acting in concert, and that are feeding of each other. I think it's the sort of thing Munger would call a lollapalooza effect.

These factors are, in no particular order:

• World entering a new tech paradigm (this time is different).
• Markets getting nervous about length of bull market and heights being reached (multiples).
• Low interest rates also feeding heights.
• Enthusiasm for the 1st item drawing capital from elsewhere, to "tech".
• Fear over 2nd item drawing capital from cyclicals/stodgy/challenged/etc to quality with good growth prospects (eg ARB, REH, CSL, COH etc).
• So, fear and greed leading to value under performing.
• Consequence: active managers, especially with a value bent, under performing.
• Feeding current narrative (generally well founded) that active management is of little value.
• The best active managers, with the stomach to stay true, under performing even more.
• The above dynamics feeding the rise of passive investment alternatives.
• The rise of passives further moving capital to those sectors with current momentum and further feeding all of the above.

This looks like a powerful dynamic to me. It however must unwind at some point. The unwinding would have to be equally powerful, I would think.


And I just find it hard to disagree with some of the commentary coming out of PTM. See for example, the following from the June monthly update, wrt The International Fund:

As highlighted on our recent roadshow and in our 19 June market update, the market is increasingly bifurcated with investors paying up for “perceived safety” or “secular growth” whilst shunning businesses with any economic sensitivity. This crowding is reminiscent of the technology bubble of 1999/2000 which is the only example in living memory of such extreme divergence. Platinum’s approach of “avoiding the crowd” is being tested to the extent that stocks which are expensive are becoming more so, and those which are cheap, are becoming cheaper. This is a great set-up when looking forward, but feels very uncomfortable whilst it unfolds. That the portfolio, which is full of leading companies in their fields, has an average earning yield of 9% and suggestive of crisis-type valuations, is very encouraging for us. Further to this is the ability to short sell where the excesses are particularly apparent, and this includes the technology-heavy Nasdaq Index, along with individual companies.More detail on the portfolio is