I was with a deep-value, deep-discount money manager for a time in Tuscon. This is a guy I've known for ten years. Significant outperformance over the last 20 years. His problem? He can’t find anything to show up on his screens. He is working on developing additional models. The world is upside down.

Andrew Lapthorne over at Soc Gen wrote today:

“Companies with weak balance sheets, as defined using the Merton model, were up 10% on a global basis in September, outperforming the market by 3.5% and outperforming companies with good balance sheets by 5.3%. The performance was wider in the Eurozone and Japan where low quality companies outperformed high quality by 8.9% and 9.9% respectively. Our second quality factor, the Piotroski model, showed similar performance with low quality outperforming as much as 5% in the Eurozone and 18% in Japan!”

It is a very scary place for value investors.