Category Lessons

Has Tesla Lost its Halo?

This weekend I was reading The Art of Thinking Clearly by Rolf Dobelli. The book has a chapter called "The Halo Effect" - and references the company Cisco (CSCO) during the late 90s / early 2000's. It was timely - as it drew parallels to my post comparing the former market darling to Nvidia (NVDA). I demonstrated both technical and fundamental similarities. However, another company came to mind. Tesla (TSLA). For the past few years - TSLA had what Dobelli calls the 'halo effect'. However, is that now wearing off? And what implications does this have?

Lessons from 1999/2000

Momentum is a powerful force. Bet against it at your peril. John Maynard Keynes was believed to have said "...the market can remain irrational longer than you can remain solvent". Sound advice. Those expecting (or worse betting) the market would reverse to start 2024 are probably questioning their decision. It's been one record close after another. Higher highs beget higher highs.

Will Earnings Deliver on the Hype?

Q4 2023 earnings are starting to hit the tape. From mine, if the market is to continue rallying - it's less about inflation and the Fed - it's whether corporate America will deliver on 12% earnings growth in 2024. Coming into earning's season - my view 12% felt ambitious - given the slowing economy and relative health of the consumer. This post talks more to the concentration in the market - the relative influence from NVDA - and why diversification will be key this year.

Equal Weight ETF to see Mean Reversion

The euphoria in markets continued last week - with the S&P 500 notching a new record high - taking out the 4817 high from Jan 2022. Thanks largely to the Fed signaling peak rates in combination with inflation trending lower - markets now believe a 'soft landing' is possible. That is, inflation ultimately trends back to the Fed's objective (2.0%) without any negative impact to the broader economy (e.g. widespread job losses). We will see how that turns out - as the Fed is attempting to thread a narrow needle. From mine, a soft landing remains a lower probability outcome. However, I believe there is still opportunity... and it's not with large cap tech stock.

Jobs Data: Choose Your Narrative

Today we learned that December added 216K jobs. CNN reported it as a "red hot" print. Was it? From mine, the headline number offers us very little. For example, what I want to know is the following (a) where are the jobs are being added (e.g. public vs private sector and what sectors); (b) what are people being paid per hour (is it rising or falling?); (c) are people working longer hours (as part time work doesn't pay a mortgage); and finally (d) what's the prevailing trend (as one month's data doesn't account for much). The headline number doesn't provide this detail - therefore we need to dig a little. My quick take - this report is weaker than what the headline suggests.

89 Books to Make You Smarter

"In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time—none" - Charlie Munger. This post includes a collection of 89 books I've read which will make you smarter (and a better investor). Old Charlie also told us ".. if it’s wisdom you're after, you are going to spend a lot of time sitting on your ass and reading". Amen to that.

2023 – The Year in Review

2023 has come to a close... and what a year it was. For many, it will go down as one of the more challenging. For others, they will have banked some very attractive gains. In short, the S&P 500 recovered from its worst year in over a decade - finishing the year 24.2% higher. As for myself, my portfolio returned 19.63%. I made some errors this year (which I will discuss) but also had a couple of wins. Net-net - it was a solid year given the unchartered waters we were navigating.

Many Lessons in One Great Chart

This post looks at one of the most compelling / informative long term charts I've come across. For example, it shows relative PE ratios, interest rates, bond yields, bull and bear markets along with performance. For me, not only does it reinforce the power of time with asset speculation - it also highlights the opportune windows when to add risk (and when not to). The latter is far more important.

A Rational Response or Pavlov’s Dog?

Market consensus is for a soft-landing with at least three rate cuts next year. The market does not expect a recession.This may prove correct (I don't pretend to know) - but there are some chinks in the armor. Readers will know I don't subscribe to a soft-landing. Typically in the lead up to a recession - spectators will generally lean towards it being "soft". Few ever forecast 'hard landings'. For example, if you have unemployment below 4% and positive GDP growth - it's hard to see anything else. But very rarely do things land softly. We've seen one over the past five decades. That's not a high ratio. What's more, soft landings are exceptionally rare after 550 basis points of rate hikes (not to mention over $1 Trillion in quantitative tightening - of which we have no parallel).

Cautious… But Invested

It's a brave person who is short the market. Probabilities suggest we are headed higher in the near-term. For example, previous episodes of Fed pausing suggests stocks typically gain. My sentiment today is best described as 'cautious... but invested'. To that end, one should always be invested to some extent. And whilst it's always unwise to be completely remiss of the risks -- it would be an even greater mistake not to have some exposure to higher quality risk assets and fixed income (at current yields)