Become a Better Investor Newsletter – 11 February 2023
Noteworthy this week
- US credit card debt reaches new heights
- Analysts are forecasting earnings contraction
- Masa Son is the undisputed master of tech bubbles
- Hedge funds perform terribly; still, people buy them
- One ton of ore generates max 10kg of copper
US credit card debt reaches new heights: Credit card debt is getting close to US$1trn in the US. It’s worth noting that it’s accelerating. Still, the credit card debt is below the 2010-2020 averages relative to GDP and total household assets.
U.S. credit card debt reached a new high of $930 billion. I see this stat popping up on my feed a lot lately.
A short thread. pic.twitter.com/iralGtZDfV
— Lyn Alden (@LynAldenContact) February 8, 2023
Analysts are forecasting earnings contraction: Analysts are generally overly optimistic and seldom forecast negative earnings growth on an aggregate level. Typical exceptions are when the earning growth has actually turned negative, and analysts tend to become overly pessimistic. We’re likely to see further earnings downgrades.
Earnings slide? The 2023 growth estimate has now flipped into negative territory (-1.1%). This will likely get worse before it gets better. Typically, the estimate comes down by around 800 bps during the year, so that implies earnings growth of around -5% for 2023. pic.twitter.com/YRRO9xAWPJ
— Jurrien Timmer (@TimmerFidelity) February 7, 2023
Masa Son is the undisputed master of tech bubbles: Took US$1bn to US$66bn and then down to a loss of US$7bn. Ouch! He lost it all in the dotcom bubble as well.
This is the cumulative performance of Softbank’s Vision fund since 2017.
It’s also one of the best examples of the double-edged sword (risk) in investing.
What creates also destroys. pic.twitter.com/8raBVGhwN8
— Nick Maggiulli (@dollarsanddata) February 7, 2023
Hedge funds perform terribly; still, people buy them: Interestingly, the assets managed by hedge funds have increased massively over the past 30 years, even as their performance has been terrible. Read the article here.
IMO the greatest anomaly in finance is despite horrific performance hedge fund assets have grown about 15x over past 30 years. Why do investors keep destroying wealth? Can it be just a desire to be a “member of the club?” https://t.co/BhfbTgFezB
— Larry Swedroe (@larryswedroe) February 6, 2023
One ton of ore generates max 10kg of copper: Another educational thread on the dirty business of the green transition. Click on the image below and read the thread.
This 1 ton rock contains between 0.6 and 1 per cent of copper. One ton of ore generates a maximum 6 to 10 kilograms of copper. Depending on the size of battery, an electric bus can use between 224 and 369 kg of copper. How do we get the copper out of the rock? Mining 🧵 pic.twitter.com/E3DVD77EIM
— John Lee Pettimore (@JohnLeePettim13) February 7, 2023
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Weekly market performance
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Chart of the week
Discussed in the Become a Better Investor Community this week
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Podcasts we listened to this week
Library of Mistakes – Ep 13: Capital Wars – The Rise Of Global Liquidity (with Michael Howell)
“Michael Howell, legendary market strategist, author and founder of CrossBorder Capital, joins our Keeper Russell Napier to discuss global liquidity. Join us for a thought-provoking episode that seasoned investors and knowledgable market observers will enjoy getting their teeth stuck into.”
Readings this week
Mitigating Risks with Factor Strategies by Larry Swedroe
“The year 2022 was a difficult one for investors in traditional 60/40 portfolios, as equities all around the globe and bonds produced double-digit losses, a very rare event. Can factor strategies mitigate risk? That performance has heightened interest in the diversification benefits of factor-based strategies.”
Book recommendation
The Education of a Value Investor by Guy Spier
“What happens when a young Wall Street investment banker spends a small fortune to have lunch with Warren Buffett? He becomes a real value investor.
In this fascinating inside story, Guy Spier details his career from Harvard MBA to hedge fund manager.”
Get the book on Audible or Kindle.
Audible is great; have you tried it? If not, click here to get 2 books for free.
Memes of the week
After meeting with my anti-capitalist financial planner, I see an atheist priest and buy steak from the vegan butcher pic.twitter.com/48chX8UnRe
— John W. Rich (Fake Tech Exec) (@Cokedupoptions) February 6, 2023
BREAKING: The Fed introduces new $1 dollar bill pic.twitter.com/DNqC9HEmUY
— Not Jerome Powell (@alifarhat79) January 31, 2023
New My Worst Investment Ever episodes
ISMS 4: Bond Yields Are Showing the Fed Has Won Its Battle Against Inflation
Unlike EMs, DMs benefited from nearly free money.
The market believes US ST rates rise has quelled inflation.
What do you think: Has the Fed succeeded at quelling inflation or not?
Download the PDF with all charts and graphs
Access the episode’s show notes and resources
Published on Become a Better Investor this week
In our latest Deming in Education podcast, Andrew and David talk about a controversial subject: cellphones in classrooms. Should teachers have them? Students? Should they be banned? Or is there another way?
Listen to Cellphones in the Classroom: Deming in Education with David P. Langford (Part 15)
Central bankers appear to be raising rates into a recession to stifle inflation; stagflation would be the worst outcome. Demand for necessities (food and energy), inflation, and supply-chain disruptions can drive commodities higher. We see opportunities to allocate to specific sectors and markets within equity. Bonds and gold to protect capital.
Read A. Stotz All Weather Strategies – January 2023
Chart of the Day: Asian markets were down in 2022 except for Thailand, Indonesia, and India in local currencies. Thailand was the strongest performer in USD terms, and Indonesia was the only other market with positive USD return.
Read Thailand Was the Best Performer in Asia in 2022
Shoei Company Limited (7839 JP): Profitable Growth rank of 1 was up compared to the prior period’s 4th rank. This is World Class performance compared to 1,000 medium Cons. Disc. companies worldwide.
Read Shoei – World Class Benchmarking
WHA Corporation Public Company Limited (WHA TB): Profitable Growth rank of 5 was up compared to the prior period’s 6th rank. This is average performance compared to 370 medium Real Estate companies worldwide.
Read WHA Corporation – World Class Benchmarking
DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.