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Become a Better Investor Newsletter – 15 July 2023

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Noteworthy this week

  • US inflation is down to 3%
  • The final leg of inflation is harder to break
  • More people fail to pay credit card bills
  • US mortgage rate reaches new highs
  • Tech PEG at Dotcom levels

US inflation is down to 3%: The June 2023 CPI in the US came in at 3.0%. Energy prices are a big reason for the lower inflation.

The final leg of inflation is harder to break: From 9% to 3% went relatively quickly, but the question is when inflation will be back around the 2% target. BofA thinks we’ll see inflation accelerate again.

More people fail to pay credit card bills: The proportion of overdue credit card bills has risen to levels that haven’t been seen since the GFC.

US mortgage rate reaches new highs: The 30-year mortgage rate has risen to 7% from 3% in just 1.5 years. This is going to hit house prices and real estate activity.

Tech PEG at Dotcom levels: PEG considers the PE relative to the EPS growth. A notable difference is that Tech companies were hardly making profits in the Dotcom era; hence, it was easier to have high EPS growth. That also explains why the PE is not at the same level as during the Dotcom bubble.

Poll of the week

80% of respondents think a company should declare in its by-laws if it follows stakeholder capitalism instead of shareholder capitalism.

Join the world’s toughest valuation training

Become a Valuation Expert. Valuation Master Class Boot Camp graduates can confidently value any company in the world and possess in-demand industry skills.

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Weekly market performance

Click here to see more markets and periods.

Chart of the week

Discussed in the Become a Better Investor Community this week

“Tonight, Dr. @andrew goes live with FINNOMENA to update you on our All Weather Strategies and investment outlook.”

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Podcasts we listened to this week

The Memo by Howard Marks – Taking the Temperature

“In his latest memo, Howard Marks discusses five market calls he’s made during his career.  He argues that investors seeking to know the market’s likely direction should focus on taking its psychological temperature and understanding the nature of cycles.  Just as importantly, they should learn to control their own emotions and have the humility to know when not to make a call.”

Listen to/read the memo

Readings this week

Slow Burn Minsky Moments (and What to Do About Them)

“In his latest paper, James Montier lays out a framework for spotting what he terms ‘slow burn Minsky moments,’ or the economic vulnerabilities associated with the build-up of private sector debt. The key to building robust portfolios in such an environment – where the risk factor is clear but the timing is uncertain – is to incorporate tail risk protection in the form of both hedges and stores of value. The best way to deal with today’s slow burn Minsky moment, he argues, is to invest in Value relative to Growth.”

Read the white paper (PDF)

Book recommendation

Man and His Symbols by Carl Gustav Jung

“Here, Jung examines the full world of the unconscious, whose language he believed to be the symbols constantly revealed in dreams. Convinced that dreams offer practical advice, sent from the unconscious to the conscious self, Jung felt that self-understanding would lead to a full and productive life.”

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

New My Worst Investment Ever episodes

Ep711: Rick Warner – Be Careful When Investing in Banks

BIO: Rick Warner is a personal development coach, mentor, and highly respected real estate broker based in California. Rick’s story is one of triumph over adversity.

STORY: Rick took his money from well-performing stocks and decided to time the market. After much waiting, he came across the First Republic Bank’s stock, whose share price had fallen from $300 to $30. He bought 700 shares at $29 each. The price kept falling. Rick bought 700 more shares at $13, hoping the price would turn around, but it didn’t. The bank was bought out, and the shares went to zero.

LEARNING: Do a lot of research before investing. Banks are very volatile, so you must be careful when investing in them.

Access the episode’s show notes and resources

Ep710: Mohit Tater – You Don’t Know What You’re Getting Into Until You Are in It

BIO: Mohit Tater is a serial entrepreneur, investor, and consultant. He founded BlackBook Investments and quickly became a recognized expert investor in online businesses and digital assets.

STORY: Mohit got enticed by the numbers his favorite pizza shop was turning and decided to start his own shop. Since he and his partner had no experience in the F&B industry, they were to receive full support from the franchise owner. Unfortunately, the owner went into a coma before the shop opened. The partners tried all they could, but the shop eventually failed.

LEARNING: Don’t venture into an industry you don’t understand and chase high returns. You don’t know what you’re getting into until you are in it.

Access the episode’s show notes and resources

Ep709: Vorathep Srikuruwal – Walk That Property Before You Buy It

BIO: As the owner of Apollo Assets Co Ltd, Mr. Vorathep Srikuruwal is a prominent figure in the real estate industry of Thailand. He has established a track record and extensive experience as a visionary leader in this field.

STORY: Vorathep came across a bank property he thought would be a good investment. He bought it for half its value and even got the bank to give him a loan. His biggest mistake was never visiting the property in person before buying. If he had, he’d have seen its terrible state.

LEARNING: If you’re thinking of buying anything, whether cheap or expensive, first go there, and have a look. Just because it’s cheap doesn’t mean you have to buy it.

Access the episode’s show notes and resources

Published on Become a Better Investor this week

Is there a secret weapon for improvement? Yes! John and Andrew discuss how students fit into improvement projects – and how that translates to businesses.

Listen to Secret Weapon for Improvement: Deming in Schools Case Study with John Dues (Part 5)

PT Matahari Department Store Tbk (LPPF IJ): Profitable Growth rank of 1 was up compared to the prior period’s 2nd rank. This is World Class performance compared to 910 medium Cons. Disc. companies worldwide.

Read Matahari Department Store – World Class Benchmarking

NCSOFT Corporation (036570 KS): Profitable Growth rank of 2 was same compared to the prior period’s 2nd rank. This is World Class performance compared to 260 large Comm. Serv. companies worldwide.

Read NCSOFT Corp – World Class Benchmarking

Central banks’ aggressive rate hikes and QT crash the stock markets. If inflation reaccelerates, we could miss out on rising commodities prices. Our high gold allocation could get hit by higher rates or improved market sentiment.

Read A. Stotz All Weather Strategies – June 2023

Shandong Humon Smelting Company Limited (002237 SZ): Profitable Growth rank of 8 was up compared to the prior period’s 9th rank. This is below average performance compared to 840 large Materials companies worldwide.

Read Shandong Humon Smelting – 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.

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