Become a Better Investor Newsletter – 15 April 2023
Noteworthy this week
- SMEs are the most negative since 1980
- Credit tightening has begun
- >1 year until the market bottoms
- China steps off the demographic cliff
- Solar and wind power are not taking over any time soon
SMEs are the most negative since 1980: Surveying smaller businesses in the US about if it’s “a good time to expand,” almost none answered “yes.” Tough times are anticipated.
1/2
The NFIB surveys its membership of small and medium businesses. The March update was out this morning.
Q “a good time to expand” equaled a 43-year low, the same as March 2009 (Great Recession). Only 1980 was worse.
Also, worse than the full lockdown of April 2020. pic.twitter.com/afrCdlDwBu
— Jim Bianco biancoresearch.eth (@biancoresearch) April 11, 2023
Credit tightening has begun: Total loan volume has turned negative.
APOLLO: “The credit crunch has started. .. A survey of 71 banks in the Dallas Fed district done after SVB went under shows a dramatic reversal in loan volumes, .. from March 21 to 29.” $KRE $XLF pic.twitter.com/tTtev6Zwkd
— Carl Quintanilla (@carlquintanilla) April 6, 2023
>1 year until the market bottoms: If we trust this chart’s findings, we’re 14-15 months away from a market bottom. Let’s see if Fed starts cutting rates in September.
On average the first Fed cut is about 10 months before the ultimate bear market low.
The curve steepening began, which tends to have a 17 month lead time. Credit conditions are now tightening, which has about a 15 month lead time.
There may be much more downside from here. pic.twitter.com/PrBETgeE3A
— Markets & Mayhem (@Mayhem4Markets) April 11, 2023
China steps off the demographic cliff: The Chinese one-child policy could be the nation’s fall. Is China becoming the next Japan?
On average the first Fed cut is about 10 months before the ultimate bear market low.
The curve steepening began, which tends to have a 17 month lead time. Credit conditions are now tightening, which has about a 15 month lead time.
There may be much more downside from here. pic.twitter.com/PrBETgeE3A
— Markets & Mayhem (@Mayhem4Markets) April 11, 2023
Solar and wind power are not taking over any time soon: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Look, folks. Hate to burst the bubble, but the whole renewable madness is nothing but a green fantasy. We’ve spent TRILLIONS on it, and here’s what we’ve achieved.
Sadly, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” pic.twitter.com/T7fmRIXOwv
— Willis Eschenbach (@WEschenbach) April 8, 2023
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.
Chart of the week
Discussed in the Become a Better Investor Community this week
Andrew: “Today I finished creating another book discussion in The Curriculum.
The Checklist Manifesto”
Try 1 month of the Become a Better Investor Community for FREE today!
You can cancel at any time. Click here to learn more.
Podcasts we listened to this week
The Morgan Housel Podcast – Play Your Own Game
“There is no world where two equally smart and informed people should agree on the best way to save, spend, and invest money.”
Readings this week
Index Investing and the Informational Efficiency of Stock Prices
“This article studies whether index investing has implications for the informational efficiency of stock prices.”
Book recommendation
Empire of Pain: The Secret History of the Sackler Dynasty by Patrick Radden Keefe
“Empire of Pain is the saga of three generations of a single family and the mark they would leave on the world, a tale that moves from the bustling streets of early twentieth-century Brooklyn to the seaside palaces of Greenwich, Connecticut, and Cap d’Antibes to the corridors of power in Washington, D.C. It follows the family’s early success with Valium to the much more potent OxyContin, marketed with a ruthless technique of co-opting doctors, influencing the FDA, downplaying the drug’s addictiveness.”
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
Here’s a useful primer on how ESG works…👇👇 pic.twitter.com/AVAjSgpRyd
— Kuppy (@hkuppy) April 5, 2023
— Edward (@edwardrussl) April 6, 2023
New My Worst Investment Ever episodes
ISMS 18: Dave Collum – What Makes Your Investments Good or Bad
In this episode of Investment Strategy Made Simple (ISMS), Dave joins Andrew again as he shares more about his good and bad investments, among other things.
Access the episode’s show notes and resources
Ep672: Vincent Deluard – Know the Difference Between a Trade and an Investment
BIO: Vincent Deluard is the global macro strategist for StoneX Group Inc., where he authors weekly commentary on global macro topics and advises pension funds on asset allocation.
STORY: Vincent decided to overleverage an ETF during the financial crisis of 2008 in the belief that the economy would bounce back. Interest rates, however, fell, and he lost 70% of his investment.
LEARNING: Take into account falling yields and falling inflation. Understand the difference between a trade and an investment.
Access the episode’s show notes and resources
Ep671: Igor Yelnik – Think About Non-Market Risks
BIO: Igor Yelnik founded Alphidence Capital Ltd in 2020 and holds the positions of CEO and CIO. Alphidence is a systematic macro hedge fund management firm based in London, UK.
STORY: Igor’s company entered into a forward contract with one of Russia’s biggest banks and sold a very significant amount of the Russian ruble against the US dollar. The company made a considerable profit, but the bank decided not to pay. After a lengthy court battle, the company gave up and counted its losses.
LEARNING: Infrastructure and systematic risks can affect your trade significantly.
Access the episode’s show notes and resources
Ep670: Bogumil Baranowski – Be Careful With Businesses in Secular Decline
BIO: Bogumil Baranowski is a founding partner of Sicart Associates, LLC, a New York City investment firm. He has almost two decades of investment experience.
STORY: Bogumil invested a lot of time and money in two companies that were drowning in debt, had poor management, and had a secular decline.
LEARNING: Just because it’s cheap, don’t compromise on debt, management, and secular decline. Debt is the number one risk for an existing company.
Access the episode’s show notes and resources
Published on Become a Better Investor this week
In this new series on applying Deming to education, Andrew talks with John Dues, Chief Learning Officer at United Schools Network and long-time Deming practitioner. This is the first in a series of 12 episodes using John’s school system as a case study for applying Deming in education.
Listen to Confusion vs Clarity: Deming in Schools Case Study (Part 1)
Developed Countries – Vast DM Country increases in ST and LT rates, Japan stays an outlier, US looks worst based on yield curve inversion.
Download the PDF with all charts and graphs
Read ISMS 15: Top 5 DM Country Interest Rates – Steep US Inversion
Central banks’ aggressive rate hikes and QT crash the stock markets. Collapsing energy prices would be damaging to our tilts to World energy. 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 – March 2023
Developed Market Regions – ST rates about to peak, LT rates are falling, inverted yield curve in DM Americas and Europe widened. Emerging Market Regions – Massive ST rate hikes in ME&A and Frontier, LT rates more stable, no yield curve inversion in Asia.
Download the PDF with all charts and graphs
Read ISMS 14: Regional Interest Rates – Low in Asia, Egypt and Frontiers on Fire
World – End of DM ST rate rise, inverted yield curves remain, high rates in EM.
Download the PDF with all charts and graphs
Read ISMS 13: Global Interest Rates – Hikes Slow, Inversion Signals Recession
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.