Become a Better Investor Newsletter – 21 October 2023
Noteworthy this week
- Make US$155k to afford a house
- Rates to stay permanently higher
- The labor market is weakening
- Wall Street no longer sees a recession
- Japan is attractive for stock pickers
Make US$155k to afford a house: To afford the median house in the US, you now need to make US$115,000 per year. The required earnings have increased by 50%+ in the past three years.
A US homebuyer now needs to earn a record $115k to afford the median priced home for sale, an increase of over 53% in the last 3 years. pic.twitter.com/dBzgFlJioB
— Charlie Bilello (@charliebilello) October 18, 2023
Rates to stay permanently higher: As shown in the longer rates, the market now expects higher interest rates to persist. Is the “era of free money” over?
There seems to be a view that once inflation hits 2%, interest rates are going back down to historic lows.
However, markets are now pricing in permanently higher rates.
Markets are pricing that the Fed funds rate will bottom at 4% in 2025 and then start rising again.
The same… pic.twitter.com/VKumsDSUi3
— The Kobeissi Letter (@KobeissiLetter) October 15, 2023
The labor market is weakening: A strong labor market is one of the things that has kept a US recession at bay. Job openings are now falling, reducing demand for labor. In the past two decades, this has happened in or around recessions.
US labor market is nearing trouble
Job openings have been falling off a cliff
Similar declines have occurred only 3 times since 2000:
1. Dot Com bubble
2. Financial Crisis
3. Pandemic
Each one ended in a recession
The worst part: This is happening at a time when the… pic.twitter.com/V1TCipVYV1
— Game of Trades (@GameofTrades_) October 12, 2023
Wall Street no longer sees a recession: Looking at the Wall Street consensus, the likelihood of a recession is now below 50%. What do you think about analysts’ forecasting abilities?
For the first time in over a year, the Wall Street consensus no longer expects a recession over the next 12 months. pic.twitter.com/CsijVGWtik
— Robin Wigglesworth (@RobinWigg) October 18, 2023
Japan is attractive for stock pickers: Almost half of the stocks in TOPIX have no analyst coverage, and another 20% have only up to 2 analysts covering them. Low coverage can often lead to mispricing, which opens opportunities for stock pickers.
46% of #stocks in Japan’s TOPIX index have zero analyst coverage, while a further 22% have only 1-2 analysts covering them. Where do you think you are more likely to find mispriced stocks? In Japan, or in the US where nearly all the stocks in the S&P have 10 or more analysts… pic.twitter.com/K5ABfffuvd
— Jamie Halse🇳🇿🇦🇺🇯🇵🌎🌍🌏 (@JamieHalse) October 12, 2023
Careers in Finance – Live Streaming
Thaksapohn Peerapatpokin – October 23, 16:00 (GMT+7/ICT)
Thaksapohn Peerapatpokin is a Vice President at MQDC Idyllias Mettaverse and an engineer with a decade of experience in Turbomachinery equipment. She also runs the popular Facebook Page DinoTech5.0. Thaksapohn has attended the Valuation Master Class, has a Master in Finance, and passed CFA level 3.
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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
RWH034: THE HIGH ROAD TO RICHES W/ PETER KEEFE
“In this episode, William Green chats with Peter Keefe, an outstanding investor who’s trounced the market over three decades. Here, Peter discusses his timeless investing principles, what he looks for in a great business, how he evaluates the quality of management, why he loves Microsoft & Markel, why managing money is a high calling, & what investors can learn from apex predators.”
Readings this week
A Few Laws of Getting Rich
“There are 13 divorces among the 10 richest men in the world. Seven of the top ten have been divorced at least once.”
Book recommendation
Determined: A Science of Life without Free Will by Robert M. Sapolsky
“Determined offers a marvelous synthesis of what we know about how consciousness works—the tight weave between reason and emotion and between stimulus and response in the moment and over a life. One by one, Sapolsky tackles all the major arguments for free will and takes them out, cutting a path through the thickets of chaos and complexity science and quantum physics, as well as touching ground on some of the wilder shores of philosophy.”
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
— Not Jerome Powell (@alifarhat79) October 19, 2023
Tell it to the FED pic.twitter.com/9pOesbqOjx
— Wall Street Memes (@wallstmemes) October 16, 2023
New My Worst Investment Ever episodes
ISMS 33: Fed Success! High LT Rates & Recession Coming
Fed Success! High LT Rates & Recession Coming
- World yield curve inversion is falling because of rising LT rates
- Rising LT rates are reducing yield curve inversion fastest in DM Americas and DM Europe
- Rates are high across EMs, crushing in FMs, and low in EM Asia
- France and Germany ST rates rising; DM countries have past peak yield curve inversion due to rising LT rates
- Rates are low in China, which, together with India, never inverted
Access the episode’s show notes and resources
Ep739: William Cohan – Get the Numbers Right Before You Invest
BIO: William D. Cohan, a former senior Wall Street M&A investment banker for 17 years at Lazard Frères & Co., Merrill Lynch, and JPMorgan Chase, is the New York Times bestselling author of seven non-fiction narratives, including his most recent book called Power Failure: The Rise and Fall of an American Idol.
STORY: In 1990, William asked a trader to buy him 10 shares in Berkshire Hathaway, thinking a share was selling at $1,200, only to be told it was $12,000. He decided to keep two shares and sold the other eight. Had William invested $120,000 for the 10 shares in Berkshire Hathaway in 1990, they would be worth $7.4 million today.
LEARNING: Get the numbers right before you invest.
Access the episode’s show notes and resources
Ep738: Neil Johnson – Take the Profit When You Can
BIO: Neil Johnson is a renowned finance expert with over 30 years of experience in investment banking, merchant banking, and research analysis in Canadian and UK capital markets.
STORY: Neil invested in an internet company building website templates when the internet was just starting. The company filed to go public, but the financiers kept delaying the process and never went public. Six months later, the company went to zero. Neil lost his entire investment.
LEARNING: Take the profit when you can. Take some money out and play with the rest. Do your due diligence.
Access the episode’s show notes and resources
Published on Become a Better Investor this week
When things go wrong, who gets blamed? When things go right, who gets the credit? Dr. Deming wrote that good managers don’t play the blame/credit game. Instead, they “study results with the aim to improve performance.” In this episode, David Langford and host Andrew Stotz discuss getting honest feedback, how to react, and why it’s important.
Listen to Whose fault is it? Role of a Manager in Education (Part 8)
5 Warning signs of impending recession
Warning Sign #1 – Inverted yield curve
Warning Sign #2 – Peak employment
Warning Sign #3 – Slowdown in bank lending
Warning Sign #4 – Leading indicators falling & bankruptcies rising
Warning Sign #5 – Weakening consumer
Read ISMS 32: 5 Signs of Impending Recession
Chunghwa Telecom Company Limited (2412 TT): Profitable Growth rank of 3 was same compared to the prior period’s 3rd rank. This is above average performance compared to 250 large Comm. Serv. companies worldwide.
Read Chunghwa Telecom – World Class Benchmarking
Aboitiz Power Corporation (AP PM): Profitable Growth rank of 2 was same compared to the prior period’s 2nd rank. This is World Class performance compared to 320 large Utilities companies worldwide.
Read Aboitiz Power – World Class Benchmarking
Henan Pinggao Electric Company Limited (600312 SH): Profitable Growth rank of 8 was same compared to the prior period’s 8th rank. This is below average performance compared to 1,460 large Industrials companies worldwide.
Read Henan Pinggao Electric – 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.