Become a Better Investor Newsletter – 22 July 2023
Noteworthy this week
- This bear market is different
- Retail sales contract
- US government interest payments heading for US$1trn
- China fixed asset investments in a downtrend
- Companies leave Germany
This bear market is different: It looks different when comparing the current bear market to Dotcom and GFC. It’s worth remembering Sir John Templeton’s words: The four most dangerous words in investing are: ‘This time it’s different.’
S&P 500 peak in January 2022 vs. peaks in October 2007 and March 2000… pic.twitter.com/hzEqhDeAxU
— Charlie Bilello (@charliebilello) July 14, 2023
Retail sales contract: Retail sales have started to contract, which indicates a slowing economy.
Here’s your “indefatigable” consumer…Weekly Same Store Sales just entered contraction. And that’s BEFORE accounting for inflation.🤫 pic.twitter.com/wfiL2Nz7M4
— steph pomboy (@spomboy) July 11, 2023
US government interest payments heading for US$1trn: The interest payments on US gov’t debt have reached US$900bn/year. Fed’s rate hikes hit the US gov’t budget.
According to new US government data, annualized interest payments on US debt just crossed $900 BILLION for the first time in history.
Annualized interest expense has moved in a literal straight line higher since 2020.
Government spending jumped 15% in June, the same month we… pic.twitter.com/H24XQs6U4j
— The Kobeissi Letter (@KobeissiLetter) July 16, 2023
China fixed asset investments in a downtrend: The fixed asset investments in China have been falling for over a decade. China is probably not coming to the rescue of the global economy this time around.
China FAI (Fixed Asset Investment) is just gone
Really bad situation, that WAS Chinese Growth
Almost a decade of drops. pic.twitter.com/E9XNXEWLtL
— David. Economic Depressions are bad ideas. (@David32375134) July 17, 2023
Companies leave Germany: The net investment flows have been negative since 2014 (with a tiny exception in 2020), which means German companies are allocating money to other countries.
And our government debates about heat pumps instead 👇 (BBG) pic.twitter.com/GVmPyBMaP4
— Michael A. Arouet (@MichaelAArouet) July 14, 2023
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Weekly market performance
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Chart of the week
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Podcasts we listened to this week
Capital Allocators: Seth Klarman – Timeless Value Investing (EP.328)
“Our conversation covers Seth’s early experience in business and investing, path to Baupost, timeless value investing principles and those that have changed over time. We discuss Baupost’s application of value investing across sourcing, diligence, portfolio construction, and risk management.”
Readings this week
Are Sustainable Investors Compensated Adequately?
“While sustainable investing continues to gain in popularity, economic theory suggests that if a large enough proportion of investors choose to favor companies with high sustainability ratings and avoid those with low sustainability ratings (sin businesses), the favored company’s share prices will be elevated and the sin stock shares will be depressed. In equilibrium, the screening out of certain assets based on investors’ tastes should lead to a return premium on the screened assets.”
Book recommendation
The Fourth Turning Is Here: What the Seasons of History Tell Us about How and When This Crisis Will End by Neil Howe
“Now, right on schedule, our own fourth turning has arrived. And so Neil Howe has returned with an extraordinary new prediction. What we see all around us—the polarization, the growing threat of civil conflict and global war—will culminate by the early 2030s in a climax that poses great danger and yet also holds great promise, perhaps even bringing on America’s next golden age. Every generation alive today will play a vital role in determining how this crisis is resolved, for good or ill.”
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
— high net-worth memes (@hnwmemes) July 19, 2023
— Not Jerome Powell (@alifarhat79) July 18, 2023
New My Worst Investment Ever episodes
Ep714: Richard Smith – Anything Valuable Is Hard
BIO: Dr. Richard Smith – Berkeley Mathematician and Ph.D. in System Science – is a fintech entrepreneur, the CEO of The Foundation for the Study of Cycles, and cofounder of the investment tool Finiac.
STORY: Richard invested his entire live savings ($10,000), and in 18 months, it had grown to $40,000. Then suddenly, the investment went down to $30,000. He believed it would go up again, so he held on. Then it went further down to $20,000. Richard kept waiting. Eventually, it went to $10,000, and that’s when he panicked and took out all his money.
LEARNING: Integrate trailing stops. It’s hard to do the right thing in the markets.
Access the episode’s show notes and resources
Ep713: David Perry – Bet on the Person, Not the Idea
BIO: David Perry was in the video game industry for over 30 years, making hits like The Matrix, Aladdin, The Terminator, and Earthworm Jim. He sold his last company to Sony PlayStation and the one before that to Atari. He’s now building a startup in e-Commerce called Carro.
STORY: One of David’s top former employees started a VR company and invited him to invest. Though David believed in this employee, experiencing motion sickness while trying out the VR games made him not invest in what became a multi-billion dollar company.
LEARNING: When you really believe in somebody, go ahead and support them. Bet on the person, not the idea.
Access the episode’s show notes and resources
Ep712: Tom Wall – If You Make Some Money, at Least Take Half off the Table
BIO: Tom Wall holds a Ph.D. in Retirement Income Planning, with original research on Whole Life as a Fixed Income Alternative under the advisement of industry thought leaders: Wade Pfau, Michael Finke, and Stephen Parrish.
STORY: Tom got pulled into the Bitcoin frenzy in 2018 and made huge gains. He had also invested in an NFT performing really well and made 15X his investment. Tom took his investment from the NFT and invested the money in Bitcoin. Then Bitcoin’s value dropped, and Tom lost almost half of his investment.
LEARNING: If you make some money, sell, or at least take half off the table. Have a piece of your portfolio that is continually growing but also accessible.
Access the episode’s show notes and resources
Published on Become a Better Investor this week
In part 5 of this series, David and Andrew discuss the pitfalls of managers acting as judges versus the benefits of acting as a coach. They explore the history of traditional management practices, and how Dr. Deming’s philosophy creates happier, healthier, and more productive workplaces.
Listen to Coaching vs Judging: Role of a Manager in Education (Part 5)
UNO Minda Limited (UNOMINDA IN): Profitable Growth rank of 5 was same compared to the prior period’s 5th rank. This is average performance compared to 1,020 large Cons. Disc. companies worldwide.
Read UNO Minda – World Class Benchmarking
Inspur Software Company Limited (600756 SH): Profitable Growth rank of 5 was up compared to the prior period’s 8th rank. This is average performance compared to 820 medium Info Tech companies worldwide.
Read Inspur Software – World Class Benchmarking
Padini Holdings Berhad (PAD MK): Profitable Growth rank of 1 was up compared to the prior period’s 3rd rank. This is World Class performance compared to 910 medium Cons. Disc. companies worldwide.
Read Padini Holdings – World Class Benchmarking
Mitsui Soko Holdings Company Limited (9302 JP): Profitable Growth rank of 3 was up compared to the prior period’s 4th rank. This is above average performance compared to 1,440 large Industrials companies worldwide.
Read Mitsui Soko Holdings – 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.