Become a Better Investor Newsletter – 25 February 2023
Noteworthy this week
- Buying high can result in a return-free decade
- Japan signals a global recession
- Approaching a deflationary period
- But real wage growth suggests an uptick in US stocks
- Solar panels require tons of mining
Buying high can result in a return-free decade: Typically, time in the market matters more than timing the market. Though, if you manage to time the absolute peak of the market, it could mean it takes a decade until you’re back on par in real terms.
#valuationsmatter Several people asked how long can you have ‘dead money’ in Equities if you include dividends. The chart below shows inflation adjusted total returns since 1920. It appears that buying at the wrong valuation can leave you out of pocket for 10 years or more. pic.twitter.com/5BQXW8f8yW
— Ian Harnett (@IanRHarnett) February 17, 2023
Japan signals a global recession: While confidence among European businesses has risen, it has fallen for two consecutive months in Japan, signaling a recession.
Instead of rising confidence among European businesses, Japanese businesses are already suggesting global recession (like a lot more data than not). Japan’s (Reuters) Tankan negative two months in a row, a recession signal that isn’t as much about Japan (see: trade plummeting). pic.twitter.com/II7GCFQ1fs
— Jeffrey P. Snider (@JeffSnider_AIP) February 23, 2023
Approaching a deflationary period: The charts are based upon actual prices, not an artificially created index like owners’ equivalent rent. As a result, they adjust up and down more quickly. They seem to be implying that we are in, and possibly approaching, a significant deflationary period.
Big inflation in these charts, eh? Thing is, none of them have imputed service-sector guesswork attached to them! #RosenbergResearch pic.twitter.com/zpxeFTSu3r
— David Rosenberg (@EconguyRosie) February 21, 2023
But real wage growth suggests an uptick in US stocks: According to the chart below, real wage growth leads the S&P 500 by 6-7 months, implying an uptick in the US stock market is coming. Time will tell.
Teaser: Real wage growth is BACK and it typically leads S&P 500 by 6-7 months pic.twitter.com/8qrseh2a3h
— AndreasStenoLarsen (@AndreasSteno) February 21, 2023
Solar panels require tons of mining: Solar panels with 1GW (750,000 homes) power capacity need about 18.5 tons of silver, 3,380 tons of polysilicon, and 10,252 tons of aluminum. It takes the largest silver mine in the world two months to produce the silver, and the polysilicon requires thousands of tons of quartz, coal, charcoal, and woodchips. Aluminum production from bauxite uses huge amounts of energy and water. Read the thread for more details about “green” energy.
Solar panels with the power capacity of a gigawatt (750K homes) need about 18.5 tons of silver, 3,380 tons of polysilicon and 10,252 tons of aluminum. It takes 3.125 million solar panels needed based on panel size of 320 watts. How much mining is required? #GreenEnergy 🧵
— John Lee Pettimore (@JohnLeePettim13) February 22, 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
Andrew: “Today, I am working on a short report related to the valuation of the top five markets in the world. Here is one of the pages to it…I will finish it tomorrow and share.”
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Podcasts we listened to this week
Driven by Larry Miller | The Direk Khanijou Show
“What I learned from reading Driven by Larry Miller. Larry Miller’s insane work ethic, buying the Utah Jazz, personal finance advice, and Larry Miller’s biggest regrets in life.”
Episode 159 – The Creation of Meaning – Nietzsche – Amor Fati | Philosophize This!
“On this episode, we talk about the creation of meaning through the work of Friedrich Nietzsche.”
Readings this week
Factor Returns and the Information in Valuation Spreads
“As Cliff Asness demonstrated in his 2012 paper “An Old Friend: The Stock Market’s Shiller P/E,” valuations provide quite a bit of important information for investors. What do valuation spreads tell us about future expected returns?”
As Adam Said To Eve, The Great Transition – 30 Years Later
h/t ROTM
“The somewhat tongue-in-cheek title announced a major transition in the post-WWII world order. Until that point in the 1990s, the global system had been led and controlled by the United States, and that was slowly changing.”
Book recommendation
Civilized to Death: The Price of Progress by Christopher Ryan
“Most of us have instinctive evidence the world is ending—balmy December days, face-to-face conversation replaced with heads-to-screens zomboidism, a world at constant war, a political system in disarray.
We hear some myths and lies so frequently that they feel like truths: Civilization is humankind’s greatest accomplishment. Progress is undeniable. Count your blessings. You’re lucky to be alive here and now. Well, maybe we are and maybe we aren’t.
Civilized to Death counters the idea that progress is inherently good, arguing that the “progress” defining our age is analogous to an advancing disease.”
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) February 22, 2023
When Jim Cramer recommends a stock on Mad Money that you just bought pic.twitter.com/bg8S80YkWZ
— Kenny Lay (Parody) (@EnronChairman) February 23, 2023
New My Worst Investment Ever episodes
ISMS 6: UK Looks Most Interesting Among the Top 5 Stock Markets
What do you think: Which of the largest country’s stock markets is most attractive?
Download the PDF with all charts and graphs
Access the episode’s show notes and resources
Ep651: Terri Spath – Always Know When to Buy and When to Fold
BIO: Terri Spath is the founder and CIO of Zuma Wealth LLC and has earned top performance marks stewarding billions of dollars at large investment shops through the booms and busts of the past quarter-century.
STORY: At the height of the Dotcom boom, Terri bought—on behalf of clients—some terrific companies because she knew how to value, assess, and analyze them. But she kept holding onto the companies when the market tanked instead of selling.
LEARNING: Know when to buy and when to sell. Don’t get too attached to your favorite stocks.
Access the episode’s show notes and resources
Ep650: Brett Martin – Fix Your Partnership or Quit It
BIO: Brett Martin is co-founder of Kumospace, the virtual HQ for remote teams, and Charge Ventures, a pre/seed VC based in Brooklyn, NY.
STORY: Brett started a company and got just 20% ownership; the rest went to investors who eventually walked away, leaving the business to crumble.
LEARNING: If you’re in a partnership that’s not working, you must push it to a conclusion. Complaining won’t resolve your problems. If you can, bootstrap your company instead of taking money from venture capitalists.
Access the episode’s show notes and resources
Ep649: Damon Pistulka – Be Careful of Concentration Risk
BIO: Damon Pistulka earned a Mechanical Engineering degree in college, then worked in technical and managerial roles, including designing, building, and operating facilities.
STORY: Damon’s company focused on building a client’s business for sale. The client pulled out of a great offer at the last minute.
LEARNING: Always have a contract in place and ensure it has an exit clause that protects you. Diversify to avoid concentration risk.
Access the episode’s show notes and resources
Published on Become a Better Investor this week
In this second episode of the Motivation series, Andrew and David P. Langford discuss how power dynamics impact motivation and why autonomy is a big factor in motivation.
Listen to Who Controls Motivation? Cultivating Intrinsic Motivation Series with David P. Langford (Part 2)
What do you think: Are we headed for a recession or has the Fed engineered a soft landing?
Read ISMS 5: How Rising Rates and Oil Prices Are Contributing to 6.4% Inflation in the US
Wistron Corporation (3231 TT): Profitable Growth rank of 8 was up compared to the prior period’s 9th rank. This is below average performance compared to 740 large Info Tech companies worldwide.
Read Wistron Corporation – World Class Benchmarking
KEI Industries Limited (KEII IN): Profitable Growth rank of 1 was same compared to the prior period’s 1st rank. This is World Class performance compared to 1,590 large Industrials companies worldwide.
Read KEI Industries – World Class Benchmarking
Central Plaza Hotel Public Company Limited (CENTEL TB): Profitable Growth rank of 8 was up compared to the prior period’s 9th rank. This is below average performance compared to 1,000 medium Cons. Disc. companies worldwide.
Read Central Plaza Hotel – 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.