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Become a Better Investor Newsletter – 25 March 2023

Noteworthy this week

  • Another 0.25% hike from the Fed
  • Deposits leave US banks due to Fed rate hikes
  • US housing market is getting hit
  • Debit Suisse appears to be a great deal…not
  • Xi and Putin teams up to challenge the US

Another 0.25% hike from the Fed: The central bank also said it could be necessary to hike further. Looking at market-implied rates, investors don’t believe JPow, though.

Deposits leave US banks due to Fed rate hikes: “Three choices: Don’t raise savings rates, continue to bleed deposits. Raise savings rates kill bank profitability. Cut the funds rate, risk higher and persistent inflation.”

US housing market is getting hit: Rate hikes hit the housing market in the US, where median prices of existing homes are “down on a YoY basis for the first time since 2012.”

Debit Suisse appears to be a great deal…not: You probably haven’t missed that UBS, backed by guarantees from the Swiss government, is buying Credit Suisse. This great track record shows CS “has been fined over 50 times for a total of $11.4 billion since 2000.”

Xi and Putin teams up to challenge the US: Xi meets with Putin after ICC issued an arrest warrant for the Russian leader. “Right now there are changes, the likes of which we haven’t seen for 100 years, and we are the ones driving these changes together.”

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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

“88% for a 0.25% hike tonight (Bkk time), 12% think it will remain unchanged Is this the time he will surprise? Don’t you think 0.50% could worsen the banking crisis in the US?”

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Podcasts we listened to this week

RWH023: Defensive Investing In Dangerous Times W/ Guy Spier

“In this conversation, Guy speaks candidly about the challenges he’s facing, including his fear that Russia’s war in Ukraine could escalate, creating a systemic risk for investors. He explains how he’s positioning his portfolio to survive & prosper in these perilous times, & he shares practical advice on how to maintain equanimity amid all this uncertainty.”

Listen to the podcast

Readings this week

Confidence by Michael J. Mauboussin

“Investing is an activity that is inherently probabilistic. Nearly all investment opportunities present a range of possible outcomes with some chance of occurring. The goal is to invest in situations where the expected value, the sum of the potential outcomes times the probability that they happen, is different than the price.

Coming up with thoughtful probabilities can be hard.”

Download as PDF

Book recommendation

Safe Haven: Investing for Financial Storms by Mark Spitznagel

“What is a safe haven? What role should they play in an investment portfolio? Do we use them only to seek shelter until the passing of financial storms? Or are they something more? Contrary to everything we know from modern financial theory, can higher returns actually come as a result of lowering risk?”

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

Ep663: Benjamin Claremon – Know What Kind of Investor You Are

BIO: Ben Claremon joined Cove Street in 2011 and has been a Co-Portfolio Manager for the Classic Value | Small Cap PLUS strategy since its inception in 2016.

STORY: Benjamin has made the biggest mistakes and lost the most money by buying cheap companies that get less valuable over time.

LEARNING: Know what kind of investor you are and let your portfolio reflects that. Just because it’s cheap doesn’t mean you have to buy it. Invest in a business you can own for years.

Access the episode’s show notes and resources

Ep662: Edward McQuarrie – Never Ever Sell Naked Calls

BIO: Edward McQuarrie is Professor Emeritus at Santa Clara University. He writes on market history and personal finance, and his research has been mentioned in columns in the Wall Street Journal, Marketwatch, and Barron’s.

STORY: Edward opened an account to trade naked puts. When the financial crisis of 2008 hit, he thought it was a good time to sell his puts. He ended up losing almost all the money in his account.

LEARNING: Keep your play money small. Never trade your treasury bond until maturity to avoid losses.

Access the episode’s show notes and resources

ISMS 12: CPI Racing Across the Globe

Is global CPI going to follow the US CPI slowdown?

Download the PDF with all charts and graphs

Access the episode’s show notes and resources

ISMS 11: US Banking Crisis and Fed Rate Cut

Did the Fed finally break something with its aggressive rate rises? I’ve been repeating in my investment strategy that the Fed will eventually break something, and yes, they did. They did.

Access the episode’s show notes and resources

ISMS 10: US CPI Could Decline to 4% By YE23; Unless QE Revs Up

Is US CPI going up or down by yearend 2023?

Download the PDF with all charts and graphs

Access the episode’s show notes and resources

Ep661: Michelle Leder – Read the 10-K Before You Buy That Stock

BIO: Michelle Leder has probably read more SEC filings than just about anyone else on the planet since writing her book, Financial Fineprint: Uncovering a Company’s True Value, and starting her website, nearly 20 years ago.

STORY: Michelle invested in a company without going through important SEC reports.

LEARNING: Dig deep into the company’s 10-K annual report before investing. Look at the risk factors and what the company says about risk.

Access the episode’s show notes and resources

Published on Become a Better Investor this week

Your “meaning network” of neurons includes the subjects (like math wizzes) and relationships (like friendships) that are important to you. In this episode, Andrew and David talk about helping folks find the “why?” that intrinsically motivates them to do something.

Listen to The Role of Meaning: Cultivating Intrinsic Motivation Series with David P. Langford (Part 6)

Rajthanee Hospital Public Company Limited (RJH TB): Profitable Growth rank of 1 was same compared to the prior period’s 1st rank. This is World Class performance compared to 570 small Health Care companies worldwide.

Read Rajthanee Hospital – World Class Benchmarking

Mitsui Mining and Smelting Company Limited (5706 JP): Profitable Growth rank of 5 was same compared to the prior period’s 5th rank. This is average performance compared to 970 large Materials companies worldwide.

Read Mitsui Mining and Smelting – World Class Benchmarking

The Silicon Valley Bank crisis started when the US government shut down its economy.

Read ISMS 9: Saving Silicon Valley Bank Brings New Risks

The strategy was on par with the 60/40 portfolio and 1.5% above World equity in February 2023. Equities appear more attractive; our biggest tilts are Europe small cap and World energy. Bonds and gold to protect capital. Global recession, collapsing energy prices, Europe underperformance, falling gold price.

Read A. Stotz All Weather Strategies – February 2023

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.