Become a Better Investor Newsletter – 28 October 2023
Noteworthy this week
- The US dominates the World index
- Not so fun to borrow anymore
- It’s hard to keep up in the US
- 10% drawdowns happen every 1.6 years
- “War is good”
The US dominates the World index: The past 1.5 decades of US outperformance has been reflected in the MSCI AC World index, where the US weight has gone from around 40% (around the GFC) to more than 60%. It’s worth keeping in mind when investing in a passive global equity fund.
I worried when it was 50%, but now it is 60%+. Too high IMO.
“US companies now make up 61% of the $60 trillion MSCI All-Country World Index index, a significant increase from their representation of less than 50% a decade ago” pic.twitter.com/R9O7cZq4dE
— Chris Bailey (@Financial_Orbit) October 26, 2023
Not so fun to borrow anymore: As rates have risen and many worry about a weaker economy, company borrowing has slowed, which in turn can lead to a slowdown in the economy.
US firms have raised just under $70 billion from sales of bonds and leveraged loans so far this month, the quietest month this year and the weakest pace of borrowing in any October since 2011. https://t.co/YYopJ4rAlf pic.twitter.com/BvdbI7AptX
— Lisa Abramowicz (@lisaabramowicz1) October 27, 2023
It’s hard to keep up in the US: About 37% of households said in October 2023 that they have had it “somewhat or very difficult paying household expenses in last week.”
Just in case one was wondering how many people in the US live paycheck to paycheck. Is it still the land of unlimited opportunities? pic.twitter.com/RuTd3h7uv0
— Michael A. Arouet (@MichaelAArouet) October 26, 2023
10% drawdowns happen every 1.6 years: Intra-year drawdowns of 10% (like it has been so far in 2023) are rather common. Always good to remember. It’s also worth noting that drawdowns of >30% only have happened once per decade.
The S&P 500 is now down over 10% from its high in late July, the largest drawdown thus far in 2023.
Is such a decline unusual?
Not at all.
A 10% intra-year drawdown has happened every 1.6 years on average. pic.twitter.com/I7Tuy6kbW6
— Charlie Bilello (@charliebilello) October 26, 2023
“War is good”: No. It’s not. It’s horrible.
War is good. For defense contractors and industrial production.
As long as our people are not getting killed what’s bad about that?
No really, that’s the attitude.
And it’s a debt financed artificial driver of economic growth.
What’s not to like.
Winning. 🤷♂️ pic.twitter.com/6HfGGGS13W— Sven Henrich (@NorthmanTrader) October 25, 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
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Podcasts we listened to this week
Ted Oakley – Oxbow Advisors – Interview Series 2023 – Grant Williams
“Grant Williams joins Ted Oakley to discuss the economy, markets, and investor attitudes.”
Readings this week
Smart Things I’ve Read Lately
“Whenever you can in life, optimize for independence rather than pay. If you have independence and you’re accountable on your output, as opposed to your input – that’s the dream.”
Book recommendation
The Capitalist Manifesto by Johan Norberg
“Marx and Engels were right when they observed in the Communist Manifesto that free markets had in a short time created greater prosperity and more technological innovation than all previous generations combined. A century and a half later, all the evidence shows that capitalism has lifted millions and millions from hunger and poverty.”
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 26, 2023
When your cat held its #Bitcoin pic.twitter.com/Fqdve6Ztsi
— Chamath Palihapitiya’s burner (parody) (@ChamathWarriors) October 25, 2023
New My Worst Investment Ever episodes
Ep742: Jay Pelosky – You Can Be Right but at the Wrong Time
BIO: Jay Pelosky has over 35 years of both buy and sell side financial market experience. While at Morgan Stanley, he was ranked # 1 in Institutional Investor in Global Equity Strategy and Global Asset Allocation Strategy.
STORY: In the 90s, Jay was bullish about Mexico even though people were concerned about foreign currency debt and the country’s risk of devaluation. He remained adamant that people shouldn’t worry because Mexico wouldn’t devalue, and everything would be fine. Lo and behold, the Mexican government devalued in the middle of the night.
LEARNING: You can be right but at the wrong time. A forward-thinking approach is precious as an investor. You must have a thick skin to be an investor because you’ll get stuff wrong often.
Access the episode’s show notes and resources
Ep741: Reuben Mattinson – Have Solid Proof That Trading Is Happening and It’s Regulated
BIO: Reuben Mattinson graduated with a degree in physiotherapy in 2012. He followed this up in 2013 with a degree in Science teaching. During this time, Reuben began building his first company, RJM Tax Exemption.
STORY: Reuben got attracted to a company doing forex crypto trading and invested hundreds of thousands of dollars even though he had no solid proof that the trading was happening and that it was regulated.
LEARNING: Have solid proof that trading is happening. Ensure that your money is being held in a regulated brokerage or platform. Ensure the trader is using proven risk management strategies.
Access the episode’s show notes and resources
Ep740: Jerry Parker – Understand Your Investing Capabilities and Limitations
BIO: Jerry Parker started his trading career in 1983 in the Richard Dennis Turtle Program. He started Chesapeake Capital in 1988. Chesapeake manages about $200M in private funds, mutual funds, ETFs, and managed accounts.
STORY: Jerry has had some stinker investments in real estate and gold over the years. Two things that have cost him money in his real estate investment are overpaying and not being patient. Often, Jerry would find himself buying homes by speculating and thinking that he knew what he was doing, only to realize that he didn’t.
LEARNING: Understand what you’re capable of and your limitations as well. Be afraid of situations you’re unfamiliar with and assume the worst.
Access the episode’s show notes and resources
Published on Become a Better Investor this week
In this series, John Dues and host Andrew Stotz discuss principles that educational systems leaders can use to guide their transformation work. This episode covers principles 4 and 5: maximize high-quality learning and work continually on the system.
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.
Read ISMS 33: Fed Success! High LT Rates & Recession Coming
Huaku Development Company Limited (2548 TT): Profitable Growth rank of 1 was up compared to the prior period’s 2nd rank. This is World Class performance compared to 300 medium Real Estate companies worldwide.
Read Huaku Development – World Class Benchmarking
B.Grimm Power Public Company Limited (BGRIM TB): Profitable Growth rank of 10 was down compared to the prior period’s 9th rank. This is poor performance compared to 320 large Utilities companies worldwide.
Read B.Grimm Power – World Class Benchmarking
Edan Instruments Incorporated (300206 SZ): Profitable Growth rank of 1 was up compared to the prior period’s 2nd rank. This is World Class performance compared to 410 medium Health Care companies worldwide.
Read Edan Instruments – 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.