“I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” ― Warren Buffett
The MAGGA Stocks: MSFT, AMZN, GOOGL+GOOG, AAPL, issued by the four largest tech companies in the S&P 500, each with total market capitalization in excess of one trillion ($US).
Feb 07 DJIA +0.8%, S&P 500 +1.3%, Nasdaq +1.9%
Feb 06 DJIA -0.1%, S&P 500 -0.6%, Nasdaq -1.0%
Feb 03 for the WEEK: DJIA -0.2, S&P 500 +1.6%, NASDAQ +3.3%
Feb 01 FOMC raised target range for federal funds rate to 4-1/2 to 4-3/4% (25 bps increase). Video of Fed Chair Press Conference, stocks close UP, $META earnings webcast 5pmET.
For the month JAN2023 DJIA +2.8%, S&P 500 +6.2%, NASDAQ +10.7
2022 Synopsis: The Fed Unleashes a Bear Market; SBF-FTX Crypto Crash; Musk buys Twitter.
2022 Worst Year since 2008: DJIA -9%, S&P 500 -19%, NASDAQ Composite -33%
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| NASDAQ Composite |
“How did you go bankrupt?” “Two ways”...“Gradually and then suddenly.” -- Ernest Hemingway, The Sun Also Rises
2022 Jul-Sep (3rd Quarter): DJIA -6.7%, S&P 500 -5.3%, NASDAQ -4.1%.
"The Committee seeks to achieve maximum employment and inflation at the rate
of 2 percent over the longer run. In support of these goals, the Committee decided to
raise the target range for the federal funds rate to 3 to 3-1/4 percent [up from 2.25% to 2.50% set July 27, 2022] and anticipates
that ongoing increases in the target range will be appropriate. In addition, the
Committee will continue reducing its holdings of Treasury securities and agency debt
and agency mortgage-backed securities, as described in the Plans for Reducing the
Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee
is strongly committed to returning inflation to its 2 percent objective."
Jun 30 Nasdaq Composite -30% YTD. S&P 500 -21% YTD, the worst first half of a year since 1970. DJIA -15% YTD.
Mar 16 Fed Chair's LIVE Press Conference following FOMC meeting Mar 15-16: ... the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting ...
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| Fed Chair Jay Powell |
Feb 26 Berkshire Hathaway 2021 Annual Report (pdf) with letter from Chairman Warren Buffett. Berkshire $BRKA $BRKB Annual Meeting 9:45am EDT Saturday, April 30, 2022 (schedule).
2022 Jan 31 for the month -- worst January since 2008 financial crisis -- DJIA -3.3%, S&P 500 -5.3%, NASDAQ Composite -8.98%.
2021 Tech Story of the Year: Social Media Censorship, the Decline of Twitter & Facebook, and the Rise of Reddit & Substack.
COVID-19 Pandemic CDC COVID Data Tracker Aug 2021: Delta Variant & Beyond, Learning to Live with COVID: "... Delta may well not be the worst that Covid has in store for us: Future variants could be even more infectious, more deadly or better at evading our immunity. Within the next month, at current trends, there will be more than 200,000 cases per day in the U.S. More hospitals, particularly in places with low vaccination rates, may find themselves unable to handle the load. Deaths will at least double ..." -- Tom Frieden, Aug 13, 2021
See also: Israel, Widely Vaccinated, Suffers Another Covid-19 Surge (WSJ.com Aug 12, 2021) and https://ourworldindata.org/covid-deaths?country=USA~GBR~ISR.
Jeffrey Gundlach on Bitcoin and the U.S. dollar (July 15, 2021): “I think it’s [Bitcoin] only a trading vehicle. I’ve never been long Bitcoin personally. I’ve never been short Bitcoin. It’s just not for me. I don’t have that kind of risk tolerance in my DNA where I have to get worried to pull up the quote every day to see if it’s down 20%. But I would not own Bitcoin presently ... In the near term, the dollar seems firm. In the longer term, the dollar is doomed."
"Central bank digital currencies (CBDCs) offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity. They are an advanced representation of money for the digital economy .... It is clear that cryptocurrencies are speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes. Bitcoin in particular has few redeeming public interest attributes when also considering its wasteful energy footprint." —The Bank for International Settlements
Warren Buffett’s Annual Letter to Berkshire Hathaway (BRK.A and BRK.B) shareholders, Saturday, Feb 27, 2021 via Annual Report posted at BerkshireHathaway.com, excerpt:
"Investing illusions can continue for a surprisingly long time. Wall Street loves the fees that deal-making generates, and the press loves the stories that colorful promoters provide. At a point, also, the soaring price of a promoted stock can itself become the “proof” that an illusion is reality."--Warren Buffett
Editor's note: For 2021 and beyond, I sincerely hope you're positioned to enjoy the ride!
"the fact that the Fed now explicitly caters to idiots, CNBC talking heads and clueless BTFDers, means that it is completely unclear who the winner of this clash will be. To be sure, judging by the 14x outperformance of retail traders vs hedge funds, one can argue that the Robinhood juggernaut can continue indefinitely until such time as the Fed realizes the catastrophic consequences of what it has unleashed ... which may well be never" -- ZeroHedge.com Dec 30, 2020
V-Shaped: S&P 500 hit an All-Time Record High Close on August 19, 2020, marking the fastest recovery in history. The "COVID Recession" was the shortest on record. The recession officially ended in April 2020.
Wednesday, July 29, 2020: hearing before the US House of Representatives' Subcommittee on Antitrust, Commercial, and Administrative Law: Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook, and Google. Witnesses: Jeff Bezos, CEO, Amazon; Tim Cook, CEO, Apple; Sundar Pichai, CEO, Google; Mark Zuckerberg, CEO, Facebook.
"A powerful algorithm for happiness is to be wealthy but anonymous"-- Scott Galloway.
Aug 14, 2019: Inverted Yield Curve (T10yr/2yr) but Former Federal Reserve Chair Janet Yellen believes this time is different.
Economic & Earnings Links:
Markets | cnbc.com | Stock Exchange Trading Hours (24 hour format / local time):
Profits explained | Finance Decoded FT.com video: Jonathan Guthrie explains how companies calculate their profit, what investors should be wary of and the different measures used to gauge how a company is really performing (video published Feb 17, 2016).
Peter Lynch on investing:
Common Terms: Infographic: Here's 40 Stock Market Terms That Every Beginner Should Know | visualcapitalist.com
Operating Profits
Revenue is the income (before deducting expenses) that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Profits or net income generally imply total revenue minus total expenses in a given period. Source: Wikipedia
Risk Assets generally refer to assets that have a significant degree of price volatility, such as equities, commodities, high-yield bonds, real estate and currencies.
Market liquidity | Wikipedia.org: "In business, economics or investment, market liquidity is a market's ability to purchase or sell an asset without causing drastic change in the asset's price. Equivalently, an asset's market liquidity (or simply "an asset's liquidity") describes the asset's ability to sell quickly without having to reduce its price to a significant degree. Liquidity is about how big the trade-off is between the speed of the sale and the price it can be sold for. In a liquid market, the trade-off is mild: selling quickly will not reduce the price much. In a relatively illiquid market, selling it quickly will require cutting its price by some amount. Money, or cash, is the most liquid asset, because it can be "sold" for goods and services instantly with no loss of value. There is no wait for a suitable buyer of the cash. There is no trade-off between speed and value. It can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs."
Fungibility | Wikipedia.org: "Fungibility is different from liquidity. A good is liquid if it can be easily exchanged for money or another different good. A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place."
Market commentary and opinions expressed herein are personal views, not investment advice nor solicitations for business. See DISCLAIMER.- TSE (Tokyo Stock Exchange) 09:00-11:30 | 12:30-15:00
- HKE (Hong Kong Stock Exchange) 09:30-16:00
- LSE (London Stock Exchange) 08:00-16:30
- NASDAQ and NYSE (New York Stock Exchange) 09:30-16:00
How to Read Financial News Redux: Process Determines Priorities & Understanding Consensus & Separate the Narrative from the Noise.
- The stock market is designed to transfer money from the active to the patient -- Warren Buffett.
- 40 Stock Market Terms That Every Beginner Should Know--visualcapitalist.com.
- Bloomberg TV US LIVE / Asia LIVE / Europe LIVE; Bloomberg Radio.
- SHCOMP - Shanghai Composite Index (Bloomberg) / SHANGHAI Composite (Google)
- SZSE Component Index (Google)
- NYSE: BRK.B Berkshire Hathaway Inc. Class B
SEC.gov | Company Search Page; see also Full Text Search (advanced)
SEC.gov | How Investigations Work - The SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. Here the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud. Crucial to the SEC's effectiveness in each of these areas is its enforcement authority. Each year the SEC brings hundreds of civil enforcement actions against individuals and companies for violation of the securities laws. Typical infractions include insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them. One of the major sources of information on which the SEC relies to bring enforcement action is investors themselves — another reason that educated and careful investors are so critical to the functioning of efficient markets. To help support investor education, the SEC offers the public a wealth of educational information on this Internet website, which also includes the EDGAR database of disclosure documents that public companies are required to file with the Commission.
SEC.gov | How Investigations Work - The SEC oversees the key participants in the securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. Here the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud. Crucial to the SEC's effectiveness in each of these areas is its enforcement authority. Each year the SEC brings hundreds of civil enforcement actions against individuals and companies for violation of the securities laws. Typical infractions include insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them. One of the major sources of information on which the SEC relies to bring enforcement action is investors themselves — another reason that educated and careful investors are so critical to the functioning of efficient markets. To help support investor education, the SEC offers the public a wealth of educational information on this Internet website, which also includes the EDGAR database of disclosure documents that public companies are required to file with the Commission.
Profits explained | Finance Decoded FT.com video: Jonathan Guthrie explains how companies calculate their profit, what investors should be wary of and the different measures used to gauge how a company is really performing (video published Feb 17, 2016).
Peter Lynch on investing:
Still following the market at age 71--(he has no plans to abandon the stock market for other leisure pursuits, “It’s a fun exercise, beats the hell out of golf" ... Lynch spends time calling companies, listening to earnings calls and reading transcripts)--investor Peter Lynch explains his philosophy this way: Use your specialized knowledge to home in on stocks you can analyze, study them and then decide if they’re worth owning. The best way to invest is to look at companies competing in the field where you work ... "If you’re in the steel industry and it ever turns around, you’ll see it before I do.” The popular-wisdom version of his ideology is mistakenly often cited as “invest in what you know,” which leaves out the role of serious fundamental stock research. “People buy a stock and they know nothing about it,” he says. “That’s gambling and it’s not good.” Lynch’s advice for small investors: Picking individual stocks is hard even for the professionals--"if you can’t understand the balance sheet, you probably shouldn’t own it.” Source: Peter Lynch, 25 Years Later: It’s Not Just ‘Invest in What You Know’ - WSJ Dec. 6, 2015
Where Markets Fail: Visible Hands | CFA Institute Enterprising Investor
Memos from Howard Marks
Shortcuts to Factor Investing 101 | blogs.cfainstitute.org: "Smart beta and factor investing are just fashionable marketing labels for a wide range of risk-based approaches that sit somewhere beyond active and passive investment management but possess attributes of both. In essence, smart beta and factor investing combine the disciplined rules-based approach of market-cap weighted passive funds with the discretionary selection of whichever chosen factors or index series those who use them hope to replicate."
See also on Domain Mondo: Investing, Jack Bogle, Warren Buffett, S&P 500 Index, US, China
Where Markets Fail: Visible Hands | CFA Institute Enterprising Investor
Memos from Howard Marks
Shortcuts to Factor Investing 101 | blogs.cfainstitute.org: "Smart beta and factor investing are just fashionable marketing labels for a wide range of risk-based approaches that sit somewhere beyond active and passive investment management but possess attributes of both. In essence, smart beta and factor investing combine the disciplined rules-based approach of market-cap weighted passive funds with the discretionary selection of whichever chosen factors or index series those who use them hope to replicate."
Common Terms: Infographic: Here's 40 Stock Market Terms That Every Beginner Should Know | visualcapitalist.com
Operating Profits
"The basis for all sustainable shareholder returns is operating profits, not, repeat NOT revenue. Profit is the source of all future dividends, it is the basis for increased book value via retained earnings. The art of investing involves buying future levels of profitability at a significantly low price to make the whole venture worthwhile. Thus, one of the first things we look at when considering an investment is the level of operating profits the firm manages to generate relative to the capital provided by owners and creditors ..."--Web.com And The Problem With Growth Investing | Seeking Alpha, Nov 8, 2015.
"Accounting games are also making the profits reported by companies much less trustworthy which, in turn, means P/E ratios are even more out of whack. Ciesielski, who writes The Analyst’s Accounting Observer ... [says] accounting manipulation has become very widespread and companies are using gimmicks to make profits look better. Company executives ...“all have a huge incentive to puff their numbers”... much of their compensation [is] tied to their stock’s performance. ... companies used to report profits according to Generally Accepted Accounting Principles — called GAAP for short. That meant all companies had to follow certain rules so that investors were able to compare apples to apples ... companies are now using creative accounting. GAAP has fallen between the cracks. The use of so-called “extraordinary items” and “non-cash charges” has made corporate earnings reports incomprehensible. “Non-GAAP earnings are more akin to anarchy,” says Ciesielski. ... How many companies are pulling these accounting tricks? Ciesielski says that, in 2009, 232 of the 500 companies in the S&P index were using tricks — thus straying from GAAP. Last year, 334 companies were doing so. Hundreds of billions in extra corporate profits were being reported simply by razzle-dazzle. It’s not that profits were actually higher — they were just made to look so." source: The secret stock market accounting trick | New York Post
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization - essentially net income with interest, taxes, depreciation, and amortization added. Often used to analyze and compare profitability between companies and industries, minimizing effects of financing and accounting decisions.
"Accounting games are also making the profits reported by companies much less trustworthy which, in turn, means P/E ratios are even more out of whack. Ciesielski, who writes The Analyst’s Accounting Observer ... [says] accounting manipulation has become very widespread and companies are using gimmicks to make profits look better. Company executives ...“all have a huge incentive to puff their numbers”... much of their compensation [is] tied to their stock’s performance. ... companies used to report profits according to Generally Accepted Accounting Principles — called GAAP for short. That meant all companies had to follow certain rules so that investors were able to compare apples to apples ... companies are now using creative accounting. GAAP has fallen between the cracks. The use of so-called “extraordinary items” and “non-cash charges” has made corporate earnings reports incomprehensible. “Non-GAAP earnings are more akin to anarchy,” says Ciesielski. ... How many companies are pulling these accounting tricks? Ciesielski says that, in 2009, 232 of the 500 companies in the S&P index were using tricks — thus straying from GAAP. Last year, 334 companies were doing so. Hundreds of billions in extra corporate profits were being reported simply by razzle-dazzle. It’s not that profits were actually higher — they were just made to look so." source: The secret stock market accounting trick | New York Post
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization - essentially net income with interest, taxes, depreciation, and amortization added. Often used to analyze and compare profitability between companies and industries, minimizing effects of financing and accounting decisions.
Revenue is the income (before deducting expenses) that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Profits or net income generally imply total revenue minus total expenses in a given period. Source: Wikipedia
Risk Assets generally refer to assets that have a significant degree of price volatility, such as equities, commodities, high-yield bonds, real estate and currencies.
Market liquidity | Wikipedia.org: "In business, economics or investment, market liquidity is a market's ability to purchase or sell an asset without causing drastic change in the asset's price. Equivalently, an asset's market liquidity (or simply "an asset's liquidity") describes the asset's ability to sell quickly without having to reduce its price to a significant degree. Liquidity is about how big the trade-off is between the speed of the sale and the price it can be sold for. In a liquid market, the trade-off is mild: selling quickly will not reduce the price much. In a relatively illiquid market, selling it quickly will require cutting its price by some amount. Money, or cash, is the most liquid asset, because it can be "sold" for goods and services instantly with no loss of value. There is no wait for a suitable buyer of the cash. There is no trade-off between speed and value. It can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs."
Fungibility | Wikipedia.org: "Fungibility is different from liquidity. A good is liquid if it can be easily exchanged for money or another different good. A good is fungible if one unit of the good is substantially equivalent to another unit of the same good of the same quality at the same time and place."
- Prior entries in archive: Markets & Stocks Archive (pdf).
