โ Club Cafe
Sort order
This is the main area of our club, where I shall post articles of topical interest. Feel free to comment and share, and please give us feedback on what sort of articles you would like to see. If you are not a member, you can join here. Members can post in the Forum and specialists can post in the other dedicated areas.ย
Circle is now beta testing the iphone app. This should be a big improvement over the solely desktop version. You are free to join the beta test here. I downloaded Testflight on the App store then clicked this link and was in straight away and I think it looks quite good - let me know what you think.
- We have the most uncertain economic outlook in history
- We have the highest stockmarket valuation in history
- oh, and we have the highest debt in history.
He is a legend at spotting bubbles but even he admits that
- this time is different and
- that there is extreme uncertainty about how it pans out.
But he makes some great points on current actions by the authorities:
- Stimulus does not create jobs. You can print $2tn of money or 10% of GDP but it won't reduce the double digit unemployment rate.
I only partly agree with this - they have to do something and some jobs will be created or at least not lost, but see the next point:
- if you print money without creating more output, you have the same amount of services and products floating around the system and more money - the price of those services or products will rise and that means inflation. That is the inevitable end game.
Grantham isย a generational thinker: On commodities, he thinks about three groups:
- Oil: we have passed peak oil demand, and shale has had a massive and fast ramp-up but there is not enough of it to keep prices low (demand will help).
- Metals: the real price of most metals has fallen in the last 100 years. That decline is over, apart from plentiful iron and aluminium. Other metals will be increasingly scarce and more expensive in the next generation.ย
- Food: It will be increasingly difficult to feed the planet and not enough is being done about soil erosion, insect destruction and many other issues.
On the virus, Grantham points out that developed countries have done an awful job. Taiwan, New Zealand, S Korea and many other countries in Asia have handled it well. Elsewhere, only Germany gets a pass.ย UK performance was woeful and he highlights that Massachusetts and New York are as bad as England. A lack of joined-up thinking is the main culprit - a lesson there for investors.
Vote with your feet
Grantham may have been one of the founders of GMO but his foundation is 60% invested in venture capital and his target is 70%. Asked if he would recommend a career in public equities, he was unequivocal: public equities is a zero sum game, venture capital is an additive game. Insightful.
Don't miss this podcast!
Enjoy this? Not a member? Why not sign up soon and enjoy more great content - it's FREE!ย
I would agree with most of this.ย However the problem is timing.ย If the problem is not manifesting itself in the next few years, the markets will likely ignore the message. ย
Food security has been a major issue for mankind since we appeared on the planet.ย The likely victim of food insecurity is Africa, which also doesn't have the money to drive the price up.ย People will simply starve.
Food security has been a major issue for mankind since we appeared on the planet.ย The likely victim of food insecurity is Africa, which also doesn't have the money to drive the price up.ย People will simply starve.
This is a great essay by Paul Graham on the need to cultivate curiosity to maintain independence of mind - this is a factor critical to investment success.
The three components of independent-mindedness work in concert: fastidiousness about truth and resistance to being told what to think leave space in your brain, and curiosity finds new ideas to fill it.
I really enjoyed this short read.
๏ปฟ
I had a most enjoyable Zoom call with a US professional investor who writes a blog under the pseudonym The Science of Hitting. We met on Twitter and I have a healthy and growing respect for FinTwit - check out his feed and the article below, published on GuruFocus. He argues that Microsoft is a great company but questions its valuation.
Enjoy this? Not a member? Why not sign up here and enjoy more great content - it's FREE!ย
Enjoy this? Not a member? Why not sign up here and enjoy more great content - it's FREE!ย
In the Library under Current Markets and Outlook Q4 20, you will find a digest of US cities daily economic activity - this is a really helpful tool when analysing the Covid recovery and in each area. Cascend have some interesting ideas on applications eg using electricity consumption to track air conditioning usage and assess ESG impact etc. I have attached below for ease.
Interesting piece on the outlook for earnings by John Authers. Suggests that my caution has been misplaced, but I am not sure why Starbucks said "we finished the quarter with the comparable store sales decline of 4% for the month of September". I believe them, obviously, but it's a surprising result. Worth reading this.
One would have thought that Covid and lockdown would have reduced the emphasis on this quarter's earnings. Not so, it seems.......
With 312 of the S&P500 companies having reported, 82% came in above expectations on earnings! Extraordinary, really. More realistic was the 68% beat on revenues.
Worst sectors were real estate, energy, and communication services.
Best were tech, healthcare and, surprisingly, industrials.
Q2 earnings growth was -34%.
Q2 revenue growth was -10%.
Full report attached.
ย
With 312 of the S&P500 companies having reported, 82% came in above expectations on earnings! Extraordinary, really. More realistic was the 68% beat on revenues.
Worst sectors were real estate, energy, and communication services.
Best were tech, healthcare and, surprisingly, industrials.
Q2 earnings growth was -34%.
Q2 revenue growth was -10%.
Full report attached.
ย
