Market Talk, December 12th 2021
Market Talk is a free Sunday issue, where I share a curation of the best things I have consumed during the week.
Each Sunday I will share:
• A Quick update on what’s coming for IT Subscribers
• The greatest articles I have read during the week
• The best pieces of company-related insights I have consumed over the week
• One stellar podcast or interview
After sending out Part 1 (Etsy, PayPal, Square) of my earnings recap (where I look to provide more concise thoughts on the six companies I am yet to comment on), I will release Part 2 (IAC, Alphabet, Sea Limited) next week. Following that, I will issue a full report on Lululemon. Otherwise, I am still working on the upcoming Company Spotlight issue for December.
Seeing as it’s Christmas if you know of anyone who may be interested in my writings or supporting Investment Talk, the option to gift a subscription is now available on Substack :)
📈 Market Action 📉
Here are your quick updates from the past week for various asset classes.
The S&P 500
Sectoral ETFs for the US
🌎 Global Indices 🌎
Europe & UK
🔇 US Market Sentiment 🔇
Fear & Greed Index
The CNN Greed and Fear Index measures market sentiment based on seven factors; momentum, price strength, price breadth, put/call ratios, junk bond demand, volatility, and safe-haven demand.
The current reading stands at 38 up from 20 last week.
The CBOE VIX closed at 18.70, down from 30.75 the week before.
Major Earnings for the Coming Week
Some of the major earnings for the upcoming week, compiled by Fincredible.
Articles of the Week
Here is a shortlist of a few interesting pieces that I have read over the course of the week, to feed your mind.
Note, these articles are not numerically listed in order of perceived value.
To access the suggested article, click the purple link after the source subheading.
1) The Many Worlds of Enough
Length: Dense Read
Source: (More to That)
Lawrence Yeo is one of those authors with a gift for storytelling. In this piece, he discusses the internal motivation to aim towards generating what we see as “enough” wealth to become content and the pitfalls that come with that. “That greed resets any goals you once had, and short of becoming a monk, you are destined to shift that goal by a few more commas.”
I struggled to put into words how great this piece is for fear of doing it an injustice. I suggest you just read it and soak in the lesson.
“That final word is often viewed as the antidote to any strain of desire. That if you could stop moving the goalpost, you’ll be able to disregard the pull of greed, longing, or any variant of these feelings. To a large extent, this is true. By defining what enough means, you’re giving yourself a concrete barometer to judge your desires by, and whether or not they are worth having. It’s the best way to tell your future self, “Hey, don’t forget where you come from.”
The problem, however, is that this future self is a projection of your present-day desires. When you’re defining what enough means, you’re effectively saying, “Given what I want today, I just need this much more of it to be satisfied in the future.” But how plausible is it that what you want today will remain unchanged as you march onward to your goal?
Oftentimes, we envision our progress toward Enough as a continuous journey between where we are now, and where we want to be. Enough is elusive because when you reach it, you’re no longer the person that once desired it. Once you occupy an entirely new world, that prior version of yourself is largely inaccessible.”
2) Nintendo Comes to a Fork in the Road
Length: Moderate Read
Source: (Ensemble Capital)
Granted I usually save company-related publications for the ‘Other’ segment, but this piece on Nintendo by Ensemble Capital was thoughtful enough to include here. The cyclical nature of Nintendo (lead by the rise and maturity of their generations of hardware) is an interesting phenomenon. As they approach the maturity of their latest flagship product, the Nintendo Switch, unit sales of the hardware are projected to decline YoY across the next 5-years. History has shown the share price correlates with this decline.
However, the team at Ensemble are bold enough to utter the four most dangerous words in the stock market; “this time is different”. Arguing that the “table is set for Nintendo to enter a new phase that would benefit all stakeholders”. A fascinating read, indeed.
“There’s no question that, with Switch in its sixth year, we’ve reached a fork in the road. Either Nintendo goes back to the “same old” Nintendo or it executes on a new strategy that smooths out console cycles and generates higher-margin revenue through higher digital software sales and subscriptions.
To us, all indications point to Nintendo management recognizing that this time is different. The table is set for Nintendo to enter a new phase that would benefit all stakeholders. Management only needs to, borrowing the phrase from Yogi Berra, take the fork in the road. We believe they’re taking steps in that direction.”
3) Volatility Takes a Bite
Length: Light Read
Source: (Woodlock House Capital)
Chris Mayer’s investing style may not be for everyone (author of 100-baggers) but I find his writings on the mental side of holding LT to be insightful. I personally don’t seek 100-baggers (a 2 or 5 bagger would suffice) but I do align with the idea that LT ownership of a business will endure periods of relative ‘cheapness’, ‘fairly priced’ and ‘exorbitant’ market valuations. Holding throughout each of those periods is hard graft.
In this piece, Mayer shares his thoughts on avoiding the daily blow-by-blow on share prices.
“Those prices flashing before your eyes cry out for action. Feeding that into your brain every day (or worse, multiples times a day) invariably compresses timeframes and makes every day seem important. Then before you know it, you are one of those people who go around with explanations for why such-and-such stock was up (or down) that day. Seems a recipe for madness. (As Gandalf said in Lord of the Rings: "Tell me, friend, when did Saruman The Wise abandon reason for madness?" I don’t know if this quote really applies here, but I felt like sticking it in).
I prefer to cultivate a general awareness of where prices are. But I couldn’t help myself after we closed the books on the month of November because it was an interesting and unusual month. Also because, frankly, it meted out some unusual pain.”
4) Trading Engineered: How to Read Stock Charts
Length: Moderate Read
Source: (Trading Engineered)
This is less of a “this article was great” and more of a “Richard Moglen does great work” type of entry into Market Talk. Whilst this particular issue was great for those looking to learn how to understand TA, I wanted to quickly highlight Richard’s newsletter today.
In my own writing, I am not a frequenter of the TA school of thought. But I realise that some of my readers either; (1) use technical analysis or (2) would like to learn how to. As such, I would recommend checking out Richard’s substack, Trading Engineered. Richard is one of the hardest working young investors I know and is a pupil of the CANSLIM method. (I interviewed him a while back, so check that out for more context).
The reason I write Market Talk is to highlight interesting research or investors for readers so that they can discover and learn. Richard’s work has an education-bent, so would be great for newcomers, or those looking to sharpen their TA skills.
Other Items I Read This Week
Note: ($) indicates there is a paywall on this content.
• The Reformed Broker: The Volatility is the Point
• Doomberg: How to Brick an Entire Economy
• Stephen Diehl: Web3 is Bullshit
🕵️ Company Insight 🕵️
• Enlightened Capital (FRC): A rare bank compounder
• Invest Karo India (HEROMOTOCO): The Business of Hero Moto Corp
• Financial Times (SBUX): Starbucks workers approve first US union at Buffalo store
• Tech Crunch (MTCH): Tinder partners with Spotify to launch ‘Music Mode’ feature
• The Verge (MVRS): Meta opens up access to its VR social platform Horizon Worlds
• The Verge (MVRS): WhatsApp launches cryptocurrency payments pilot in the US
• Ensemble Capital (NTDOY): Nintendo Comes to a Fork in the Road
• Stretechery (AMZN): The Amazon Empire Strikes Back
• Compounding Curiosity (SE): Punch Card Investor, Sea Ltd Deep Dive
• Tech Crunch (TWTR): Twitter acquires Quill
Podcast of the Week
There is a huge range of Podcasts to listen to, and the choice can feel quite saturated at times. Here, I will share one podcast I listened to during the week, that I feel is worth your time.
Michael Mauboussin Master Class
In this episode of Acquired hosts Ben and David sit down with Michael Mauboussin to discuss skill and luck, moats and how they are measured, VC, decision making, expectations investing, and how to parse valuations in the current market environment. The title does is justice, it is a masterclass for all listeners.
Guest: Michael Mauboussin
Thank you for reading Market Talk and have a great week,
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