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
For Subscribers
This week I will be sharing the last of my reports from Q3’s earnings roundup, on Lululemon. I have a number of things in store for the end of the year too, including some reflection on the year’s performance, another company spotlight issue, and some insight into the newsletter’s progression.
The Guest Interview flywheel is also being spun up again and I have reached out to a few people so far, so expect to see some more of those in the new year.
FYI: This Sunday, which is Boxing Day here in the UK, there will be a one-week hiatus for Market Talk, as I spend this time with my family and loved ones for Christmas.
📈 Market Action 📉
Here are your quick updates from the past week for various asset classes.
Global Equities
Source: (FinViz)
The S&P 500
Source: (FinViz)
Sectoral ETFs for the US
Source: (SPDRIndustryETFs)
🌎 Global Indices 🌎
The Americas
Source: (Koyfin)
Europe & UK
Source: (Koyfin)
Asia
Source: (Koyfin)
🔇 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 26 down from 38 last week.
Source: (CNN)
Volatility
The CBOE VIX closed at 21.57, down from 18.70 the week before.
Major Earnings for the Coming Week
Some of the major earnings for the upcoming week, compiled by Fincredible.
Source: (Fincredible)
Upcoming IPOs
Source: (Nasdaq)
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) CEOs and Stock Prices
Length: Moderate Read
Source: (Musings on Markets)
In the wake of Dorsey’s exit from Twitter, Aswath Damodaran discusses what makes for a “great CEO”, what happens when mismatches occur between company and CEO, handling mismanaged transitions, and touches on the relationships between founders and their companies.
“ I believe that the discussion of what makes for a great CEO is flawed for a simple reason. There is no one template that works for all companies, and one way to see why is to bring in the notion that companies go through a life cycle, from start-ups (at birth) to maturity (middle age) to decline (old age). At each stage of the life cycle, the focus in the company changes, as do the qualities that top managers have to bring for success. Early in the life cycle, as a company struggles to find traction with a business idea that meets an unmet demand, you need a visionary as a CEO, capable of thinking outside the box, and with the capacity to draw employees and investors to that vision.
As the products/services offered by the company scale up, the capacity to build businesses becomes front and center, as production facilities have to be built, and supply chains put in place, critical for business success, but clearly not as exciting as selling visions. Once the initial idea has become a business success, the needs to keep scaling up may require coming up with extensions of existing product lines or geographies to grow, where an opportunistic, quick-acting CEO can make a difference.
2) Measuring the Moat
Length: Dense Read
Source: (Credit Suisse)
Another Michael Mauboussin and Dan Callahan fixture this week (I share their work a lot). This time, a 52-page document (from 2016) focussed on assessing the magnitude and sustainability of value creation. AKA, how to measure a moat.
Probably one to store away in your bookmarks for later reading, but a valuable resource to highlight (which is why I write Market Talk every Sunday). Discussing everything from life cycles to moats, to industry analysis, porter’s five forces, firm-specific frameworks, brands, mean regression, and skill & luck, this is a great find. Complete with checklists and frameworks to allow you to incorporate the findings into your own process.
“Stock prices reflect expectations for future financial performance. Accordingly, an investor’s task is to anticipate revisions in those expectations. A firm grasp of the prospects for value creation is a critical facet of this analysis. But value creation by itself does not lead to superior stock price performance if the market fully anticipates that value creation. The expectations investing process has three parts.
1. Estimate price-implied expectations. We first read the expectations embedded in a stock with a longterm discounted cash flow model (DCF). We use a DCF model because it mirrors the way the market prices stocks.
2. Identify expectations opportunities. Once we understand expectations, we apply the appropriate strategic and financial tools to determine where and when revisions are likely to occur. A proper expectations analysis reveals whether a stock price is most sensitive to revisions in a company’s sales, operating costs, or investment needs so that investors can focus on the revisions that matter most. The strategic analysis in this report is the heart of security analysis and provides the surest means to anticipate expectations revisions.
3. Buy, sell, or hold. Using expected-value analysis, we are now in a position to make informed buy, sell, or hold decisions.”
3) Speculation in 1980s Taiwan
Length: Moderate Read
Source: (Asian Century Stocks)
I can’t quite remember how this article, written back in June, resurfaced its way into my line of sight, but I am glad it did. Michael Fritzell, author of Asian Century Stocks (the best newsletter for all things Asia) write this piece narrating the rise and collapse of the bubble that gripped Taiwan in the 1980s; a period when “stock prices went up by more than 12x in less than four years”.
Michael walks the reader through the entire ordeal from the emerging market success story (1949-1985) to the eventual “crescendo” (1988-1990), followed up by illustrating the investor denial that took place during the crash, the aftershock which followed and concluding by looking at the current bout of speculation that has crept back into the Taiex since 2020.
If you like markets, history, Asia, and great storytelling, then you will love this. Hands down the most enjoyable thing I read this week.
“The central bank issued new brokerage licenses and eased listing requirements. There was a huge increase in the number of licensed brokerages, from 27 in June 1988 to 297 in March 1990. Easily available but generally illegal, margin credit was provided through many of these brokers. The new brokerage firms pushed stocks to retail investors. The larger cities Taipei and Kaohsiung were blanketed with new brokerage offices. The major firms then set up new shops in the secondary cities of Taichung, Tainan, Chiayi, Hsinchu and Changwha. When those reached saturation, brokerage firms finally opened up offices in even the most obscure country villages like Shalu, Fuhsing, Chubei, Huwei, Wuchi, and Huaton. Looking for new market niches, brokers established offices specifically targeted at housewives, doctors, farmers and students to lure more customers in.
In 1985, there were only 400,000 investors in Taiwan. By the end of 1990's first quarter, active brokerage accounts reached 4.6 million in a country with a population of just 20 million.”
4) On Ambition
Length: Moderate Read
Source: (Neckar’s Insecurity Analysis)
Neckar’s writing has become one of my favourite sources for reflection. His candour is refreshing particularly for myself as we both write substacks and are surrounded by similar digital environments. This piece focuses on ambition and the importance of the Inner Game.
“When I look at other creators on Twitter it sometimes seems like they simultaneously build a startup, invest a fund, host a podcast, create a DAO, and write a book. Oh, and raise children while they’re at it. They seem to aim higher, move faster, and scale better. I look at my own life and hear a familiar voice: You’re writing a substack? That’s it? What are you doing all day? Where is your sense of urgency? Where is your ambition?
Which is why I’m convinced that the “inner game” is the most valuable skill, if you can call it that, I’m learning right now. Not letting these thoughts drive me insane seems pretty important to everything else.”
Other Items I Read This Week
Note: ($) indicates there is a paywall on this content.
• Doomberg: There’s Not Enough Oil
• Institutional Investor: How J.P. Morgan Is Putting Data Science Into Practice
• Vision Investing Viewpoints: Investing: Is it skill or luck?
• Baillie Gifford: We Need to Talk about Inflation
• Investing City: Optimal Research
• IE: A private equity approach to public markets
• Crosswind Capital: Modern Prosperity
• Of Dollars and Dara: The Age of Financial Misinformation
🕵️ Company Insight 🕵️
• MBI Deep Dives (SPOT): Spotify: Play the Audio ($)
• The Science of Hitting (TWTR): Has Twitter Truly Changed? ($)
• Compound248 (TWTR): An Open Letter to Twitter Leadership
• Plum Capital (UAN): Plum's Best Commodities Play
• AGB (POOL): Pool Corp Deep Dive
• Tech Crunch (SQ): Cash App Allows Stock and Bitcoin Gifting
• Insider (LYFT): Lyft Announce Major Push into Food Delivery
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.
Rob Koyfman - Fintech Founder
The Business Brew
I am sure many of you have used Ycharts, Koyfin, QuickFS, Tikr, or Tradingview before. The space for financial data dashboards is hotting up and I have found myself rotating between the above list numerous times over the last few years. Currently, after migrating away from Ycharts, I now use Koyfin and QuickFS.
I once had the pleasure of hopping on a call with Rob Koyfman. Mostly as a way of giving him feedback, and for him to show me the depths of the product (there were many functions I now use that didn’t know existed beforehand).
In this discussion with Bill Brewster, Rob outlines the stimulus for the desire to create this ‘Bloomberg Lite’ product, discusses the inner workings of the business and explains what the overarching goals for Koyfin are. Given there are visuals, I recommend watching the YouTube version for the best experience.
Host: Bill Brewster
Guest: Rob Koyfman
Conor,
Author of Investment Talk