Market Talk, December 5th 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
I am currently getting into the weeds of the latest company spotlight issue, which should be released shortly. Besides that, expect a few more ‘thoughts from the quarter’ from some of the companies I hold. This Monday, I plan to share a more personal memo around the topics of savings.
I have a few things planned for the end of the year, such as a full-year recap of what I learned in the market this year, complete with the performance of my own portfolio. I am also planning to write about the Newsletter at a high level, sharing some lessons learned, the small wins, the growth, and what’s next for 2022.
📈 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 20 down from 31 last week.
The CBOE VIX closed at 30.75, remaining elevated from 28.62 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) My Investment Philosophy
Length: Moderate Read
Source: (The Science of Hitting)
Alex Morris (Author of The Science of Hitting) put out a great memo on his investment philosophy this week. Highlighting the key tenants to his approach (long term holdings, high-quality businesses, a concentrated portfolio, valuations and modelling), this is a must-read for any long-term investor.
Besides the granular detail that Alex goes into for each tenant, the authorship style, a byproduct of over 10-years of writing, makes this an informative, fun, and highly insightful read. I am personally an avid reader of The Science of Hitting, and this is one of my favourite memos to date. I learn a great deal from Alex both as a writer and an investor.
“This comment from Chuck Akre’s Q3 2007 partner (investor) letter is worth thinking about:
“The majority of the time, we are allocating our dollars to better than average businesses at ‘fair’ prices, and only occasionally do we get an opportunity to buy these businesses at ‘bargain’ prices.”
Akre has narrowed his opportunity set to a single bucket (“better than average businesses”). And as his team has noted subsequently, it’s quite a restrictive definition: “Of thousands of publicly traded companies, there are probably fewer than 100 that meet our criteria”. Personally, I accept the trade-offs associated with this approach: Anything that does not pass the quality filter is no longer under consideration as a potential investment, no matter how attractive the valuation appears, or actually is. (As Buffett put it, “I don’t have to make money in every game.”) I’ve chosen the sand box I want to play in, and I’m focused on finding the best investments available to me within that clearly defined opportunity set. Given that I’m only likely to own about 5-15 companies at any given time (more on this below), I’ve found there is still ample room to find attractive investments despite this constraint.
2) How This All Happened
Length: Moderate Read
Source: (Collaborative Fund)
Unlike most of Morgan Housel’s memos on the Collaborative Fund blog (which tend to be concise and short in length), this particular piece was an excellent 5,000-word essay on the past 73 years (1945 to 2018) of US economic History.
For those looking to step back in time, or sharpen up/refresh their knowledge of US history, this makes more an enjoyable trip down memory lane.
“If you fell asleep in 1945 and woke up in 2018 you would not recognize the world around you. The amount of growth that took place during that period is virtually unprecedented. If you learned that there have been no nuclear attacks since 1945, you’d be shocked. If you saw the level of wealth in New York and San Francisco, you’d be shocked. If you compared it to the poverty of Detroit, you’d be shocked. If you saw the price of homes, college tuition, and health care, you’d be shocked. Our politics would blow your mind. And if you tried to think of a reasonable narrative of how it all happened, my guess is you’d be totally wrong. Because it isn’t intuitive, and it wasn’t foreseeable 73 years ago.
Here’s how this all happened.”
3) A Founder’s Guide to Community
Length: Dense Read
Source: (Lenny’s Newsletter)
Lenny’s Newsletter is not strictly related to investing, but more so the inner workings of businesses. So, really, it is related to investing as understanding these concepts can help you more readily identify a great business, or a business that has the hallmarks of potentially becoming a great business.
I digress. This particular issue spoke to me as it relates to something I am trying to do here at Investment Talk. Build a community. Whilst the scope of the piece goes deep into the more technical aspects, the parts discussing the base-level strengths of building a community were useful to me as a writer.
After one kind subscriber suggested I create a Discord for everyone to converse, some 6 months ago now, I quickly discovered that these micro-communities can quickly become self-sustaining. Shortly after, I discovered that the Discord had become my favourite aspect of writing this newsletter. Business aside, it allowed me to connect with readers, as well as allowing readers to connect with others readers. Thus, I am always searching for insights into how to make this community stronger, better, more fun, and so on. That’s how this piece spoke to me, but outside of that, the piece does a great job of explaining more business-related material. Another piece I enjoyed from this publication was “How the biggest consumer apps got their first 1,000 users”.
The one quote I wanted to share from the community piece is short, but is panoptic enough in its own right.
“To build an audience, you help people.
To build a community, you help people help each other.”
4) Gratitude, Desire, and a Money Paradox
Length: Light Read
Source: (Neckar’s Insecurity Analysis)
In order to truly connect with the story that a writer or an orator presents to the reader/listener, there has to be a sense of vulnerability. This is something I have grown to appreciate. Alongside candour, it reminds the reader that everyone struggles and, as humans, we are all walking along the same path; winning and struggling in tandem. Most often people chose to selectively share the latter, if at all.
Frederik Gieschen (author) is (a) a great wordsmith and; (b) someone who doesn’t shy from revealing vulnerability and transparent thought. In this article, he shares a short story about the paradox of money. More specifically, the anxiety that follows the desire to never worry about money. In wishing to not worry about money (in the future), the worry naturally bloats in stature in the present day.
“Using money as a scorecard was bound to lead to perpetual frustration, especially in a place like New York which, as Paul Graham wrote, “tells you, above all: you should make more money.” Great read all around. Got me thinking, and that’s what I look for in the content I read.
“I realized that my desires require time and attention much more than money. It was a paradox: What I wanted was to not ever have to worry about money again. Instead, all I worried about was money. As Tim Ferris said, “An obsession with security breeds a feeling of insecurity.”
Money was supposed to provide safety. Instead, an obsession with money made me feel anxious and inadequate. I failed to appreciate what I already had. To reach an imagined state of freedom, I focused my time and attention on money. I encaged myself and ended up with neither.”
Other Items I Read This Week
Note: ($) indicates there is a paywall on this content.
• Uncover Alpha: The Assets of the Metaverse
• Alex Morris from The Science of Hitting: AMA
• Sleepwell Capital: A Duel of Capital Allocators & The Perils of Investing Heroes
• Trading Engineered: How to Time the Market
• A Wealth of Common Sense: Picking the Losers is Easier Than Picking the Winners in the Stock Market
• Dividend Growth Investor: Who Owns US stocks?
🕵️ Company Insight 🕵️
• Galician Investor (ABNB): A new and safe way to travel
• Plum Capital (IEA): The One to Average Down
• Stratechery (TWTR): Twitter Has a New CEO; What About a New Business Model?
• MacroOps Musings (AUTO): AutoStore Holdings
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.
Expert: Yen Liow
Readers will know that I am a big fan of Yen Liow, so this conversational-style discussion with Alec and Bryce (Co-Founders at Equity Mates) had been on my ‘to-listen’ list for a week or so.
After catching up with the ~50-minute conversation, I felt it was worthy of sharing in Market Talk this week. Walking through the story of Yen’s first investment, Aravt's investment philosophy, and his thoughts on the future of the payments industry, the discussion excretes a number of nuggets and had me laughing a couple of times. A little more casual than most of Yen’s interviews.
Guest: Yen Liow
Thank you for reading Market Talk and have a great week,
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