What was true for the Bailey Bros. Building & Loan in “It’s a Wonderful Life” still rings true for J.P. Morgan today: If too many depositors demand their money back at the same time (a bank “run”), you can’t pay them all, and the bank fails.
At the same time, we can’t help but see the similarities between the hype surrounding how AI is going to disrupt the way we live and learn with the excitement over how cryptocurrencies were going to replace government-issued currencies and “de-fi” (decentralized finance) was going to render our current financial system obsolete.
Indeed, the very first Bitcoin was “mined” in 2009. By late 2021, the market value of cryptocurrencies reached a staggering $3 trillion.
The combination of COVID and Russia’s invasion of Ukraine delivered the coup de grace to globalization by exposing the fragility of interdependence and risks of offshoring.
Warren Buffett famously said, “It’s only when the tide goes out that you learn who has been swimming naked.” Indeed, ultra-low interest rates were the tide that lifted all boats.
Absent a bodacious post-midterm election bounce and/or late-year “Santa Claus” rally, stock and bond mutual funds seem likely to end 2022 in deeply negative territory.
Two of the greatest minds in investing believe economic and market forecasts offer only the illusion of certainty and you should never base your decisions on them.
Historically, stock prices have been: 1. weaker in MTEYs (median annualized return of 3.1% for the Dow Jones industrial average going back to 1900) than in years one (12.7%), three (14.8%) or four (7.4%) of a presidential cycle, but, 2. stronger in the months immediately following the election itself.
We are currently in a bear market (usually defined as declines greater than 20%). This is not something to be feared—just understood.
The narrative of abundant, ultra-cheap credit was a tide that lifted asset classes of all types.
Low interest rates spur economic growth by making it cheaper to borrow and spend. Conversely, higher rates can slow an overheating, inflationary economy.
The U.S. Securities and Exchange Commission has proposed new climate-related disclosures that will be a tremendous burden on oil and gas companies.
It’s important to note that, while stock prices can be extraordinarily volatile (like recently), the intrinsic values of the underlying businesses are much less so.
The process-oriented coach or investor takes the action with the highest chance of success.
Investors should expect more modest returns in 2022.
Investors consistently hurt themselves with wrong-footed attempts to “time the market” and by chasing past performance, when they would be far better off to “keep it simple, stupid,” or KISS.
Algorithms are cheap, don’t eat much and never get sick. However, as Zillow can attest, they can also kill you.
COVID revealed the fragility of the global supply chain; when it’s broken, it’s all over the headlines. When you can’t get what you want, it’s all you think about.
As the calendar flips to October, investors will face various scary “ghosts and goblins,” including the collapse of one of China’s largest real estate developers (China Evergrande Group), the recurring brinksmanship over raising the debt ceiling to forestall a government default/shutdown, and the Federal Reserve’s removing pandemic-related emergency measures.
ARK Innovation was up a stunning 147.8% in 2020 (versus the S&P 500 total return of 18.4%), which led to Wood’s assets under management surging from less than $10 billion at the end of 2019 to almost $85 billion today.
