How I Talked Myself Out Of Worrying About War, Inflation, And Rate Hikes

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How I Talked Myself Out Of Worrying About War, Inflation, And Rate Hikes

seekingalpha2022-03-10

tdub303/E+ via Getty Images2022 has been an ugly (insert your own adjective) year thus far. For starters, the Nasdaq (QQQ) has fallen over 20% from its all-time-high, the Fed could possibly raise ...

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For starters, the Nasdaq (QQQ) has fallen over 20% from its all-time-high, the Fed could possibly raise ...</p>\n\n<a href=\"https://seekingalpha.com/article/4494132-how-i-talked-myself-out-of-worrying-about-war-inflation-and-rate-hikes\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>How I Talked Myself Out Of Worrying About War, Inflation, And Rate Hikes</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nHow I Talked Myself Out Of Worrying About War, Inflation, And Rate Hikes\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-03-10 03:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4494132-how-i-talked-myself-out-of-worrying-about-war-inflation-and-rate-hikes><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>tdub303/E+ via Getty Images2022 has been an ugly (insert your own adjective) year thus far. For starters, the Nasdaq (QQQ) has fallen over 20% from its all-time-high, the Fed could possibly raise ...</p>\n\n<a href=\"https://seekingalpha.com/article/4494132-how-i-talked-myself-out-of-worrying-about-war-inflation-and-rate-hikes\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4534","symbol_name":"瑞士信贷持仓","start_time":0,"source_url":"https://seekingalpha.com/article/4494132-how-i-talked-myself-out-of-worrying-about-war-inflation-and-rate-hikes","article_id":"2218828239","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2218828239","pubTimestamp":1646853349,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"tdub303/E+ via Getty Images2022 has been an ugly (insert your own adjective) year thus far. For star","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4534":"瑞士信贷持仓","BK4567":"ESG概念","BK4507":"流媒体概念","GOOGL":"谷歌A","BK4533":"AQR资本管理(全球第二大对冲基金)","BK4576":"AR","03145":"华夏亚洲高息股","BK4525":"远程办公概念","BK4566":"资本集团","QQQ":"纳指100ETF","GOOG":"谷歌","BK4535":"淡马锡持仓","BK4538":"云计算","BK4577":"网络游戏","BK4527":"明星科技股","BK4077":"互动媒体与服务","BK4579":"人工智能","TSM":"台积电","BK4526":"热门中概股","BK4550":"红杉资本持仓","BK4141":"半导体产品","BK4503":"景林资产持仓","BK4574":"无人驾驶","BK4573":"虚拟现实","BK4097":"系统软件","BK4561":"索罗斯持仓","BK4505":"高瓴资本持仓","BK4581":"高盛持仓","BK4504":"桥水持仓","BK4512":"苹果概念","BK4548":"巴美列捷福持仓","BK4514":"搜索引擎","MSFT":"微软","BK4528":"SaaS概念","BK4516":"特朗普概念","BK4532":"文艺复兴科技持仓","BK4554":"元宇宙及AR概念","BK4553":"喜马拉雅资本持仓"},"translate_title":"我是如何说服自己不要担心战争、通货膨胀和加息的","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TSM":1,"QQQ":1,"MSFT":1,"GOOG":1,"GOOGL":0.85,"03145":0.6},"content_text":"tdub303/E+ via Getty Images2022 has been an ugly (insert your own adjective) year thus far. For starters, the Nasdaq (QQQ) has fallen over 20% from its all-time-high, the Fed could possibly raise interest rates by five times, oil prices are now at 14-year highs, inflation just hit 7.5% in January, and Bill Ackman thinks World War III has likely started as Vladimir Putin promises further action should the Western world declare a no-fly zone in Ukraine. If I could use poker as an analogy, it literally feels like you've just hit two-pair on the flop (as economic growth and corporate earnings are likely to remain strong in 2022) yet the turn card on the river points to three of a kind, a flush and a straight. Obviously, this is a difficult (or should I say extremely awkward) time for stock investors as the market is entering oversold territory while news headlines seem to get worse by the day. Should you sell stocks to prepare for worsening geopolitical developments? Should you buy stocks to make sure you can fully participate in the upside when markets recover? Should you hedge for inflation as everything from oil to nickel prices points to further trouble? Should you completely exit the market as more economists are seeing an increasing probability of an economic recession?\n These are highly complex questions, and the past seems to be an unhelpful guide for investors. Historically, the impact of geopolitical events (Cuban missile crisis in 1962, Reagan shooting in 1981, US terrorist attacks in 2001, Russian annexation of Crimea in 2014, etc.) on equities tend to be short-lived. Every dip caused by exogenous shocks such as the North Korea missile crisis in 2017 was an opportunity to buy stocks. This time, however, things are a little different as (1) the scale of the geopolitical tension is much bigger (Russia being a major adversary of the US vs. say North Korea), (2) the monetary environment is entering a massive tightening cycle with five hikes on the horizon, and (3) the Fed may have limited tools to combat a potential economic recession as rates are already near 0%. In short, every piece of evidence on the table argues for a risk-off attitude. But here's how I talked myself out of worrying about everything from war, inflation, to rate hikes: well, nothing is within my control. It's clear that today's stock prices are the unfortunate byproduct of Russia's invasion of Ukraine, which drives the price of oil, inflation expectations, and ultimately the number of rate hikes as the Fed embraces a \"data-driven\" approach. Put simply, Vladimir Putin now determines the price of oil, thereby indirectly determining the levels of inflation and Powell's next moves. In other words, in order to successfully forecast the financial markets and the path of monetary policy from here, one must successfully forecast what Putin will do next. While there are all these military experts discussing how the story will unfold, I believe no one has the perfect foresight. In fact, I'm willing to bet that even Putin's closest confidant, most beloved son, or Putin himself does not know the answer, as his every decision must be carefully considered in relation to the ensuing consequences from the West. So when will Russia stop invading Ukraine? What type of Western sanctions will likely be coming next? Will Europe follow the US and UK in banning Russian oil? Which side is China on? Will China see this as an opportunity to act on Taiwan if Putin gets what he wants? What does that say about the global semiconductor supply chains? What is the incremental impact on the broader equity market if the geopolitical landscape worsens from here? Are we already in a bear market? Your guess is as good as mine, and everyone else's on TV. If none of these are within our control, what is?\n The most important things we as investors can control are what we buy and how long we plan on holding it for. There's no question that the market will remain volatile in the near future, so unless you're an incredibly talented trader, your best bet is to stick with quality names with a long-term mindset. That said, I agree that the recent ups and downs may not be for everyone, so it's perfectly fine to gradually get back in when things look better. Speaking of quality, I recognize that everyone may have a different definition, but in general, I would look for companies that have the following: a market-leading position, pricing power, strong business visibility driven by secular tailwinds and most importantly, solid profitability (I'm talking about net income after tax, not adjusted EBITDA) and a reasonable valuation. For example, Microsoft's (MSFT) growth trajectory is likely to remain strong in a post-Covid world as Azure revenue grew by 46% in C4Q21 and the IaaS/PaaS market is expected to grow at a 29% CAGR from $127 billion in 2020 to $452 billion in 2025, per Gartner. Commercial RPO for the quarter was up 32% to $147 billion, where ~45% of revenue will be recognized in the next 12 months (+26% YoY). As Office products have no viable substitutes, management has been able to raise prices without turning customers away. The company's operating margins are nicely above 40% and FY22 guidance points to some margin expansion. EPS is expected to be $10.76 in FY 2023 (ending June 2023) and $12.54 in FY 2024 for a forward P/E of 26x and 22x vs. the 3-year high/low of 40x/24x. Suppose we're already in a recession, it's likely that companies will want to cut office rents, have everyone work from home, and do everything on the cloud. Another example would be Alphabet (GOOG), a dominant force in digital advertising that will account for almost 70% of the estimated $261 billion search advertising market in 2022 (+17% YoY), per Magna Global. As consumers increasingly spend more time on their digital devices, YouTube is a strong AVOD (ad-supported video on demand) asset that should continue to benefit from the cord-cutting trend. The cloud business, $5.5 billion and up 45% YoY in 4Q21, is slowly but surely approaching profitability. The recent acquisition of cybersecurity firm Mandiant ($5.4 billion all cash) should help enhance the product breadth of Google Cloud. Finally, further discipline on its \"Other Bets\" segment could drive incremental earnings upside. Alphabet is expected to generate EPS of $116 in 2022 and $136.6 in 2023 for a forward P/E of 22x and 19x vs. the 3-year high/low of 38x/21x. Should there be a recession, people will likely eat out less and spend more time at home googling \"the meaning of life\" and watching pancake tutorials on YouTube.\n If you're into chip stocks, consider Taiwan Semiconductor (TSM) to be a great opportunity to own the world's most competitive foundry player that has recently been sold off thanks to the Russia-Ukraine crisis that sparked investors' concerns over China's possible takeover of Taiwan. The company just reported a solid 4Q21 driven by strong demand for HPC, IoT and automotive, and management also revised the long-term revenue CAGR from 10-15% to 15-20% and gross margin from 50%+ to 53%+. While Capex was $30 billion in 2021, operating margin for the year still came in at a respectable 40.9%, significantly above street estimates. As its biggest rival Samsung (OTC:SSNLF) struggles with yield issues, TSMC already owns 80% of the market for advanced processes (7nm and 5nm) and will virtually have a monopoly in the 3nm technology as production remains well on track for 2H22, with Apple and Intel being major customers in 2023. Valuation wise, EPS is estimated to come in at $5.51 in 2022 and $6.28 in 2023 for an undemanding forward P/E of 18x and 16x vs. the 3-year high/low of 34x/17x. A recession induced by oil prices? It'd simply be too depressing for consumers not to upgrade their iPhones as they watch Netflix at home trying to save gas money. Food for thought on skyrocketing oil prices potentially leading to a recession, why should people put up with $4-$5 gas per gallon when the total cost of owning an EV may be lower? Must everyone drive to work when work from home is now the norm? You could argue it's higher commodity prices in general that will reduce people's spending power, but it's important to recognize that a good portion of the recent surge in commodity prices is driven by a supply shock in Ukraine and Russia and market speculators simply trying to make a quick buck. If you have a long investment horizon and believe this too shall pass, staying invested through market volatility should be handsomely rewarded when the dust has settled. Of course, nothing is certain in life so manage your positions wisely. Final thoughts Investing is hard (I really did learn this the hard way from trying to trade in and out of the market), and everyone who thinks its easy is crazy. It's safe to say that the past two years have been a cake walk for the average investor as the Fed did everything in its power to help lift the market up from a pandemic. Before, valuation didn't matter and you could buy any pre-revenue SPAC and watch it go up 3x in days. Now, valuation does matter and you could do the same and watch it go down 80% in days. Focus on the fundamentals and have a long investment horizon as the old adage goes: time in the market beats timing the market. Happy investing and hope everyone comes out the other end a better investor.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"hasMoreComments":false,"newsSizeData":{"likeSize":5,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}