To The Moon

Climate change seems too massive to reverse. Its sheer size and scope make climate anxiety seem inevitable. I often struggle with how efficacious I can be as a mere individual. We have clear limits: without trillions of dollars or control over policy, how is anyone expected to put a dent in a global crisis? The problem at hand is that we need structural change. Construction needs to get cleaner; agriculture needs a more sustainable composition; transit needs to be less individualistic. These all seem like greater problems than what’s accessible at the individual level. Societal infrastructure requires massive reconfigurations with the intent to become sustainable. A solution that I find attractive is angel/venture investing. Disruption of existing industries is necessary to create str

This market is confusing. Is there going to be a recession? What’s the interest rate trade? What can we assume about where the Fed’s discount rate is headed? Should we just take the 5% risk-free t-bill and get on with it? I think there are solid cases for both the t-bill trade and the long equities trade. Here I’ll make both. T-bills T-bills have become much more popular with investors in the last year. Even more everyday people are talking about getting the 5% risk-free return. That’s attractive. The t-bill trade isn’t what it was a few months ago, however. People were scooping up t-bills at 4+ % because they didn’t want to hold during a risky stock market. There were common fears that the Fed’s aggressive rate hikes would force a recession. That would pinch stocks. We are

Anheuser-Busch stock $BUD collapsed recently. This was partly due to backlash. One of the firm’s brands, Bud Light, partnered with a transgendered influencer. Buyers of Bud Light decided to boycott the beer due to its involvement with a trans person. The boycott dethroned Bud Light as the top selling beer in the United States. Consumers easily replaced it with substitutes, and the stock reacted negatively to depressed sales. This is where I come in. I was thinking about looking into picking up some $BUD stock at a discount. Boycotts typically don’t last forever, and Anheuser-Busch is an empire with a wide range of products that aren’t seeing depressed sales. At first glance, I thought that it could be a market overreaction. Then I realized that if anti-woke sentiment will continue to

The labor market has stopped behaving. Historically, employment has been a rather dynamic and fluid economic input. In macroeconomic models, we assume that employment can easily change in the short run. It doesn’t look like it will necessarily always be the case. COVID-19 shocked the economy across the board. One of the most notable changes was to the labor market in the US. There was a steep rise in unemployment, which was followed by a substantial boom in jobs. Job creation was large. Job demand was humongous. Aggregate demand swelled after the initial shock, and firms hired to meet demand projections. The labor market they were demanding in had changed, however. Many workers were remote, or given new flexibility from their employers. This meant that people could apply to

PayPal stock is down about 16% in the last year. The S&P 500 is only down 1%. PayPal took a beating. This is not a unique situation, however. Many tech stocks had a rough 2022. There was a selloff in tech at large, and few companies seemed exempt. As inflation soared, rates went up, and thoughts of recessions loomed in the air, unprofitable stocks suffered. Many of these were tech names that thrived during an era of growth at any cost. I’ve been looking through those names, and a few weeks ago I think I found a diamond in the rough. Looking through large cap stocks that suffered the most serious declines, it was hard to find any firms with reliable profit. Positive net income was scarce, and several years of it was almost out of the question. I bought PayPal 3/21/23 and

Bears maintain that the S&P 500’s winning year is on borrowed time. I hear more and more about an upcoming “earnings recession” where companies are expected to report notably poor earnings in upcoming quarters. Forward P/E decline from YCharts.com Investors pay for earnings. They buy stocks to secure earnings, to be entitled to those earnings. An earnings recession would mean falling stock prices and a market rout. But there’s a good chance we’re not going to get worst case scenario. Sometimes the stock market prices in bad news as it happens. But sometimes there is so much anticipation for something that the market prices it in beforehand. If I told you that equities would have negative returns in 2024,

Business leaders have called for a halt in AI. They voice concerns that we don’t know what it’s capable of and could quickly spiral out of control. In recent months, I feel like I’ve heard someone express their concern for the uncertain yet daunting future of AI on a near daily basis. Venerable figures like David Faber repeatedly discuss their worries that AI will replace everyone and everything. This doomsday characterization could be right. But that doesn’t mean I buy it. First of all, I think we should take business leaders’ warnings with a grain of salt. Sure David Faber is a journalist without a stake in the game, but he isn’t the voice call

I was watching a stock pitch recently for Ford ($F). Their main thesis was simple: Ford is a growth story, ready to jump in on the EV boom. Ford is a legacy car brand. They’re ancient. Can they really be a growth play? EV growth is indeed huge. In fact, EV sales in the US went up 65% last year. This doesn’t mean that legacy car companies are positioned to be growth stocks. EV sales in the US will cannibalize the existing car market. So if Ford makes money selling its electrics, it’s probably also selling less gas cars. Every EV sale in the United States bites into consumer demand that used to be entirely gas cars. Buying autos becomes tricky in this situation. Generally, we ou

Several banks have failed, collapsed, or been bought in the last few weeks. Do not make the mistake of thinking this is just like 2008. Banks need to maintain solvency: assets have to be greater than liabilities. This has been the issue in both crises, hence people drawing many parallels. A big difference is that banks in 2023 are not a house of cards. Last time the banks started to fail, it was largely because of exposure to highly overvalued mortgage derivatives that were never worth what they were sold for and contained excessive risk. Banks like Lehman Brothers had high exposure to these “toxic” assets, so they failed. In 2008, markets woke up and realized that many assets owned by the banks are worth a lot less than previously thought. This is partially due to widespread mor

Bank stocks have plummeted in the midst of the banking crisis. The SVB stock halted due to the SVB collapse, First Republic is down roughly 90% in its wake, and dozens of other bank stocks have slid down with them. Regional bank stocks seem to all have plummeted 20 some percent or more in the last two weeks, with several notching more than 50 percent drops. This is due to investor fear that banks are exposed to interest rate risk on their fixed income assets and fleeing depositors. A 25% drop in a bank stock largely reflects investor weariness that the bank could be the next one in trouble. I see this as a buying opportunity. Pretty much every bank stock has seriously suffered. There are a few that are relatively protected — nobody expects JPMorgan to fail, for example — but generally