To The Moon

🌟🌟🌟The end of this week brought a brutal reality check for tech investors like me.  Friday was a sea of red with a sharp broad selloff across AI related names and a significant tumble for stocks like $Broadcom(AVGO)$  and $Oracle(ORCL)$  

The market felt the pain as capital frantically rotated into defensive sectors.  Now we are all standing on the edge of the weekend, holding our breath and dreading next week.

The big question looms: Are we facing a massive bounce next week or is this the beginning of a long painful slide?

The emotional whipsaw is real.  One minute we are riding the AI wave to the moon.  The next minute we are questioning every decision that led us to buy tech stocks .  The sudden weakness in the S&P 500 and Nasdaq has rattled the most stoic investors.

Why the Sudden Slide?

The market's abrupt shift on Friday December 12 was primarily triggered by a double whammy of corporate disappointments that fueled fears of an AI bubble and commentary from Federal Reserve officials that pushed bond yields higher.

Broadcom's Margin Warning: The primary catalyst was $Broadcom(AVGO)$  earnings report.  While the company beat revenue and earnings expectations and reported a massive USD 73 billion AI order backlog, management warned that the mix of higher volume, lower margin custom AI products would squeeze overall profitability in the short term.

This has sparked concerns that the AI business maybe less lucrative than the market had hoped.

Oracle's Spending Spook:  This followed a similar negative reaction to Oracle's report earlier in the week, where it highlighted massive capital spending on AI infrastructure that missed revenue expectations.

Rising Treasury Yields and Fed Commentary: The market also felt pressure from rising US Treasury Yields, which climbed after Federal Reserve officials who recently voted against a rate cut, voiced concerns that inflation remains too high.  

Higher yields typically make high growth tech stocks less attractive to investors.

Profit Taking and Rotation: The disappointments from Broadcom and Oracle prompted a broad rotation of capital out of high flying , richly valued AI stocks and into more defensive sectors.

So What's Next?

The Optimist's Hope (Bounce Back):  Bulls are hoping that this was a necessary healthy correction, a temporary rotation of capital that will reverse itself as value investors step in to buy the dip.  The strong fundamentals of many of these tech companies suggest that they are on sale.

The Pessimist's Fears (More Pain):  Bears see this as the long overdue air coming out of a frothy bubble.  The sharp drop in a major player like Broadcom could be the canary in the coal mine, signalling a shift in sentiment and a potentially protracted downturn.

For now the uncertainty is the most painful part.  For those of us with portfolios that are full of tech stocks , the anxiety of the next trading day is a heavy burden to bear.  Whether we see a strong rebound or another slide , one thing is certain: our emotions are along for the ride.

A Dose of Buffett Inspired Calm: The Magic of Compounding and Long Term Holding

In times of market turmoil, it helps to zoom out and remember the power of time and patience.  This is where the wisdom of Warren Buffett becomes our investment North Star.

Warren Buffett consistently advocates for a Buy and Hold strategy, leveraging the undeniable magic of compounding returns.

Warren Buffett's approach encourages us to view a market downturn not as a crisis but as a potential opportunity to acquire quality assets at a discount.  He has famously said "Our favourite holding period is forever".  This mindset helps us to filter out the daily noise and emotional reactions that drive short term trading decisions and often lead to poor outcome.

So when the market gets volatile and Tech Meltdown Friday rattles our resolve, remember Warren Buffett's simple but powerful philosophy:

"Find great companies, buy them at fair price and let the magic of compounding do the rest."

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