To The Moon

My investing muse

Turkey & Syria

The main thing in my heart is the earthquake that hit Turkey and Syria. It is heartbreaking to see the destruction. What awaits both countries will be challenging months ahead.

From the comfort of my home, I was able to do this review with warm food & roof over my head. From the latest update, over 25,000 fatalities have been reported from this earthquake. This number is expected to rise over the days.

If you have resources to spare, I hope that you can consider donating to help the displaced. Please feel free to work with your local charity or you can consider donating to Unicef via the link below:

https://www.unicef.org/turkiye/en

Market Irrationality

I am seeing more irrationality in the market. With companies announcing layoffs, stock price increases are not expected. When companies announce layoffs, it is usually due to the need to control costs in lieu of (potentially) challenging market conditions. With the increase in interest rates, the market typically moves away from high-growth equities to safer assets. Yet, there were rallies in crypto and certain stock sectors. I was quickly reminded of the following quote.

It is important to lean back on the research that we have done for our investing. Looking at the fundamentals of the businesses, may we find the conviction to stick to our investing strategy. Price does not always represent the value or worth of a business. Price is the result of demand and supply - which in the short term can be driven by sentiments. As per my S&P500 review, we are expecting the market to continue its downtrend in the coming week. As previously advised, this could be a window for us to close out stocks that are not doing well, especially those with failing fundamentals.

The US shot down the strayed balloon

This may seem to be trivial but this has revealed the relationship between China and the US. China has advised against military action, claiming that this is a stray civilian balloon. The US went ahead to shoot this down and now the FBI is leading the investigation. US Secretary of State Blinken cancelled the trip to China. Following this, the US is unable to reach the Minister of Defense (China) for closure of the balloon incident. In the last 2 days, from one China balloon, 2 Unidentified Flying Objects (UFOs) have been shot over US & Canada.

There seems to be more tension between these 2 superpowers. With the issues and crises on hand, it would be much better to work together.

Concluding thoughts

Before we get all excited about sending the bear back to hibernation, there are some interesting data points for our kind consideration.

Source: Factset- S&P500 sector level change of EPS (Dec 2022 to Jan 2023)

From the chart above, every sector (except for utilities) has experienced a drop in its EPS from 31 Dec 2022 to 31 Jan 2023.

From Fidelity’s S&P Guide to sector investing (1995) above, could we be around the “early bear” time duration? Would we see the earnings compression for Q4 2022 when earning season ends on 31 Mar 2023? We have a few more weeks and most of the big boys have completed their earnings. Let us wait for the rest of the earnings and economic data to be announced. Earnings compression or expansion would be made clear.

Personally, I am still monitoring, reviewing earnings and shortlisting great companies. Let us spend within our means, invest with what we can afford to lose (avoid leverage) and save “cash for crash” so that we can buy great companies at good discounts. “No trade” can turn out to be a good trade too. Let us do our due diligence.

@TigerStars

$S&P 500(.SPX)$