Great thread of lessons learned from a $1B start-up. Hint: it’s never a bad idea to listen and learn from those who have grown billion-dollar companies. So many gold nuggets in this thread.
- The outage felt ‘round the world. As I’m sure you know, Facebook (along with Instagram and Whatsapp) crashed Monday for 4 hours, ending the day down 5% shedding tens of billions in market cap value. The outage was one of the longest in the history of the company and happened the same day a whistleblower came out about the company’s negligence on prioritizing profits over users' safety. Too early to tell if this will have permanent effects, as Facebook is no stranger to scrutiny. PS - if you’re wondering what platforms didn’t crash, Facebook used Twitter to announce the outage. Read more here.
- Despite the Monday slump, Tech stock’s multi-year rally is likely far from over, and it could be time to double down on a number of winners during the dip. Remote working and online shopping has fueled a sharp growth in demand for cloud, e-commerce, cyber security, and other facets of the technology ecosystem, stressing that this growth may just be the tip of the iceberg. Read more here.
- Black Friday is kicking off extra-early this year as retailers try to accommodate for delivery delays due to supply chain bottlenecks. Amazon rolled out Black Friday deals this week, 53 days before the actual day. Target is also kicking off its holiday promo next week to attract customers who want to knock out their shopping list early, and other major retailers are sure to follow suit. This year’s shopping season is set to be the longest ever, and last-minute shoppers will have to change their strategy if they want to ensure their list is covered. Read more here.
- Here’s an interesting chart of the up and down homebuilding trend over the last four years: January 2018-June 2020, the US was starting more homes than selling. Then from July 2020-May 2021 we were selling more homes than starting. Most recently in June 2021-August 2021 we were back to starting more homes than selling. It’s good to take note of these trends for investment foresight.
WHAT TO WATCH
- A new SEC regulatory push could shake up some of Wall Street’s most lucrative business models. SEC Chair Gary Gensler is working on tougher rules for high-speed trading firms, private-equity managers, mutual funds, and online brokerages. His main target: economic rents. The SEC hasn’t issued any formal proposals yet, so there’s not been any pushback. But if the hammer drops, expect a spark in opposition. Read more here to deep dive into the implications of these regulations.
- ICJ’s Pandora Papers reveal South Dakota is one of the world’s top tax dodger havens. On Monday, a trove of millions of documents leaked to the ICJ revealed that foreign individuals, shell companies, money launderers, drug cartels, and the like have been holding wealth there for decades. Since the late 1990s, South Dakota's legislature has passed dozens of laws that protect trust companies in the state from creditors, foreign governments, and tax regulators - making the state a $360B trust tax haven. Read more here.
- Watch S&P 500 moving averages closely - bear market may be looming. Some investors are predicting U.S. stocks may be on the verge of starting the biggest bear market since the Great Depression. Equities are looking peaky. Pair that with overbullish sentiment, economic weakness, excessive debt levels, and limited policy tools and you’ve got all the ingredients to signal a market rout worse than that seen in 2008-09. Read more here.
- If inflation stays around for too long we could see a depreciation of currency exchange rates, especially in countries experiencing the highest inflation prints. Many economists think the Fed isn’t taking the risk of sustained higher inflation seriously enough. The U.S., U.K., Canada, and Australia are among the developed countries at the highest risk. Read more here.
- Bigger Fannie and Freddie loans are coming as the conforming loan limit officially goes up on Jan. 1, 2022, making its biggest leap ever as it increases by more than $75,000. Lenders are betting home prices will keep rising in the third quarter, and that they'll be able to sell even bigger loans to Fannie and Freddie after the first of the year once the loan limit officially rises. This big loan limit jump was necessary to offset the steeply rising housing prices, allowing more buyers to afford a home. Read more here.
"And so the emotions tend to get people to buy, buy, buy at the top, until the last potential buyer has bought and spent all his money— at which point the top is reached and the second derivative goes negative—and sell, sell, sell at the bottom, until the last person who’s going to panic out does so." (Howard Marks - Shane Parrish)
This quote is from a private interview of Howard Marks, the legendary investor and now, philosopher. This is how market cycles are born. At the end of the day, it’s hard to buy when the markets are down and hard NOT to buy when they’re up. But you have to keep your strategy devoid of emotion. This is why dollar-cost averaging works and it’s never been a better time to implement this strategy in your own investment career.
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