Whitney Tilsons email to investors discussing stop stressing about inflation; wheres the bottom in high-growth stocks?; which countries utilize the U.S. dollar as their official currency?
John Doerr Of Kleiner Perkins Invested His Foundations Money In These FundsMany prominent financiers put the millions of dollars they earn every year to work through philanthropy. Q3 2021 hedge fund letters, conferences and more We Read MoreStop Worrying About Inflation
1) The front page, above-the-fold stories in both the New York Times and the Wall Street Journal today have to do with inflation hitting a 40-year high (accompanied by great deals of scary charts, obviously)– take an appearance:
This certainly catches the unbelievable outperformance of the highest-growth stocks for 11 months, from late March 2020 through mid-February 2021– and the agonizing pullback theyve experienced ever since.
Is this the bottom for such stocks?
I question it. They tend to overshoot to both the drawback and the benefit …
What indications might I search for to suggest a bottom?
Off the top of my head, how about this: 5 years ago, ARKK, which is a terrific proxy for this sector, had a simple $15 million in assets under management.
Eleven months back, they peaked at $28 billion– a boost of almost 2,000 times!
Now theyve been halved.
No other way is that the bottom …
When bubbles like this burst, my general rule is that they decrease by a minimum of 80%, so that would bring ARKKs assets to $5.6 billion.
But even this would probably be too early …
It advises me of the saying: “What is the meaning of a stock down 90%?”.
Answer: “One thats down 80%– and after that gets halve!”.
To be clear, Im talking about ARKKs properties, not the share cost … which I think still has room to fall, however not by 80% to 90% from its peak. Were in fact bullish on some of its holdings like Block (NYSE: SQ)– the new name for Square– and Shopify (NYSE: SHOP).
In summary, take care out there.
An entire generation of financiers has been conditioned to buy every dip. You can see this, for example, in 2 of my least preferred Dirty Dozen stocks, GameStink (NYSE: GME) and AMC Entertainment (NYSE: AMC).
I suspect that many of these investors are going to need to learn the difficult method that theres another side of buying the dip, which is capturing a falling knife, which I can inform you– having experienced it lots of times myself– is no enjoyable …
Which Countries Use The U.S. Dollar As Their Official Currency?
3) This will win you a trivia contest: What other nations utilize the U.S. dollar as their main currency (excluding a bunch of tiny islands like Palau and Bonaire)?
Response: Ecuador, El Salvador, Panama, Somalia, and Zimbabwe.
And for benefit points, while Liberia has its own currency, according to Lonely Planet:.
The Liberian dollar is connected to the U.S. dollar at L$ 70 to US$ 1. When in the country, U.S. dollars are used for anything over roughly US$ 5. You can pay for anything in U.S. dollars and your modification may be in either currency (typically a mix of both).
Finest concerns,.
Whitney.
P.S. I welcome your feedback at [e-mail secured]
Upgraded on Jan 14, 2022, 2:58 pm.
Simply 37% of Americans name the infection as one of their leading 5 priorities for the government to work on in 2022, compared with 53% who stated it was a leading top priority at the exact same time a year ago. A similar percentage said the same last year, but points out of inflation are much greater now: 14% this year, compared with less than 1% last year.
When we do, were usually right …
YesterdayThe other day we were all on a call discussing various things, and when the topic subject inflation came up, not one of us argued that its going to be a major significant this year for the economy or markets. Heres why …
Inflation is calculated based on the rise in the consumer-price index relative to the same very same duration year ago.
And due to the fact that vaccines werent yet extensively offered, everyday COVID deaths soared, hitting a grim all-time high of 4,406 a year ago to the day (for viewpoint, 1,827 Americans passed away of the illness the other day– still an awful toll, however 59% lower).
Not surprisingly, Americans are stressed about inflation, according to the numerous studies. Heres a current one: Americans are more concerned about inflation, less about virus, survey discovers. Excerpt:
Just 37% of Americans call the virus as one of their top five priorities for the government to work on in 2022, compared to 53% who said it was a leading concern at the same time a year earlier. The economy outpaced the pandemic in the open-ended concern, with 68% of participants mentioning it in some way as a top 2022 issue. A similar portion stated the very same last year, but discusses of inflation are much greater now: 14% this year, compared to less than 1% in 2015.
Should inflation be a top concern? In a word: no.
My colleagues Enrique Abeyta, Berna Barshay, Herb Greenberg, and I dont typically concur– thats the appeal of our diverse group. However when we do, were usually right …
Yesterday, we were all on a call discussing numerous things, and when the topic of inflation turned up, not one of us argued that its going to be a significant concern this year for the economy or markets. Heres why …
Inflation is calculated based on the rise in the consumer-price index relative to the exact same duration a year ago.
Well, believe about where we were a year ago: after a decrease in the middle of 2020, COVID-19 had returned with a revenge. And since vaccines werent yet widely available, everyday COVID deaths soared, striking a grim all-time high of 4,406 a year ago to the day (for point of view, 1,827 Americans passed away of the illness the other day– still a horrible toll, however 59% lower). Not surprisingly, the economy was hopping along as people stayed home and businesses closed. Unemployment was at 6.7% in December 2020.
Now compare this to todays white-hot economy …
With joblessness down to 3.9% last month, companies are scrambling for employees– and raising earnings, specifically at the low end. To a large extent, legislation raising the base pay to $15 per hour is becoming superfluous– companies are currently needing to pay this (or more) to fill their openings.
In light of the plain contrast between a year ago and today, is it any surprise that inflation– again, measured on a year-over-year basis– is up so sharply?
But its practically certain to come down over the course of this year, simply since the economy enhanced significantly throughout 2020, suggesting the “comps” (year-over-year comparisons) are going to get much easier.
Wheres The Bottom In High-Growth Stocks?
2) A hat suggestion to HFR Capital, which tweeted a chart revealing that since the pre-pandemic market peak on February 19, 2020, value-investing legend Warren Buffetts Berkshire Hathaway (NYSE: BRK.B) has now matched the efficiency of go-go-growth darling Cathie Woods ARK Innovation Fund (ARKK), with far less threat and volatility. Take an appearance …
