Weekly Update – Markets & Investing

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Sir Isaac Newton and His Giant Investing Blunder

In one of the greatest investing books of all time, “The Intelligent Investor,” by Benjamin Graham, there’s a little nugget about Sir Isaac Newton.

In the book, Graham writes about one of the smartest people to ever walk the planet, getting caught up in an investing blunder.

“Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he ‘could calculate the motions of the heavenly bodies, but not the madness of the people.’ Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002-2003’s] money. For the rest of his life, he forbade anyone to speak the words ‘South Sea’ in his presence.”

Graham described Newton’s investing episode perfectly when he said, “For indeed, the investor’s chief problem – and even his worst enemy – is likely to be himself.”

Morgan Stanley Market Timing Indicator At Extreme Levels

The sell signal is flashing on the Morgan Stanley Market Timing Indicator. Have a look at the charts to the left, and you will spot a few obvious concerns.

Morgan Stanley commented, “for only the fifth time in over 30 years, each of Morgan Stanley’s five market-timing indicators are giving a sell signal at the same time.”

Just one problem, the MS “Market Timing Indicator” has been giving the sell signal for months, still no plunge.

Another thought, the last four times the indicators hit these levels we didn’t have trillions of dollars pouring into the economy from the Fed responding to a global pandemic.

The beautiful thing about markets is absolutely nobody knows how it’s all going to play out – not even Morgan Stanley.

Druck Gives His Thoughts on Dot-Com, Market Risks, Crypto, and More

Billionaire investor and hedge fund mastermind Stanley Druckenmiller made an appearance on the ‘My First Million’ podcast and gave his view on various topics.

Druck was pretty insightful on some past market mistakes and his trading style and philosophy. He talked about the Dot-Com Bubble and how he navigated his way through the mess.

Of course, he commented on the current Fed policies and whether we are in a bubble currently or not. Druck also gave a few opinions on the risks to markets he sees going forward.

The interviewer couldn’t let Druck off the hook without hitting him with a crypto question. They discussed bitcoin and also his opinion on Dogecoin. He said The Doge is just a result of the “manifestation of the craziest fed policy in history.” But he added you don’t want to be shorting it because he “doesn’t like putting out campfires out with his face.”

Here’s the full interview at My First Million with Trung Phan.

Entrepreneur Marc Lore Talks Past, Present, and Future

If you don’t know the name Marc Lore, it’s time for you the get educated on one of the greatest entrepreneurs of the last several decades.

Lore was featured on the podcast ‘How I Built This’ recently and shared his incredible story. After starting a baseball card company called ‘The Mint’ in high school, Lore went on to excel in athletics and began working in banking.

Co-founder of ‘The Pit,’ an internet collectibles company acquired by Topps in 2001. Diapers.com, acquired by Amazon in 2011, and Jet.com, acquired by Walmart in 2016 for $3.3 billion, are a few of Lore’s endeavors, just to name a few.

Check out the entire podcast episode below –

Bitcoin Continues Plunge, Where’s the Bottom?

The week’s biggest story is Crypto plunging and Bitcoin losing half its value within a few weeks.

What happens when a $1.2 Trillion asset class becomes a $600 million asset class so quickly? I have no idea.

The losses on a percentage basis are much worse for Ethereum. Crypto-heads sound more confident than ever this is only a blip on the way to Bitcoin $500,000. They might be right. But what happens if they are wrong and the slide continues? Massive pain.

Be careful people. Hundreds of billions of dollars in net worth have been lost. I have no idea what happens next, but I do have a full bucket of popcorn in hand at the moment.

Taleb Twitter Thread on Currency, Gold, and Hedges

Here’s a thought-provoking Twitter thread by Nassim Taleb that might give some insight on currency and what creates a store of value, in his opinion.

Taleb argues stability is a key feature in a currency. He gives historical examples back to ancient times when money-changers took Shekel from Tyre.

Taleb has been picking apart Bitcoin lately on Twitter and fighting the Crypto Mob, sometimes one at a time. I can’t say I completely grasp all his perspectives, but I know he doesn’t like the extreme volatility of Crypto. Recently, he’s also been critical of the “Bitdiots” misunderstanding Satoshi’s original Bitcoin White Paper.

One of the reasons I love following Taleb is his absolute fearlessness in stating his views.

“Inflation” Searches Soaring on Google

Search interest on Google Trends shows the term “Inflation” is higher than it’s ever been, going back to 2004 when Google began collecting search data.

Trending questions typed into the Google search bar are:

  • Why is lumber so expensive?
  • Why is gas so expensive?
  • Why are rental cars so expensive?
  • Why are flights so expensive right now?
  • Why are used cars so expensive?

Copper Prices Move Higher

Copper prices per lb. continue to hit multi-year highs, and stocks of copper producers are also hot. The ETF, Global X Copper Miners (COPX) includes mining stocks, and the U.S. Copper Index fund (CPER) directly owns futures contracts on Copper itself.

“Experts” predict: Tight global supplies and high demand from the recovering global economy will keep prices high for the foreseeable future.

As always, take the expert’s predictions with, “Addito salis grano.”

U.S. Home Prices Hit 15-Year Record

Home prices in the U.S. gained 12% since last February for the biggest annual increase since 2006.

To say the residential real estate market is hot right now would be an understatement. Inventory is low, demand is high, and there’s “no end in sight” to the rapid price gains.

How far does it go? Nobody knows. And if someone tries to tell you what will happen to house prices – quickly plug your ears.

Investing Resource of the Week – Compound Interest Calculator

Here’s a great investing resource that is easy to forget. Bookmark this page and re-familiarize yourself with the formula for compounding interest.

The Compound Interest Calculator at Calculator Soup is a simple yet powerful way to watch the amazing results of compounding interest.

The site includes full descriptions of “the most powerful force in the universe.” The ideas behind compounding interest are the foundation of great investors.

Lumber prices have been skyrocketing, and it’s anyone’s guess as to when the rise will subside.

Demand is high for residential home building and remodeling, while lumber mills have not ramped up production fast enough.

Check out the crazy price chart for lumber from Nasdaq.com