While we aren’t necessarily bullish at the moment, we’re excited to build positions at some point in the coming months. Ironically, the returns of the beginning of this century vs. last century have averaged out to being nearly identical.
To be clear:
Total real return from Jan 1900 – Nov 1922 = 128%
Total real return from Jan 2000 – Sept 2022 = 124%
Takeaway:
Do your best to not freak out about your investments. If it was money that you wanted to be liquid — you shouldn’t have invested it in the first place. If you’re currently opening your brokerage and either feeling extreme euphoria from green days and extreme sadness from red days — take a step back.
Try to identify your best entries (which in the short-term, we believe will be later in Q1), place your bets, reassess them on an ongoing basis. We love hearing feedback from subscribers, but it seems that too many of you are focusing on the day-to-day. Training your emotions is the most difficult part of investing.
We shared the above image in yesterday’s Week in Review, but it’s worth sharing once more. Remember that during these chaotic times in the market — volatility is the norm. Make your plan, keep calm, and don’t get so worked up on things that you begin to hate investing. That’s ultimately how you lose in the long-term.
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Key Earnings Announcements:
Netflix tries to keep investors enticed through targeted ads and Tesla tries to reverse after a dreary month in the market.
Monday (10/17): Bank of America, BNY Mellon, Charles Schwab, Marten Transport
Tuesday (10/18): Albertsons, Goldman Sachs, Hasbro, Interactive Brokers, JB Hunt, Johnson & Johnson, Lockheed Martin, Netflix, Pinnacle, Truist, United Airlines
Thursday (10/20): American Airlines, AT&T, Blackstone, Boston Beer Co, CSX, Dow Inc, Ericsson, Nokia, Philip Morris, Snap Inc, Whirlpool
Friday (10/21): American Express, Schlumberger, Verizon
What We’re Watching:
Netflix Advertising Details:
Analysts are expecting revenue of $7.85B and EPS of $2.17 for NFLX this Tuesday. Additionally, a new batch of 1.1M paid subscribers is expected (mostly due to the broad success of Stranger Things). We’re looking for an update on the new ad-driven revenue model (mentioned yesterday), as well as the impacts of foreign currency volatility on the company. Keep in mind — Netflix is available in over 190 countries.
Tesla Closely-Watched:
After dropping over -30% in one month heading into the Monday morning — some bulls appear to be arriving back on the scene for Tesla. Bespoke Investment Group unveiled some interesting research that “when Tesla stock has fallen more than -20% over a seven-day stretch – the stock averaged gains of 37%, 84%, and 238% over the next month, three month, and one-year timespan, respectively.” A rather random statistic, but Tesla was hovering around that level of losses heading into today. If we see another leg down in the short-term — it may be time to dive into some shares of Tesla.
Investor Events / Global Affairs
War games, robot vacuums, and a sneaky form of government buybacks?
NATO & Russian “Routine” Nuclear Drills
Radoslaw Jozwiak, Getty Images
Let’s have a quick touch-base on what’s been going on with that whole ‘nukes’ situation:
Threats: Retired four-star general David Petraeus had threatening words for Russia, saying that nuclear action would lead to “a collective effort that would take out every Russian conventional force that we can see and identify on the battlefield in Ukraine and also in Crimea and every ship in the Black Sea.”
Just keep an eye on these things! We’ll report back everything that we’ve found in the next Week in Review post.
Telegraph World News @TelegraphWorld
🔴 Russia will deploy 9,000 soldiers to Belarus, the Belarusian ministry of defence has said, as Kremlin allies began to close embassies in Kyiv because of the risk of a ground assault
iRobot (IRBT) Shareholder Vote on Amazon (AMZN) Acquisition
Shareholders of iRobot will vote on an acquisition offer from Amazon today. Coming in at an expected $1.7 billion price tag — iRobot would be the third-largest acquisition in Amazon’s history.
Learn more details about the acquisition below!
Rate of Return by Austin Hankwitz
🤑 An Opportunity for a +17% IRR
Huge shoutout to Chris DeMuth Jr. for joining Daniel and I last week on Stock Market LIVE! on Seeking Alpha — he’s who inspired me to write this post. If you’d like to read more of his amazing work, click here. What is Merger Arbitrage? As you may remember from this…
In response, some expect the Treasury to announce a bond buyback program, which would enhance the low level of treasury market liquidity.
“The U.S. Treasury Department is asking primary dealers of U.S. Treasuries whether the government should buy back some of its bonds to improve liquidity in the $24 trillion market.” — Yahoo Finance
Important New Information:
We’ve got the Treasury Secretary saying that this “isn’t QT or QE — this is none of those”… meanwhile this would be a US government entity buying back debt in order to keep markets afloat. This would essentially be performing QE on top of the Fed’s QT. This is genuinely bizarre and we need to look further into if this will actually take place.
This former Senior Fed Trader seems to believe that the primary dealers (big banks) need to get back to the Treasury with their advice by next Monday (10/24). If this proxy version of quantitative easing were to be rolled out — things could turn more bullish quickly. Frankly, this has “boost the market before midterm elections” written all over it. We’ll be sure to follow up on what we find out!
Major Economic Events
Seeing how much air is left under the housing market’s wings, deeper economic insights from the Beige Book, and assessing the current state of industrial production.
Bank of America’s earnings this morning showed that the state of the American consumer still remains relatively strong and credit card delinquencies are down YoY.
Monday (10/17): Empire State Manufacturing Index (Released this morning —> Expected: -5.0, Actual: -9.1)
Tuesday (10/18): Industrial Production Index, NAHB Home Builders’ Index, Speeches by ATL & Minneapolis Fed Presidents
Wednesday (10/19): Building Permits, Fed Beige Book, Housing Starts, Speeches by Chicago & Minneapolis Fed Presidents
Thursday (10/20): Existing Home Sales, Leading Economic Indicators, Speeches by Fed Gov Cook & Philly Fed President
Friday (10/21): Index of Common Inflation Expectations
Housing Data on Watch:
This week, we’ll get a further glimpse into how homes are selling, how much demand for building new homes has decreased, and the highly-respected Home Builders’ Index from the NAHB. With mortgage rates hovering around 7%, it’s hard to imagine this housing data improving much in the short-term.
Events-Driven Winners
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
Buybacks, layoffs, and bankruptcies. This is the name of the game during crazy times in the market like we’re currently experiencing. Did any of you notice that Intel (somewhat quietly) announced that it’s going to lay off thousands of workers?
We’re interested to see how bad the headcount reductions will get across the board. The labor market remains tight, but we’re expecting it to be forced to loosen. Remember — Jerome Powell’s speech in Jackson Hole was just 6 or 7 weeks ago. He made it clear that he “very likely” expects the “softening of labor market conditions.” This should be an interesting end to Q4 and start to Q1.
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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
🔴 Russia will deploy 9,000 soldiers to Belarus, the Belarusian ministry of defence has said, as Kremlin allies began to close embassies in Kyiv because of the risk of a ground assault
