Curiosity@Intelsense
Weekly dose of learning
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1.
Sharpening your saw during market downturns
Over the course of any investing career, there will be sharp market sell-offs and each will have their own flavor. What’s consistent in each, however, is contagious worry among investors. What will happen next? Could the markets fall further?
These things are outside of our control. What we can control is how we respond in such times. If you find yourself getting caught up in the headlines, I recommend stepping away from the news cycle and social media and learn about a great business.
It’s in periods of uncertainty where wonderful businesses led by exemplary stewards of capital are meant to shine. While competitors panic, they adjust and take market share. While their stock prices decline, they’re buying back stock at a better price. When uncertainty subsides, they are in the pole position.
In over twenty years of investing, my best investments occurred in periods of uncertainty - either about the company or about the market as a whole. The better we know our companies, the better we can recognize irrational worry and capitalize on opportunities.
2.
Trump, tariffs and dollar
The other constraint is geopolitics and the fact that the Trump administration is operating in a multipolar world. While you can bully some countries, bullying all countries will lead to negative consequences for America, both geopolitically and economically. Countries are going to make public procurement decisions that are not in favor of America, whether that’s deciding on where to buy equipment for defense, whether to buy planes from Airbus or Boeing, or whether it’s American AI infrastructure versus Chinese AI infrastructure. President Trump’s plan to force the world to pay for his tax cuts won't work. It will be whittled down. And in the process of being whittled down, it’s going to become a non-event for financial markets.
The bond market is restraining President Trump on fiscal policy, whereas his behavior is forcing other countries to realize they need to boost their own fiscal policy. So we’ll see a big macro shift, driven by fiscal policy, where US growth expectations are dropping, while the rest of the world’s growth expectations are increasing. That’s why we have already seen this extraordinary decline of the dollar relative to the euro in the past weeks.
That’s why the most important signal right now is the fact that the 10-year Treasury yield is at 4.3% even while the S&P 500 is going through a correction. This means that investment capital is shifting away from the US.
Pic of the Week
Thought of the Week
"We are what we repeatedly do. Excellence, then, is not an act, but a habit." - Aristotle
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