Free eLetters

July 2020

Warren Buffett is Back in the Game, Sort Of

July 9, 2020John Banks

Warren Buffett is back in the game, sort of. He is only spending 7% of Berkshire’s $137 billion cash pile, but it’s a start. In the aftermath of the 2008 financial crisis, Buffett acted boldly. His distressed-asset deals helped support blue chip companies like General Electric, Goldman Sachs, and Bank of America. This time around, though, Buffett has not been bold. The market saw a panic sell-off in March, and then a historic rebound, and still Buffett didn’t buy anything.

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Jim Rogers is Dead Wrong about Bitcoin

July 8, 2020John Banks

When it comes to Bitcoin, Jim Rogers is sorely misinformed. To be clear, Rogers deserves great respect as a macro investor. As a co-founder of the Quantum Fund along with George Soros, Rogers had one of the greatest performance runs of all time. In the 1990s, he wrote an incredible book called Investment Biker. The book chronicles a two-person trip around the world by motorcycle, with the trip doubling as an investment tour. In the book, Rogers decides whether or

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The U.S. Stock Market is Starting to Look Like China’s

July 7, 2020John Banks

U.S. capital markets are no longer free. If they were quasi-free markets before, they are more or less state-directed markets now. This assessment comes from Ray Dalio, one of the most connected hedge fund managers in the world. Dalio founded Bridgewater Associates, one of the largest hedge funds in the world, in 1975. His personal net worth is in the $15 billion to $20 billion range. “The capital markets are not free markets allocating resources in traditional ways,” Dalio said

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When a Bounce is Not a “V” (2020 versus 2009 and 1982)

July 6, 2020John Banks

On July 2, the June 2020 U.S. jobs report was released. Nonfarm payrolls jumped by 4.8 million, the largest monthly gain in U.S. history, when a gain of only 2.9 million jobs was expected. The outsized beat of economists’ expectations was seen as bullish for stocks, at least initially. A larger than expected decline in the unemployment rate, to 11.1%, was also seen as bullish. But there is a problem here, and it has to do with starting points. You

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Opting Out of State-Directed Capitalism

July 2, 2020John Banks

“Turn on, tune in, drop out” was a counterculture phrase from the 1960s. Perhaps it is time to revive it. The thing to “turn on” in 2020 is awareness of Bitcoin… So that one can “tune in” to a digital store of value… And then “drop out,” or rather opt out, of state-directed capitalism. Make no mistake, state-directed capitalism is the new thing. We saw confirmation of this on July 1, when the U.S. government bought nearly 30% of a

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Three out of Four Election Scenarios are Bearish — and One is a Nightmare

July 1, 2020John Banks

In early November, which is not far off, the U.S. will hold an election in the midst of a pandemic. (We say “in the midst” because, by November 2020, there is a very small chance the virus will be gone — and an overwhelming likelihood it will not.) The stock market is ignoring the election, or otherwise failing to adjust the odds as of this writing. We say this because three out of four election scenarios are bearish, and one

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June 2020

America’s Top CEOs are Not Optimistic About Recovery

June 30, 2020John Banks

Who thinks the business impact from coronavirus will disappear quickly? Not America’s top CEOs. They see pandemic-related challenges lasting until the end of 2021 — and perhaps even longer. The Business Roundtable, founded in 1972, is an association based in Washington, D.C., that only has CEOs as members. Unlike the U.S. Chamber of Commerce, where membership exists at the business level, only a company’s top executive can join the Business Roundtable (BRT). The BRT released its latest quarterly report this

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PayPal and Venmo Could Soon Embrace Crypto — Which Would be Huge for Bitcoin

June 29, 2020John Banks

PayPal and Venmo could be adding cryptocurrency to their suite of payment options. Inside sources verified by CoinDesk, a crypto-focused news service, say a built-in wallet feature could be rolled out within three months. There is no official announcement yet — only the CoinDesk sources — but if true, this would be a huge development for Bitcoin, and other crypto assets, too. For PayPal and Venmo, meanwhile, the timing would be excellent. “My understanding is that they are going to

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Quarantines are Here and Lockdowns Could Follow

June 26, 2020John Banks

In early April — which was only 12 weeks ago, but feels like a lifetime ago — we said in these pages that domestic travel bans were highly likely for the United States. We further said that, due to variations in how infections would spread, the U.S. would be sorted into “green zones” and “red zones” (or something to that effect). The green zones would then have reason to keep red-zone travelers out. Fast forward to late June, and the

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Hysteresis and the Post-Reopening Coronavirus Fatality Rate

June 24, 2020John Banks

“Hysteresis” is a vital concept in mechanical engineering. It also applies to economics, medicine, and financial markets. Hysteresis occurs when changes to a system happen with a time lag. It can also be defined as systemic state-dependence, meaning, whatever happens next is influenced by the past. There is no hysteresis in, say, rolling a pair of dice. The outcome of the dice roll has no relationship with past rolls. There can be a frustrating amount of hysteresis, on the other

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The Factors Behind a Potential “Lost Decade” for Stocks

June 23, 2020John Banks

Bridgewater Associates — one of the most successful hedge funds in the world by dollar volume of profits since 1975 — is warning of a potential “lost decade” for stocks. “Globalization, perhaps the largest driver of developed-world profitability over the past few decades, has already peaked,” said Bridgewater analysts in a June 16 note to clients, as reported by Bloomberg. “Now the U.S.-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains,” they

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The Fourth Great Bubble in a 51-Year Investment Career

June 22, 2020John Banks

Jeremy Grantham thinks we are witnessing the “fourth great bubble” of his investment career. This matters because of what Grantham did over the course of that career, and how long it has lasted. Grantham entered the money management business in 1969, using a “quantitative value” strategy long before Wall Street knew what that meant. Grantham himself called it “dopey value,” although the results were not dopey at all. His firm would buy stocks based on fundamental factors like discounted price-to-book,

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