#112 - Facebook Files, History's Most Seductive Beliefs, and the Remote Work Trends Beyond Collaboration.
In this week's episode of Reformed Millennials, Broc and Joel dive into the latest trends in the employment & HR space — aka. the knock-on effects of remote work. We start off at a high level with a warning on history's most seductive beliefs from Morgan Housel, zoom in on when that "narrative market fit" can be misleading and end with two specific examples of companies focused on the more operational side of this trend with things like workplace culture and data security.
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
If you've been paying attention, the market’s been messy for most of the year.
We finally got a major resolution in what we consider one of the most important charts in the world these days.
I’m talking about the US 10-year yield reclaiming that critical 1.40% level this week. And this begs the question as to what a rising rate environment might mean for investor portfolios.
Some stocks do better with rising/higher rates, while others thrive in markets characterized by low growth and low yields. If this is the beginning of a fresh move higher for yields, then we want to be focused on buying the stocks that are likely to benefit the most.
It all goes back to the global growth, reflation, and reopening trade these days. It’s cyclical and value stocks. Those are the groups that should outperform.
Meanwhile, growth and tech stocks–and any long-duration assets, for that matter–could come under pressure, as they become relatively less attractive during periods where more economically sensitive areas are offering more appealing growth prospects.
So, if you’re looking to bet on higher rates, Energy and Financials are excellent places to start.
To illustrate how strong a relationship these stocks have with yields, take a look at this overlay chart of the US 10-year with EQRR relative to the S&P 500:
What this is showing us is that, when rates are moving higher, these stocks are typically outperforming. Alternatively, when the 10-year is falling, these stocks generally are lagging the broader market.
So, are we starting to see rotation into these higher rate beneficiaries yet? Here’s a look at a daily relative rotation graph:
Energy is the clear leader right now over shorter timeframes, as it’s in the leading quadrant.
Financials are showing improving momentum and appear to be hooking up and to the right toward the leading quadrant as well. The same can be said for Industrials and Transports.
Meanwhile, growth sectors like Tech and Communications are headed lower and left toward the lagging quadrant. That tells us these groups are likely to underperform for the foreseeable future. The same can be said for Utilities and other defensive or “bond-proxy” sectors like Real Estate and Staples
💸Reformed Millennials - Post of The Week
The Stock Market Is Drunk
from Andy Kessler at WSJ: bold ours
Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Does that seem right? In this market, why not? Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six. Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas. Do fundamentals even matter?
I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq. I live at the intersection of innovation and disruption, but when companies are worth more than any possible reality, watch out.
How about those meme stocks still getting hyped on Reddit’s WallStreetBets? Those who bid GameStop shares into the stratosphere waved at Virgin Galactic Holdings as they soared by. A year ago, the stock was $6 and it is now $190—some dupes paid $483, game over. Short sellers Melvin Capital, Point 72 and D1 Capital focused on fundamentals and got their assets handed to them. Shorts lost more than $9 billion between January and June.
New Chairman Ryan Cohen, who is driving change at GameStop, may be a retail genius for turning around Chewy, but Redditors may want to put in a call to hedge-fund manager Eddie Lampert, who bought Kmart and merged it with Sears in 2005, as a highly touted “integrated retail” play, combining stores and online sales, eerily similar to the argument for investing in GameStop today. The stock peaked at $135 in 2007. It is now at $0.30 as the company languishes in bankruptcy. A 1970s Sears Johnny Miller leisure suit is worth more.
AMC Entertainment’s stock was scraping $2 at the end of 2020. It is now $50 thanks in part to Robinhood speculators, and the company has smartly raised cash. But what about fundamentals? Theaters are still sparse, and Disney and others are willingly putting blockbusters directly onto their streaming services—ask Scarlett Johansson about Black Widow’s ticket sales. Theaters are the new roller rinks.
Venture capital is cuckoo.
read the rest at the link:
Joel’s Opinion - Cambridge Analytica was a false panic. It’s time to move on.
Broc’s Opinion - Facebook should bear more responsibility for improving.
What’s your opinion?
Goldman Sachs Communacopia
Goldman Sachs held its 30th Annual Communacopia conference last week in which it hosted senior leaders from across the top companies in TMT (technology, media and telecom).
In the recent investor events, Snapchat management has drawn attention to Snapchat's evolution into a social platform with multiple products such as Games, Maps and Bitmoji.
The company also recently made significant investments in its AR tools and experiences, and announced third-party partnerships and integrations across a wide range of tools.
In the Communacopia conference, CEO Evan Spiegel gave his views on competition, AR shopping and more. CEO Evan Spiegel described two different avenues where Snapchat competes.
The first is entertainment, where Snapchat is competing for people's time, and the competition is intense.
🌊 Canadian Companies To Peruse🌊
Thriver - A Toronto based food and culture platform providing workplace culture programs aimed at promoting employee engagement and wellness. Aug 2020 they raised $33M Series B - 57 employees on LinkedIn (hiring for product managers, product marketers, engineers, etc.)
Headversity - A Calgary based workplace mental health and resilience platform. Dec 2020 $2.7M Seed Series - Andre de grasse is their resilience ambassador.
🔮Best Links of The Week🔮
Apple, privacy and health - According to the WSJ, Apple is doing research on using iPhone interactions (such as how you type on the keyboard) to diagnose things such as depression or cognitive decline. Valuable and important, clearly, but also another example of how Apple’s decision to be the ‘privacy company’ is a strategic building block for future products.
Amazon does physical department stores - The WSJ has a look at Amazon’s plans for its own department stores. Amazon is not a ‘website - it’s trying to be the fastest and most efficient way for you to get the SKU, and that could sometimes be a store. The real challenge is that a good department store is about experience, curation, and expertise, not just logistics and SKUs, and that’s alien to Amazon’s whole culture in ways that a physical store is not.
The Man Behind Verano from Todd Harrison - I didn’t know the culture, the team or the mindset and that has now changed. It didn’t take long for me to see what Verano was all about, the passion and purpose that so many of them share, the people, the process and the product that they take so much pride in, up and down the ranks / across George’s various enterprises. I also noticed that George doesn’t f*** around. He’s all about results, accountability and forward progress, and he sets that tone by walking the walk / setting an example daily.
History’s Most Seductive Beliefs - The biggest takeaway from history is that the characters change but their behaviors don’t. The technologies, trends, tragedies and winners – the events that take place – are always in flux and can be nearly impossible to predict. But the behaviors that drive people into action, influence their thoughts and guide their beliefs, are stable.
Gitlab and All Remote Companies - What the first IPO of a truly all-remote company tells us about remote work