#91 - A Common Sense Explanation for Lumber Prices, When NOT To Take Stock Option Grants, BRK Shareholders Meeting Highlights, and the Ethereum Hype Cycle.
In this week's episode of Reformed Millennials, Broc and Joel hit the ground running as they discuss the Berkshire Hathaway Annual Shareholder meeting, why lumber prices are spiking and the history of bubbles.
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
The rotation from zoomer to boomer stocks is in full flight.
$PTON, $ARKK, and $TDOC are trading like absolute garbage and we have to take heed of what could result from these stay-at-home stocks continuing to deteriorate.
If you like health care - check out GDRX or BKD instead of TDOC.
The chatter on the street has been all about “Sell in May & Go Away”, but perhaps the better move is to Rotate in May & Go Away. The below chart shows Growth vs. Value over the past 14-months ($IWF/$IWD).
Readers/listeners may remember, this ratio broke down in favor of Value in late February. Growth staged a nice rebound in March-April. However, that rebound fizzled out recently as the ratio retested the level it broke down from in February. Value outperformed Growth in a meaningful way the last week, which begs the question – was that the end of Growth outperformance?
Interest rates are an important catalyst to watch for this relationship. Keep in mind, Value caught a bid as interest rates were spiking in late February. If rates pick back up, it will likely put more pressure on this ratio.
FANGMAG Earnings season
Every big tech company has had a record 12 months: lockdown and working from home meant more computer hardware of every kind, more software, more ecommerce and more entertainment spending. Big companies are accelerating their 'digital transformation' (a terrible term that reflects a very big, generational shift) and, under the hood, Amazon and Google each saved $1bn in travel costs. It's not clear how much of that was spending pulled forward from 2021 and 2022, nor how much corporate travel and physical retail snaps back. But making everyone do everything on the internet for a year was good for internet companies.
💸Berkshire Annual Shareholder Meeting
Berkshire Hathaway released first quarter 2021 earnings at its annual meeting on Saturday.
Q1 Operating Earnings came in at $7.02B, up $1.15B YoY. Read the full report here.
Warren Buffett and Charlie Munger spoke to shareholders for ~5 hours following the release.
Buffett beautifully passed when Bitcoin came up but Charlie Munger had his own words:
Of course I hate the bitcoin success. I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air.
I think I should say modestly that the whole damn development is disgusting and contrary to the interests of civilization,” said Munger
Here’s the full 5-hour feature.
Tren Griffin @trengriffin1/ What might you want to take away from today's Berkshire meeting? Focus on the way they think about the investing process. You are not them. You have a different circle of competence and different resources, needs and goals. How they think about investing is what matters.
I’ve been exploring Ethereum (and buying, for full disclosure). This is a plain-english recap of the very basics, to test my learning! (and maybe a frustrating oversimplification for the experts)
Bitcoin was the first blockchain. Every blockchain has a cryptocurrency. Bitcoin’s cryptocurrency is named bitcoin. (Lowercase) or $BTC.
Bitcoin showed us what blockchains could do, so people started creating new blockchains, separate from Bitcoin.
Ethereum is one of those new blockchains. It has a cryptocurrency called Ether or $ETH. Unlike Bitcoin, Ethereum has a complete programming language inside it, so programmers can write code and make apps on Ethereum.
Ethereum is like a giant distributed computer. Rather than running an app on Amazon Web Services’s servers, developers can use Ethereum.
Apps run on Ethereum are secure from hackers, because the blockchain ensures data stored in the app cannot be changed. The combination of perfect security with executable code has created “Smart Contracts” and lead to many new kinds of apps.
“Smart Contracts” are like having a robot lawyer live in a computer. This robot lawyer can observe, validate, and execute agreements between total strangers perfectly, cheaply, millions of times per day.
With Ethereum, for the first time, you can trade with someone you don’t know or trust — IF you both agree to the code (Smart Contract) that determines your agreement. If this isn’t an “oh shit!” moment, think about how much time, energy, and money we spend on preventing fraud, protecting ourselves, achieving trust, or recouping losses.
Examples of trust as a primary value driver:
Trust is the foundation of all successful brands.
Want to buy art, insurance, domain names, stock, tickets, music rights, cars, digital files… without worrying about getting scammed? It’ll happen on Ethereum. The code for Ethereum is written by a self-organizing group of volunteers, who openly share the ideas, the rules, and the code so the community can verify and validate. The radical vision is that much of the trust we currently place in Governments and Banks would be better-placed in visible code created by this open community. Anyone can be a part of the Ethereum movement by owning Eth, contributing to Ethereum, or building and using decentralized apps.
Want to learn more - check our specially dedicated crypto interesting reads at the bottom of this newsletter!
🐳The Japanese Bubble of the Late 1980’s
RM’s Favorite Bubble anecdotes:
Real estate prices in Tokyo 40x comparable property in London
Total RE value in Japan was $20 trillion, 5x the entire US
Avg lifetime earnings couldn't buy a small condo in Tokyo
A yakuza leader's fund returned 50x in 1987 and he spent $113K/sq m building a new headquarters
Country club memberships were going for > $1 million
Golf memberships, art, and just about anything else could be used as collateral to fund stock speculation
The record price paid for a piece of art, diamonds and books were all set in the late 80s by Japanese buyers
🌊Best Links of The Week🔮 ETH Edition
Buy ETH on Coinbase: coinbase.com/join/jorgen_1q
Read/Contribute to Developer conversations on GH: github.com/ethereum/EIPs/…
Read the ETH Whitepaper: https://t.co/B7Q6WgsmCs
Learn more about Cryptocurrencies and Blockchain generally from my edit of @Naval’s best blockchain explanations: navalmanack.com/secret-section…
This blog is presented as a general educational, informational, and entertainment resource. While the author of this blog, Joel Shackleton, is registered as an Associate Advising Representative with Gold Investment Management Ltd., a firm registered as a portfolio manager and located in Edmonton, Alberta, this blog does not provide, and should not be construed as providing, individualized investment advice, nor as containing any recommendation to buy or sell any specific securities or otherwise make any other form of investment or investment decision. Joel Shackleton and Gold Investment Management Ltd. specifically disclaim any reader of this blog from relying on any of its contents as investment advice or as an investment recommendation. The views and opinions expressed herein are the personal views and opinions of the author only and do not necessarily reflect the views or opinions of Gold Investment Management Ltd. or any of its other registered individuals or employees. For a comprehensive legal disclaimer please visit GIM’s website at https://gold-im.com/legal/