What’s up, folks. Exciting news for the blog before we get into regular business.
Beginning next week, The Most Competitive Game will launch podcast episodes that correspond with weekly readings and a new flavor of blog posts where I dig into a company and provide my own research report. It should be similar to Seeking Alpha’s Behind the Idea podcast.
There will be a slight twist with the new pod. I’ll be having a few of my buddies on each time to ask questions about the topic(s) at hand. They’re the ones who pushed me to do the podcast for TMCG, so this should be a fun way to engage them and simplify the blog posts.
I’ll go ahead and apologize in advance for whatever stupid stuff we say on the podcast.
Here we go:
Reasons To Worry: Trade War, Manufacturing Malaise, Geopolitics, Profits Pinched, Squeezed Central Banks, Reluctant Governments.
Reasons Not To Worry: The U.S., Hiring Sprees, Central Banks Acting, China, Fewer Excesses
Additional Related Reading: IMF downgrades outlook for world economy, citing trade wars (Associated Press)
A Strong U.S. Consumer Won’t Prevent a Recession (Bloomberg)
“Real consumer spending is 70% of GDP and it declined in seven of 13 post-war recessions, though it rose in the other six. Still, even a slowing of growth in household outlays, combined with weakness in capital spending, housing and foreign trade, will push the economy into decline.”
“Look for weakness in employment and consumer spending in the coming months. That will seal the case for a recession.”
“Canada’s cannabis sector is dominated by five companies whose total market value has plunged from about $40 billion in September 2018 to roughly $17 billion as of Friday.”
Additional Related Reading: Feeling burned: The first year of legal cannabis has been a complete disaster for investors (Financial Post), The good, the bad and the ugly from Canada’s first year of legal pot (BNN Bloomberg)
When EBITDA Is Just BS (Institutional Investor)
How to Read Financial News Redux: Prevent Memory Contamination (CFA Institute)
“Source amnesia is normal: We often acquire information but forget when and where we learned it.”
“We must be careful with sensational news because this nonsense can plant phony ideas in our heads, like weeds, that eventually creep into our long-term memory.”
Roberts’s process for reviewing corporate earnings in early 2019:
- Understand Consensus
- Form My Own Opinion
- Question the Narrative
Terrible Business Plans, Wonderful Businesses (A Wealth of Common Sense)
“We’re going to open a new chain of grocery stores. The stores will sell zero branded items. No Coke. No Budweiser. No Lucky Charms. Everything will be private label.
There will be no advertisements on TV or social media. Nothing in the store will ever go on sale. There will be no coupons accepted, no loyalty rewards cards and no Sunday newspaper circulars. There will be no self-checkout kiosks. The aisles in the stores will be narrow and the stores and parking lots will be relatively small.
Who wants to invest in this company?”
Look Away (The Irrelevant Investor)
Why Are We Still Using the P/E Ratio? (Chief Investment Officer)
“The view of the market’s future now and the direction of valuations, as determined by P/E, is mixed. Interest rates, after three years of rising, are going down again.
That is propitious for stock prices: Uber-investor Warren Buffett once remarked that rates “act on financial valuations the way gravity acts on matter. The higher the rate, the greater the downward pull.” That’s because the return from risk-free Treasury paper becomes more appealing than that from stocks. When rates descend, the reverse is true. And if earnings are contracting and prices go up, then P/Es will move even higher.”
- Short-Term Bonds
- Retail Corporate Bonds
- Taxable Bonds
- Junk Bonds
- Preferred Stock
A few other quick and easy reads:
Investing Like Joel Greenblatt, Benjamin Graham… And Mr. Rogers (Brad Thomas on Seeking Alpha)
A Eulogy for the 60/40 Portfolio (A Wealth of Common Sense)
When Performance Leads Assets (A Wealth of Common Sense)
Money Blinders (Of Dollars And Data)
Thanks for checking in again this week.