ArminvanBuyout

NVDA being the latest example, TSLA being a pre-COVID example

Interesting read on US outperformance https://www.bridgewater.com/_document/us-exceptionalism-drivers-of-equity-outperformance-and-whats-needed-for-a-repeat?id=00000192-48f2-d1cc-ab9b-fbf6d9e30001

Buying some building products to add to my basket

Neg in a rate cut environment

Isn't a large part of ABNB earnings from interesting income?

Which in turns drivers higher ROIC, which coupled with declining rates, just means average SPY company probably on net is creating more value. Shift towards tech post-GFC (which have better incremental ROIC vs. banks/cyclicals, etc.) further cements multiple expansion

Almost feels like momentum traders piled into the stock mid-Aug anticipating earnings smash, and when it didn't, are just exiting now.

There's the whole topic of yen carry trade deleverage. People borrowed yen for US assets, and now that yen has strengthened from 162 to 149, there is degrossing happening

Imagine trying to raise when Debt to GDP is 250%...

Agreed - near-term is a bit iffy because volumes will probably miss (they've been talking down volumes to the Street on weather and poor housing data), but over the MT / LT is a solid winner. They've also focused more on pricing through this cycle, which means that incremental margins likely better than before

Saw somewhere that ~40% of S&P return YTD came from NVDA

I think BLDR looks cheap if you assume we're at near-trough earnings right now, and it's likely trading at high-single digit normalized/mid-cycle EPS. And if you believe that we still have structural underbuilt housing, then the cycle will last much longer than prior ones, and the entry is solid. Obviously not as cheap as it was in October - stock has ripped a lot, so makes sense for such a large drop, but nonetheless, it's still cheap if you have a multi-year view

Added to BLDR

I saw recently that US firms have been increasing market share internationally - one reason for why earnings growth has outpaced GDP growth. The other reason is that if you believe technology drives winner takes most/all dynamics, then the larger companies (who are generally winners) should disproportionate amount of market share from private companies, resulting in public companies representing larger % of the GDP pie

It seems like the largest increase in fiscal spending recently is interest expense, which then flows back into the economy. So in a way, isn't this a bit circular, where keeping rates high continues to drive fiscal spending, which continues to prop up economy (i.e. stimulative to the point of the comment a page or two ago). Would there be a scenario where the geniuses at the Fed see that, and will cut to "reduce" the fiscal impact?

Warder's a beast - was a great resource when I was ramping up on met

Building on my prior response, the other model I have is thinking around where market is underpricing growth. Based on experience, market generally just seems to price in 1-2 years of earnings (based on implied DCFs). If you think growth is sustainable for longer, then you can lean into duration, and underwrite higher growth for longer. Just think of how many companies look expensive on metrics, but in hindsight, everyone should've been buying those companies regardless of NTM metrics

One thing that's really helped for me for framing is to lean into duration as a competitive advantage, and recognize that the incremental buyer or seller today is most likely someone who works at a pod shop, and therefore has a different trading window than me. If something looks good for the a 3-5 year period, but is trading cheaply because the path to get to that point is still a bit uncertain, then I take the risk. I'm effectively getting paid to take that uncertainty on, and I lean into that duration advantage (frankly one of the only advantages I have as an individual investor). This probably has higher vol than the traditional buy companies on cheap metrics, but I think open up the opportunity set to much better risk-return skews

First example I've seen of AI actually driving profits through layoffs (which acts as deflationary force). Basically saying AI is handling 2/3 of CX tickets now, and that will save $40 Mn per year https://www.fastcompany.com/91039401/klarna-ai-virtual-assistant-does-the-work-of-700-humans-after-layoffs

Interesting paper from GMO on how the last decade has been the outlier on the largest large caps outperforming, with this quote quite powerful - "Since 1957, the 10 largest stocks in the S&P 500 have underperformed an equal-weighted index of the remaining 490 stocks by 2.4% per year. But the last decade has been a very notable departure from that trend, with the largest 10 outperforming by a massive 4.9% per year on average" https://www.gmo.com/americas/research-library/magnificently-concentrated_gmoquarterlyletter/

In what way?

The gap is likely filled by government deficits - corporate profits is tied to government actions + household actions, and with the amount of deficits we've been running the last few years, I'm not surprised at the strength of corporates.

Bigger than the Super Bowl

What happened to it since 2021? Seems like share price has completely collapsed and is barely above pre-COVID levels

Completely agree - there's less public companies vs. before, while the amount of money in the market (whether it be through 401Ks, foreign capital, etc.) has drastically increased. Think there's been a permanent shift in the floor valuation, and stocks will mostly look more expensive vs. history. I also wonder if the tenure of the average public company has lengthened (would love to see data on this), resulting in investors naturally willing to underwrite more years of NT cash flows before applying a terminal (DCF analogy)