In Search of the Perfect Investment

This is the past ten years of Nasdaq. Notice last week’s downward blip? Nup. Me neither.

This is the past five years of Nasdaq. Notice last week’s downward blip. Nup. Me neither.

This is year to date (really just a month) of Nasdaq:

Now you can see the blip. Not much in the greater course of events. We’re still above where we opened 2018. So far.

Reasons why it blipped last week:

+ Janet Yellen said stocks were overvalued.

But in December she said:

+ Some people re freaked by rising interest rates:

The 10-year treasury yield opened the year at 2.46%. Now it’s about 16% higher. That’s a big jump in a month. You can see why some people are freaked.

Of course, nobody knows why the market fell last week — except that everyone and their uncle and Blind Freddie knew we were due for a “correction.” And last week we got it.

Will it develop into what happened in 2001-2002? The Dot Com Bust. Or what happened in the Great Recession  in 2008?

I doubt it. But stranger things have happened. Stocks are highly valued at present. Apply conventional metrics and you can be easily freaked — CRM sports a P/E of 11,078. Amazon 363. Netflix 214. Microsoft is 62. Nvidia is 58. You get the idea. Bring these P/Es down to earth just a little and prices would tumble bigly.

I would not sell because we had a small correction last week.

I would re-assess the individual stocks I own based on their latest earnings and their latest conference calls.

So I’m looking. I think Cramer’s right about Google. That really is a boring stock compared to Amazon. Can’t Google think of something new and exciting other than “search.” Something comparable to Amazon moving from selling low margin junk to me and selling high margin cloud services to innovative companies like Netflix.

I’m looking at great industrial companies I own — like MMM, Honeywell and Boeing. Their P/Es are high.

Should we see a 15% decline, I’ll think about trimming. Or maybe adding more.

For now, I’m thinking this is not 2001-2002 or 2008. The world’s economies are firing on all cylinders. The big growth is in tech. And that’s where I will continue to be heavily invested, for now.

Crytocurrencies are back in the news

This is the headline on a fascinating FT Weekend story:

A third of the world’s bitcoin exchanges were hacked between 2009 and 2015.

$520 million of XEM coins was stolen in the raid. Its value had risen about 10,000% since January 2017.

You must read the crazy story. Click here. 

You must also visit coincheckup.com. There you’ll find pricing for 1,511 crypto-currencies. I didn’t make that number up. They’re all there listed in perfect spreadsheets. Here’s a tiny sample:

Head Games. The Mental Tricks of Athletic Endurance

The Wall Street Journal outdid itself with a piece on figuring on how you can mess with your brain and improve your performance — on the tennis court, etc. Here are some excerpts:

In 1961, a pair of scientists at George Williams College in Chicago showed that they could boost the maximum strength of weightlifting volunteers by 7.4% if an experimenter sneaked up behind the subject and fired a .22-caliber starter’s pistol just before the lift. It was among the first (and most bizarre) attempts to demonstrate that the limits we perceive as physical and absolute are often negotiable and mediated by the brain. …

Whatever the mechanism, both camps agree that the subjective perception of effort is a sort of master controller-which means, in practical terms, that if you change your perception of a task’s difficulty, you can change your actual results. …

There are plenty of examples of this phenomenon. In a 2014 experiment described in the journal Frontiers in Human Neuroscience, researchers led by Dr. Marcora showed cyclists images of smiling faces on a screen in imperceptible 16-millisecond flashes. The exposure boosted cycling performance by 12% over the level recorded with frowning faces projected in the same way. The sight of a smile didn’t lower the subjects’ heart rates or lactate levels, according to Dr. Marcora. Instead, it subtly altered how their brains interpreted those signals, evoking feelings of ease that bled into their perception of how hard they were pedaling.

Eliud Kipchoge, the Olympic marathon champion from Kenya, has sought to self-administer the same effect. Mr. Kipchoge has come the closest to breaking the 2-hour barrier in a marathon, missing by just 26 seconds (in a race in Italy last year that doesn’t count in official records). He deliberately smiled broadly every mile or so during the final stretch. “When you smile and you’re happy,” he later explained to reporters, “you can trigger the mind to feel your legs.”

Booms do indeed implode

I’m currently in California’s Coachella Valley. Susan and I have been coming here for the past ten plus years to escape the tedious New York winter. The Valley is about as close to paradise as you can find — warm weather, blue skies, super scenery, gorgeous snow-capped mountains.

Google Coachella Valley and you’ll see images like this:

But you’ll also see photos like this:

The developers have over-developed the valley. Too many golf courses. Too many houses. Too many gated communities. The early folks made out. But since 2008, prices of the priciest homes have fallen every year. They are still falling. There is too much retail. “For rent” signs are even appearing on ritzy El Paseo, the Valley’s premier shopping street.

Ironically there are no “bargains,” Prices continue to drop.

I compare Coachella to Manhattan. Coachella has infinite land to build more houses, more golf clubs, more gated communities. More retail. Manhattan is an island. They’ve filled in all the land. There’s no more. The buildings rise and rise. Prices climb — except for the $50 million plus apartments. Sanctions on Russia have hurt those.

But Coachella Valley. Nice and cheap, and getting cheaper. No boom. A mini-recession. A tale of two areas.

Coachella’s savior might be marijuana. They’re building pot factories all over the valley, including one scheduled at one million square feet under roof. They call Coachella “God’s Waiting Room.” He’s soon going to have a lot of stoned visitors.

This says it all.

From this week’s New Yorker:

Harry Newton, who’s playing tennis this morning.