We Aren't Far From AI Being Smarter Than The Smartest Human Alive
The markets are having an internet moment with AI hype. We discuss these impacts in todays newsletter.
Welcome back everyone.
After a much needed vacation from content production, we’re back writing today to update our followers on the future plans of the podcast, but also update everyone on our thoughts regarding the market, trends and price action.
Moving forward we will be mixing in more interview with business owners and market analysts.
I will also be committing to my weekly newsletter update that will cover what I’m seeing in markets, the articles that I find informative and important along with the audio and video content that I find interesting.
Onwards!
Market Update📈📉
There was a huge FED meeting this past week. Yeehaw.
Some thoughts:
Quite a few tech stocks were getting weaker heading into the FOMC. The premise of this weakness was that higher inflation might be back and the Fed is likely to be more hawkish in their remarks…
None of that happened.
The Fed confirmed its original plan to reduce interest rates by 75bps in 2024 and cut more in 2025. As a result, stocks bounced, led by small caps, financials, and Consumer Discretionary/retailers.
Semiconductors also had a decent bounce but for a more legitimate reason.
Micron ($MU) crushed earnings estimates which inspired a rally across the board. $NVDA, QCOM 0.00%↑ and AVGO 0.00%↑ all quickly recovered from its dips to its rising 20-day EMA and it is back near its all-time highs.
The dips in chips continue to get bought.
The second best-performing major sector year-to-date is financials. All the talk in the market about the repricing and write downs in commercial real estate prices has had little to no effect on financials . So much strength across the board as JPM 0.00%↑ and GS 0.00%↑ hit new all time highs.
Earnings season is basically over and typically retailers are the last to report. It has been a mixed picture there.
$LULU, $NKE, DG 0.00%↑ sold off.
$WSM, ARHS, TGT, GPS gapped up and followed through.
Tech stocks are the ones having issues with following through lately.
The IPO market is finally back in the news. RDDT 0.00%↑ and $ALAB were the crowd’s favorites.
Podcast & YouTube Recommendations🎙
Datatrek had a fantastic video for young investors who think they can make it as traders:
Four key points for developing your skills as a trader.
Develop a process with a proven track record. Start by setting a weekly profit goal, like $100. Once you achieve that goal, cut back your positions or sell everything and focus on developing ideas for the next week. Gradually increase your goals as you consistently make money. If you start struggling, go back to a lower goal.
Identify and plan for what could go wrong. Write down why you could be wrong before entering a trade. Set targets, stop losses, and time frames and stick to your plan.
Respect price trends and understand that other traders know more than you do. Don't short new highs or buy new lows. Think twice before buying or selling based on valuation alone.
Know yourself and trade according to your own risk tolerance and experience. Some traders are comfortable with high risks, while others prefer to limit losses.
Investing involves finding undervalued assets that will rise in value over time. Here are three points to keep in mind.
Most stocks don't outperform in the long run. Indexing is a good option because it casts a wide net and increases exposure to stocks that are actually creating value.
Investing requires patience. It's like a marshmallow test - you have to delay gratification for a larger payoff in the future.
Don't mistake a trade for an investment. Focus on long-term holds, such as US large cap and high quality growth stocks.
Overall, investing can be a worthy side hustle, but it's important to understand the difference between trading and investing and to choose the approach that best suits your risk tolerance and personality.
B2 Pod had a fantastic guest on this week: (notes below)
Bill Gurley, Brad Gerstner and Bob Mylod are discussing stock based compensation on the podcast. Bill Gurley disagrees with Warren Buffett on the idea of not using stock options as a form of compensation. He believes that stock options create a lot of alignment and incentives. Bob Mylod says that the best thing to consider when a company is deciding on stock based compensation is cash equivalency.
Later in the episode, Bill Gurley and Brad Gerstner talk about the rumor that Apple is talking to Google about leveraging Gemini. Bill Gurley believes that this rumor is not likely to be true because Apple is in a good position to build its own AI. Brad Gerstner also thinks that this is a sign of weakness on Apple. The conversation then turns to large language models (LLMs). Bill Gurley believes that voice AI may be more interesting than video AI. Brad Gerstner worries that the switching cost of LLMs is around where data resides.
Best Links of The Week🔮
"A record amount of money has flooded into US corporate bond markets this year, as investors rush to lock in the highest yields in years ahead of an anticipated series of interest rate cuts by the Federal Reserve. Inflows into corporate bond funds have reached $22.8bn so far in 2024, according to fund tracker EPFR, the first positive start to a year since 2019, when $22.4bn had flowed in by this point." Source: FT
"Amgen is among a crowded field of drugmakers racing to develop the next blockbuster weight loss drug — but it’s taking an entirely different approach than its rivals. The biotech company is testing a monthly injection that works differently from Wegovy and Zepbound and appears to help patients maintain their weight loss even after they stop taking it." Source: CNBC
"China has introduced new guidelines that will mean US microprocessors from Intel and AMD are phased out of government PCs and servers, as Beijing ramps up a campaign to replace foreign technology with homegrown solutions. The stricter government procurement guidance also seeks to sideline Microsoft’s Windows operating system and foreign-made database software in favour of domestic options. It runs alongside a parallel localization drive under way in state-owned enterprises. " Source: FT
"The world’s largest, most-important financial market is growing by leaps and bounds. On Wall Street, that is making people nervous. Annual issuance of U.S. Treasuries has exploded, nearly doubling since the pandemic began. The government sold a record $23 trillion worth in 2023. And few think the spree is going to slow soon... Treasuries are considered the safest and easiest-to-trade securities on Wall Street, and many worry that any instability there could rapidly spread." Source: WSJ
"Peter Thiel, Jeff Bezos and Mark Zuckerberg are leading a parade of corporate insiders who have sold hundreds of millions of dollars of their companies’ shares this quarter, in a signal that recent stock market exuberance could be peaking. As markets hit record highs, the ratio of corporate insider selling to insider buying is at the highest level since the first quarter of 2021." Source: FT
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