Invest Smarter

This week's episode was a blast to record. We start off by covering a great piece from Morningstar about the challenges Cathie Wood and her Ark funds are likely to face now that her funds are enormous. We chat about the Fed and what Jerome Powell said to make markets happy. We discuss a great 2020 and 2021 outlook from legend Howard Marks from Oaktree Capital Management. We discuss some interesting Bitcoin facts, particularly as it relates to environmental concerns. We also look at how there is truth to the idea that investing in stocks a  monkey picks by throwing darts at a stock dartboard is potentially a better option than a cap-weighted index fund. And we wrap up trying to figure out NFTs and Metaverses! Enjoy!

Articles Discussed:

Morningstar: No Room on the Ark?

Here’s what changed in the new Fed statement

Fed sees the stronger economy and higher inflation, but no rate hikes

Howard Marks 2020 Review

The Nasdaq Is Acting Strange. What That Means for Stocks.

The Flaws of Capital Asset Pricing Model (CAPM)

BofA Global Research: 10 Surprising Facts About Bitcoin - The Big Picture

Commodities Supercycle Looks Like a Stretch - WSJ

What a week! One of my favorite stocks, Digital Turbine (APPS), hit a 52 week high on Tuesday on great news and proceeded to drop 35% in the Span of 72 hours! This is a microcosm of what is happening across the board in stocks that have been the biggest winners. The media is labeling the stocks taking hits as non-profitable tech stocks, but from what I can see, it is anything that has been a big winner, profitable or not. If you are waking up with a feeling of confusion and uncertainty, take a listen to this podcast. This is not a time to panic. We are seeing a run-of-the-mill correction in stocks that have been absolute beasts- so naturally, the correction is a bit deeper and more painful. It's time to stay calm and keep our eyes downfield.

What a week! One of my favorite stocks, Digital Turbine (APPS), hit a 52 week high on Tuesday on great news and proceeded to drop 35% in the Span of 72 hours! This is a microcosm of what is happening across the board in stocks that have been the biggest winners. The media is labeling the stocks taking hits as non-profitable tech stocks, but from what I can see, it is anything that has been a big winner, profitable or not. If you are waking up with mounting losses, take a listen to this podcast. This is not a time to panic. We are seeing a run-of-the-mill correction in stocks that have been absolute beasts- so naturally, the correction is a bit deeper and more painful. It's time to stay calm and keep our eyes downfield. 

In this week's episode, we chat about how rates rising have rattled the market a little bit.  We discuss the mechanics of why this happens and tie it to the big picture of inflation expectations. We wonder which sectors would benefit from more inflation and what will happen to the high-flying tech stocks. There has been a divergence even within technology stocks, and some may be more vulnerable than others.

We also talk about the expectation gap that exists with individuals expecting large returns on their portfolio and list capital preservation as a top priority. We discuss the importance of having a plan and knowing what you actually need in terms of return to make your plan work. You do not always need excess returns to make your vision a reality!

Other Topics:

• Digital Advertising growth
• Cathie Wood
• Bubbles
• Getting started with stocks or funds

In this week's episode, we spend the bulk of our time talking about inflation. It has been one of the most frequent questions we have received recently. When you Google search, "Is inflation coming?", you seem to find that for every alarmist article citing inflation fueled market crash is imminent, there is another article suggesting that there is nothing to worry about. We break down some of the top reasons for both arguments to help our listeners understand some of the dynamics at play. Big picture, however, inflation and rates will have to normalize at some point. Those who have investment horizons of 10 years or less until retirement will want to be very vigilant in how their investments are allocated. Asset allocations may need to adjusted in more seemingly drastic ways to be able to expect the required rate of return to get some individuals to the finish line. We dive in. We also casually chat about why we love Roku and how they make money, and why the stock's massive valuation MAY be justifiable!

We know, we keep bringing up bubbles and Cathie Wood. Why? Cause everyone keeps talking about bubbles and Cathie Wood! And over the last couple of weeks, Cathie even talked about why she thinks we aren't in a bubble. So Cathie + Bubble talk means we had to talk about it. Enjoy this week's episode!

The lowest 2021 S&P 500 large bank price target is 3800, which is essentially where we are. In 12 of the last 15 years, the consensus end of year S&P 500 price target has been overestimated. Being bullish is good for business and a safe choice for analysts when everyone is following the herd. We discuss this in our latest episode. We also take a look at the valuation of the market which is at levels hard to justify even in this low rate environment. We discuss Jeremy Grantham's piece from early January about the nature of bubbles, and why he believes we are in a bonafide bubble at the moment. Finally, we answer a listener question about what to do with the cash that you want to use to buy a house in a few years. 

Articles Discussed

Wall Street analysts make a big S&P 500 call for 2021. Market history says ignore them

Goldman says the bull market is still in the early stages, gives six trades to play it

Short seller Carson Block says rolling bubbles that keep popping up show fragility of stock market

WAITING FOR THE LAST DANCE

Hey guys so every week or every other week (still deciding), I'm going to have another version, call it a subchannel, of the podcast where I spend 15-20 minutes talking about what's on my mind regarding the markets, what I'm watching, what's catching my eye, and so on where I just get it out of my system. I'm thinking of a name for the subchannel so if you have any thoughts, let me know. Hope you like it, please let me know what you think by emailing [email protected].

In the first rendition, I talk all about the Gamestop situation. I cover

• How it all started
• Why it's happening
• Why it will happen for a while
• How the market is gamified
• Why this won't last forever
• Fundamentals vs. "flow"
• An alternative to the "meme stock of the week" strategy