Data Dependent ??????

Morning folks!

February's coming at us faster than Lewis Hamilton heading for the Ferrari garage and we have the Superbowl week of market data but first, I want to talk building and fixing things ...

Yes, that's right and the reason this is interesting is I am NOT a "fixing things" kind of guy, pretty much all the tools in our house belong to my wife or my dad. Anyway starting from last weekend I have built an astronaut's rocket pack, a water wall kids toy (it needed at least a couple dozen screws cmon) and am one thermofuse installation away from a hopefully successful overhaul of my prized Gaggia coffee machine (via a replaced pump and a complete teardown to descale a solenoid, all from youtube videos). The Gaggia seriously needs to work because I can't keep living off nespresso anyway ... update next time

I've said it before and I'll say it again, February has the best start to finish improvement of any month and here we are: in the final grip of winter rugged up in puffy puffas one minute heading straight into spring the next.

Markets mumble

There has been a lot packed into this week as both the BoE and Fed kept rates on hold, with Jerome Powell telling the market to chill out on the March rate cuts vibe while the Bank of England reckons inflation will be back down to target in just a few months with the economy far stronger than predicted a year ago. Mind you their forecasts have been all over the place these last couple of years.

Still, looking globally we have pretty low unemployment, solid wage growth, a booming US economy with low inflation and central banks poised to cut rates with the stockmarket close to all time highs. Fed haters gonna hate but JP and friends could justifiably be taking a victory lap here.

Earnings are a big deal at the moment as the market, especially US mega cap Mag7 names, is priced for pretty damn strong earnings growth this year. Microsoft and Alphabet announced on the same day as the Fed meeting which ended in a bit of a risk-off market bump but as at the time of writing most of that has reversed and other Mag-7 names have been well rewarded on earnings results. Tesla and Alphabet are the exceptions with the latter stock getting punished on what didn't seem like an obviously bad report perhaps gives some strength to the priced-for-perfection narrative but it hasn't really slowed down the overall market.

Follow App Economy Insights for all those neat charts breaking down earnings reports.

Overall stocks are flat to slightly up still for the year with the run of US exceptionalism continuing, and EM in the back seat.

Bond funds have taken a hit to start the year as long term rates bounced higher from their low point at the turn of the year but continue to be pretty see-saw.

Things I'm reading

1. Teaming is hard because you are probably not on a team [link]

Been thinking about teams a lot this year and this really stuck. Real teams differ from working groups and teams-in-name-only and I think I've been part of all three in the past -

2. Navigating ESG fatigue in shareholder voting (link)

Some good new potential reasons here for the big drop off in support for ESG resolutions in the 2023 season some of which I hadn't seen before and thoughts looking ahead to 2024 proxy seasons

3. Aswath Damodaran on risk (link)

“Don’t let discount rates become receptacles for all your hopes and fears”

Prof Damodaran on where the industry has gone wrong on risk -

First, it has put too much emphasis on market-price driven measures of risk, where price volatility has become the default measure of risk, in spite of evidence indicating that a great deal of this volatility has nothing to do with fundamentals. Second, in our zeal to measure risk with numbers, we have lost sight of the reality that the effects of risk are as much on human psyche, as they are on economics. Third, by making investing a choice between good (higher returns) and bad (higher risk), a message is sent, perhaps?unwittingly, that risk is something to be avoided or hedged.

Things I'm listening to

1. The Compound and Friends with Neil Dutta of Renaissance Macro (web | apple )

Super conversation with one of very few folks who made the correct no-recession call last year.

"It's not about the call it's the thought process"

2. Goldman Sachs Insights -the case for US equities ( web | apple )

Interestingly bullish take on US equities which runs counter to a lot of the outlooks I seem to read that have often groupthought their way to being relentlessly cautious/negative/outright bearish on the US stockmarket. A reminder the US has plenty unique features that no-one else can compare to and that valuation multiples have never been particularly great capital allocation tools at an asset class level.

3. Cal Newport on learning hard things and Slow Productivity (web | apple)

The productivity systems guru on why applying our brains to learning hard things is so fundamental to humans, slowing down to do more and why you need three different types of note taking systems: (1) extended memory (2) obligation tracker and (3) blue sky big picture memos to self

4. OddLots with Zongyuan Zoe Liu (web | apple )

I see a lot of headlines on de-dolorisation but reading the articles they are usually more about a slight effort toward diversification of currency dependence in the context of a system still totally centred around the US dollar (apparently journalists don't write their headlines who knew).

Grab bag

Toby Nangle in the FT with a neat piece on corporate bonds which captures a lot of how we look at them (link):

Come for the spreads stay for the all-in yield

I particularly resonated with this idea (in the comments) that the "balkanisation" of financial markets with very specialised participants looking at things in very specific and different ways leaves gaps and holes when seen from a generalist perspective (in this case the different viewpoints of looking at corporate bonds from a spread point of view or an all in (real) yield point of view).

Having had a busy week we're STILL one episode away from the end of Fool Me Once NO SPOILERS!!!

I haven't managed to get really properly stuck into the Netflix 6 nations series yet - does anyone have thoughts?

It's a whole set of new-look teams for this year's tournament and arguably a few teams with the pressure off. Let the rugby-chat commence!

Our lives in their portfolios: Blackrock buys GIP.

Map of castles in Europe (from @culture_crit on twitter):