Simply Complicated

This week shows just how complex financial markets are. We saw rate increases from the BOE and the Fed, which equity markets read as positive, then strong job numbers in the US that were perceived as negative. This just as many equity markets are starting to rebound off their lows and see positive technical signs, but at the same time forward looking estimates are beginning to turn lower. Fed futures are not showing any confidence in Powell's statements of continued rate increases. As the title notes, things are simply complicated. If you're familiar with American singer songwriter Jimmy Buffett, he has a song of the same name in which the chorus notes, "Life is complicated with its ifs, and ands, and buts. It's alright to be crazy, just don't let it drive you nuts." The same can be said about investing and trading in today's financial markets.

In last week's markets, we can see the energy commodities are continuing their slide. Crude, Nat Gas, and Gasoline were all off decently, which is good for consumers and inflation numbers. A little note that Bitcoin continues a decent start to the year.

Rather than go through the stats for the first month of the year, I found this chart from Callum Thomas easier to steal. Callum Thomas does some excellent work each week and I recommend following him. REITS are a bit of a surprise on this monthly chart, but you can see nothing Callum is following here is on the negative side of the line. Markets are risk on right now.

Earnings Watch

Earnings were again a big factor in the performance of equities last week. Things were all over the place here too. Apple missed on both top and bottom line, but ended the week slightly higher. Alphabet missed as well. Amazon beat, but sellers overwhelmed. Meta, aka Facebook, was a standout. It had a wide miss, but future considerations had it up more than 20%. Exxon beat, announced a huge $50B buyback, and raised its dividend, but that seemed like a bit of a disappointment to traders. Maybe it was Chevron's massive numbers last week that set a high bar.

We're now about a quarter of the way through this earnings' season. On the global stage India is furthest along at 61% of large cap names reporting. The financial sector led by Banks is the further along at 46% reported. I also broke out the North American performance as well.

We're coming off the heights of reporting back to a slightly more normal level of names. We also shift from the largest names to more of a focus around the small cap names. There are still almost 100 S&P 500 names reporting, but a larger percentage by market cap of the Russell 2000 and TSX in Canada report.

On the individual name side, I've got an eye on Toyota with its 6.8% Predicted Surprise. Also of interest is BP's report with the recent ginormous buybacks announced by the US firms. UBER should be a volatile one on Wednesday.

Best of the Week

This one does get a bit of a bump because it's something done by my LSEG marketing team. That said it's still an excellent episode on one of my favorite topics. Jamie is a fantastic host, who I've also had the pleasure of working with before. A few of the points made I found helpful for a sales related context as well. When in a slump, you need to do something different with your brain. Examples are exercise, walk in nature, cooking, or learn a new language. The deeper the slump the more you need a rest. The cool thing about all of this too was the focus on it in the TV show 'Billions' where it was normalized in their work. Alden noted that after the show he say immediate and material growth to his business. They mentioned that naps are good as well, which is easier in the work from home environment. Ten to twenty minutes is an ideal time, but even micro naps of a minute or two are useful. One final point I'll highlight is that cognitive load impact performance and decisions tend to be worse toward the end of a busy day or week. The end of earnings season is not great for new analyst reports. I can't recommend this one enough. Listening time: 47 minutes

Best of the Rest

With the explosion of talk around ChatGPT, I thought I'd share a few articles I found. This first one off ZeroHedge highlights the dominance of Chinese firms in AI patents. The article is mainly just a share of the Statista chart, but the last point in the article highlight Chinese insurance and banking firm's jump from a measly 46 patents to a big 6,410. It uses most of those to assess insurance claims. And you thought those insurance apps were intrusive. The second link also focuses on AI, and specifically using ChatGPT to analyze a stock. My colleague Richard Bateson alerted me to this one. Soon this AI will be able to help an awful lot more workflows in finance. As the post notes, right now it will not uncover hidden gems or do anything revolutionary. It will start to help with some time consuming tasks like generating backtesting code for signals. This allows me to bring in some of the things I'm extremely excited about with Microsoft's partnership with my company, LSEG (London Stock Exchange Group) . There's so much we've started to talk to them about in using our products and communities together. My head has been in the clouds since this announcement.

Jamie Catherwood's content always amazes me. He's a history buff and by history, I don't me the inflation comparisons to the 1970s. Jamie is more about the 1670s, 1770s, or 1870s. In this conversion, he relates today to the early 1920s. He also talks about how the fraud cycle lags the market cycle and bad and questionable businesses are now starting to unravel. He reveals the Italian origin of the word bankrupt. Jamie then compares crypto to what was happening in the stock market in the late 1800s. He explains bucket shops, aka gambling dens, and that gets into the origin of the ticker tape. Another ridiculous historical fact Jamie shares is that before the 1933 Securities Act, the return on IPOs was -52% over next five years, and after the Act, it was +5.7%. He also gets into how the 1907 San Francisco earthquake eventually led to the creation of the Fed. There's so many amazing facts in this. Jamie Catherwood is another person's who work I recommend following at Investor Amnesia. Listening time: 73 minutes

Jim Cramer is one of the most criticized "analysts" on Wall St. He has some spectacularly wrong calls. In fact, as the article points out there's an ETF (SJIM) that's the opposite of his recommendations. In his defense, he makes about 20-30 calls every weekday. There's no way one man can follow and know that many securities. This article talks with Quiver Quantitative CEO, James Kardatske about their "Inverse Jim Cramer Strategy" and Matthew Tuttle, managing director of Tuttle Capital Management, about his SJIM ETF. Jim's recent fame has made him a target, but he has had much success in his career at Goldman, his hedge fund, and TheStreet.com. This is a good article if you're curious about the animated CNBC personality.

The author compares the coming regulatory changes to one of the most active periods in history. Two big points in this article are the T+1 settlement for equities. A point shared is that 81% of brokers use some manual processing, so this would be a tough and likely expensive one. The second one is around the market structure that main street investors are using to execute with wholesale brokers.

One for the Road

Something for your travelling, but hopefully not while driving, entertainment. I have not seen all of these, so will give one a try the next time I have nothing to do.

Hey good lookin, thanks for reading. Come Monday, I hope you have some changes in latitudes and get to enjoy a cheeseburger in paradise.

Michael