Insights on markets, emergent trends, history, innovation, risk management, global economics, strategy, policy, and other topics that catch our attention. Inspired by ongoing research, conversations and events. Written and edited by Osbon Capital Management and published every Thursday morning.
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Too much time is spent talking about price. Fundamentals are ultimately what drive equity prices higher over time. To say this another way, a company’s stock price can’t continue to rise unless it continues to be successful. The famous quote by Warren Buffett is, “In the short run, the market is a voting machine, but in the long run (...)
More GPT, Spikes and Limbo
GPT and AI tools Microsoft recently invested $10B into OpenAI at a $29B valuation. This is reminiscent of Adobe buying Figma for $20B. Both valuations are extremely high, but these companies cannot afford to not participate in the future of these markets. LLMs (large language models) like ChatGPT completely change how we gather, interact with and consume information. Whereas a…
AI Integrations, Debunking, Fed Fights
Let’s start with the bright spots Life.Subtitled. NReal is an augmented reality glasses company from Beijing that’s reminiscent of the success of DJI, the dominant consumer drone company. NReal’s augmented reality glasses look like regular sunglasses, which makes them attractive for public use. The combination of NReal’s AR glasses, Amazon’s Alexa tools powered by AWS and a smartphone app…
Bullwhip, Normalization, Momentum
Bullwhip Effect As we enter 2023, we’re now three years into the substantial and dramatic shifts brought on by Covid. Redrawing the economic landscape is like attempting to redraw country borders after shifting tectonic plates. The path back to homeostasis cannot happen without bullwhip effects and significant, momentum-driven ups and downs across all markets. Earnings volatility reduces valuations. At a…
AI 2023, Automation, Rates
Rates The driving forces of this market boil down to a handful of factors we’ve been tracking all year. Short-term rates are now 4.5%, up from .25% in February 2022, meaning you can earn 3.5%-4.5% on your cash alone. Higher rates make risk assets like equities far less attractive. Why risk anything when you can earn 4% guaranteed? The problem…
Hikes, Productivity, Leaps
Rate Hikes The Fed is doing exactly what it said it would do: raising interest rates rapidly to get inflation under control. This week’s 50 basis point hike brings us to 4.5%, the fastest rate hike in modern history. Notably, the futures market says this could be the final rate hike, with now just an outside chance of reaching a…
Money Supply, Inflation, ChatGPT
Money Supply When you add cash into a system, the value of each dollar starts to dip, which ultimately leads to a rise in prices across the board. And if supply is tight due to disruptions in the supply chain, well, then you can expect prices to skyrocket for obvious reasons. The big question on everyone’s mind right now is…
Unicorns, Commodities, Warp Speed
Unicorns The term “unicorn” refers to a private startup worth over $1b. Globally there are more than 1,200 unicorns with a combined valuation of $4.2 trillion. This term serves as a tool for marketing and recruitment as well as bragging rights for founders and investors. VC’s don’t have enough dry powder to mint or sustain unicorns on their own. In…
Turning The Corner, FTX Fallout
Turning the corner on rates and inflation The Fed’s next rate hike meeting is on December 14th. More likely than not they will raise interest rates by another 50bp from 4% to 4.5%. This continues the fastest rate hike in modern history from .25% to +4% in less than 12 months. The next inflation report is on December 13th, just…
Marching Forward, FTX, AI
Marching Forward The latest inflation data will be out by the time you’re reading this. That data informs how the Fed will treat further rate rises. The Fed recently stated their preference for raising rates too far and fixing the ensuing damage with stimulus. In the meantime, I think we’ve all got the message that the Fed wants to slow…
