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 (...)
Fundamentals, Copper, Rents
Fundamentals After yesterday’s Fed meeting, we’re now roughly 80% of the way through the rate hike cycle. The fed funds rate is now at 4%, up from .25% in March ‘22 and will likely peak around 5% early next year. Most companies’ revenue and earnings continue to climb steadily, but forward guidance is weak. Any company that issues weak guidance…
Timing and Earnings
Timing By the end of 2022, we will have raised rates from .25% to 4.75%, the fastest rate rise in modern times. Larry Summers said, “This is probably going to be a textbook case of crisis creation followed by crisis mismanagement.” Investor sentiment is very negative due to continued negative price momentum, the ongoing implications of Russia/Ukraine, inflation prints and…
Liquidity Priorities and Private Markets
Liquidity Priorities The Fed continues to battle inflation by raising interest rates. We’ve had five rate rises since March 2022, from .25% to 3.25% We have two more rate hikes to go before year-end, at which point we should be at 4.5%. The Fed’s intention was to shock the system, and it’s worked for the most part in that investor…
Waiting Game, Japan, Fusion
Waiting Game The timeline for the Fed is getting clearer as we approach the end of the rate hiking cycle. We have an expected .75% hike on November 2nd, a .50% hike on December 14th and a possible but unlikely .25% hike on February 1st. After a prolonged bear market, the end of the rate hikes on the horizon is…
Treasuries, Patience, Bits
Treasuries Treasury yields are drawing attention now that they yield between a 2-4% risk-free rate of return. Treasury Bills (TBills) are liquid and commonly used by financial professionals, but most people are only vaguely familiar with what they are and how they work. For example, Warren Buffett keeps Berkshire Hathaway’s cash in T-Bills. We last used TBills in 2018, when…
The Fed, Lithium, Merge
The Fed As expected, the Fed raised rates yesterday by .75% to bring the Fed Funds rate to its highest since 2007. As of now, futures markets expect another .75% hike in November to bring the rate to 4% and a peak of 4.75% by March 2023. Commodity prices continue to fall, which will help bring down inflation numbers. Many…
Inflation and Aftershocks
Notes on Inflation Next week brings the Sept 21st Fed rate hike, which is expected to be 75bps. Former Secretary of the Treasury Larry Summers has been outspoken about the reasons for a 100bps hike, namely that we need to be more aggressive because inflation changes are reacting too slowly, if at all. Either way, this next hike brings the…
The Dollar, Population and Productivity
The Dollar The US dollar has soared in value recently to a multi-decade peak. The Euro is at parity for the first time in twenty years and the British Pound is getting closer to parity, something that happened only once for a very brief period in the 80’s. There are big shifts happening in all markets, and the currency market…
The Fed, DNA Sequencing, More AI Developments
Don’t Fight The Fed It’s an important time to practice investment patience. September brings another CPI release (Sept 13) followed by a Fed rate decision (Sept 21). The Fed has said many times they will continue to tighten until the inflation rate comes down. For now, we can get an early peek at the inflation numbers that will arrive at…
