US Stock market up 26% in 2021. And that’s on the back of 21% and 31% in 2020 and 2019. In fact, if you invested in the stock market in January 2017, you’ve DOUBLED your money in 4 years.
Last year I mentioned my fascination/obsession with FATMAANN (FB, AAPL, TSLA, MSFT, AMZN, GOOG, NVDA, NFLX): dominant market leaders, growing revenues and profitability, global brand recognition and adoption. FATMAANN up monstrous 44% last year!
BUT, it hasn’t been all ponies and rainbows; particularly if you were invested in high-growth new tech stocks. I’m going to call them “Shiny and New” vs the “Tried and True.”
Here are some key observations:
- Tried & True is up 44% over the last year, while Shiny & New is down 29%.
- Tried & True is 13% off high, while Shiny & New is 57% off high.
- Average age of Shiny & New is 3.5 years since IPO, while the Tried & True is a whopping 23 years!!!
- Interestingly both groups have similar average price/sales ratios of 12.
BTW, I think Stitch and the Hood are going to rebound massively, as will others (but not investment advice!)
Markets are down because the Fed intends to begin tapering and raising interest rates in an effort to combat high inflation. This has the effect of driving the stock market down for a few reasons:
- As interest rates rise, alternative investments (like fixed income bonds) become more attractive.
- Investors use leverage to purchase stocks and as interest rates rise, leverage/debt becomes more expensive. So less borrowing to buy stocks.
- In draw-downs, like we’re seeing this week, there is a psychological collective market flight to safety. Everyone's a little panicked so they pull money out and sit on the sidelines. The key is to wait and not panic.
There are a lot of reasons to be hopeful in 2022:
- Job openings are at record highs and unemployment record lows. See Beveridge curve.
- Our economy is booming and companies (like FATMAANN) are likely to post record revenues and profits for Q4.
In other words there are no fundamental structural issues with our economy. We are due for a correction, its short term pain, but markets will continue upward and to the right soon enough.
Web 3.0 was the dominant theme of 2021: DAOs, NFTs, BlockChains, Crypto, tools, protocols and digital infrastructure that are enabling our worlds to be more secure and decentralized. Here's an informative primer from a16z on What is Web 3.0.
I’ve been digging into Crypto lately and encouraging my clients to explore and own as well. It’s here to stay and I see value incorporating it into your financial portfolio. The best one page information source I’ve discovered on Crypto is an annual thesis written by Messari CEO Ryan Selkis; it's extremely insightful and entertaining (I love how he unapologetically bashes Gary Gensler).
On a personal note, I’m using Coinbase and Voyager apps to purchase Bitcoin, Etherium, Solana, Dogecoin and Luna on a weekly basis (dollar cost averaging in).
Nancy Pelosi is a sophisticated stock trader and if you want to follow her it's publicly available here. Not sure how I feel about our politicians trading stocks, but at least it's disclosed, and I’m pretty excited she bought call options on Roblox, Alphabet and Salesforce.
Back Door Roth. Build Back Better didn’t pass – at least not yet – so your back door and mega-back door Roth IRA’s are safe for now.
Breakaway Podcast. Check out my Pod and come be a guest.
Entertainment. With the kids we’re watching Lost in Space and starting Cobra Kai. Lorena and I are finishing Succession and getting ready to binge Yellowstone. And I just started Narcos Mexico S3. All recommended.
Job. If you know someone younger in their career or even recently graduated that wants to work as an investment advisor let them know I’m looking for a junior partner.
Please forward this to someone you think may find it interesting.
Be kind. Be positive. Persevere.
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