Tuesday 1st November 2022

The RBA today increased interest rates another 0.25% today to 2.8%. 

 

Thursday 3rd November 2022

Overnight the FED increased interest rates another 0.75% with comments indicating interest rates will go higher than expected and inflation is more of a challenge than previously thought. 

The market’s response was what you’d expect, a lot of red. 

A friend sent me a post on Twitter where the fact checkers got fact checked. Basically the White House posted about inflation and how they are helping people deal with it. This is of course false but until Elon bought Twitter you’d have to search far and wide to get the truth. 

Not any more! There were what’s called ‘community notes’ on the White House’s post revealing the truth that a former government had in fact enacted a bill many decades ago, not Biden. The White House then deleted the post.

That’s an interesting way to deal with things… but a wonderful change of circumstances for open dialog on the internet. 

 

Thursday 10th November 2022

The latest Animal Spirits podcast discussed the layoffs happening at a bunch of the big tech companies. Facebook alone has apparently cut 11,000 staff. In the scheme of things, this doesn’t impact the economy too much especially with unemployment rates currently so low. 

What I do find interesting is Warren Buffett’s quote that rising interest rates are like gravity to asset prices. We’ve seen and are seeing this play out with a re-rating of asset prices, now risk free rates are climbing. The value of these businesses in this new environment are correcting so these businesses must prioritise profit. Reducing fixed costs in business contributes to greater profits.

2022 mid term elections have come and gone. Better than me doing a summary, this week's 'All In' podcast has a fantastic discussion covering all bases. 

 

Friday 11th November 2022

Inflation numbers came in better than expected overnight in the US at 7.7% over the year to October, down from 8.2% a month earlier. It would be an understatement to say this was positive for the market. 

Check out some of these numbers: 

S&P 500 + 5.54% 

NASDAQ +7.35%

Apple +8.90%

Amazon +12.18%

Square +17.81%

Coinbase +10.74%

Unity +29.40%

Meta +10.25%

Snowflake +15.14%

One of the reported challenges of market timing is simply missing rare day’s like this. If you’re not invested during the 5 or 10 biggest days of each year it negatively impacts total returns. 

 

Wednesday 16th November 2022

Wages in Australia rose 1.0 per cent in the September quarter and 3.1 per cent annually, which slightly exceeding forecasts according to Australian Bureau of Statistics data.

 

Thursday 17th November 2022

Australia's unemployment rate falls to a new record low of 3.4 per cent versus expectations it would remain at 3.5 per cent in October.

With unemployment being so low, it appears either interest rates need to rise further or the effects of the existing interest rate rises are yet to filter through.

 

Friday 18th November 2022

One of my favourite podcasts I’ve mentioned a bunch of times is the SB Talks podcast, which had former RBA Governor Ian MacFarlane on as a guest. It’s worth a listen.  

 

Thursday 24th November 2022

Confession time… The back end of this month is the first month since I started the Project Passive diary, not the project itself, just maintaining the diary side of things, that I’ve felt no need to stay on top of various events. 

This month with the midterms in the US and the FTX crypto debacle was particularly eventful. In spite of this, I felt absolutely no need to concern myself with any of it. I must say it’s a great feeling.  

Quality businesses will do well and by owning the index I’ll own these quality businesses. The self cleansing nature of indexes ensures I don’t miss out. Sure, I may not own enough of them through an index, but I'm also not going to miss them entirely nor make a dumb investment and loose money.     

If it wasn’t for the public accountability I mention at the start of every podcast episode I’d probably have paused my documentation this month. So I'm grateful for the monthly deadlines and public accountability and much as it can be uncomfortable.  

That said, I know the shortest pencil is better than the longest memory. So documenting my thoughts and actions in real time is valuable to me. As is having such little concern for things I cannot control, is a worthy part of this documenting process.

Plus I’ve heard and seen too many cases of fact intertwined with fiction over the years in my profession of athlete preparation coaching, business and the like. I don’t want to have to rely on my memory... 

Now’s probably a good time to mention the FTX crypto exchange mess. If you’ve not heard about it, google it. It appears to be criminal, fraud and theft rolled into one.

The exchange founder used customers' money to be the second biggest donor to the Democratic party in the US behind George Soros, promote himself as a virtuoso and be another wonderful example of the shortcomings of greed and arrogance. 

As a result Bitcoin and the crypto market in general has contracted significantly. In unregulated markets, these are the risks. If people had their crypto in hard wallet storage it wouldn’t matter. But this is difficult when FTX was offering 8%-18% returns staking coins and currencies on their exchange in a 0.1% interest rate environment. This never added up for me and it’s now clear why.

If things seem too good to be true, they usually are. This certainly was. Brian Armstrong the CEO of the USA publicly listed crypto exchange Coinbase was interviewed on the ‘All In’ podcast a week ago (Ep 103 or 104). It’s worth checking out if you’d like to learn more.  

What’s most interesting to me is go back a year or two and people were happily buying BTC for $30,000, $40,000, $50,000, and $60,000+ USD. Whereas today it’s at around $17,000 USD and nothing has changed in relation to BTC itself and I bet London to a bridge around 80% of people who bought BTC between $20,000 to $60,000USD are not buying anymore. 

That right there is an example of dumb money. 

To be clear, I’m not making any inferences around if you should or shouldn’t buy it now. I’m pointing out the extremely obvious behavioural biases most people end up facing and needing to learn from and overcome. 

 

Wednesday 30th November 2022 

Inflation here in Australia has come back marginally but the way we measure inflation can be confusing because it’s a rate of change measure. This inflation print coming in a bit lower while good ,from a ‘rate of change’ perspective doesn’t communicate that we have clingy inflation rate way above the 2%-3% band the reserve bank prefers. 

Like most things in life the devil is in the detail.  

To wrap up November, I’ve recently re-read Nassim Taleb’s book The Black Swan. It’s reminded me how incompetent we humans are at predicting significant future events.  

I quote from page 135:

‘When I ask people to name three recently implemented technologies that most impact our world today, they usually propose the computer, the Internet and the laser. All three were unplanned, unpredicted and unappreciated upon their discovery, and remained unappreciated well after their initial use. They were consequential. They were Black Swans. Of course, we have this retrospective illusion of their partaking in some master plan... "

I hope you have a fantastic December and enjoy the festivities!