Priced-in Perfection? (TWTW – May 3-7, 2021)
This week had it all, in my books!
WealthSimple (Simple if you are WealthSimple?) To wit – has Canada’s financial space gone “SPAC tactics”? Call Justin, someone, please! Ok, not Justin T, the PM, no, the Bieb! That’s probably now what it’s going to take anyone looking to compete with Canada’s own bona-fide Unicorn, which to great fanfare early in the week announced a $750MM round of financing, valuing the whole enchilada at $5 Billion. Oh, and yes, Drake apparently is investing … (and a client?). Starting from the bottom …
Berkshire – That, well, was at the one end of the Financial space. At another, we had the benefits of some zingers on Crypto from a pair of dapper nonagenarians who last week-end hosted their yearly annual meeting. At that meeting – yes, you guessed it – Berkshire Hathaway’s Woodstock equivalent, Warren Buffett admitted that “well, my biggest lesson has been to listen more to Charlie (Munger). He’s been right on some things that I’ve been wrong on”. In passing, Buffett admitted he “may have made a mistake by selling some of the firm’s AAPL shares and its airline holdings, considering everything that has occurred over the past 12 months”. Now, for the Crypto zingers from Charlie, who is known for not mincing his words: “I think the whole damn development is disgusting and contrary to the interests of civilization,” said Munger. He went on to call bitcoin a “financial product invented out of thin air.” Further stating “Of course I hate the bitcoin success,”“I don’t welcome a currency that is so useful to kidnappers and extortionists.”
For more on the meeting => Click HERE!
Now … perhaps the MOST important takeway from the meeting was … announced a day later, namely who would carry on Warren’s responsibilities as CEO going forward. The answer to that is Greg Abel. Click HERE!
Considering the issue of succession has always been something noted as a concern when looking at investing in the company, will this sufficiently address the topic that the shares may lift as a result?
3 things out of all of this though: 1) Buffett; Munger; and Berkshire aren’t long Bitcoin 😊 . If they hate it so much, would they ever short it? Looking at the recently launched Horizons ETFs bitcoin products: Long and Inverse, funny enough, the Inverse has more AUM at the moment. BUT neither has anywhere near the kind of $ that went to Purpose’s Bitcoin when it launched mid-February. 2) Anyone looking to get some Berkshire exposure – evidently it is a big weighting in XLF the Select Sector SPDR Financials in the US. 3) Well the whole airlines “thing”. Warren could always look at diversifying into Harvest’s TRVL here in Canada 😉
Tuesday … was a rough day in the markets, as US Treasury secretary Janet Yellen mentioned that she thought that “interest rates in the U.S. might need to rise in order to prevent an economic overheating during the recovery out of the pandemic”. Tech stocks in particular, did not like the thought – declining by the most since March (-1.9%).
Janet Yellen subsequently walked back some of these comments … I think indicating that she obviously was no longer in charge of the FED, that any inflation might be transitory and that the FED in any event has plenty of tools to deal with that (or all of the above …). Worth noting – on the transitory inflation front – David Rosenberg in agreement with that notion => Click HERE!
Friday though … would have given you the impression we were witnessing an economy charging ahead full steam. THAT, however, wasn’t the impetus for a pretty good session to conclude the week. NOPE! The move higher was courtesy of yields declining (nod to technology again …) in reaction to rather disappointing payroll data, which at +222,000 fell way short of expectations.
Oh! Almost forgot: the Price-in Perfection was in relation to earnings, which continued to come in on the strong side of the equation. According to CREDIT SUISSE’s Jonathan Golub, 85% of companies that reported beat expectations by 22.1% in aggregate. Pas Mal, this. To which someone opined that “when the best earnings growth since 2010 spawns a yawn, it’s pretty clear that perfection is priced in”.
PTON – Somewhere where imperfection got priced-in was in the share price of one Peloton, AFTER the company did a 180 degrees on their treadmill product. The stock got clipped pretty good on Thursday, just ahead of earnings the next day. The stock, incidentally, had already not done well at all after having some supplies and delivery issues. Anyhow, Friday saw earnings provide some reprieve, but later in the day, the stock closed pretty much where it had been after getting hit by the treadmill recall. Penalty box for that one!
Evolve – Do you need more FANGMA? Yes, you know, Facebook; Apple; Netflix; Google; Microsoft; and Amazon?
Well in case you do/did – Evolve has … evolved the idea into their latest ETF launch => click HERE!
Personally I fall in the “no category” … been there … done that … for about a decade … oh, BTW, the links in the all products page don’t work … (404 error Oops! That page can not be found. Across all 3 versions).
Talking about … MICROSOFT. Ok, we weren’t, BUT the news this week regarding MICROSOFT pertained to his founder Bill Gates announcing that he and his wife Melinda Gates were hitting splitsville, but continuing on with their work and collaboration on the Foundation. In the context of this, this article came out, which speaks to how the foundation invests – including in shares of Canadian National Railways, which Melinda just became one of the largest individual shareholders in => click HERE! That CNR investment – obviously seen by all as emulating Bill’s friend Warren 😊
Vanguard Canada – Earlier in the week, I took a look at Vanguard’s flows in April, as well as looked back further in terms of seeing how the firm’s AUM had grown through the Pandemic => Let there be Growth! Take note of a few things, if you would: 1) which isn’t in the post. I calculate that the AUM weighted MER across Vanguard’s 37 ETFs in Canada is … 17 bps. THAT – is helping Canadians save $10s if not $100 of million of Dollars (!!!) in management fees. AND THAT is going to be part of a nest egg Canadians will be able to enjoy. Which makes it always worth noting! 2) the firm’s Asset Allocation ETFs are continuing to enjoy significant uptake. Why? Read 1 again, probably … oh, and 2 … maybe just Simple … not Wealth … Simple … just SIMPLE! AND effective. One thought on that front – these look to have discretion to rebalance when they see fit. BONDS – evidently have had a horrible time of it since the “let’s reopen” the economy green light of the vaccines. For rebalancing to make a meaningful difference, in my books, there has to have been meaningful price moves. Because it is then that rebalancing can make the biggest impact.
Other – Oil and Gas: Good results from what I could make out, out of Canadian Oil and Gas heavyweights Suncor and Canadian Natural Resources (largest weightings in iShares S&P/TSX Capped Energy – XEG). XEG is up 38.4% ytd, and more seems to be in store as far as upside. Thankfully I have been participating in that move, from last Fall onward 😊 (BTW – performance-wise, neck and neck with iShares Global Base Metals XBM currently).
NOT GOOD To read that the Oilsands space is ground zero for COVID19 infections in the Province of Alberta, itself in the worst shape in the country at the moment. NOT GOOD 🙁
Stay safe everyone, and oil workers, our thoughts are with YOU!
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