Stocks

Automotive Semis

  • Informative post on what is going on in automotive semiconductor markets.
  • Shortages in the short term – mainly because the pandemic wrong-footed car makers.
  • Growth in the long term – driven by the amount of semi-content in a car (an electric vehicle has 110% more content than a conventional vehicle, autonomous driving doubles that).
Misc

Being Negative

  • This is an eye-opening essay on The Art of Negativity with useful read-across to investing.
  • This was an interesting result from research – “there is a clear “asymmetry in the way that adults use positive versus negative information to make sense of their world; specifically, across an array of psychological situations and tasks, adults display a negativity bias, or the propensity to attend to, learn from, and use negative information far more than positive information.“”
  • A nice quote – “An optimist believes we live in the best possible of worlds. A pessimist fears that this is true.”
Macroeconomics

Inflation pt 2

  • Most indicators suggest inflation is heading higher in 2021, though there is some disagreement (here).
  • Here is one more from Nordea to add to the list.
  • The bank argues overshooting inflation will be harder to defend in an average inflation targeting regime than when it is below target.
  • The Fed and the market, as we wrote before, need to discern whether this is transitory or persistent.
Macroeconomics

Inflation

  • Inflation has been a big topic in markets recently.
  • This post is worth reading to understand the key distinctions between transitory and persistent inflation.
  • Interesting stat – sectors that are vulnerable to post pandemic consumption shifts are less than a quarter of PCE inflation component weights.
  • The bottom line is it is important, for markets and the Fed, to watch labour markets alongside inflation.
Stocks

John Lewis Results

  • Results from John Lewis are out.
  • This is a great post from Stephen Clapham pulling out the key insights.
  • Interestingly – “Given the pronounced shift to digital, we reassessed how much shops contribute to whether our customers buy online with us or not. Before the pandemic we believed that shops contributed around £6 of every £10 spent online but we now think that figure is £3. John Lewis shops are now held on our balance sheet at almost half the value they were before the write downs recognised in 2019/20 and 2020/21“.
Macroeconomics

Market Inflation Expectations

  • “The five year constant maturity Treasury yield has risen; but after accounting for the estimated term premium, the increase is much more modest, if not negative. Moreover, expected 5 year inflation has not on net moved much over 2021.“
  • Correction: One needs to also adjust for the liquidity premium.
  • Source.
Tools

Art of Reading

  • This is a neat post on the art of reading well.
  • Without giving too much away there is a lot to be learnt about how to read effectively.
  • One idea that really struck home was, as one reaches the fourth and final level of reading, synoptic, connections start to form.
  • Then, as Steve Jobs said, “Creativity is just connecting things”.
Misc

The Internet

  • A thought provoking and contrarian read arguing that the tailwinds from the internet and silicon valley are fading i.e. the industry is maturing.
  • This chart shows that growth rates are coming down in most areas of tech.
  • Worth noting it was done in early 2020 so missed the pandemic driven acceleration (the unanswered question being whether that was just pull forward or a true step change).
  • This type of environment leads to a rebalance of growth away from start-ups towards internet-first incumbents – as the former can’t rely on the market to grow and the latter use vast operational muscle.
  • This has profound effects including the financialisation of the technology industry.
Misc

Power of a Story

  • A really nice piece about the power of stories in academic research, investing.
  • And even innovation as seen in these great extracts from Rory Sutherland’s Book:
  • “Making a train journey 20 per cent faster might cost hundreds of millions, but making it 20 per cent more enjoyable may cost almost nothing.“
  • “The Uber map is a psychological moonshot because it does not reduce the waiting time for a taxi but simply makes waiting 90 per cent less frustrating.“
  • “It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking. Put simply, it’s easy to achieve massive improvements in perception at a fraction of the cost of equivalent improvements in reality.“
Macroeconomics

Long term currency movements

  • This chart presents exchange rates against the US Dollar over a long period of time.
  • The values are indexed to 1.0 in 1900.
  • Over 121 years most currencies depreciated against the dollar.
  • The number of Italian lira (then Euros) that could be bought with one US dollar is 280 times more now than in 1900 – a huge depreciation.
  • Only the Swiss Franc has meaningfully appreciated against the dollar in this period.
Macroeconomics

Savings

  • There has been a colossal build up of savings at households.
  • By Q2 Goldman’s expects this to be 11% of GDP.
  • Many think this could be unleashed leading to a huge recovery.
  • It is important not to view savings in one sector outside of the savings/dis-savings of other sectors (especially the government sector).
  • This is an idea popularised by Richard Koo as a way to understand the great financial crisis.
Stocks

Repairability Index

  • France has introduced something very interesting.
  • From this month on, makers of certain electronic devices, like phones and laptops, will be required to give them a score on how repairable they are.
  • This will allow consumers to chose devices that are easier to repair and incentivise durability.
  • Other countries (including the EU) are looking to follow.
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