Hello
The S&P is up 20% from the lows of last fall and Brian Belski increased his targets this week. The report is attached, and it’s interesting how this market climbs this ‘wall of worry’.
The brilliant team at G&R provided an in-depth piece again on the commodity space and highlighted an important area, US Shale Production. It reminds me of a 2014 research report sent by my friend at Morgan Stanley where they explained that the massive shale production growth will hurt oil prices. Well, this commentary shows that the opposite is happening with Shale production plateauing and as one industry CEO said “if this is the case, we need access to every type of energy source to keep us going.”
The ‘Dean of Valuation’ looks at Nvidia and the sports team bubble sector. Aswath Damodaran provides some interesting comments on how he values things.
Steve Saretsky once again tackles the immigration issues that are affecting the housing markets. He also points out the real GDP numbers and why so many Canadians are having a tough time.
The great team at Doomberg explains the challenges going forward with the electrical grid system. Plus, a couple takeaways included from the very good Luke Gromen.
A high school buddy sent me a piece on a San Fran firm who is making a big switch. A company that focused on helping companies working remote realized that nothing is better and more efficient than people working together.
The BBC picked on the solar panel industry and Rowan Atkinson thinks he was duped on Electric Vehicles. How the narrative is changing and again, make your own conclsuions.
Speaking of a changing narrative, when The Atlantic starts challenging the DEI industry then you know the tide is changing,
And the big news in sports was on Tuesday when a surprise announcement came in the world of Golf. Many do feel for Rory, and I included a piece on that story. My son, Matthew, turned 30 that day and he has been a big supporter of the LIV initiative. It made for an interesting dinner chat and with Matt being a great dog lover, I had one birthday gift in mind. One of my Robert Bateman’s all time best.
David and Amy
Number 1 - Brian Belski moves target up on S&P
Through five months of the year, it has become increasingly clear to us that stock market resilience is here to stay. Admittedly we entered the year more cautious than we have been in the past given the host of uncertainties the market faced to begin 2023, but it seems that all the doom and gloom that many others were prognosticating has yet come to fruition. We have always taken our cues from the data and the biggest worry entering the year was that the Fed would “hike” our economy into severe recession. Well after 5 ppt points of rate hikes, inflation has clearly subsided, and yet labor market strength has remained intact. In other words, we believe the anticipated recipe for disaster is simply not present. So, from our perspective, all the worries that damaged 2022 market performance are slowly beginning to subside. Yes, earnings growth is likely to remain a sticking point, but it appears investors fully understand this and are looking past 2023 results and expecting growth to reaccelerate in 2024 and beyond. Therefore, we expect market price momentum to persist, albeit at a slightly slower clip for the remainder of the year, and are raising our 2023 S&P 50 year-end price target to 4,550 from 4,300.
Number 2 - G&R - The Hubbert’s Peak is Here
From here on out, just six counties in West Texas must meet all global demand growth. Given the strategic importance of the Permian, it’s imperative to understand its underlying health. Using our neural network, we have updated our basin analysis, and the results are shocking. The Permian is likely less than a year from peaking and starting its decline. The only source of non-OPEC supply growth is now primarily tapped out.
After many false starts, Hubbert’s Peak is finally here.
Number 3 - Why the ‘Dean of Valuation’ Just Sold His Nvidia Stock
Plus: Tesla, Citigroup, and the sports team bubble. And a listener asks about BDCs and covered calls.
Number 5 - More Than Meets the Eye - Doomberg
https://doomberg.substack.com/p/more-than-meets-the-eye
We had two key takeaways from the article: Luke Gromen
- We remain bullish on electrical infrastructure-related industrial equities and commodities (in particular, copper.)
- We agree with Doomberg’s view that the odds of extended local or regional power outages in the US are rising meaningfully – think “the power is out for weeks at a time – how would my family and I fare?” If the answer is “poorly”, we would invest in real goods to remedy that (back-up generators, etc.), and consider investing in companies that make and sell such equipment.
Number 6 - Is San Francisco's Remote Work Backlash Finally Gaining Steam?
(a big story out of San Fran which will get a lot of attention)
https://sfstandard.com/business/is-san-franciscos-remote-work-backlash-finally-gaining-steam/
Tech CEO Flo Crivello was a huge believer in the way Covid permanently changed work—so much so that he started a company in 2020 with the mission of helping teams go remote with the creation of virtual office software. But three years later, he’s made a complete reversal on that theory. The conclusion he’s come to through building his new startup, Lindy.Ai—which uses artificial intelligence to act as a personal assistant—is that remote work just won’t work for the company he and his employees are building. “The experiment is over; we tried, and we failed as an industry,” Crivello said. “It’s very hard to beat how the brain has evolved over millions of years for synchronous in-person collaboration. Everyone just wants to get out of the darn Zoom meeting.”
“The one team that’s staring each other in the face and being able to have super high bandwidth communication, they’re probably going to beat the [remote] team nine times out of 10,” Tan said.
Number 7 - Solar panels - an eco-disaster waiting to happen? - BBC
“Energy experts are calling for urgent government action to prevent a looming global environmental disaster.”
Number 9 - The DEI Industry Needs to Check Its Privilege - The Atlantic
The worst of the industry is expensive and runs from useless to counterproductive – By Conor Friedersdorf
We hope you found the Top Ten interesting this week, and are looking forward to another selection of articles, stories, and commentary next week. If you know of anyone else who would be interested in receiving our weekly note, please let me know.
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