History Rhymes?
History Rhymes?
Consumer staples companies (non-cyclical companies that sell goods or services that are always in demand) currently comprise 6% of the S&P 500, the sector’s lowest share since March 2000. The market in March 2000 shared other similarities with today’s environment. Like the current market, technology stocks were the dominant sector by a large margin. Investors then were enamored with “new internet economy” companies such as Yahoo! and American Online and willing to pay exorbitant prices for them. To fund those purchases, investors sold the shares of boring companies that didn’t hold the allure of unending future hyper-growth. We observe analogous behavior today in the price action of certain segments of the market, including cryptocurrencies, unprofitable tech unicorns, and cult stocks like GameStop. As prices climb, more investors and traders display a Fear of Missing Out (FOMO) and are drawn in. The stock price gains fuel a feedback loop that pushes prices higher and higher, increasing the risk of significant losses if sentiment changes. At First Fiduciary, we choose not to invest in highly speculative areas. Instead, we prefer companies with durable competitive advantages, strong cash generation, and shareholder-friendly behavior. When these companies are out of favor with investors, such as what appears to be happening today with consumer staples, we take that as a sign it is time to look even closer for opportunities in companies that exhibit steady growth and sell essential products. Buying great companies at attractive prices is how we grow client wealth. Not falling victim to FOMO is how we protect it.
Articles We Liked
Data Don't Lie
How could two groups of scientists come to completely different conclusions with the same data? The Economist explores that question and reveals that it is an all too frequent occurrence.
Deep Learning
Dense article that details how computationally and energy-intensive today’s deep learning models are. As an example, researchers estimate that improving an image recognition model mentioned in the article by 5% would produce as much carbon emissions as New York City does in a single month.
The Sopranos Re-watch
If, like me, you are one of the many who have discovered (or re-discovered) The Sopranos over the last 18 months, this article will resonate. Many of the themes of the show, including those concerning a crumbling empire and mental health awareness, are more relevant than ever.
City of the Future
Marc Lore founded Diapers.com and Jet.com. He sold the companies to Amazon and Walmart, respectively. For his next act, Lore is creating “the most sustainable city in America,” replete with autonomous vehicles and drone deliveries.
How IBM Lost the Cloud
A look at how a once-great company lost its way as the world changed around it.
Local News Vacuum
How does the loss of a local newspaper affect a small town? It often makes residents feel less connected and more alone, according to The Atlantic.
Notable Reads
The Fabric of Reality: The Science of Parallel Universes
by David Deutsch
Physicist David Deutsch combines philosophy, biology, computer science, and quantum physics in his attempt to explain the universe. The main tenet of Deutsch’s worldview (and what he spends the most time explaining) is Hugh Everett’s many-worlds interpretation of quantum physics. Everett’s theory implies there are many -- perhaps infinite -- parallel universes (what Deutsch calls “multi-verses”). The idea that there are multiple universes is controversial and certainly not yet settled science. The book was enlightening, even if I felt out of my depth for much of it. – AG
Maverick: The Success Story Behind the Worlds Most Unusual Workplace
by Ricardo Semler
Semco was an old Brazilian manufacturing company, indistinguishable from hundreds of other companies…until Semler took the reins from his father. Under his watch, Semco overhauled all of its processes, eliminated many layers of management, and empowered its employees to determine everything including their hours and even their pay. If the phrase, “But that’s how we’ve always done it,” makes you cringe, this is probably the book for you. – AG
The Amazing Adventures of Kavalier & Clay
by Michael Chabon
The Pulitzer Prize winner for fiction in 2001, Chabon’s tale follows the lives of two Jewish cousins in the years surrounding World War II. Joe Kavalier, a Czech artist who made a daring escape from the Nazis, and his cousin Sam Clay, a Brooklyn-born writer, partner up in New York City to create a comic book. Drawing inspiration from Superman, the pair find success with their own superhero, The Escapist, and the book does an admirable job re-living the golden age of comics. However, what could have been a tight story about a teenager dodging fascism and finding salvation in America became a meandering opus that lacked tension and felt like it would never end. – AG
No Country for Old Men
by Cormac McMarthy
While a quick read, there is nothing breezy about this book. McCarthy famously blends humorous, folksy dialogue with intense, graphic violence, and No Country was no exception. The story centers on a regular guy who stumbles upon a drug deal gone wrong. After stealing a briefcase full of drug money, his life is changed in an instant, as he’s forced to go on the run and leave behind everything (and anyone) he once held dear. The book’s antagonist, the hitman Anton Chigurh, is worthy of his place on any Greatest Villains list. Superb book. – AG
Restaurant Review
Outermost Inn
81 Lighthouse Rd., Aquinnah, MA 02535
(508) 645-3511
At first blush, the Outermost Inn seems to have a lot stacked against it. It is hard to get there; located on the western extreme of Martha’s Vineyard, the island is only accessible by plane or boat. It is expensive; figure on at least $100/person. The menu is a limited prix-fixe one, five choices for appetizers, entrees and desserts. Closed seven months a year, the Outermost Inn is open mid-May through Columbus Day. Seating is quite limited and reservations can be hard to obtain. Despite the limitations, dinner at the Outermost Inn was one of the best I have experienced. The food was perfect in both presentation and delectability and the ambience and service were top-notch.
Set on 20 acres high above the nearby Atlantic, the views are spectacular, the breezes perfect for relaxation and the patio seating is ideal for viewing nature. Activity from a nearby brood of osprey entertained us. We watched as the majestic parents delivered food to the nest and we used a telescope to observe the activity in the nest.
The Outermost Inn was built in 1971 as a private home for Hugh and Jeanne Taylor. One look at Hugh and visitors typically know who his more famous, musical brother is. In 1989, the house became an inn and the Taylors and their offspring continue to run the show. My vegan dinner featured an amazing sweet pea soup and a meaty, peppery-flavored roasted whole maitake mushroom accompanied by lentils and almond puree. It was truly sensational. The rest of our group enjoyed lobster dumplings served in a light, flavorful broth, perfectly prepared lamb saddle, locally caught fluke and an impressive rib eye steak. Fluffy lemon meringue with fresh berries provided an ideal mix for a tart and sweet dessert.
In addition to the prix-fixe menu, the Outermost Inn offers a wonderfully fresh raw bar. While the Outermost Inn may have some limitations, I anxiously await the opportunity to return. – BH
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