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Inside Edge is dedicated to providing a collection of investment-related charts, articles and musings that have hit our desks or inboxes. Once in a while we will post materials we’ve created and glimpses of EdgePointers’ lives.

Charts of the week

Leverage equity buying (net calls) at an all-time high



Household savings by year



In 60 years, the Momentum trade has never gotten this carried away (including the top of the market in 2000)



A nice dissection of the components of inflation


Cash generation is strong



The Big Growers' share of market cap: we're above 2000 top and are now in line with the Nifty Fifty


Bits and pieces:

• The Shiller cyclically adjusted PE ratio is the highest on record with the two worrying exceptions of 1999 and 1929. (Source: Morningstar)

• Small traders are dominating the options market and 75% of the volume is in contracts that expire in two weeks. (Source: Bianco Research)

• The urge to trade seems to be universal:  A legion of day traders is taking over Korea's stock market accounting for 88% of the total value of Korean equity trading in the first 8 days of September (Source: Bloomberg)

• Millions of Indians have piled into the country's stock market helping sustain a strong rebound from the depths of march. Average age of new customers in Zerodha - India's discount brokerage house: 28. With the impetuosity of youth, the novices are choosing to bypass underperforming mutual funds and do their own stock picking, penny issues preferably. (Source: Financial Times)


With the sway of stay-at-home traders growing and starting to eclipse other influences on equities, figuring out who is doing what among amateur stock dabblers has become a critical mission for big investors. They're canvassing Reddit threads and picks at retail brokerages, plugging data into programs and trying to gain an edge.



Over the last twenty years, the average equity mutual fund posted a yearly return of 8%. Over the last twenty years, the average investor in an equity mutual fund posted a yearly return of 4%.

The reason is that majority of investors play the short-term game - trading in and out, in and out of equities - an asset class that has been known to build wealth over long periods of time.

The tendency - of short-termism - has become more common over the years. Investors, who are have become so used to chasing short term performance, are acting a lot more with the vastly available information on how funds perform not just year on year, but even on a quarterly and monthly basis.

This doesn't mean that you must stick with your losing funds forever, as people do with their losing stocks to get their money back. But instead of switching in and out of funds, you must give time to the ones that have been managed well in the past but may just be going through a temporary period of underperformance vis-à-vis the new leaders. This also applies to your losing stocks. Stick with businesses that have been managed well in the past, and even now, even when their stocks are going through a temporary phase of a downturn owing to the overall market weakness.

"Investing is simple, but not easy," says Charlie Munger. Knowing that following the herd or chasing market leaders is a way to hell is the 'simple' part. Avoiding it is the 'not easy' part.

Trying to time the market or finding winning stocks or fund managers and then siding with them till you find the next batch of winning stocks or fund managers is a waste of time that often backfires.

To do well over the long run, your best bet is to keep things simple. Stick with stocks, funds, and managers who are intrinsically good, even when they are going through temporary bad phases, do not deviate from your investment process, minimize your costs, and keep a long-term perspective.

Amazon's weight in S&P 500 Index is now bigger than the entire energy and materials sector combined.



S&P 500 Index EPS vs. U.S. Corporate Profits

This chart puts into perspective the wide divergence between S&P 500 Index EPS and U.S. corporate profits.

S&P 500 EPS vs. U.S. NIPA Corporate Profits


RHS - right hand side of the chat
NIPA - National Income and Product Accounts


WSJ: What elements of the Netflix culture are tougher to maintain now that so many employees are working from home?

Mr. Hastings: Debating ideas is harder now.

WSJ: Have you seen benefits from people working at home?

Mr. Hastings: No. I don't see any positives. Not being able to get together in person, particularly internationally, is a pure negative. I've been super impressed at people's sacrifices.

WSJ: It's been anticipated that many companies will shift to a work-from-home approach for many employees even after the Covid-19 crisis. What do you think?

Mr. Hastings: If I had to guess, the five-day workweek will become four days in the office while one day is virtual from home. I'd bet that's where a lot of companies end up.

WSJ: Do you have a date in mind for when your workforce returns to the office?

Mr. Hastings: Twelve hours after a vaccine is approved.

WSJ: I like that.

Mr. Hastings: It's probably six months after a vaccine. Once we can get a majority of people vaccinated, then it's probably back in the office.


This guide explores everything you need to know about mental models. By the time you're done, you'll think better, make fewer mistakes, and get better results.

In a famous speech in the 1990s, Charlie Munger summed up the approach to practical wisdom through understanding mental models by saying: "Well, the first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form. You've got to have models in your head. And you've got to array your experience both vicarious and direct on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You've got to hang experience on a latticework of models in your head."


Just when investors thought Masayoshi Son was reining in risk at SoftBank Group Corp., the Japanese billionaire's foray into highly leveraged derivatives is giving them fresh reason to worry. SoftBank shares tumbled 7.2% on Monday in Tokyo, erasing about $9 billion of market value. The drop came after the conglomerate made massive bets on high-flying technology stocks using equity derivatives. What has alarmed shareholders is that Son appears to be using options to amplify his exposure to a corner of the market where valuations have soared and mercurial individual investors are playing an ever-greater role.


The inimitable charm of government bonds over the last 30 years or so has been their wonderful tendency to give capital gains when the world starts to fall apart. The fly in the ointment is that those capital gains came from an expectation that the Federal Reserve would reduce interest rates to combat any economic weakness Today that is probably no longer true. And while you can argue as to whether I'm merely speculating about a hypothetical future problem, let's look at what happened to the 10-year bonds in each of the G-10 markets during the Covid-19 crisis this winter.


Those markets where short rates were meaningfully above zero saw significant gains in their 10-year bond, even if none were quite as impressive as we saw in the U.S. Those markets where the short rate was already around zero or lower, though, told a very different story. The average bond return in those markets was -1.3% and none of them had a positive return in the period. So much for hedging the losses in the rest of the portfolio!

And today, the group of countries where short rates are already around zero or lower consists of every member of the G-10, the U.S. included. As a result, it seems to me unlikely that any government bond in the G-10 would provide meaningful positive returns if the global economy should encounter further problems associated with the Covid-19 outbreak or for any other reason in the near future. If short rates and bond yields rise meaningfully between now and that future downturn, that might no longer be the case. But if you are counting on such a rise occurring before the next downturn, you are also counting on bonds delivering a negative return in the interim.

Long Bonds Are Bringing Trouble

Nothing new here, but it looks like a bad month for investment-grade in August has some managers and their clients taking notice.

"U.S. companies are locking in low yields now for as long as they can, and the result is pain for investors. So far this year companies ranging from snack food maker Mondelez International to airplane manufacturer Boeing to communications giant AT&T have sold more than $290 billion of bonds maturing in 30 or more years, more than twice the longer-term securities sold over the same period last year, according to data compiled by Bloomberg. The average tenor of new issues this year is 12.9 years, up by more than a year from 2019, according to JPMorgan Chase strategists

Investors are buying longer-term notes to get higher yields in a near-zero-interest-rate world. But they're also taking on more interest-rate risk in the process. Investment-grade notes posted a loss of 1.4% in August, the worst monthly returns since March and only the third negative month in the last two years, driven in large part by rising Treasury yields hitting longer-term securities."

"Money managers who focus carefully on credit risk might have to pay more attention to the risk of longer-term yields rising, said Matt Brill, head of U.S. investment-grade credit at Invesco."



Longer-term notes may offer yields that look high relative to the alternative, but they are still low on an absolute basis. The notes Mondelez sold this week that mature in 2050 paid a coupon of 2.625%, compared with 1.5% for the 10-year notes.

"For our total return clients on the insurance side, it's hard to invest in these low, all-in yields, so more client dollars are going to different asset classes," said Travis King, co-head of investment grade credit at Voya Investment Management in Atlanta.

By Max Reyes
Source: Bloomberg LP.


Here is an article from 1999 where a record number of U.S companies attempted to capitalize on market euphoria by splitting their shares. During the dot-com craze, investors responded very positively to stock splits, bidding share prices up even further, and stoking the eye-popping run-ups in the U.S. stock market. Qualcomm for example announced a 2-for-1 split in May 1999 and then a 4-for-1 split in November 1999. By December 25th the stock was up 1500% for the year.

Today, Tesla's stock split investor reaction is somewhat '1999ish'. Tesla shares ran up 13% in a single day on just the announced stock split earlier in August.

Stock splits add zero liquidity or additional tangible value to investors but nonetheless broadcast a bullish message that resonates powerfully with investors. They often open the gates to more buyers by lowering the price of a company's share. This makes them more attractive to more investors because more people are more likely to buy more.


In Malcolm Gladwell's latest book, Talking to Strangers, he writes about the concept of alcohol myopia. It's a theory that alcohol causes drinkers to focus on their immediate environment. As Wikipedia puts it, intoxicated individuals act rashly, choose overly simple solutions to complex problems and act without considering the consequences.

What does this have to do with investing? Well, right now it feels like we're experiencing market myopia. Investors are focused on today, leaving the future for later. I'm not so much referring to the strength of the stock market, but rather all the stuff that's going on around it.

Here are some signs that investors are getting intoxicated:

Extrapolating current demand

Companies that did well during the lockdown are generally expected to keep growing and profiting in the post-pandemic world, including home improvement stocks such as Home Depot Inc., Lowe's Cos. Inc. and Best Buy Co. Inc., athleisure stocks like Lululemon Athletica Inc. and Nike Inc., and, of course, technology stocks.

Worrying about profits later

One of the features of this market cycle has been the emergence of what I call the "non-profit" sector: companies that are growing rapidly, but don't have a clear path to profitability. Some of today's tech giants weren't overly profitable in their early days either (for example, Facebook Inc. and Alphabet Inc.), but the next generation (Netflix Inc., Uber Technologies Inc., Zoom Video Communications Inc., Slack Technologies Inc. and Wayfair Inc.) appear to be different. They are mature companies and are losing money in a favourable business environment.

Chasing yield

The bonds of cyclical and highly indebted companies got hammered during the March meltdown as holders worried about getting their money back. Since then, however, most of the lost ground has been made up, even though the economic outlook is no more certain. Investors are moving up the risk scale to feed their insatiable appetite for yield, because high-quality corporate and government bonds are yielding next to nothing. Investors are getting a little more yield with a lot more risk.

Stock splits and price targets

In recent weeks, Tesla Inc. and Apple Inc. were sharply up on news that they were splitting their stocks. The splits made the shares more accessible to smaller investors but didn't create one dollar of additional value.

Crowded trades and fat pitches

We can't be sure how or when the hysteria will end. We just know it will. The most enduring inefficiency in the stock market is time frame. There will always be rewards for looking beyond the near-term noise to the opportunities and risks further out. The myopic market has put the spotlight on a select number of popular trades, which leaves plenty of other areas to explore. There are fat pitches out there, to use Warren Buffett's analogy, they just haven't gone viral yet.


Our retirement series concludes with a link to a retirement calculator to assess your own retirement preparedness and the key takeaways to remember from the series.

Inflation expectations vs. Treasury yields

Over the past 5 months, real yields have collapsed to all-time lows as inflation expectations rise and nominal yields remain relatively unchanged. Historically, market returns have been more highly correlated with change in nominal interest rates.



Source: Credit Suisse

Mind-boggling stats

1. Apple has added $420 B of market cap over the last month, which is more than the current market cap of 493 companies in the SPX.

2. The market cap added by Apple just since reporting and announcing its stock split at the end of July is equal to the combined total market cap for the bottom 77 stocks in the SPX.

3. Apple alone is worth pretty much as much as the whole of German stocks…

4. It took them 38 years to get to 1 trillion market cap, and 8 months to add another 1 trillion. Normal.

5. 80% of outstanding bonds globally yield less than 1%.

6 Elon Musk founded / co-founded companies are now worth more than 500% of the total combined accumulated revenue of ALL of them. And NONE of them have ever had a profitable year.

7. Elon Musk net worth is greater than the cumulative revenues of ALL of his companies founded or co-founded by him while he was there… of course don't ask about profits.

8. TSLA is now the 12th largest company in the world with a market cap of $383 B, sales of $24 B.

9. Since announcing its stock split on August 11, TSLA has added almost $200 B in market cap… or 5 FERRARIs or Fiat + Peugeot + Renault + BMW + DAI + VW. In 9 days!!!

10. FB, AMZN, AAL, MSFT, GOOG, now account for 23% of SPX well above the 18% high of the 2000s.

11. While the SPX closed at an all time high, every single sector in the US market had more decliners than advancers last week. All 11 sectors except tech…

12. US corporate bankruptcies (companies with assets > $1B):
2002: 24
2009: 38
2020: 45 and counting!

13. 80% of outstanding bonds globally yield less than 1%.


Early in August 1720, Sir Isaac Newton was faced with a choice. In a year when London's stock market was roaring upward in an utterly unprecedented boom, should he sell the last of his safe investments to buy shares in the South Sea Company? Since January of that year, shares in the firm-one of the largest private companies in history-had gone up eightfold and had made paper fortunes for thousands.

Newton was usually a cautious investor. He did own shares in a few of the larger companies on the exchange, including South Sea, but he had never been a rapid or eager market trader. That had changed in the past few months, though, as he bought and sold into the rising market seemingly in the hopes of turning a comfortable fortune into an enormous one. It was a disastrous choice. Within three weeks, the market turned. By Christmas, it had utterly collapsed. Newton's losses reached millions of dollars in 21st-century money.

The global financial system still breaks the same way it did 300 years ago. The dot-com bubble that collapsed from 2000 to 2002 and the real-estate bubble of 2007 and 2008 were part of a recurring pattern of boom, bust, and bankrupted people, institutions, and nations. Newton's errors matter, because we're still making them. Months into a deadly pandemic that has ravaged the world and thrown millions of Americans out of work, the crisis that sparked the Great Recession seems like a distant memory. Forgetfulness is only one of the reasons bubbles happen again and again.


A collection of videos covering advice from the most successful money managers and investors of our time. You will find many investing/business/trading books summarized into short videos.


Since the inception of EdgePoint, there have been six periods of significant volatility in the markets, and each of them provided opportunities to find outstanding investments for those willing to do the work. Short-term pullbacks in the market will happen, but they're only temporary. What matters most is how you react during these tough times.

A mix of charts and clips that caught our attention this week

People over 55 own over 80% of the bonds out there.


The ten-year Treasury bond yield is 140 basis points below the underlying inflation gauge, a record gap.


Real income and sales have gone up despite a huge rise in unemployment.


Apple is worth $2 trillion, and is now bigger than all the S&P oils and banks combined












In the fourth installment of our retirement series, we talk about the sequence of returns risk and how to structure your investments so that you give your portfolio a chance to handle any short-term volatility.


As of August 10th, 1 in 5 small and mid-cap stocks are still down more than 30% since the beginning of the coronavirus crisis. According to JPM's Head of Small and Midcap Equities, many of these businesses have solid balance sheets, all-time low valuations, and are not structurally damaged.

This brings opportunity for active investors who use fundamental analysis and expertise to pick specific investments in an effort to beat the market over the long-term. For every dollar that is managed actively today, there is 80 cents managed passively with no regards for fundamentals. Passive investors are simply tracking an index which today is exacerbating the gap between fundamentals and valuations.


Investors, cooped up and eager for normality's return, are mistakenly bidding up share prices, Seth Klarman contends-and it won't end well.

One of the culprits: deluded investors. His assessment, is a nuanced reading of mass psychology amid virus anxieties and isolation. Impatience for a return to a regular, epidemic-free life has made them eager for quick riches through stocks, he believes.

"There is little evidence of thought as to whether the price of a security already reflects current and projected future news flow or whether the opening up of the economy might be premature, a sign not of strength, but of impatience, lack of resolve, and poor judgment."

A devotee of value guru Benjamin Graham, Klarman has long preached that investors should be patient.


The shutdown impacted businesses of all sizes. Many proclaimed our old way of life would be changed forever. It would be "the end of commuting," "the demise of retail," or "the collapse of globalization".

The reality of how companies are dealing with the crisis and preparing for the recovery tells a very different story, one of pivoting to business models conducive to short-term survival along with long-term resilience and growth.

Let's examine the world of restaurants. They have been battered by the lockdown, with many owners pondering whether to close for good. The usual way to think about restaurants includes envisioning a seating area next to a kitchen. However, restaurants are kitchens whose output can be delivered to customers in a number of ways and using various kinds of business models. Eat-in, take-out, delivery, and catering are just the tip of the iceberg.

One pivot would be to offer a flat rate for a set number of meals per week or per month, with limited menu choices. Restaurants could increase their margins as they learned how to manage captive demand. Another pivot would be to offer a combination of precooked dishes with sides or additions that could be prepared at home using ingredients supplied by the restaurant. The restaurant could send a link to a video that walks the customer through preparation, thus incorporating an experiential and learning element. Deliveries could be in amounts large enough for several meals in a given week. Both pivots would lead to a greater variety of business models, which could become a permanent feature of the restaurant landscape, especially if the trend toward remote work from home consolidates over the long run.

The crisis has also led to broken supply chains, as reflected in the ominous images of empty supermarket shelves - a void that presented small farmers with a unique opening. After seeing their sales to restaurants and specialty stores plummet during the lockdown, many small-scale farms have set their sights on the needs of the homebound consumer. This pivot requires investments in information technology, marketing, and logistics that could prove profitable over the long run if the trend toward shorter supply chains gains momentum.


Warren Buffett appears to have bought back more than $7 billion of Berkshire Hathaway stock over the past three months, underlining the famed investor's willingness to deploy significant amounts of cash and his view that Berkshire shares are a bargain.

Moreover, the buybacks indicate that Buffett views Berkshire stock as undervalued, given his policy is to only repurchase it when it trades below a conservative estimate of Berkshire's intrinsic value. Berkshire's shares are down about 7% this year, lagging the benchmark S&P 500 index's 3% gain.

The company's market capitalization is also about 1.3 times its net assets of $397 billion at the end of June - not far off the 1.2 multiple Buffett has previously quoted as an enticing level to buy back shares.

BRK is a holding in EdgePoint and Cymbria portfolios.


This graph shows the % of light vehicle sales between passenger cars vs trucks/ SUVs through July 2020. Light trucks/SUVs accounted for 76% total light vehicle sales in July 2020.


Big 5 stocks dominate markets

Over the past year, the 5 largest S&P 500 companies (AAPL, MSFT, AMZN, GOOGL, FB) returned 58% vs. 1% for the rest of the market.

At $6.2 trillion, the combined market cap of Apple, Amazon, Microsoft and Google is now greater than the GDP of every country in the world with the exception of the US and China.


In his latest memo, Howard Marks dissects the impact of the COVID-19, Fed policy, and the long-term implications of low-interest rates in equity markets.

Marks concludes with some thoughts on today's extreme valuations and the current market darlings:

On one hand, we have the surprisingly rapid recovery of the stock and credit markets to roughly their all-time highs, despite the fact that the spread of Covid-19 hasn't been halted, and that it will take a good number of months for the economy to merely return to its 2019 level (and even longer for it to give rise to the earnings that were anticipated at the time those market highs were first reached). Thus p/e ratios are unusually high today and debt yields are at unprecedented lows. Extreme valuations like these are usually justified with protests that "this time it's different," four words that tend to get investors into trouble.

On the other hand, John Templeton allowed that when people say things are different, 20% of the time they're right. And in a memo on this subject in June of last year, I wrote, "in areas like technology and digital business models, I'd bet things will be different more than the 20% of the time Templeton cited." It certainly can be argued that the tech champions of today are smarter and stronger and enjoy bigger leads than the big companies of the past, and that they have created virtuous circles for themselves that will bring rapid growth for decades, justifying valuations well above past norms. Today's ultra-low interest rates further justify unusually high valuations, and they're unlikely to rise anytime soon.

But on the third hand, even the best companies' stocks can become overpriced, and in fact they're often the stocks most likely to do so. When I first entered the business in 1968, the companies of the Nifty Fifty - deploying modern wonders like computing (IBM) and dry copying (Xerox) - were likewise expected to outgrow the rest and prove impervious to competition and economic cycles, and thus were awarded unprecedented multiples. In the next five years, their stockholders lost almost all their money.

We reach our conclusions, limited by the inadequacy of our foresight and influenced by our optimistic or pessimistic biases. And we learn from experience how hard it is to get the answer right. That leads me to end with a great bit of wisdom from Charlie Munger concerning the process of unlocking the mysteries of the markets: "It's not supposed to be easy. Anyone who finds it easy is stupid."

Seth Klarman on the Fed

Seth Klarman said the Federal Reserve is treating investors like children and is helping create bizarre market conditions that are unsupported by economic data. "Surreal doesn't even begin to describe this moment," Investor "psychology is surprisingly ebullient even though business fundamentals are often dreadful". "Investors are being infantilized by the relentless Federal Reserve activity. "It's as if the Fed considers them foolish children, unable to rationally set the prices of securities so it must intervene. When the market has a tantrum, the benevolent Fed has a soothing yet enabling response."


Taking the the best managers over the past 10 years in Canadian equities. These are the ones that have crushed it over a decade of measurement and are in the top position among their peers. But, during that same 10-year period, almost all of them spent a three-year period or longer with below average results. (chart 2) Half spend at least a three-year period in the bottom quartile. If you are prone to chasing performance, you would likely have bailed on these managers when they were underperforming

Alternatively, we looked at Canadian equity funds that were in the top quartile in June 2014 based on their three-year trailing performance (June 2011-June 2014). Some 69% of these funds were not positioned in the top quartile in the next three year period (June 2014-June 2017) - 44 % were actually below average. Similarly, 65% of the top-quartile funds in June 2017 were not top quartile during the next three-year period (2017-2020). See Chart 3.




A narrow group of companies or business models is perceived to be so valuable that any company that is seen as belonging to this group is valued at extraordinary levels.

In the 1920s it was the radio stocks. In the 1960s it was the conglomerates and the Nifty Fifty. In the 1990s it was the Internet stocks. Now it's "platform companies".

Company "stories" become more impactful than financial results.

Many of the current market darlings don't have amazing financials to lean on. What they do have is stories, and perhaps some period of revenue growth which is yet to translate into substantial profits. So which do you think will help them promote their stock: the stories or the numbers?

Securities are purchased based on belief rather than thorough analysis.

This sign refers to which part of the brain investors are using to make decisions: the part they use to figure out which refrigerator offers the best value for the money, or the one that makes some of their heads turn when a really attractive sports car drives by.

Doubters have been wrong for a long time and are largely disregarded as people who "just don't get it".

When a group of people have been warning about danger for a prolonged period of time, a certain fatigue sets it. Kind of like the story about the boy who cried wolf.

Ironically, in stock market as prices rise higher and higher without the fundamentals to support that increase, the longer the warnings have been sounded and ignored, the more relevant they become. Only they do not appear so. These naysayers become largely discredited and ignored. Usually just as what they have been warning about is on the cusp of wiping out a large chunk of investors' portfolios…

The specifics change, but the general pattern reoccurs throughout investing history. The most expensive words in investing are "this time is different." Yet investors think and say these words every few decades. In large part, they do this because every time is different. The details change. What doesn't change is that in the long-term, stock prices are determined by weighing the cash flow streams of the underlying companies, not by stories or by popularity of these companies for a period of time with investors.


We are looking at one share of Berkshire B relative to one share of Apple. Three years ago, one share of BRK was enough to buy 1.2 shares of Apple, whereas today, one share of BRK would be sufficient to buy less than half a share of Apple.


Meanwhile, Berkshire owns 250 million shares of Apple, which have a market value approaching $100 billion. So, while the number of shares of Apple that one share of Berkshire can buy has been steadily falling, BRK's stake in AAPL (which should positively impact BRK's stock price) has been steadily rising.

Berkshire is also renowned for its large cash hoard.


What does one get in the Buffett Stub? Essentially, it would be all the insurance assets, Burlington Norther Santa Fe (BNSF) and all the other investments public and private that Berkshire has made ex-Apple.

If we strip out AAPL, the cash and BNSF, the rest of Berkshire - mainly insurance and the remaining public and private investments essentially have a negative value.


You are essentially getting much of the company for free.

*BRK is a holding in EdgePoint and Cymbria portfolios.


Given the high number of consumers working from home, especially those with school age children, it should come as no surprise that one-in-three Americans signed up for a new subscription service in the first few weeks of the shelter-in-place lockdown in the U.S.


Nearly 60% of parents with children under the age of 18 signed up for a new subscription of some kind in the first few weeks of the national emergency.

Baby Boomers stood out as the least likely group to sign up for new services, with just 10% of those surveyed saying they had signed up recently.


By May, a new trend was becoming evident in the subscription industry - subscriber fatigue. In Deloitte's Digital Media Trends Survey, it was apparent that churn was becoming a major factor as companies were rapidly onboarding and offboarding customers at an alarming rate.

Almost a third of consumers had added a new streaming video service or added one while canceling another since mid-March. Further, when looking at cancellations since mid-March, 14% had either cancelled a service outright with no replacement or cancelled a service and picked up a competitor's service instead. All-on-all, almost four-in-ten U.S. consumers had made a change to a video streaming service in the first two months of the pandemic.



Will Berkshire step up now to buy businesses on the same scale?

"Well, I would say basically we're like the captain of a ship when the worst typhoon that's ever happened comes," Mr. Munger told me. "We just want to get through the typhoon, and we'd rather come out of it with a whole lot of liquidity. We're not playing, 'Oh goody, goody, everything's going to hell, let's plunge 100% of the reserves [into buying businesses].'"

On the airlines:

"They've never seen anything like it. Their playbook does not have this as a possibility."

"Nobody in America's ever seen anything else like this. This thing is different. Everybody talks as if they know what's going to happen, and nobody knows what's going to happen."

Is another Great Depression possible?

"Of course we're having a recession,"

"The only question is how big it's going to be and how long it's going to last."

"I don't think we'll have a long-lasting Great Depression. I think government will be so active that we won't have one like that. But we may have a different kind of a mess. All this money-printing may start bothering us."


Photo contest: Winner!

In this quarter's EdgePoint photo contest, we chose the theme of "Home Life" to make sure our partners stayed safe while trying to find new ways to look at things they saw every day. The Committee had to look through some strong submissions, including family photos, restaurant-quality dishes and several artistic endeavours.

After some debate, this quarter's winner is Québec's very own Marc-Andre for his close-up of some latte art that showed us home truly is where the heart is.



Even though there are still travel restrictions, doesn't mean the Investment team's latest reading and listening recommendations can't help you escape some of the summer heat.

Bifurcated market

We guess this makes sense when Apple, Amazon, Microsoft and Google combined are now worth more than the entirety of the Japanese stock market.






"Can 'bad' things happen to an otherwise 'good' investment portfolio? To answer this question, I looked at the performance of a very large and well-known investment portfolio that has a long history of exceptional results. This particular portfolio provides a good 'test case' because its history goes back more than 50 years. Therefore, its success clearly cannot be attributed to mere luck."

Over its lengthy tenure the portfolio has widely outperformed its benchmark, adding significant value for investors over time. However, all sorts of bad things happened to this portfolio all along the way:

  • There were 11 calendar years over its tenure, where this 'good' portfolio would have lost you money. To add insult to injury, in seven of those negative years the portfolio also underperformed its benchmark.
  • There were 17 years in total where the portfolio underperformed its benchmark. That's almost 1/3rd of the time.
  • There were 21 years where this otherwise 'good' portfolio experienced a calendar year return that was negative and/ or worse than its benchmark.
  • There were 20 calendar years where the portfolio returned less than 10%.
  • And finally, it also experienced a couple of prolonged periods of particularly poor results. Throughout its history this portfolio experienced two separate periods of time where it had either a negative rate of return and/or underperformed its benchmark for four years in a row. In other words, if you had hired this particular portfolio manager at the start of either of these periods, and looked back at your results four years later, you would have experienced either negative or relative underperformance in each and every one of the previous four years.

    In either of these scenarios, many investors would have promptly pulled their money and fired the manager! The "portfolio" we've analyzed above is none other than that of Berkshire Hathaway, and the 'portfolio manager' you'd have fired would have been the world's greatest investor himself - Mr. Warren Buffett!

    Over the 54 year period from the beginning of 1965 to the end of 2018, Buffett/ Berkshire returned an average of 20.5% per year, more than doubling the S&P500 Index, returned 9.7% per year over the same period

    Truly bad things can only happen to good investment portfolios through our own behaviour; i.e. how we react to "bad" events such as temporary underperformance. If the portfolio itself is indeed a 'good' one by definition, it won't do bad things to you. Only you can do bad things with it.

    Retail sales

    Topline retail activity is now just -0.8% away from the pre-pandemic level.
    There is wide dispersion within the sectors and the "work-from-home" theme is clearly visible when we look at the fact that groceries are 11.5% above pre-Covid, e-tailing is sitting at 20.9% higher and now sporting goods etc. has ramped up to 23.1% above the pre-pandemic level.


    Household spending

    Although average spending fell for all households as the economy shut down at the start of the pandemic, unemployed households actually increased their spending beyond pre-unemployment levels once they began receiving benefits.

    Store openings and closures in the US


The central bank bought about $3 million of the company's bonds due 2024 at around 105 cents on the dollar, but they'll be redeemed at 101 cents on Tuesday. That will amount to a roughly $120,000 loss in principal on the debt purchased on June 23, according to the Fed's latest update to its secondary market facilities purchases.

The transaction highlights the risks central banks take when they leave the safety of sovereign debt and venture out into niche corners of the bond market.

The surge in Indian internet subscriptions has been spectacular. A near threefold increase between 2014 and 2020. Google said Monday that it will set up a $10 billion fund to invest in India over the next five to seven years, including investments in other companies, to speed up the adoption of digital service.

India is a largely untapped market: It has 1.35 billion people and only about half of them are online. Digital services from e-commerce to online media are underdeveloped.


Net new retail accounts across major online brokers 
As you can see from the chart below, all the online retail brokers saw a huge swath of new users this year.

Dining in the hotspots heading lower

Gasoline consumption up on reopening as well as avoidance of mass transit
78% of the appreciation in S&P500 in last 5 years is attributable to tech and e-commerce

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