Links - 01/24/2023
“My calculations of trendline value of the S&P 500, adjusted upwards for trendline growth and for expected inflation, is about 3200 by the end of 2023. I believe it is likely (3 to 1) to reach that trend and spend at least some time below it this year or next. Not the end of the world but compared to the Goldilocks pattern of the last 20 years, pretty brutal. And several other strategists now have similar numbers. To spell it out, 3200 would be a decline of just 16.7% for 2023 and with 4% inflation assumed for the year would total a 20% real decline for 2023 – or 40% real from the beginning of 2022. A modest overrun past 3200 would take this entire decline to, say, 45% to 50%, a little less bad than the usual decline of 50% or more from previous similarly extreme levels. But this is just my guess of the most likely outcome. The real risk from here is in the unusually wide range of possibilities around this central point.” —Jeremy Grantham
After a Timeout, Back to the Meat Grinder! - by Jeremy Grantham (LINK)
Verdad Weekly Research: Dot-Com Redux—How to invest after valuation risk strikes (LINK)
So after writing about it non-stop from 2019 through 2021, where are relative and absolute valuations currently?
For value versus growth, the state of relative valuations was well summarized in AQR’s year-end note: “value’s returns in 2022 were extremely strong, and the spread only moved from roughly the 100th percentile [of market history] to the 94th, which makes us very optimistic about the prospects of continued normalization in 2023 and beyond.” For small caps versus large caps, we recently wrote a piece on the topic showing just how much room we believe there is to run here in figure 4.
Will Berkshire Hathaway Survive — and Thrive — After Warren Buffett is Gone? (LINK)
The surprising key to a clean energy future - by Bill Gates (LINK)
Netflix’s New Chapter - by Ben Thompson (LINK)
Thinking through the Bull Case for OpenAI’s threat to Google’s dominance - by Sarah Tavel (LINK)
Amazon adds generic prescription perk for Prime members (LINK)
Auto Insurers’ Rising Rates Are No Accident (LINK)
These ‘Big Short’ Vets Were Up 169% Last Year [H/T Linc] (LINK)
Founders Podcast: #287 The Founder of Rolls-Royce (LINK)
Invest Like the Best Podcast: Daryl Morey - Systems Thinking in Sports (LINK)
A Revolutionary Way to Influence and Persuade (LINK)
“Curiosity is one of the permanent and certain characteristics of a vigorous intellect.” —Samuel Johnson
“We keep moving forward, opening new doors, and doing new things, because we’re curious and curiosity keeps leading us down new paths.” —Walt Disney