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FAANG It! The Stock Market Is Just 5 Stocks - McAlvany Weekly Commentary
Warren Buffett’s Annual Letter: Mistakes, Buybacks and Apple
Warren Buffett published his annual letter to shareholders over the weekend. The annual update, which has become one of the largest events in the calendar for value investors, provided Buffett's views on one of the most turbulent and extraordinary years for the financial markets in recent memory. Q4 2020 hedge fund letters, conferences and more Read More
Welcome to the McAvaney weekly commentary. I'm Kevin Orrick along with David McElvaine. You know each week we tend to talk about things that we've done that week. Dave you never cease to amaze me. You push your family far beyond what I think I've pushed my family. I did my first 14 or when I was in my 20s 14000 foot peak you know there are over 50 14000 foot peaks in Colorado. But you took your entire family including what your youngest. How old is he. He's 4 years old. We went over near Salita. It wasn't a mild 14 are either.
Now is five thousand vertical feet of climbing. And we actually thought we could do two in a day Shaviro and Tabbaa watch there right next to each other and you cross a saddle drop a little elevation and weren't enough if one weren't enough you're like Let's try to get a second line and tell you what it was worth recognizing our limits and it was also worth playing according to our game plan. We were up and climbing at 5 o'clock yeah. And the reason you do that is because in the summer months you have the monsoons which come in between 12 and 2 and you want to be off the mountain by 12 o'clock.
You know one of our favorite books Dave is Deep Survival by Gonzales and he talks about people who have a good experience. Maybe they'll do something that's high risk and they succeed unless they know history and unless they have a plan a lot of times that high and you know literally in this case with a 14 or that high of success can be taken into a disaster if you don't know history and you knew history. Anyone who climbs 14 years in Colorado understands you have a turnaround time whether you've made the top or not.
Right. And it was interesting because we are sitting there at the top and it's so tempting. Yeah you've seen most of the work. You're 5000 feet. You have only about another six to eight hundred foot gain to get to the other one. Why wouldn't you just do the second. Now it's an hour out and it's an hour back. You were past your turnaround which would have been past our turnaround time and as it turned out as we got to the base of the mountain sure enough the clouds were in the thunderclaps began. The rain started and it was a good call to just be modestly happy with one and know that we could come back for another day especially with your whole family.
You know in a way it's a lot like investing if you don't know history you can be running on an endorphin high you know you see the markets that are high you want to buy higher and higher and higher why would it stop unless you understand history unless you have a turnaround time.
I tell you what. It's an downer. Actually it was a downer for me to be on top of the mountain and know that we had to turn around and yes we made the first pick but we weren't going to make the second. And it was sort of the end of momentum if that's what you're getting because the momentum trade the momentum trend in investing is we've made it this far we can go a little further versus recognizing limits. There's a money manager by the name of Howard Marks and he says the big money in the investment world that dependable money the safe money is made not betting that things that have gone up a lot will continue to do so. But on betting that the things that have gone down and become unloved will rebound. And it's funny because I mean as we're coming down the mountain there's people who are just marching up and they don't know better. Right. They really don't know but they don't know about a turnaround time we passed a group actually early in the morning from Connecticut. And you know one of them's actually lying at 13 5 in a fetal position with altitude sickness. But he is determined he's going to make it to the top. He won't quit. I appreciate his tenacity but they don't know some of the rules of the game which is if you don't get off you can end up with other issues like lightning strikes and things like that.
And it reminds me of the book that Jon Krakauer wrote years ago about the two expeditions up Everest that they betrayed their turnaround time and it ended up costing many lives. Will they have enough with analogies let's just move on to currency war. Because we live in a day and age where it's beneficial to have a currency that's cheaper or lower value than a currency of your neighbor. OK. And what that does is that makes you more competitive. The problem is it's just like descending that mountain you can only descend at 5000 feet. OK there's a point where you hit rock bottom currencies really in a way have no bottom except for zero or zero buying power. Now Venezuela has reached that zero buying power. They won the currency war for a short time and then of course they lost all.
And I think the IMF now estimates that by year end they'll be at a million percent in terms of their rate of inflation. Said I believe you and counting exactly. 43000 percent. You begin to think you've got an inflation issue but there's still more to the year and more to the decline in their currency.
Let's look at something bigger though.
The Chinese are purposely lowering the value of their currency and the Chinese orchestrate a lower R and B we tend to accuse them of currency manipulation. Right. But it was just last year our currency was declining and if our currency.