November 24, 2024

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Notable market news this past week (24-Nov-24)

Here is the Skeptivest roundup of the latest market headlines for the week

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💸 Berkshire’s $325b cashpile. What does it signal?

Record cash reserves: Berkshire Hathaway's cash hoardhas surged to $325 billion—its largest ever—doubling since year-end. Thisaligns with Buffett's preference to increase cash during high marketvaluations. Berkshire's cash allocation has risen from 1% in 1994 to 28% today.During the 1990s internet bubble, Buffett raised Berkshire’s cash allocation to13% by 1998, then reduced it to 3% in 1999 (despite being a year too soon). Herepeated this approach before the 2008 crisis, increasing cash to 25% by 2005and deploying it during the downturn, including a timely investment in GoldmanSachs.

Valuations at high: Buffett’s favoredmarket-to-GDP ratio indicates expensive stock valuations. With expected equityreturns lagging behind cash yields, the shift reflects cautious positioning. Asseen above, S&P500 forward PE of 25x means a 4% annual return, which palesagainst 4.4% yield on risk-free 3 month treasury bills.

Strategic allocation, not market timing: Ratherthan predicting downturns, Buffett allocates based on expected long-termreturns. His approach underscores disciplined investment amidst low returnprospects for U.S. stocks.

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☕️ Quick fire happenings to note

🌏 Global macro

• Bitcoin nearing $100k: The token's value has more than doubled this year,     driven by increasing Wall Street involvement in crypto and President-elect     Donald Trump's apparent support for the industry.
• US home sales rise briefly in October: US used home sales jumped 3.4% in October, buoyed by a dip in mortgage rates. However, with rates climbing again, the rebound may be short-lived.
• US dollar strengthens admid global shifts: The US dollar has surged 2.65% since November 5, hitting a two-year high. Tax cuts, tariffs, and tighter monetary policy under Trump could further fuel its rise, shaking global currencies and economies.
• Scott Bessent as Treausry Secretary: Trump has picked Scott Bessent, founder of Key Square Capital and former Soros Fund CIO, as Treasury Secretary after a competitive selection process. Bessent, now aligned with MAGA, previously urged Trump to focus on deregulation and tax cuts but avoided mentioning tariffs.‍
• Musk and Ramaswamy Push to End Federal Remote Work: Elon Musk and Vivek Ramaswamy propose mandating in-office attendance for federal workers, arguing taxpayers shouldn't fund "Covid-era privileges." Their plan could spark conflicts with unions if adopted by the Trump administration.

🏦 Individual stocks/companies

• Singapore     internet companies Sea (+12% past 1 month)/Grab (+23% past 1     month) stock price gain momentum: Stock price rose for both Grab     and Sea post-earnings as (i) Sea reports Q3 breakeven for its e-commerce     unit, Shopee alongside beating consensus estimates for both its gaming and     fintech businesses; (ii) Grab reports profitability in Q3 and raises 2024 revenue     forecasts.
• Snowflake     (+33% past 5 days) stock rallies: Snowflake defied expectations     with Q3 earnings, posting 28.3% YoY sales growth to $942.1 million and     adjusted EPS of $0.20, beating estimates. Despite widening GAAP losses,     its 127% net retention rate stole the show for the $56b company.‍
• PDD     (-14% past 5 days) stock tanks: The firm aimed for a strong     earnings report, but it missed the mark with just 44% YoY revenue growth     and 60% net income growth, both falling short of estimates. Regulatory,     geopolitical, and competition challenges in Q3, combined with a more     hawkish U.S. administration, dampened optimism for the Chinese firm.
• Target     (-18% past 5 days) disappoints: The retailer missed earnings and     revenue expectations, with flat Q4 and FY24 guidance disappointing during     its peak season. Same-store sales rose just 0.3%, with foot traffic up     2.4%, while a 10% jump in online sales was the only highlight.
• DOJ calls for breakup of Google and sale of Chrome: The Justice Department is calling for Google to divest its Chrome browser, following a ruling in August that the company holds a monopoly in the search market. Chrome, which Google launched in 2008, provides the search giant with data it then uses for targeting ads. The DOJ said in a filing on Wednesday that forcing the company to get rid of Chrome would create a more equal playing field for search competitors.
• Huawei’s chip ambitions face major US-imposed hurdles: Huawei's advanced processors remain stuck at 7nm architecture due to US-led restrictions, while rivals like TSMC advance to 2nm chips. Huawei’s partner SMIC struggles with low yields for 7nm chips, delaying progress and hindering China’s AI and tech goals.

🇸🇬 Singapore related

• Singapore upgrades 2024 economic growth forecast to around 3.5%: Singapore’s Q3 2024 GDP growth exceeded estimates at 5.4%, prompting the Ministry of Trade and Industry to revise 2024 growth forecasts to ~3.5% (from 2-3%) while projecting 1-3% growth for 2025.