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THIS WEEK: S&P 500 Stays Strong

Weekly recap, Jeff Bezos' letters, earnings and economic Data

Author

GRIT
12 Nov

Hi Everyone 👋,

Welcome to the latest edition of your GRIT weekly free newsletter!

GRIT’s BIG 3 of the Week:

  1. Genevieve’s Corner 👉 EVENTFUL WEEK

  2. Matt Allen’s Corner 👉 JEFF BEZOS’ LETTERS

  3. Comin’ Up 👉 EARNINGS AND ECONOMIC DATA

1. Genevieve’s Corner

Hi Everyone!

It was an eventful week in the markets. Let’s recap! 👇

MARKET UPDATE:

  1. Jerome Powell “Close the f****** door”

  2. Moody’s downgrades U.S to negative from stable

  3. World’s largest bank gets hacked, forced to trade via USB stick

  4. Elon Musk releases “Grok” to rival ChatGPT

  5. WeWork filed for bankruptcy

  6. Oil prices drop, down 18% from September high

  7. FED says it will hike rates further if necessary

  8. Bitcoin hits +$37k, up +6% this week

  9. Mortgage rates drop by the largest amount in a year

  10. Ken Griffins says U.S is “spending on the government level like a drunken sailor”

  11. Microsoft stock hits record high

  12. BlackRock files for Spot Ethereum ETF with NASDAQ

  13. Lucid stock hits record low

  14. 80% of S&P 500 firms have reported less than HALF have beaten revenue estimates for Q3

  15. U.S Treasury’s $24 billion 30-year bond auction goes poorly, weak demand

  16. Hollywood actors' union agrees tentative deal to end 4-month strike

  17. Plug Power collapses after 'going concern' warning from hydrogen developer

  18. Consumer alert: excess savings in the US peaked in August 2021 at $2.1 trillion. Now down to just $148 billion

  19. US car owners are falling behind on payments at the highest rate on record

  20. Credit card debt hits $1.08 trillion in U.S, a record-high

Wild week.

You can’t make this stuff up!

In case you missed it, here is this week’s viral “door” video of Jerome Powell.

🎯 Genevieve’s Take:

So, what happened in my portfolio this week? Upgrade to GRIT VIP to find out!

Have a great weekend,

Genevieve Roch-Decter

2. Matt Allen’s Corner

Jeff Bezos’ Letters

I believe you can learn many things in life from people who have been incredibly successful. I firmly believe that you can apply these things to any aspect of your personal life.

In terms of investing, studying companies' leadership and their vision is critical. You can take the things that Jeff Bezos talks about and look for them when you are trying to find the next Amazon.

I believe that if you had read these letters back in 2005, you might have invested in Amazon because you would have been a big fan of their vision.

In my corner, I will go over some of the best lessons that Jeff Bezos teaches in his letters.

The first idea is to bet on ideas that have unlimited upside.

A dreamy business product has at least four characteristics. Customers love it, it can grow to a very large size, it has strong returns on capital, and it’s durable in time—with the potential to endure for decades. When you find one of these, don’t just swipe right, get married.

Jeff Bezos

Bezos believes in making big bets on dream products with unlimited upside and a capped downside. These products have four characteristics: customers love them, they can grow to enormous sizes, they have strong returns on capital, and it’s durable.

Bezos made three incredibly risky bets: Amazon Marketplace, Amazon Web Services, and Amazon Prime. These three bets did not make sense in the short term, but they did in the long term. With Prime, for example, no one on the Amazon team could point to numbers showing that giving customers free shipping for a yearly fee would never pay for itself.

However, all 3 of these make billions each year.

The second idea is to focus on companies that generate free cash flow.

Why focus on cash flows? Because a share of stock is a share of a company’s future cash flows, and, as a result, cash flows, more than any other single variable, seem to do the best job of explaining a company’s stock price over the long term.

Jeff Bezos

Many public companies are judged by earnings per share or earnings growth when judging their performance. Free cash flow should be prioritized because it is pegged to your company’s value today and in the future.

In Bezos’ original 1997 letter (discussed below), he clarified to his new investors exactly how Amazon thought about free cash flow vs. GAAP accounting.

With each letter, he has enclosed a copy of that original letter to remind shareholders of Amazon’s outlook on this question.

For Bezos, focusing on free cash flow provides a clear method of valuing Amazon for internal planning purposes, as well as for investors.

The metric represents how much value each individual share of stock in a company has today and stands to have in the future.

The third idea is to build a cash moat during lean times.

The year 2001 will be an important one in our development. Like 2000, this year will be a year of focus and execution. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter. While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get there, it’s our top priority, and every person in this company is committed to helping with that goal. I look forward to reporting to you our progress in the coming year.

Jeff Bezos

I believe that this is important for someone personally and a business. Focusing on free cash flow or otherwise giving your business some form of cash moat (whether through outside equity, debt stakes, or tight operations) will help ride out difficult times when customers aren’t buying and/or financing has dried up.

This is so true for us personally; if you have multiple streams of income, it will allow you to go on offense when times get tough instead of when 99% of people go on defense.

🎯 GRIT TAKE:

One of my favorite lessons from Bezos is
 Sign up for GRIT VIP to read our complete GRIT Takes!

Cheers,

Matt Allen

BIG NEWS!

VIP OFFERINGS

As a Grit VIP member, you already have access to the live portfolios of Genevieve Roch-Decter, Matt Allen, Warren Buffett, and Bill Ackman.

Anytime they make a trade their portfolio is automatically updated, and VIPs get to see in real-time what they are buying and selling.

However, we have received tons of feedback asking for MORE portfolios to be added. And we listened to you.

We just added billionaire investors David Tepper, George Soros, Mohnish Pabrai, and Carl Ichan!

Premium subscribers will have ultimate access to their portfolios when they buy and sell stocks.

David Tepper is the billionaire owner of the Carolina Panthers. He is known for founding and managing Appaloosa Management, a global hedge fund based in Miami Beach, Florida. He has gained widespread recognition for his success in the investment world, particularly for generating significant returns during the financial crises in the late 2000s, solidifying his reputation as one of the most successful investors in recent history.

George Soros is a renowned Hungarian-American billionaire investor, most famous for his management of the Quantum Fund, which he founded. His successful bet against the British pound in 1992 earned him the nickname "The Man Who Broke the Bank of England."

Carl Icahn is a billionaire investor known for his role as a leading activist investor. He is the founder and controlling shareholder of Icahn Enterprises, a diversified conglomerate holding company. Icahn has built a reputation for his aggressive strategies in buying significant stakes in various corporations and then pushing for changes to increase shareholder value, often leading to substantial impacts on the companies he targets.

Mohnish Pabrai is a billionaire investor widely recognized for his value investing approach. He is the founder and manager of Pabrai Investment Funds, a family of hedge funds inspired by Warren Buffett's investment style. Pabrai has garnered significant attention in the investing community for his high returns and his deep understanding of value investing principles, often drawing comparisons to Warren Buffett in his investment philosophy and methodologies.

3. Comin’ Up

EARNINGS AND ECONOMIC DATA

💰 Earnings:

Monday: Nu, XP, Tyson Foods,

Tuesday: Home Depot, Sea Limited, Tencent, ON

Wednesday: Cisco, TJX, Target,

Thursday: Walmart, Alibaba, Applied Materials, Warner Music

Friday: Buckle

📈 Major Economic Events:

Monday: Monthly U.S. federal budget

Tuesday: CPI

Wednesday: PPI

Thursday: Initial jobless claims

Friday: Housing starts

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Benjamin Graham

The author of this newsletter owns ETF’s (exchange traded funds) that may hold ownership interests in the companies discussed in this newsletter as of the published date of this newsletter. An insider to GRIT Capital Corporation currently holds an ownership interest in Microsoft (MSFT) as of the published date of this newsletter. The insider to GRIT Capital Corporation does not guarantee that they will maintain their ownership interest in Microsoft (MSFT) and may increase or sell such interest at any time.

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