Hi Everyone 👋,
Welcome to the latest edition of your GRIT weekly free newsletter!
GRIT’s BIG 3 of the Week:
Genevieve’s Corner 👉 EVENTFUL WEEK
Matt Allen’s Corner 👉 JEFF BEZOS’ LETTERS
Comin’ Up 👉 EARNINGS AND ECONOMIC DATA
1. Genevieve’s Corner
It was an eventful week in the markets. Let’s recap! 👇
Jerome Powell “Close the f****** door”
Moody’s downgrades U.S to negative from stable
World’s largest bank gets hacked, forced to trade via USB stick
Elon Musk releases “Grok” to rival ChatGPT
WeWork filed for bankruptcy
Oil prices drop, down 18% from September high
FED says it will hike rates further if necessary
Bitcoin hits +$37k, up +6% this week
Mortgage rates drop by the largest amount in a year
Ken Griffins says U.S is “spending on the government level like a drunken sailor”
Microsoft stock hits record high
BlackRock files for Spot Ethereum ETF with NASDAQ
Lucid stock hits record low
80% of S&P 500 firms have reported less than HALF have beaten revenue estimates for Q3
U.S Treasury’s $24 billion 30-year bond auction goes poorly, weak demand
Hollywood actors' union agrees tentative deal to end 4-month strike
Plug Power collapses after 'going concern' warning from hydrogen developer
Consumer alert: excess savings in the US peaked in August 2021 at $2.1 trillion. Now down to just $148 billion
US car owners are falling behind on payments at the highest rate on record
Credit card debt hits $1.08 trillion in U.S, a record-high
You can’t make this stuff up!
In case you missed it, here is this week’s viral “door” video of Jerome Powell.
So, what happened in my portfolio this week? Upgrade to GRIT VIP to find out!
2. Matt Allen’s Corner
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.
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.
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.
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.
One of my favorite lessons from Bezos is… Sign up for GRIT VIP to read our complete GRIT Takes!
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3. Comin’ Up
EARNINGS AND ECONOMIC DATA
Monday: Nu, XP, Tyson Foods,
Tuesday: Home Depot, Sea Limited, Tencent, ON
Wednesday: Cisco, TJX, Target,
Thursday: Walmart, Alibaba, Applied Materials, Warner Music
Monday: Monthly U.S. federal budget
Thursday: Initial jobless claims
Grit Capital Viral Video of the Week
In the short run, the market is a voting machine, but in the long run, it is a weighing machine.
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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