Ideas that stuck 2022 💡
Ideas that stuck, markets at year end, economics of Christmas and big drawdowns
Happy holidays, happy Christmas, Feliz Navidad, Joyeux Noel & bonne année and the rest … so, we’re in that strange few days where we’re unsure what it’s called, unsure what day it is, but quite sure that each christmas tune is now hitting like a jug of orange juice after cleaning your teeth …
I will say it was STRESSFUL watching that final with a French family! The best one ever? Not sure. Did seem tough from a French point of view but I guess you can’t have your team go AWOL for 90% of game time and expect to get away with it, no matter how good they are 🤷♂️. From a semi neutral viewpoint it was hard to begrudge Messi getting his hands on the trophy wasn’t it. That Salt Bae thing though ?!
We took the family to Portugal for a Christmas family holiday where the sun is shining and the Pasteis de Nata are going down by the dozen 😁 that does mean I’ve been reading rather more Paw Patrol sticker books than investment commentaries at the moment - undoubtedly for the best this time of year - so I’ll keep this super short, but I did want to talk about some of the big ideas that have stuck with me this year. Time that’s not spent chasing an energetic 2-year old and building sandcastles at this time of the year is meant for a bit of reflection.
As we close out the year it’s only natural to reflect on the year that’s been and 2022 has been, well … a lot. There’s no sugar-coating it or breezily joshing around it. However you cut it there’s surely been a big fall in human wellbeing globally and locally through war, inflation, cost-of-living and more. It’s not obvious that we’re near the end of it either and 2022 is not ending in a better place than it began. Despite all that, on we go - one thought I often come back to is the words of Hans Rosling author of Factfulness who always says (something like) - the world is simultaneously bad, worse, great and getting much better.
In stock markets it’s been an outlier, unprecedented, black swan [insert cliche of choice]. You know the rest: inflation shocks, super size rates hikes, bear markets. I’m going to file these little forecast polls I did on linkedin at the start of the year in the “prediction is difficult” folder …
Quickly on christmas …. You may be surprised to hear that Economics does have a few comments to make about Christmas, which broadly fall into two opposing sides: on the one hand you’ve got the “Christmas is inefficient” lobby, The Economist did a piece on this, who say that $100 spent on Christmas presents is only worth $85 in the hands of the recipient. On the other side you have the “time is a network good” crowd who say that time off becomes more valuable the more people you’re able to share it with (rather than something where more is always better). Making christmas holidays the most valuable kind of time. Who knows?
Markets
Stocks have huffed and puffed since our last update in the week of all those inflation & interest rate announcements, with the central bankers’ chitchat being taken to mean that interest rates might rise more than thought. The overall effect is that with just a couple of trading sessions left of the year global stocks are about 5% down in December, UP about 10% this quarter and just shy of 20% down year to date (the lowest they got to was about 25% down in October).
UK investors fared a little better as a sterling based investor in global markets would have only seen losses of about 10% due to a falling pound, and the UK stockmarket was one of few markets up on the year. Emerging market stocks are down just a touch more. Tech stocks have fallen off a bit of a cliff this month and are back at lows for the year.
Higher rates = lower stocks, as it has done for pretty much the whole year. Global 10-year rates crept up over December most notably in the UK where they are up over half a percent in December. The benchmark US 10 year yield looks set to finish the year just shy of 4%, having started the year at 1.5%.
Bond markets are going to close 2022 with one of the biggest down years probably ever. Corporate bonds have lost about 18%, and gilts anywhere between 25-35%.
There are some pretty stonking individual stock losses going on underneath all that (and not just in things like Peloton and Coinbase): Tesla gets the headlines (doesn’t it always) with a 73% loss of value from its highs, and Meta with its well-publicised 70% fall but Amazon has quietly fallen 56% and google 43%. That’s a lot of the world’s largest companies that got cut in half this year. The biggest $ market-cap drawdown? Meta has lost about £600bn, Tesla c£700bn. But the winner there goes to Amazon, whose fall comes in at over a trillion dollars from peak. This year was the revenge of the Dow stocks.
An outlier year -
Things worth thinking about this week:
I felt that the reaction I got to this tweet tells me that this is something we ought to be talking about more:
As I have for the last few years, I recapped my favourite podcasts of the year (link).
How many ideas were you exposed to this year? Dozens certainly, hundreds, maybe thousands? But how many stuck. Here’s some that stuck for me that I’ll be taking into 2023. If you’re interested read my full article here.
Being a long-term thinker in a short term world - Dorie Clark (seminar, podcast & book) - why it’s hard, why it matters, where to start
Grow the Pie - Alex Edmans (book, podcast) - a realistic blueprint for stakeholder capitalism and a radical rethink of how companies can serve society better, grounded in business school thinking. New paradigms are much needed right now, be open to it.
4,000 weeks - Oliver Burkeman (book) - why the vanishingly short period of the average human lifespan means we miss out on almost everything, but the worst thing is in avoiding this fact we risk wasting what we do have. Be present.
Stories Matter - Stacy Havener (podcast) - in business and in life understanding your own story and telling it authentically makes all the difference. Do it more.
Multiple is not Valuation - Michael Mauboussin (twitter thread, podcast). It’s a shortcut for the full valuation process, which embeds a lot of hidden assumptions. You need to earn the right to use a multiple. Use with care.
Which ideas stuck for you this year?
And to finish, a double dose of lightheartedness, this little video is causing a lot of laughs in our household: oh la laaaaa
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and still one of the funniest things I saw in 2022:
That’s it! Hope you all have an excellent New Year and I look forward to continuing these conversations, real talk & reflections on what matters, or should matter, in 2023 which I’m sure we all hope is a better year than 2022. Let’s keep up this conversation, and see you all soon.