I suspect there’s a measure of schadenfreude (another German word) among many people at the angst now being experienced by buyers of hot tech stocks, overhyped IPOs, Bitcoin, stocks and memes that flourished in 2020 and 2021 and are faltering in 2022.
Many US techies that were supposed to be the next hit things taking on the FANGs have retraced much of their gains. Twitter is off 50% from 12-month highs, Paypal 40% and eBay, Nvidia, Salesforce and Adobe have all dropped over 20%. Despite a recent uptick, Tesla is still down 22% over the last three months.
In Australia, investors couldn’t get enough of stocks that were seen as permanent beneficiaries of the pandemic, and pushed them to record highs. A lot of these have regretfully also fallen out of favour and have now bedevilled themselves and been shunned as disgracefully below their 12 month highs, Kogan ($18.01, now $6.38), Accent Group ($3.08, now $2.03), Airtasker ($1.97 now $0.84), Appen ($25.46, now $10.38), BlueBet ($3.03, now $0.95), IOUPay ($0.85, now $0.20), Marley Spoon ($3.22, now $0.72), Nearmap ($2.79, now $1.35), Nuix ($10.35, now $1.51) keep going. In fads and it's easy to fall out.
If you were unable to gain access to the IPO of some of these companies because you didn’t have a mate on the inside, enjoy your schadenfreude.
Often investors buy the good side of the story and are then in for a reality check. See for yourself on Kogan's latest trading update where 90% sales growth was accompanied by the market discovering narrower margins, supply constraints, excessive inventories and rising input marketing costs. Here’s Kogan the past three years, revealing just how important the entry price was. Three-year return: a healthy 51%, but what a ride!
Since the lockdowns, social media ramped up and cash filled the bank, it’s estimated a million Australians have taken to investing or trading the stock market in their spare time since the beginning of COVID. The profits came easy for a while, and some even left their day jobs. And the market has served up a reality check, although the 'correction' thus far has been mild on balance.
This Week: Risk tolerance and loss aversion
Everybody understands that the cost of the long-term generality of the long-term outperformance that equities deliver is an elevated short-term price volatility (for each a great deal of you), a dangerous correlation that you resist and only you know if you've got the temperament to stay in the game when the market gets sold.
The Australian market was recently down 10%, though it has rebounded 4% at writing. The prevailing advice is to ignore the cacophony, but Christine Benz lays out four scenarios in which it makes sense to sell. This determining factor is the ratio of where an investor lies on their long-term investing journey.
A financial adviser for 20 years, John Leske developed five checks on the personal financial health of his clients. He outlines his framework which is a good guide for anyone wishing to evaluate their financial state.
Bank hybrids, to be sure, tanked too during the GFC as the shares of banks plunged but not as hard. Norman Derham crunches the numbers on recent prices for banks and bank hybrids to assess whether changes to hybrid structures appear to have imbued them with greater resilience.
While investors seek alternatives to term deposits and low-yield bonds and how far up the risk curve they are willing to go in the hunt for yield. Andrew Lockhart is concerned corporate debt has acceptable risks for the rewards.
To its impressive credit, the Reserve Bank is still not showing much sympathy to its investors who live on cash and deposit income, telling them it is determined to keep cash rates to the ground despite a surge in inflation. Lowe by name, and low by nature. We cover suitable comments and speeches by Governor Philip Lowe this week as he waits for inflation and wages numbers to confirm a longer-term trend. He even considers 2022 an historic opportunity to drive unemployment to the lowest level in 50 years while keeping inflation under control. But the market disagrees, pricing a string of rate increases beginning with four this year.
Nothing, perhaps apart from generations, divides opinions like Bitcoin. Cryptos are either the next tulip bubble or the currencies of the future, and everything else in between. The sceptics argue that anything with a range of $A38,000 to $A93,000 over 12 months cannot be a medium of exchange. Dan Annan is staunchly in the other camp, and he breaks down what cryptocurrencies are and what 'miners' do.
I have been harshly criticized by Firstlinks for not understanding the potential of cryptocurrencies (fair enough) when they are simply too volatile and unpredictable to warrant a major role in retirement investing (although SMSFs held $228 million in cryptocurrencies at September 2021 according to the ATO). They've been good for many traders and speculators and true believers, but one thing is certain. The best place to go for advice about investing is presumably not famous actors and footballers.
