Taylor Morgan Capital

01/05/2022

An excerpt from our latest 2021 Year-End investor letter.

04/09/2021

From our most recent investor letter: a lot of craziness going on on Wall Street.

“Most institutional portfolios are badly out of balance. The returns of most institutional portfolios are 90+% driven by the return of equities, exposing them to a single adverse event which could last for decades, a poor performing equity market….

02/02/2021

Excerpt from our latest Investor Letter. We're living in interesting times, indeed.

"The nutshell is this: the old line economy stocks just don’t work because they have earnings and eventually rising interest rates impact earnings. New economy stocks have no earnings, so investors don’t see a need to exit.

01/29/2021

Regarding (and IBKR) halts in trading of , and other issues: They should not restrict any purchases/orders placed with cash balances. If the investor has the money in the account, they should be able to buy whatever they want. It's their money to invest/trade and they're not at risk of going negative.

Even though I personally think we're in the midst of an unprecedented mania and some people are going to lose because of it, it's their money and their risk to take if they want. It’s NOT for the brokerage to make that call with a cash account.

The brokerages should have notified traders of any updated margin requirements and liquidated if they fell below those (that is common and happened several times in 2020, 2008, etc.). Short sales and some options plays should be carefully monitored and restrictions there are understandable.

01/27/2021

"Gonna party like it's 1999." , , , SPACs, r/wallstreetbets, TikTok Finance. This is not investing. It's an unmoored Tulipmania redux.

So, a couple of hedge funds were caught in leveraged, concentrated, directional, un-hedged bets. That's not new. Nor is individuals thinking they've got it figured out and will "just day-trade for a living."

But a rising tide (Fed, stimulus) raises all boats and these moves have nothing to do with financial reality. The rules (earnings, cash flow) haven't changed, so let's not call the game at halftime.

And speaking of tides, Warren Buffet was right on: "Only when the tide goes out do you discover who's been swimming naked."

And trader Brent Donnelly: "In 1999 the...thesis was 'internet gonna change the world'. Now the...thesis is 'stonks only go up'. The market is turning into a meme machine, a cartoon of its former self...

The orthodox view (or “the boring Boomer view”) is that the stock market is where companies go to raise money for investment and expansion in the real world. Now, the cynical view is the majority view: the market is a place where founders and insiders cash out and executives turbocharge stock-based compensation via buybacks. That’s not good.

It’s all fun and games until someone loses their 401k."

01/08/2021

"I feel like I'm taking crazy pills." Tesla's market cap is now above $830B - that's $1.7M for every car they currently produce in a year. Compare that to GM at $9,000 per car made.

That's simply not sustainable, nor is this current stock market. Valuations are beyond nonsensical. Choose any justification you want (TINA, ZIRP, stimulus, reopening), but this is going to end badly.

If you're on margin, consider getting off. If you have large gains in the most speculative, high-flying stocks, consider taking some profits. If you have the knowledge, consider hedging.

Here's a great post from Jeremy Grantham (where I first read that particular Tesla market cap comparison) about how absurd this market really is, with some great context from history. https://lnkd.in/ewdqyy9

08/28/2020

Great synopsis of Sir Isaac Newton's folly investing in the South Sea Bubble: "Already a wealthy man, Newton was usually a cautious investor.... That had changed in the past few months, though, as he bought and sold into the rising market seemingly in the hopes of turning a comfortable fortune into an enormous one. By August, he’d unloaded most of his bonds, converting them and other assets into South Sea shares. Now he contemplated selling the rest of his bonds to buy still more shares.

He did sell nearly all of them. It was a disastrous choice. Within three weeks, the market turned. By Christmas, it had utterly collapsed. Newton’s losses reached millions of dollars in 21st-century money."

And we currently find ourselves nearing a precipice again. Yes, currently the Fed has their fire hose fully open, but no, it's not different this time.

Agree? Disagree? Let me know in the comments.

If Isaac Newton could lose all reason in the pursuit of riches, so can anyone else.

07/09/2020

China vs. Emerging Markets Index: Investing in the strongest components of an index vs the entire index has the potential to significantly improve a portfolio's performance (return and risk adjusted).

Here's GXC (China, blue) vs IEMG (MSCI Emerging Markets, black). Not only is China outperforming YTD +17% to -3.8%, but it fell much less through the worst of the crisis, down 17% when the index had fallen by a full third (down 33%).



Source: MarketWatch

06/05/2020

Great to see good job numbers reported for May this morning. Wall Street had expected a big drop, so the gain in jobs was decidedly surprising (as reflected in the Dow’s rise today).

Hope it holds and a lot of people can start to get back to work safely.



https://www-cnbc-com.cdn.ampproject.org/c/s/www.cnbc.com/amp/2020/06/05/jobs-report-may-2020.html

04/02/2020

Just announced: jobless claims jumped to 6.6 million (last week, after 3.3m the week before) - above even the highest expectations.

For context, that number is 1. from last week through Friday, so it doesn’t include several states that just issued lockdown orders, 2. doesn’t include many gig workers, freelancers or those whose hours were simply reduced or many of those who were furloughed, and 3. the markets have still likely not priced in all of the ripple effects of this level of unemployment.

Investors need to be prepared for a retesting of the lows from March and probable drops lower. If you’ve considered getting defensive and raising some cash, now is the time. If you’re a committed long-term investor, prepare yourself mentally for what could be a tough ride (not a “V bottom” recovery).

First-time claims for unemployment insurance were expected to total 3.1 million, according to economists surveyed by Dow Jones.

03/10/2020

A good summary of the economic challenges that the Coronavirus has brought to the fore: high debt, low growth, little Fed ammunition.

And these are just those we face domestically - other economies (highly indebted ones like Italy and those highly reliant on oil revenues) face even steeper challenges.

Dominos is an apt metaphor.

The virus may prompt a severe recession that could erase much of the 11-year recovery.