This Week on Trends with Friends (August 25, 2024)
Welcome Friends,
Here’s an assortment of posts shared this week on Trends with Friends. Let’s dive in…
THE POLARITY BETWEEN FINANCE & FINTECH
Howard Lindzon shares his take on the polarity between public and private financial companies. He writes,
The financial sector hit all-time highs yesterday.
I doubt that is bearish, but that is not the point of the post today.
Way back in January 2020, pre COVID, fintech (venture capital) was HOT…and financial stocks were in the toilet (see chart below):
I remember this moment well because Angela Strange at A16z wrote a research piece titled ‘Every Company Will Be A Fintech Company’.
I was happy because financial service disruption had been my focus since we started Social Leverage back in 2008. It was good to get confirmation of the trend from a top tier venture firm, but it also made me cringe a bit because everybody would now jump in the fintech pool.
What has happened since…
By 2022 fintech peaked. Most of those 2,000 fintech companies/and their investors launched just in 2019 wish they had picked a different sector to attack.
Coinbase and Robinhood got public and between 2020 and 2022 the fintechs that were already public at the time of A16z’s piece had an incredible run (See Square and Paypal).
As the digital ink on Angela’s post dried, fintech public companies bottomed. As you can see from the financial sector ETF chart at the top of the post, it has been nothing but good times.
IT’S JUST MATH
JC Parets uses math to objectively view market conditions. This week he shares the equally-weighted S&P 500’s all-time high writing,
Imagine waking up every day trying to make up reasons for why it’s bearish when the Equally-weighted S&P500 is making new all-time highs?
There are people out there who are purposely going out of their way to blatantly lie to people about how historically bearish it is when market breadth is expanding, and more and more stocks are making new highs.
It’s like a weird fetish or something. These people need help.
Here’s what they’re so angry about and why they think the market is about to fall apart:
I would understand the more cautious outlook if it was just 7 stocks going up, or if perhaps the new lows list was expanding.
But none of that is happening.
The new lows list is non-existent, regardless of whether you look at longer-term new lows or shorter-term new lows.
It’s just math.
AI WEEKLY SUMMARY
Michael Parekh reviews OpenAI’s GPT-4o Fine-Tuning, Meta’s AI Opportunities, Acqui-Hires, AI Images and more in this week’s AI Summary.
It’s a must read.
THE BOY WHO CRIED “ROTATION”
Larry Thompson shares his 3-step process to detect sector rotation. He writes,
The concentration risk in the S&P 500 is real, with roughly a third of the index invested in technology stocks, while an equal-weighted approach offers much more diversified exposure. I’m not here to complain about it but simply to provide context on what it could mean if this rotation is indeed happening.
For active managers, it’s a godsend. Diversification is a principle that many preach, and most firms enforce exposure limits. However, the technology concentration in the S&P 500 has made it challenging to outperform during periods of tech dominance. But if a true rotation occurs, active managers might finally have their moment to capitalize on their diversified strategies.
For passive investors, it’s a wakeup call. As rotation unfolds, their perceived diversification could prove to be less robust than expected. A shift out of technology could expose the vulnerabilities in a portfolio that leans too heavily on a single sector, despite being part of a broader index.
But how do we know when to listen to the Boy Who Cried Rotation and when to tune him out? The answer lies in the charts.
The example we’ll use to illustrate rotation is the comparison between RSP and SPY. An upward-sloping ratio between RSP and SPY implies broader market participation or, at the very least, technology underperformance, whereas a downward-sloping ratio indicates the continuation of tech dominance.
SO YOU WANT TO GET HEALTHY TODAY
Looking to get healthy? Phil Pearlman keeps it simple…
Here’s one for people who want to start getting healthy today but don’t know where to begin or are having some trouble getting going. There is a lot of information out there and a lot of it is complicated or contradictory.
The first thing to know is that you want to keep it stupid simple. Here are the only two things you need to know to get started getting healthy today.
1. Walk. Start with short walks if you need to and then build slowly over time. Walk in the morning, afternoon or night. Walk wherever you can, trails are great, the neighborhood is great, and a treadmill is great on rainy days. Splurge on some good walking shoes.
2. Eat natural foods that are high in protein and low in carbohydrates. Beef, fish, chicken, eggs, plain Greek yogurt, veggies, and berries.
Season simply with salt and pepper, olive oil, maybe some garlic and herbs, squeeze of lemon or lime. Avoid sneaky sugary sauces and dressings.
That’s it. That’s the whole plan to get started and all you need to know.
Do these two religiously for a few months and then you will be ready to add some more intensive exercise.
HARVARD’S ELEPHANT IN THE ROOM
Ted Merz provides a magnificent profile on the Harvard Club’s elephant in the room. Merz writes,
The elephant in the room at the Harvard Club is the elephant.
I mean that literally. There is a large elephant head jutting out from the wall of the Gordon Reading Room, an amazing space that is three stories tall.
A friend took me to the club a couple of years ago for lunch and as we were entering the dining room he said: “make sure you don’t miss the elephant.”
It’s not something you miss. It’s been there since 1909 and while it isn’t a secret, the club doesn’t go out of the way to promote it on the Web site.
The Old Guard may like the elephant, but on balance it’s not going to help recruit new members. You don’t see animal heads on the wall at Zero Bond or Soho House.
A photo on the Web site shows a young, diverse crowd, which, based on my very limited one-day sample, seems aspirational.
I say this neither to bury nor praise the elephant. I don’t have a dog in this fight.
What is fascinating is how the elephant illustrates a challenge organizations, companies and institutions face: balancing the tension between tradition and the future.
THE REAL PURPOSE OF FUN
Tadas Viskanta’s linkfest looks at The Real Purpose of Fun. Here’s a sneak peek.
TRENDS WITH NO FRIENDS
Trends With No Friends sifts through the noise and discovers stocks above $1B market cap with high relative strength and low social following.
The publication shares 52-Week Highs and Lows sorted by followers on Stocktwits.
Why is high relative strength and low social following important?
Stocks that are outperforming tend to continue to outperform. Stocks that have a low social following are, by definition, undiscovered by the crowd. Stocks that have both Relative Strength and Low Social Following can really outperform as more investors discover them.
This week, Trends with No Friends featured…
BBB Foods ($TBBB), Credo Technology Group ($CRDO), Fabrinet ($FN), Cadeler ($CDLR), Inter & Co ($INTR) and more.
THIS WEEK’S EPISODE
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And in case you missed it… Howard Lindzon, Phil Pearlman, JC Parets and Michael Parekh break down the broadening bull market, semiconductors and healthcare stocks, AI’s influence and more in the latest episode of Trends with Friends.
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