Market scorecard
The first three months of 2024 have already come and gone. The S&P 500 had a very solid quarter, closing 10.2% higher. The so-called "magnificent 7" only contributed a third of that gain, as compared to 2023, where two-thirds of the index's performance was from just those seven companies. Currently, 118 stocks in the S&P 500 are at record highs, and 83% of the companies are above their 200-day moving average. So, the current market strength is broad thanks to strong US economic data.
In company news, 3M was the top gainer (+6.0%) yesterday, as it announced final approval of a $10 billion settlement with US public water suppliers. It is good to see a company being held to account for past mistakes. Reddit dropped 8.9%, as the market finds a level for the social media company after its IPO last week. The share was priced at $34 for the IPO, opened at $47, rose to $74.90 at one point, and is now trading at $45.97.
On Thursday the JSE All-share rose 0.85%. Yesterday the S&P 500 closed down 0.20%, and the Nasdaq closed up 0.11%.
Our 10c worth
One thing, from Paul
Danny Kahneman said "All of us would be better investors, if we just made fewer decisions."
The Nobel prize-winning behavioural economist died last week, and you should try to read this touching profile of him by Jason Zweig in the Wall Street Journal.
Kahneman is best known for his work with Amos Tversky, who died of cancer in 1996. Before them, it was assumed that people made rational, self-interested decisions, assessing all useful information and making unbiased and consistent choices.
They proved that that is nonsense. Humans are a hot mess. They make decisions with minimal thought, ignore base rates, and are strongly influenced by recent data, and strongly-expressed narratives in the news.
There are many lessons to be drawn from his best book, "Thinking, Fast and Slow," published in 2011. The one that I've profiled above is applicable to our style of stock-specific equity management. Pick quality and then do nothing. Hold on to your shares, don't read too widely and get distracted by noisy headlines. In other words, make fewer decisions.
Byron's beats
If you had invested money at the beginning of this year you might have felt a little apprehensive, because 2023 was such a good year for stocks. Well done for taking the plunge then because the market was up another 10.2% in the first quarter. We've just enjoyed the 15th best start to a year since 1928.
If you are sitting on cash now, suffering from FOMO but waiting for a pull back, please don't wait much longer. According to Wall Street Journal, when the S&P 500 is up more than 8% for the first quarter of the year, it has finished higher for the rest of the year 94% of the time.
If you invest money now in US stocks, the odds are in your favour that your money will have grown by the end of the year.
Michael's musings
As Paul mentioned above, Daniel Kahneman passed away last week at age 90. Back in my varsity days, I really enjoyed reading his academic papers.
Kahneman is considered the father of behavioural economics, and his work helped to explain why complicated economic models are often not applicable in the real world. He showed that humans are irrational and unaware of their own mental biases.
One of his findings was that the emotional impact of gains and losses are not equal. If we were perfectly rational, the pleasure from winning R10 should be directly proportional to the pain experienced from losing R10. Due to our survival instinct, we feel losses more acutely than gains. Each person and situation is different, but roughly speaking, we feel losses twice as intensely as gains. These findings have significant importance when it comes to the world of investing.
That was just one of many of the biases he identified. Read his book Thinking, Fast and Slow, for a detailed breakdown of all his findings. It is very interesting.
Kahneman made a great contribution to human understanding. He will be remembered for years to come.
Linkfest, lap it up
AI start-ups are blossoming. Tech titans can't afford to get left behind - Amazon tops up investment In Anthropic AI to $4 billion.
What's the time right now? Sailors navigating the globe were the first to need a reliable time piece - The most accurate clock ever can tick for 40 billion years without error.
Signing off
Last week Sam Bankman-Fried, the convicted fraudster and founder of FTX crypto exchange, received a 25-year prison sentence. That's half of the possible maximum and the internet is full of opinions about whether that was too harsh or too lenient.
In Asia this morning, Hong Kong stocks are up 2.4%, after being closed yesterday. They are playing catchup to stocks in mainland China, which rose strongly on Monday. Japanese and Australian markets are slightly lower this morning.
US futures are modestly positive and the Rand is at $/R18.93. Our currency has been remarkably stable between the $/R18.80 - $/R19.15 band for the last couple of months.
Enjoy this 4-day week to kick off the second quarter of the year.