Weekend Reading

22 December 2018 | by Katherine Fischer, CFA
A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.

The Stock Market Has Wiped Out Its 2018 Gains. But if You Step Back, It’s Still Riding High (Stephen Grocer @stephengrocer and Karl Russel @KarlNYT, The New York Times)

Even though it might feel as though we’re headed into deep bear market territory, technically we’re only in a market correction.  “In the last 20 years, there have been 10 corrections. Only two turned into a bear market, defined as a decline of 20 percent from its high, amid the recessions that began in 2001 and at the end of 2007.”

Treasury Secretary Says Market Has Overreacted to Federal Reserve (Kate Davidson @KateDavidson, Wall Street Journal)

Fed officials voted Wednesday to raise their benchmark federal-funds rate a quarter percentage point from 2.25% to 2.5%.  Markets reacted negatively to the news leading Treasury Secretary Steven Mnuchin to state that the market reaction had been “completely overblown”.  Market reactions to Fed policy changes and public comments are nothing new for the markets.  Earlier this year, when Fed chairman Jerome Powell told PBS’s Judy Woodruff: “We’re a long way from neutral at this point… probably”, Sean Stannard-Stockton wrote about how Ensemble Capital thinks about Fed decisions when it comes to investing in the blog post: We’re a Long Way from Neutral… Probably

U.S. charges Chinese hackers in alleged theft of vast trove of confidential data in 12 countries (Ellen Nakashima @nakashimae and David J Lynch @davidjlynch, Washington Post)

The United States Justice Department moved forward on indicting two Chinese hackers who it said acted “in association with” the Chinese Ministry of State Security (MSS).  Following the charges, Secretary of State Mike Pompeo and Homeland Security Secretary Kirstjen Nielsen then made a statement saying China has violated Xi’s landmark 2015 pledge to refrain from hacking U.S. trade secrets and intellectual property to benefit Chinese companies.  The news is the latest in the ongoing political strain with China contributing to market negativity.

Redfin’s 2019 Predictions: Housing market will be the coolest we’ve seen in years, but homeownership will continue to rise (Daryl Fairweather @FairweatherPhD, Redfin Blog)

According to predictions by real estate giant Redfin, inventory is likely to rise and price growth will continue to slow in 2019.  Despite a cooling housing market, however, home ownership rates are expected to continue to rise.  Sean Stannard-Stockton also wrote recently about what a cooling housing market might mean for the probability of recession in Strong Evidence of Rare Events: False Positives in a Sea of Noise.

Netflix named The Associated Press’ Entertainer of the Year (Mark Kennedy @KennedyTwits, Washington Post)

“The dominant online video streamer started 2018 with almost 118 million subscribers, went on to win its first feature-film Oscar, briefly surpassed Disney as the most valuable U.S. media company, lured the likes of superstar show runners Shonda Rhimes, Kenya Barris and Ryan Murphy — not to mention Barack and Michelle Obama — and is expected to end the year with 146 million subscribers and a likely best picture Oscar nominee in “Roma.””  Ensemble Capital’s Arif Karim recently wrote about Netflix’s Pricing Power amid their massive popularity and success.

Investing: How to teach kids about money and stocks (Tamara Holmes @TamaraEHolmes, USA Today)

With more family time on the docket for many as we enter the holiday season and break, it might be a good time to think about talking to your younger family members about investing and stocks.  Ensemble Capital also recently hosted 16-year-old investor and author Maya Peterson to talk about how she learned about investing growing up.  Her recap of the interview offers lots of insightful information for young people and adults alike in how to inspire young people to take an interest in investing.

While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.

The information contained in this post represents Ensemble Capital Management’s general opinions and should not be construed as personalized or individualized investment, financial, tax, legal, or other advice. No advisor/client relationship is created by your access of this site. Past performance is no guarantee of future results. All investments in securities carry risks, including the risk of losing one’s entire investment. If a security discussed in this blog entry is owned by clients invested in Ensemble Capital’s core equity strategy you will find a disclosure regarding the security held above. If reviewing this blog entry after its original post date, please refer to our current 13F filing or contact us for a current or past copy of such filing. Each quarter we file a 13F report of holdings, which discloses all of our reportable client holdings. Ensemble Capital is a discretionary investment manager and does not make “recommendations” of securities. Nothing contained within this post (including any content we link to or other 3rd party content) constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instrument. Ensemble Capital employees and related persons may hold positions or other interests in the securities mentioned herein. Employees and related persons trade for their own accounts on the basis of their personal investment goals and financial circumstances.