What a week!

On Tuesday, Fed chair Jerome Powell spoke and in an instant, changed the markets’ view on the direction and magnitude of interest rates. Then Silvergate Bank, a bank that provided services for the crypto industry, got shut down on Wednesday. And yesterday, Silicon Valley Bank, a bank that catered to startups and the VC crowd announced it was also getting liquidated.

It’s already common knowledge that the low-interest rate environment of the last decade fueled an excess in the startup, crypto, and tech space. If there was any excess in the system, that was where the excesses were and therefore, it’s no surprise that the tech space has borne the brunt of the reversal that came because of higher interest rates.

What we’re seeing now (tech layoffs, demise of those who extended credit to the sector) seems to be Act 2 or beginning parts of Act 3 of that bubble bursting. I don’t think we’ve seen the end of this story yet because many of those who benefited from the bubble are still around (think ARK Invest, Tesla, and Masayoshi Son).

Having said that, if you’re investing for the long-term, valuations are definitely a lot more compelling now than in January. Even more so if your reference point are the all-time highs of early 2022.

Photo by Mikes Photos on Pexels.com

The Fed is Breaking Things (and it could get worse)
(The Big Picture)

SVB
(The Reformed Broker)

Two-fer that gets you up to speed with the news and commentary surrounding the demise of Silicon Valley Bank. I’ve seen less-than-informed mainstream media outlets in Singapore suggesting that this is another ‘Lehman moment’ and that the next GFC is around the corner. Honestly, they don’t know what they’re talking about.

Most stock pickers underperformed in 2022’s ‘stock picker’s market’
(Tker.co)

S&P Dow Jones Indices published their annual SPIVA U.S scorecard. Even in a year like 2022, picking an active manager to beat the S&P500 fared worse than a coin-toss. I’ve looked through the report (link here) and the base case for picking an active manager that can beat their benchmark is awful (Report 1a and 6a for US and International Funds respectively).

It Turns Out Money Does Buy Happiness, At Least Up to $500,000
(Bloomberg)

So much for the often-quoted figure of $75,000. By the way, that figure is for salary and not net worth. So it appears that most of us in the rat race are there for a reason.

The Basics of FIRE
(Early Retirement Now)

Big ERN provides a very succint overview of the various components and quick math to FIRE.

HOW TO ACTUALLY BE DATA-DRIVEN
(cheerful.egg)

A wonderful and well-written piece on how to actually do data-driven decision-making. Reminded me so much of how we used to do the opposite at my former job that I sent this to a former colleague. We agreed that so much of the time wasted in meetings was due to the fact that many of the meetings didn’t focus on the data. If anything, it was driven by personalities, anecdotes, and opinions.