You’ve probably heard of George Soros, the investment magnate and one of the world’s most famous investors.
Within investment circles, his co-founder of the Quantum Fund, Jim Rogers, is equally respected and renowned.
Many see him as a legendary figure.
Read on for lessons from the man himself.
Why listen to Jim?
Well, in case you don’t know who he is, here is a little about him:
- Earned his loyal investors returns of a staggering 4,200% over his last ten years as an investment manager (he retired in 1980)
- As mentioned before, he co-founded the Quantum Funds, founded in 1973 and which grew to be one of the most successful funds ever: based in the Cayman Islands and Curacao
- He is also renowned for his books that appeal to audiences outside of finance, for their humor and interest stories (he has traveled extensively since retiring from finance)
One of his books, Adventure Capitalist, was written after clocking up 150,000 miles driving around the world.
In it are many valuable lessons.
If a stock is right, hold it forever
Rogers believes that buying things and holding them forever is a good method.
The success he has had in investing has typically come from very cheap and undervalued stocks.
The silver lining of buying cheap is that you won’t lose much, even if your bets are wrongly placed.
They are low risk and have a high return potential.
The graph below shows the responses received from holding stocks over time, compared with other investment targets:
Having said this, buying cheap on its own isn’t enough.
If this were true, investing would be easy.
You need to buy cheap, but also buy in something in which you see improvements on the horizon.
Something that will become common knowledge in the next few years or decades, but that you latched on to before anyone else.
That is the key to successful long-term investing.
Seeing trends like the rise of middle-man platforms like airBnb or Uber, or earlier things like the rise of DVD and the fall of Betamax; having enough wisdom to know what major shifts will occur in the next few years, and having the guts to stand by your predictions.
Luck probably helps too, but the best investors have proven themselves adept in forecasting trends.
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Things aren’t always this straightforward though
Prices are relative.
The same price may be expensive for one stock and cheap for another.
Stocks are more elusive and ambiguous if you don’t know your stuff, and you can get caught out by looking at price alone.
For example, a share that trades for $100 could be cheap for what it is, and similarly, something trading for a few dollars per share could be expensive depending on what it is.
A low price to earnings ratio (P/E) compared to other stocks in its sector or the historical levels recorded would be considered cheap.
And you also have to think about the reasons why a stock might be cheap.
Research and industry knowledge are critical here. Things to consider include:
- Where the company is facing management problems, be it interpersonal or structural
- It could have invested capital disastrously and could be seeing evil returns, or just seeing a general low return on assets
- The sector the company is in: if it is a declining industry doesn’t be surprised to see low stock valuations with no bright future for growth
These issues can lead to a situation which investors call a ‘value trap’.
It is when a stock appears like a good deal because of its comparatively low price, but once bought the investor realizes they been sold a pup.
However, at the same time, a value trap can turn into a golden egg.
For each of the problems mentioned, there could be a silver lining, such as (respectively):
- Improved management thanks to individual ability, which is hard to predict: venture capitalists are renowned for their capacity to assess individual aptitude and character, as such assessments are integral to success
- The capital could see a turnaround thanks to favorable tax changes, reduced regulation, increases in value of certain assets due to outside factors
- The industry could pick up again: some manufacturers to see strong, sharp recent growth after decades of decline are the vinyl industry and artisan breweries
The graph shows how it the industry has gone from virtually a flat-lining to a pickup in recent years (though still far from its dominance in the seventies).
Sometimes you just have to do nothing
Though knowing when this is the case is the key to being a successful investor.
Being too energetic and eager is a sure way to lose money.
Rogers says that the active investor normally does nothing until they see opportunities spring up.
If money is lying there, of course, you go and pick it up.
But don’t buy the treasure chest to find it empty inside.
Of course these opportunities come along few and far between, and so the key is seizing them when they present themselves.
But even so, you stick to the first piece of advice, which was buy cheap and when you predict positive change on the horizon.
The important thing that you need to remember is the advantage you have from your position.
As an individual investor, you are not constrained by time, targets or client demands.
Short-term performance can be disregarded for the long-term objective, whereas a portfolio or fund manager belonging to multiple clients will not have this luxury.
Remember that every investment has an opportunity cost.
Don’t sell hastily if you don’t see short term gain from a cheap stock.
Relax in the luxury of time that has been afforded you as an independent investor.
Keep capital available for those moments when opportunities present themselves to you.
Have some leeway to move towards the money lying in the corner, if you will.
The advice from Rogers has led to his legendary status among investors and rightly so.
Following these pieces of advice should help you move forward in the investment industry.
Moderna Vaccine ‘Actively Preparing’ for Distribution
In light of advanced stages in its clinical trial, a Moderna vaccine is actively preparing for distribution. One of the Covid-19 vaccine leaders, Moderna’s mRNA-1273 vaccine is expecting trial results by November. An independent data monitoring committee will conduct an interim review in November. This involves sifting through data from 30,000 volunteers.
Also, by the end of 2020, Moderna aims to produce 20 million doses, with another 500 million to 1 billion doses by next year.
Phase III Trial Infection Rates Meet Expectations
Moderna reported that trial infection rates were on track with expectations. Chief Medical Officer Tal Zaks said that they are “following the ZIP codes and the counties from which these participants come, we have pretty sophisticated models of what to expect.” He added that “I think we’re on track for those expectations.”
During Thursday’s results call, CEO Stephane Bancel said they hope for FDA approval soon. A U.S. regulatory green light for Moderna’s vaccine would endorse the biotech’s vaccine platform.
In a press release, Bancel wrote: “We are actively preparing for the launch of mRNA-1273 and we have signed a number of supply agreements with governments around the world. Moderna is committed to the highest data quality standards and rigorous scientific research as we continue to work with regulators to advance mRNA-1273.”
How does the Moderna vaccine work?
mRNA-1273 uses synthetic messenger RNA (mRNA) to mimic the surface of the coronavirus. It then “teaches” the immune system to recognize and attack it. This technology is the same used by Pfizer and BioNTech to create a rival COVID-19 vaccine. The method has yet to produce an FDA-approved vaccine.
The Phase III trials, which involve 30,000 participants, expects to end by early November. Moderna’s board will conduct its analysis only after there are 53 diagnosed cases of Covid-19.
The FDA will require a two-month safety data follow up after the final trial. So, Modena will have to file for emergency use authorization. This can happen as early as mid-November, upon completion of the trial review.
Moderna vaccine Getting Supply Deals Ready
This early, Moderna is readying its supply deals to its early customers. This includes governments of the US, Japan, Canada, and Israel. The US pre-ordered 100 million doses of the vaccine valued at $25/dose. They also have an option to buy an additional 400 million doses. All in, Moderna holds $1.1 billion in deposits from its customers. This includes grants and performance payments.
The most recent deal came via Takeda of Japan. Moderna announced earlier today that they will supply Takeda with 50 million doses. Pending local approval, this batch will arrive during the first half of 2021.
More inquiries are coming in. The company is in talks with the European Union for possible supplies to its members. It is also negotiating with the World Health Organization group COVAX. Discussions include vaccine distribution and scalable pricing.
Moderna Shares Up by 13%
Moderna stock prices rose as much as 13% in Thursday trades as investors warmed up to a potential vaccine. Shares traded higher by as much as 13%, as it reiterated that it is “actively preparing” for its vaccine launch.
During the earnings call, Moderna reported a 3rd quarter loss of $233.6 million, or 59 cents a share. This is greater than Refinitiv’s prediction of 43 cents per share. Moderna generated $157.9 million in revenue. This is more than double the expected $77.5 million.
Watch this as Yahoo! Finance reports that pharmaceutical firm Moderna is getting ready to distribute its vaccine across the globe:
Do you think a vaccine will be ready and available for Americans within the year? Or should we wait a bit more? Let us know what you think. Share your thoughts in the comment section.
Stocks Post Its Worst Day in A Month
Wall Street took a beating Monday as stocks posted its worst day in a month. Rising coronavirus cases and a fading stimulus relief led investors to sell-off.
The Dow Jones Industrial Average closed 2.3% lower. It fell down 935 points during the day before settling 650 points lower. All Dow stocks closed in the red except Apple, which eked out a .01% gain. It was the Dow’s worst day since September 3.
Meanwhile, the S&P 500 closed for the day at 1.9%, marking its worst day since late September. The tech-heavy Nasdaq Composite, which bounced back from its lows in the morning, finished lower at 1.6%.
While all sectors across the board experienced losses, some got crushed more. These include energy, industrials, and financials.
Higher Cases of Coronavirus
With eight days remaining before the elections, investors are starting to get jittery. Despite lots of talks, Congress has yet to approve a stimulus package. Cases of coronavirus are jumping in all states, and it recently hit a daily high average of 68,767 last Sunday.
Meanwhile, big tech companies are set to report earnings later this week. This lot includes Microsoft, Apple, Google, Facebook, and Twitter. Fawad Razaqzada of Think Markets noted that the reports can inject further volatility. In the note, Think Markets believed that “on a more macro level, ongoing US stalemate over US fiscal stimulus and the rapidly spreading Covid-19 is going to determine the direction for the wider markets.”
Tom Lee, head of research at Fundstrat Global Advisors, thinks Covid is a big influence over the market. He said “It’s almost as important as the Fed right now. Covid is suppressing the economy, and it’s essentially offsetting easy money. If we didn’t have Covid, people would be going out and spending money. It’s acting as a huge headwind.”
No Relief in Sight
Brad McMillan, CIO of Commonwealth Financial Network, thinks the reality hit investors hard. He told CNN business: “I think a big difference this time around [is]…there’s been a tremendous amount of hope baked into the market for quite a while, and we saw some things over this weekend that hit those assumptions hard.” The negotiations for a new relief package is gone at least until after the elections. Senate Majority Leader Mitch McConnel adjourned the Senate after confirming new Chief Justice Amy Coney Barrett. They will resume their session on November 9, or six days after the elections.
Without a clear stimulus plan, the US economy could start to double-dip. And if the rise in coronavirus cases continues, the business will shut down again. This nightmare scenario is haunting the market at present. Steven Wieting, the chief strategist at Citi Private Bank, sees dimmer prospects. “The ability to fight the virus further right now is very much in question, and it’s a political question.” Wieting believes that Washington could take months before anything gets done. This made investors tentative.
Tom Lee added that “We have a lot of things to be anxious about in the next couple of weeks. That’s why this is a pre-election market. But post-election, I think a lot of things that make people nervous turn into a tailwind. The post-election stimulus is a when not an if. Even if it’s a mixed Congress, I think there’s still some common ground. It’s just the scope that’s different. It would be a smaller package.”
Eight Days Remaining
The final eight days before the elections usually brings good vibes for Wall Street. This year, the bulls will need some extra running following Monday’s selloff spree.
Sam Stovall, chief investment strategist history, observed this bull phenomenon. Since 1944, the S&P 500 rose on average 2.5% in the eight days before elections. The index is up 17 out of 19 times, or 89%. The biggest rise came during the recent financial crisis, with the S&P 500 roaring back 18.5% in a bear market rally. That year, Democrat Barack Obama won over the GOP’s John McCain. The market sunk back to new lows after the election. It bottomed out four months later. The first decline in 1968 (-0.8%), happened as Richard Nixon won over Democrat Hubert Humphrey. The other was in 1988 when Republican George H.W. Bush won against the Dems’ Michael Dukakis.
Wall Street needs to get its act together with eight days remaining. A short, decisive victory by either party can help uplift America’s image. And with all the drama removed, maybe the market can go back to its winning ways.
Watch this as Stocks fall sharply at open amid Covid-19 resurgence:
Stock investors of The Capitalist, are you selling off right now, or are you holding off for a bigger payday? Do you think the market will rally in the next few days, or do you foresee better days after the elections? Share with us your stock scenarios as we count down to the elections. Leave your thoughts in the comment section below.
US Housing Sales Boom Will Last Until 2021
Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.
Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion.
Why do people buy houses during a recession?
During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.
The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap.
The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy.
Demand coming from the rich
Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”
People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.
Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said: “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.”
Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”
Shrinking inventory of houses for sale
With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data.
Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”
Demand won’t last forever
The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities.
The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.
Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:
Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.
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