The markets look to finish the week higher, with the Dow Jones Industrial Average pulling away more than its peers. It is worth noting that the markets look to finish the year strong after having peaked in August and fallen precipitously through October. Fear gripped many as it appeared the gains that had been hard won, were all but lost. However, a strong reversal took hold in November as broad and steep gains showed us once more the folly of trying to time the markets. If you were in cash in November, you would have given up a 10% gain, which is more than the historical annual return of the S&P 500. We are pleased with the current direction of both the economy and inflation and believe the Federal Reserve is now done raising interest rates. May the Christmas spirit continue to move markets favorably these next four weeks.
Let’s start with the most important development this week. Consumers remain in spending mode as Black Friday and Cyber Monday sales broke records. Apparently, just over 200 million consumers shopped on these two days versus the expectation of 182 million. The early timing of Thanksgiving, favorable weather, and solid consumer confidence all factored into what has been described as a strong weekend. Both brick-and-mortar and online shopping were strong with 121 million shoppers in the former and 134 million in the latter. Among the most popular purchases were clothing, toys, gift cards, and books, video games, and other media. The National Retail Federation anticipates 3-4% spending growth bringing the total to just under $1 trillion this holiday season.
In a bit of sad news, Charlie Munger died this week at the age of 99. He was Warren Buffet’s right-hand man at Berkshire Hathaway and had a long and illustrious career, if not frequently in Warren’s shadow. Well known for his “Mungerisms,” the billionaire has left a wealthy fortune of wisdom. Here are some of his best quotes.
- “What everybody has learned is that everybody needs some significant participation in the 12 companies that do better than everybody else. You need two or three of them at least.”
- “I think value investors are going to have a harder time now that there’s so many of them competing for a diminished bunch of opportunities. My advice to value investors is to get used to making less.”
- “If you’re going to invest in stocks for the long term, of course, there are going to be periods when there’s a lot of agony and other periods when there’s a boom. You just have to learn to live through them. I believe in doing as well as you can and keep going as long as they let you.”
- “Mimicking the herd invites regression to the mean (merely average performance).”
- “The world is full of foolish gamblers, and they will not do as well as the patient investor.”
- “Capitalism without failure is like religion without hell.”
In company news, we learned that Cigna is looking to acquire Humana in a stock and cash deal worth $60 billion. In 2017, Cigna tried to acquire Anthem in a $48 billion deal but was blocked on antitrust grounds. It is hard to imagine an even larger deal would meet with approval. So, it is even more interesting that rumors (today) suggest Walmart may be in the running to acquire Humana. Given that Walmart is not in the industry, this deal could conceivably win regulatory approval if both sides can reach an agreement. And who better than Walmart? In company news, it should be noted that Amazon has surpassed both UPS and FedEx to become the largest delivery company in the United States. The company had shipped 4.8 billion packages in the U.S. before Black Friday and predicts it will deliver about 5.9 billion by the end of 2023. In comparison, its closest rival UPS only handled around 3.4 billion parcels domestically in the first nine months of the year and said its volume is unlikely to exceed last year’s 5.3 billion.
In closing, I want to share with you that the most powerful supercomputer on the planet is coming to life just outside of Chicago. Called Aurora, the supercomputer’s high-performance capabilities will be matched with the latest advances in artificial intelligence. Together they will be used by scientists researching cancer, nuclear fusion, climate change, encryption, cosmology, and other complex sciences. Housed at the Energy Department’s Argonne National Laboratory, Aurora may be the first to execute more than two quintillion operations per second. That is 2 with eighteen zeros after it or put another way, a billion billion. Unlike other computers, this supercomputer will take months to bring online and is expected to be fully operational in 2024. Weighing 600 tons and roughly the size of two tennis courts, it is basically the size of my first computer growing up. Now you know.Bruce J. Mason, MBA