Monday, May 2nd 2022

Three Things (5/2)

Commentary

“It is remarkable how much of a long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” —Charlie Munger

The below content and projections are the opinion of the authors. Any conclusions or takeaways are their own. This should not be considered as investment advice. Investing involves the risk of loss and returns are not guaranteed.

1) Warren Buffett buys $51 billion worth of stock in first quarter amid broad market slide

  • Berkshire Hathaway disclosed the purchase of over $51 billion of stock in Q1 ahead of its annual meeting on Saturday; netting out the sale of stocks during the quarter, Berkshire increased its equity holdings by $41 billion.
  • During Q1, Berkshire also bought insurance giant Alleghany for $11.7 billion, its biggest acquisition since 2016.
  • Berkshire ended the quarter with $106 billion in cash on its balance sheet, the lowest level since Q3 2018.

Titan’s Takeaway: One of Buffett’s most famous quotes encourages investors to be fearful when others are greedy, and greedy when others are fearful. Perhaps investors are offered some solace by seeing Buffett follow his own advice, loading up on stocks during what remains one of the most challenging environments in some time.

2) Employment costs rise at fastest pace on record in sign that inflation pressures are likely to persist

  • The employment cost index rose 1.4% in the first quarter and 4.5% over the prior year period, the most in the history of this data series.
  • The employment cost index includes the cost to employers of wages and benefits, not just hourly earnings captured in the monthly jobs data.
  • Excluding government jobs, private sector wages rose 5% from the same period last year.

Titan’s Takeaway: Commodity markets and supply chains remain stressed by Covid-related challenges and war in Europe, suggesting some global price pressures may not persist indefinitely. More consumers earning more money to spend on goods and services, however, suggests demand isn’t likely to wane quickly, even in the midst of surging prices.

3) China prepares to ease crackdown on tech companies as economy worsens amid Covid outbreaks

  • China’s top internet regulator is set to meet this week to discuss its regulatory campaign, according to the WSJ.
  • New rules limiting young people’s time spent on mobile apps are expected to be delayed.
  • Covid-related lockdowns in Shanghai and the specter of similar actions in Beijing have led to forecasters downgrading outlooks for economic growth this year.

Titan’s Takeaway: It may seem a trite observation, but China’s economic programs are always rooted in political convenience first and economic outcome second. And with recent Covid lockdowns threatening to stop China’s economic growth in its tracks, the politics of reigning in a profligate tech sector have quickly moved to unsteady ground.

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