Streaky
Lost amid all the selling in equities last week was the fact that crude oil and gold both closed out the week with significant streaks of losses and gains. For crude oil, last week’s decline of 0.5% was only modest, but it extended the current streak of declines to five weeks in a row. As shown in the chart below, this is the longest streak of weekly declines for black gold since December 2023 and just the 26th losing streak of five or more weeks since 1985.
Ironically, even though crude oil is down five weeks in a row, the total decline has been less than 10%. The ETF that tracks crude oil – USO – was near a 52-week high earlier this year, but even after the recent declines, it closed out last week right in the middle of its trading range and sandwiched between the 50 and 200-day moving average. Coupled with some of the weak economic data, though, the weakness in crude is adding to concerns that the economy is slowing down.
Unlike crude oil, which has been moving lower, gold has surged. Last week capped off the eighth straight week of gains, which is the longest winning streak since July 2020. Additionally, since 1985, there have only been five other streaks that lasted eight or more weeks and only three lasted longer.
A look at recent trading in the Gold ETF – GLD – shows that a ninth week of gains may be harder to achieve. As the price of gold has surged, the rally has taken its price to the top end of its trend channel that has been in place since last spring. That doesn’t mean it can’t keep rising, but it just illustrates how extended gold has gotten on a short-term basis.
Bespoke’s Morning Lineup – 2/24/25 – Bounce?
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“I never look at where a candidate has gone to school. Never!” – Warren Buffett
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It’s been a tough couple of days for bulls as the S&P 500 pulled back over 2% Thursday and Friday after hitting record highs the day before. Bulls will look to make a stand this morning, but the real tell will be to see how much staying power they have. It’s a quiet day for earnings, but Wednesday will bring about a very important report from Nvidia (NVDA). The economic calendar is also quiet today with the Dallas Fed Manufacturing Business Survey, the only report on the calendar.
The college admissions process has never been more competitive (and it’s harder than ever for the richest Americans to bribe their kids into the top colleges). Still, the quote above from Warren Buffett in this year’s Berkshire Hathaway annual letter should provide comfort to any high school seniors (or their parents) who didn’t get into their first choice. That line is only one of many parts of what has become required reading over the last few decades. Another good one: “Businesses, as well as individuals with desired talents, however, will usually find a way to cope with monetary instability”.
Berkshire’s annual letter also serves as a reminder of what a money-making machine the company has been over the last 60 years. The first chart below shows the annual percentage change in market value of Berkshire Hathaway versus the S&P 500 from 1965 to 2024. As the company has become larger over the years, its margin of outperformance versus the S&P 500 has narrowed as the company has become so large that it’s harder to move the needle on a relative basis. Back in the 1970s and 1980s, though, the size of some of the blue bars dwarfs the red ones.
In Buffett’s first 11 years at the helm of Berkshire, the company ‘only’ outperformed the S&P 500 in six years, but from 1976 to 1983, the company outperformed for an epic eight straight years taking its cumulative percentage of years of outperformance above 70%. Since then, the pace of outperformance has leveled off with time, and through 2024, Buffett has outperformed the S&P 500 in two-thirds of all years.
Outperforming in two-thirds of all years may not sound all that impressive at face value, but like a snowball, it adds up. The chart below shows the cumulative total return of the S&P 500 and Berkshire since 1965. The S&P 500’s cumulative gain during this period is over 39,000%, but it’s barely noticeable compared to Berkshire’s gain of more than 5,000,000%!
Given its size, it has become more difficult for Berkshire to significantly outperform the S&P 500, especially during bull markets. However, given the company’s track record under Buffett’s leadership, most investors are willing to give him the benefit of the doubt. With that in mind, the stock’s modest underperformance versus the S&P 500 over the last year hasn’t caused concern for investors. The last two sessions also serve as a reminder that when the times get tough, Berkshire usually hangs in as it only declined 1% relative to the 2%+ decline for the S&P 500.
Get Invested: Embrace Market Declines
Our “Get Invested” series is a simple yet powerful resource designed to help anyone understand why investing in stocks for the long term is one of the best financial decisions they can make. The slide below from our Get Invested piece is titled “Embrace Market Declines.”
Emotions and investing don’t mix. Emotional investors tend to sell when the market is going down and buy when the market is going up. They should be doing the opposite. As shown below, if you only owned the US stock market on the day after up days since SPY began trading in 1993, your cumulative gain would be just 44%. If you only owned the market on the day after down days, you’d be up 851%!
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Brunch Reads – 2/23/25
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
Raising the Flag on Iwo Jima: On the morning of February 23rd, 1945, five days into one of the bloodiest battles of World War II, a small group of US Marines from the 2nd Battalion, 28th Marine Regiment, 5th Marine Division, began their ascent up Mount Suribachi, the dominant high ground on the island of Iwo Jima. The battle for the island had already claimed thousands of lives, and Japanese forces, deeply entrenched in bunkers and tunnels, continued to resist fiercely.
The Marine eventually reached the summit and hoisted a small American flag. Associated Press photographer Joe Rosenthal was there to capture what would become one of the most iconic images in American history. His photo of six Marines raising the flag, five Marines and one Navy corpsman, immortalized not just a military victory but grit and sacrifice. Rosenthal’s photo won a Pulitzer Prize and later inspired the Marine Corps War Memorial in Arlington, Virginia. But for the men who raised the flag, three of whom never left the island alive, the moment was less about glory and more about survival.
Economic Trends
With Falling U.S. Sales, Companies Are Trying to Hit the Sweet Spot for Prices (WSJ)
Companies are scrambling to keep shoppers happy as people get pickier about where their money goes. Reynolds American is pushing cheaper Newport packs, PepsiCo is tweaking chip sizes so people can buy more or less depending on their cash flow, and Estée Lauder is trying to revive sales with everything from budget-friendly makeup to $1,000 perfumes. It’s less about slashing prices and more about convincing shoppers they’re getting the most bang for their buck, whether that’s stronger trash bags, more concentrated cleaners, or luxury beauty products that feel worth the splurge. [Link]
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Get Invested: There’s Always Light…
Our “Get Invested” series is a simple yet powerful resource designed to help anyone understand why investing in stocks for the long term is one of the best financial decisions they can make. The slide below from our Get Invested piece is titled “There’s Always Light at the End of the Tunnel.”
Through wars, assassinations, bankruptcies, and crashes, the US stock market has always gone on to make new highs. A wise investor once said: “Never bet on the end of the world, because it only happens once.”
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The Bespoke Report – 2/21/25 – Short, But Not Sweet
To read our weekly Bespoke Report newsletter and access everything else Bespoke’s research platform offers, start a two-week trial to Bespoke Premium. In this week’s report, we look at factors contributing to this week’s sell-off, some positive trends, the housing market, and much more! Don’t miss it.
Bespoke’s Morning Lineup – 2/21/25 – More Pain for UNH
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“You will become way less concerned with what other people think of you when you realize how seldom they do.” – David Foster Wallace
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If you’re looking at futures on the Dow, it’s not looking like a positive start to the last trading day of the week. Futures on that index are down nearly half of a percent on news that the index’s second most heavily weighted component – UnitedHealth Group (UNH) – is down over 10% following a WSJ report that the Department of Justice has launched an investigation into the company for its billing practices related to its Medicare Advantage plans. Outside of the Dow, though, S&P 500 futures are flat, and the Nasdaq is on pace to open 0.35% higher.
Overnight, Asian markets traded higher to close the week with broad-based gains as Japanese CPI rose 0.5% m/m versus an increase of 0.6% in December. In Europe, stocks have also bounced back from yesterday’s decline with the STOXX 600 trading up over 0.5% putting it back into the black for the week. The gains come despite some mixed PMI readings where the Manufacturing index came in higher than expected (but still in contraction territory). At the same time, the Services PMI, which was above 50, missed expectations.
The S&P 500 and Nasdaq were down less than 0.5% yesterday, but there were some big moves in individual stocks as some of the market’s highest flyers in recent weeks/months were taken out to the woodshed. Among the largest US banks and brokers, the percentage declines may not have been as large as some of the other market areas, but relative to their normal price moves, the declines were large. Of the six large US banks shown below, all of them were down at least 1%, with four down over 3%; JPMorgan Chase (JPM) and Morgan Stanley (MS) both fell more than 4%.
The moves may have been painful, but putting them in perspective, most of these stocks have seen large gains in recent months. On a six-month chart, they don’t look especially significant. Besides Bank of America (BAC), they were all either at or right near 52-week highs heading into yesterday’s decline.
The Closer – What Drives the Dollar? – 2/20/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look at what drives moves in the dollar (page 1) followed by a look at some discrepancies in the latest jobless claims and Philly Fed data (page 2). We then show some of the mean reversion that has taken place in the past couple of sessions (page 3). Next, we review today’s 30-year TIPS auction (page 4) before closing out with a recap of the latest EIA data (page 5).
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Q4 2024 Earnings Conference Call Recaps: Airbnb (ABNB)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Airbnb’s (ABNB) Q4 2024 earnings call.
Airbnb (ABNB) operates a global marketplace for short-term rentals, connecting millions of travelers with unique accommodations in over 220 countries. The company has transformed the hospitality industry by enabling individuals to monetize their properties, offering everything from city apartments to countryside retreats. What sets Airbnb apart is its scale, over 5 billion site visits per year, and its evolving platform, which increasingly integrates AI, flexible payment options, and host services. ABNB’s Q4 revenue grew 12% YoY to $2.5B, driven by product improvements and global expansion. The Co-Host Network hit 100,000 listings, boosting supply and host participation. AI-powered customer support launches in 2025, positioning ABNB as a leader in AI-driven travel experiences. Expansion outside its core markets accelerated, with targeted growth in Brazil and Japan, where bookings are growing twice as fast as mature markets. Regulatory challenges persist, notably in New York, but ABNB is strengthening city partnerships globally. The better-than-expected results were well received as the stock pushed 14.5% higher on 2/14…
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Q4 2024 Earnings Conference Call Recaps: Deere (DE)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Deere’s (DE) Q1 2025 earnings call.
Deere (DE) is a global giant in agricultural, construction, and forestry equipment, manufacturing everything from high-horsepower tractors to precision ag technology. DE has also been at the forefront of autonomous farming and digital connectivity, helping farmers maximize yields and efficiency. The company’s financial services arm supports equipment financing, while its precision ag solutions, like Starlink-enabled JD Link Boost, improve real-time machine monitoring. DE reported a 35% YoY decline in equipment sales to $6.89 billion, reflecting industry-wide weakness in large ag and construction equipment due to high interest rates, macro uncertainty, and rising used inventory. Precision ag adoption remains strong, with over 1,500 orders for its ag essentials kits in Brazil. Large ag field inventory fell 25% YoY, and DE continues underproducing to balance supply. US farm income is expected to rise 22% YoY, supported by $10 billion in government aid, though order velocity remains slow. Construction & forestry faces pricing pressure, leading DE to cut price realization guidance to flat for the year. On mixed results, DE shares fell 2.2% on 2/13. That broke a streak of nine quarters of better-than-expected results…
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