🔬Gold is at All-Time Highs, Earnings Season is Finally Over, and Much More

"I like to think of the investment world as divided into two groups: those who don't know where the market is headed and those who don't know they don't know"
- Jeremy Grantham

"A plan without action is not a plan. It’s a speech"
- T. Boone Pickens

• Strong Friday for the big markets with S&P 500 +0.59% and Nasdaq +0.55%.

• 10 out of 11 sectors finished in the green, led by cyclicals (Real Estate +2.1%, Industrials +1.6%, Con. Discretionary +1.3%) with only Communication Services in the red (-0.2%)

• Earnings season unofficially comes to an end (94% of S&P 500 companies have reported) with 82% of companies posting earnings beats and 62% beating on Revenue.

• Fed Chair Powell made some modestly hawkish comments about it being too early to conclude that current rates are sufficiently restrictive to bring inflation into the 2% target range but did note that policy rates are "well into restrictive territory."

• Gold closed up +1.6% and hit a fresh all-time high!

***There will be no StreetSmarts Tuesday. I am taking the day off to rest and binge watch Squid Game***

Street Stories

FIRST $100 BILLION BOND FUND - The Vanguard Total Bond Market ETF (BND) surpassed $100 billion in assets for the first time, driven by a $14 million inflow and $15.6 billion total absorption this year. This achievement reflects 2023's trends of higher yields making fixed-income more appealing and the growing preference for low-cost ETFs over traditional mutual funds. Despite a volatile year for fixed-income due to inflation and Fed policies, BND has consistently attracted investment, outperforming its rival, the iShares Core U.S. Aggregate Bond ETF (AGG), which is nearing $96 billion in assets.

---

GOLD! - Gold spot prices in New York surged to a new all-time high of $2,071 per ounce (called it!), driven by expectations of potential U.S. interest rate cuts and safe-haven demand amid Middle Eastern turmoil. Despite these gains, analysts caution that gold might be overbought, with mixed forecasts suggesting prices could stabilize between $1,900-$2,000/oz in the near term. I’ve talked quite a bit about gold lately, including this deep-dive into why its a safe haven asset. Think I’m a closeted gold bug.

---

EARNINGS SEASON TAKE-AWAYS - Due to all the macro stuff taking place, this earnings season seemed to take a back seat to broader market goings-on. Regardless, here are some of the big take-aways from Q3:

• 94% of companies in the S&P 500 have reported their actual results, and a notable 82% have reported earnings per share (EPS) above expectations, a figure that exceeds the five-year average of 77% and the ten-year average of 74%. This high percentage of positive EPS surprises is the highest since Q3 2021.

• Overall, the earnings reported are 7.1% above estimates, which, while lower than the five-year average of 8.5%, is still higher than the ten-year average of 6.6%. This indicates a strong performance in earnings relative to analyst expectations, despite not reaching the heights of the past five years.

• The key sectors contributing to the positive earnings surprises have been Financials, Consumer Discretionary, Information Technology, and Communication Services. These gains were slightly offset by downward revisions in EPS estimates and negative earnings surprises in the Health Care sector.

• In terms of revenue, only 62% of the companies in the S&P 500 have reported actual revenues above estimates, a figure that is below both the five-year average of 68% and the ten-year average of 64%. If this trend continues, it will mark the lowest percentage of companies reporting positive revenue surprises since Q1 2020.

• Another interesting take-away is that companies seemed less inclined to talk about inflation or recession fears as grounds for their performance and expectations:

---

ARK IS BACK (OK, NOT REALLY) - Cathie Wood's ARK Innovation ETF (ARKK) is having a comeback year, soaring 55% in 2023 (S&P 500 +20%, Nasdaq +37%). The fund, which thrives on 'long-duration' growth stocks, is reveling in November's 31% gain, thanks to the recent exuberance in meme stocks and zero-profit tech. Despite outperforming major indexes, the fund is still experiencing a significant investor exodus. Oh, and she tanked 67% last year so she’s still very much under water… (I did a nice update on crazy aunt Cathie a few weeks back)

Joke Of The Day

Just saw an advert in the local newspaper which read: “Accountant Needed: $55,000 – $60,000”. So I rang them and said, “-$5,000”.🫡

Hot Headlines

(Reuters) Countries promise clean energy boost at COP28 to push out fossil fuels. 118 governments pledged to triple the world's renewable energy capacity by 2030 at the U.N.'s climate summit on Saturday.

(Axios) Aging America faces a senior care crisis.

(CNBC) Meta’s AI chief doesn’t think AI super intelligence is coming anytime soon, and is skeptical on quantum computing. Hope he’s right but he works at Meta where they don’t really ‘do’ innovation.

(Reuters) Bitcoin breaks $40,000 as momentum builds.

(The Times) The Wolf of Wall Street’s car goes on sale. Scorsese’s into authenticity so it’s a real lambo and possibly real coke residue.

(Bloomberg) Meme-stock crowd plows into cross-asset rally lifting risky bets.

(Buzz Feed) 26 photos highlight how insane ‘tipping culture’ has gotten. Yes, I posted a Buzz Feed article. I know, I feel icky now.

Trivia

This week’s trivia is on famous investors.

1. Who is known as the "Oracle of Omaha"?
   A) Carl Icahn
   B) Warren Buffett
   C) George Soros
   D) Peter Lynch

2. Which famous investor is known for his $1 billion profit on a single trade betting against the British Pound in 1992?
   A) Warren Buffett
   B) Carl Icahn
   C) George Soros
   D) Ray Dalio

3. What is the main investment strategy of Ray Dalio's Bridgewater Associates?
   A) Value Investing
   B) Growth Investing
   C) Risk Parity
   D) Index Fund Investing

(answers at bottom)

Market Movers

Winners!

• Elastic (ESTC) [+37.1%] Beat on Q2 earnings, revenue, and margins. The company saw significant growth in large customers and strong engagement in GenAI use cases.

• UiPath (PATH) [+26.7%] Q3 earnings and revenue surpassed forecasts. Margins, billings, and FCF were all above consensus. Management was upbeat about GenAI deployment (of course they are). Q4 revenue guidance aligns with Street expectations.

• Equitrans Midstream (ETRN) [+11.2%] The company is reportedly considering options, including a potential sale, as per Bloomberg sources.

• Paramount Global (PARA) [+9.8%] Paramount is reportedly in talks to bundle its streaming service with Apple at a discounted rate, according to recent reports.

Losers!

• Marvell Technology (MRVL) [-5.3%] Q3 earnings and revenue slightly surpassed consensus, but Q4 guidance midpoints fell below Street expectations. Analysts highlighted poor Enterprise performance and expressed concerns over the wireless growth trajectory and ongoing wireline inventory pressures.

• Pfizer (PFE) [-5.2%] Decided not to proceed with Phase 3 of its oral GLP-1 (Ozempic competitor) after phase 2 trial showed weight loss reductions below the threshold necessary to compete with leading injectables, according to analysts.

• Dell Technologies (DELL) [-5.2%] Q3 revenue fell short by 3%, though EPS and FCF exceeded expectations, underscoring operational efficiency.Positive aspects include server momentum, especially in AI.

• Spotify Technology (SPOT) [-2.4%] Downgraded to Neutral from Buy at Citi. The analyst cited a less compelling risk/reward balance due to rising ARPUs, ongoing churn declines, and a less efficient business model as growth shifts to less developed markets.

Market Update

Trivia Answers

1. B) Warren Buffett is the Oracle of Omaha.

2. C) George Soros, in his famous ‘Breaking the Bank of England’ trade.

3. C) Bridgewater is known for its Risk Parity or ‘Market-Neutral’.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.