TOPLEY’S TOP 10 May 06 2024

1. Warren Buffett vs. S&P 25 Year Chart

Slight lag vs. S&P

From Abnormal Returns Blog

2. History of Returns Post 5 Months of Gains

3. Returns During Fed Pause Phases

From Dave Lutz at Jones Trading
Stock performance is typically varied during the pauses, but positive on average, Bloomberg notes.

4. PARA Takeover Bids…Stocks Still Negative YTD 2024

5. Starbucks Stock Now Negative 5-Year Return

6. Defensive Utility Sector +5% One Month

XLU 50day thru 200day to upside beginning of April

7. Gold vs. Yen

Gold’s Rise Against the Yen

Source: Bloomberg   From Zerohedge

8. Active Managed ETF Growth

Active ETFs Activate:  On the other hand, active ETFs have taken off. Goes to show, you can either bemoan and suffer from a new dynamic such as the rise of passive investing and ETFs, or ride that trend.

Source: mahmood noorani

9. Russian energy giant Gazprom reported its first annual loss in 24 years amid Western sanctions

Business Insider
A sign advertises Russia’s natural gas giant Gazprom, in Moscow, Russia. Alexander Zemlianichenko/AP

  • Russian energy giant Gazprom posted its first annual loss since 1999.
  • The West’s ban on Russia’s energy exports, combined with macro factors, dragged profits.
  • The oil company also projected fewer investments for 2024. 

Russian energy producer Gazprom Group reported its first annual loss in 24 years, with restricted energy flows to Europe a leading factor in dragging down earnings. 
Gazprom, which is majority-owned by the Russian government, saw a net loss of 629 billion rubles, equivalent to about $6.84 billion last year, marking a sharp drop from 1.23 trillion rubles in 2022, according to an earnings report published Thursday and first reported by Bloomberg. 
It marks the first annual net loss for the energy giant since 1999, largely due to restricted flows to Europe and lower fuel prices following the West’s sanctions over Moscow’s war against Ukraine. 
The market reacted by sparking a 4.4% drop in the company’s share price, the largest decline in more than a year. 
Gazprom’s report also revealed a 40% drop in gas revenue to 4.88 trillion rubles ($52.6 billion USD). International Energy Agency data indicates that gas flows to Europe hit their lowest levels since the early 1970s. 
The financial loss was also driven by broader energy market factors, including plunging gas prices, lackluster demand, and overflowing inventories.
Meanwhile, Gazprom has outlined investments totaling 2.57 trillion rubles for this year, indicating a reduction of nearly 16% compared to its projections for 2023.
Once a booming market for Russia’s gas exports, Europe has placed hefty restrictions on the country’s energy outflows to the continent since the war in Ukraine started. Russia has managed to reroute much of its energy flows to other countries such as China and India.*eglwm7*_ga*MTcwNTA0MjU4My4xNjYxMzU3MTY0*_ga_E21CV80ZCZ*MTcxNDY3NTUxMS4xMDUuMS4xNzE0Njc3OTQxLjYwLjAuMA..

10. Warren Buffett’s warning about AI 🧐

The See’s Candies exhibit at Berkshire Hathaway’s 2024 annual meeting. (Source: Sam Ro)
OMAHA, Neb. — Warren Buffett, CEO of Berkshire Hathaway, has mixed feelings about artificial intelligence (AI).

“It has enormous potential for good and enormous potential for harm,“ Buffett said at Berkshire’s annual shareholders meeting on Saturday.
He shared a personal experience with AI that had him shook.
“Fairly recently, I saw an image in front of my screen,” he said. “It was me, and it was my voice and wearing the kind of clothes I wear. My wife or my daughter wouldn’t have been able to detect any difference. And it was delivering a message that in no way it came from me.”
He explained: “When you think about the potential for scamming people… Scamming has always been part of the American scene. If I was interested in investing in scamming— it’s gonna be the growth industry of all time.”

Warren Buffett speaks at the 2024 Berkshire Hathaway shareholder meeting. (Source: CNBC)
Buffett drew comparisons to the emergence of nuclear weapons.

“We let the genie out of the bottle when we developed nuclear weapons, and that genie has been doing some terrible things,“ he said. “The power of that genie scares the hell out of me. And I don’t know of any way to get the genie back in the bottle. And AI is somewhat similar. It’s part of the way out of the bottle.”
Warren Buffett and Charlie Munger bobble heads. (Source: Sam Ro)

In the context of investing, analysts have mostly spoken bullishly about AI thanks to the potential for improving productivity across many sectors. TKer has written about this narrative herehere, and here.
Asked later about how Berkshire’s own businesses could be disrupted by AI, Buffett noted the technology would affect “anything that’s labor sensitive” and that for workers it could “create an enormous amount of leisure time.”

Greg Abel, vice chairman of Berkshire’s non-insurance businesses, added that “we’re in the early innings” of understanding the impact.

Buffett has taken this tone before 👂

Buffett, arguably the most successful stock market investor in history, is well-known for his persistent bullish long-term view of the U.S. economy and stock market.
“I understand the United States’ rules, weaknesses, strengths,” Buffett said on Saturday. “I don’t have the same feeling generally around the world. And the lucky thing is that I don’t have to.”
But he’s no stranger to expressing caution on matters with significant downside risks — especially in regards to technology.

For example, Buffett has been vocal about his concerns about cyber attacks. Here’s some language I shared in the March 5, 2023 issue of TKer:

There is, however, one clear, present and enduring danger to Berkshire against which Charlie and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a ‘successful’ (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States.“ – Buffett in 2016
“I don’t know that much about cyber, but I do think that’s the number one problem with mankind.” – Buffett in 2017
“Cyber is uncharted territory. It’s going to get worse, not better.” – Buffett in 2018
“I think cyber poses real risks to humanity.” – Buffett in 2019

As you can see, this dire tone from Buffett is not new.
What’s important is that it has never stopped him from being bullish on stocks for the long run.

Zooming out 🔭
Emerging technologies like AI come with risk, as they have the potential to scale up bad behavior in the same ways they’ll scale up good behavior.

Broadly speaking, you can never be certain about how risky anything is. And even worse, there are limits to how much you can hedge a risk before you eliminate the potential for a reasonable return.
Unfortunately, this is just the nature of investing in stocks. And it speaks to why returns in the stock market are relatively high — investors demand a high premium for the uncertainty tied to taking on the risk.

“Nothing’s sure tomorrow,” Buffett said at last year’s meeting. “Nothing’s sure next year. Nothing is ever sure in markets or in business forecasts or anything else.”

We can only hope that history repeats, and the good outcomes far outweigh the bad outcomes — as they always have.   Found at Abnormal Returns Blog