Highlights

The S&P 500 and the Dow are coming off their worst weeks since March. Despite the Fed signalling the end of interest rate hikes, analysts don’t expect much out of the Market looking forward. Goldman Sachs, Bank of America, and Morgan Stanley predict the S&P will end the year lower than its current level. A clear sign that interest rate hikes had already been “priced in” by top investors and that concerns are growing about the state of the economy and the banking system is still there - the Titanic may be heading for the iceberg. A big shift in inflation is the only thing that's going to turn the ship and bring returns back to the staggering voyage they’ve been on so far this year. 

Hidden beneath the waves, US officials are looking into possible market manipulation of regional bank stocks. And some analysts suggest that the stock market could become "untouchable" if the bank crisis keeps spiralling. That's what Fundstrat's Tom Lee said in a recent note, adding that any intervention raises too many tail risk issues across the economy and in commercial real estate.

Stock Spotlight

Some of us got up early on the weekend to watch King Charles III’s coronation - something from a different time. You like what, Camilla?

Others tuned in to another kind of royal ceremony: the Berkshire Hathaway annual shareholders meeting in Omaha, Nebraska, which looks at the last tears and future performance of the legendary Warren Buffets investment portfolio.

There were a few highlights, as always, from the nonagenarian (someone in their 90’s, apparently). 

In discussing Berkshire's performance, Buffett said perhaps a majority of its operating businesses might fare worse in 2023 than in 2022 as economic activity slows. But he said Berkshire could offset this with more income from investments, including $7 billion of Treasury bills bought in April.

Buffett defended the size of Berkshire's $151 billion Apple investment, saying consumers are less likely to shed their $1,500 iPhones than, for example, their $35,000 second cars.

"Apple is different than the other businesses we own," Buffett said. "It just happens to be a better business."

On the regional banking crisis: Buffett bashed leaders at the banks that failed this spring (First Republic, SVB, etc.), saying they “should suffer” and face “punishment.” But he also blamed the “totally crazy” bank regulations that incentivise bad behaviour and “very poor” messaging around the debacle from politicians and the media. Buffett thinks the government was right to intervene to protect SVB depositors, claiming, “It would have been catastrophic” otherwise.

On the status of the dollar: “We are the reserve currency. I see no option for any other currency to be the reserve currency,” Buffett said. He called the notion of Bitcoin or other tokens dethroning the dollar a “joke.”

Stock Spotlight

Strong Apple earnings helped ease investor concerns about a possible iPhone slowdown. The stock jumped on Friday after the latest report exceeded analyst expectations. Wedbush analysts said Apple delivered "another masterpiece performance." Apple's stock price surge adds $135 billion as a result. The company has also launched a $90 billion stock buyback program and raised its quarterly dividend by 4%.

Apple's revenue from Apple Services now totals +$20bn. That's more than the combined revenues of the other major providers you might think of with similar services.

What's more, Apple has over 2bn iPhone users around the globe. Less than half are currently subscribing. As Apple continues to grow its subscription base from existing users, plus diversifying its revenues from other services such as banking, it feels that old Warren might be right on this one...they seem to know what they are doing!

Sustainability News

Heard of the banana index? The Economist proposes a new way of comparing popular foodstuffs on three metrics: weight, calories, and protein. Introducing the banana index, which indexes greenhouse-gas emissions to the humble banana, a fruit of middling climate impact and nutritional value. You might be surprised to hear that eating a juicy steak is worse for the environment than frying up some tofu. Going vegan can significantly reduce the carbon footprint of your diet, but it's not always easy to compare emissions of meals that are equally nutritious. So how does this all compare to the new index?

Now, let's get into the meat of the matter. Beef is bad for the environment, no matter how you slice it. Producing one kilogram of mince causes as many emissions as 109kg of bananas, giving it a "banana score" of 109. Adjusting for nutritional value, beef's banana score falls to 54, meaning that one calorie of beef mince causes 54 times as much carbon emissions as one calorie of banana. And when measured by protein, beef scores only seven.

Poultry, on the other hand, scores 11 bananas by weight and four by calorie. But as a source of protein, it is more carbon-friendly than bananas: poultry protein emits just three-fifths of the same amount of banana protein. The same applies to salmon. And for all you plant-based eaters out there, you'll be happy to know that a meat-free burger scores just one-fifth of the emissions of bananas per gram of protein. However, other plant-based foods such as grapes, sugar, and coconut milk contain barely any protein, which sends their banana scores soaring.

It's important to note that some foods that out-emit bananas on one metric put them to shame on another. Olive oil, for example, has a banana score of six when measured by kilogram but scores 0.7 when measured by calories. Others include breakfast cereals, cashew nuts, and croissants, which all flip from bad scores to good when measured by calories.

Our banana index relies on average emissions for a given food, and while some producers are more climate-friendly than others, and some foods travel farther to consumers, in most cases, differences between foods are much greater than these variables within them. For all the emphasis on locally produced food, transportation contributes less than 10% of most foods' total emissions, and for beef, it's usually less than 1%. It's also important to note that our banana index doesn't capture other environmental impacts, such as land and water use, although beef tends to fare poorly in these areas as well.

Recent polling in Europe by Ipsos for Yara, a fertilizer firm, suggests that most consumers want to be more climate-friendly, and with food production responsible for perhaps a quarter of global emissions, eating with the climate in mind would make a significant difference. The survey showed that just 31% of respondents found it easy to make sustainable choices, and three-quarters said they want labels that would explain the climate impact of their food. Studies have found that labels encourage consumers to choose lower-emission options, although they are not widely used. In the meantime, our banana index might help you make more climate-friendly choices at the grocery store.

Quote of the Day

"A lighted match can be turned into a conflagration or can be blown out," Buffett said. "You have to have punishment for people who do the wrong thing."

Buffett when stating that bank shareholders and executives should bear the risks of mismanagement that have led to banking collapses.

Douugh, did you know?

We’ve given you heaps of information about buying shares. But what about when it comes time to sell?

There are a number of reasons to sell. For instance you might sell for more than you paid to make a profit, to invest in something else, because you are worried the things are trending downwards and wont recover, or simply because you need the money. 

That being said, there are a few things you should ask yourself before selling:

Are you on track to achieve your goals?

If you haven’t reached your goals, but your investments are increasing in value, then selling might get in the way of you reaching them.

The same goes for if your investment is losing value, you need to ask yourself if you think it is going to continue to lose value.

Do you need the money?

Life has a tendency to throw curve balls. Before you sell, do your due diligence and check which shares you’ll sell and for how much. No point selling something that is doing well and on track to do so! 

Have you thought about locking in a loss?

Locking in a loss could prevent you from losing more money. If you buy shares for $100, and they drop to $90 so you sell, then you have locked in a $10 loss.

But, if they drop to $80, then your $10 loss was actually a better outcome. Had you waited, the $10 loss would have turned into a $20 loss!

Remember that there is nothing wrong with selling shares, just make sure you take into consideration the context when you sell - your goals and your overall Portfolio. 

Top Tip: This is also a good reason to have a well-diversified Portfolio, in order to reduce the overall impact if any one investment drops in value.