Navexa Blog

September 30, 2024

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The Bitcoin bet that left Wall Street in its dust

Dear Reader,

August 11, 2020.

MicroStrategy announces its first Bitcoin purchase.

It would prove to be the first of many. The company now holds more than quarter of a million BTC.

Nobody at the time — save for the company’s then CEO, Michael Saylor — would have predicted the seismic shift it would trigger in the company’s fortunes.

Four years later, let’s see how this particular Bitcoin bet has played out.

David vs. Goliath: MSTR takes on the S&P 500

Since that fateful day in August 2020, MicroStrategy (MSTR) has embarked on a journey that would make even the most bullish tech investors blush.

While the S&P 500 has delivered a respectable 70% return over this period, MSTR has gained 1,071%.

Check it out:
​

​

Let that sink in for a moment.

While the broader market was busy navigating pandemic recovery, inflation fears, and geopolitical tensions, MicroStrategy was quietly (or not so quietly) outperforming nearly every other stock in the index.

The numbers don’t lie

At the time of writing, MSTR is trading at $165.98, up 9.24% in a single day.

Compare this to the S&P 500’s current level of 5,648.40, which represents a 25.31% increase over the past year.
​

MSTR performance over the past five years

MicroStrategy’s market cap is $30.37 billion.

The company’s 50-day moving average price is $142.38, while its 200-day moving average is $120.86.

MSTR’s trading volume has exploded, with 16,889,560 shares changing hands compared to an average volume of 11,784,407.

These figures paint a picture of a stock that’s not just growing but accelerating.

Driving this acceleration, of course, is the company’s massive Bitcoin holdings.

As of the latest reports, the company holds 252,220 BTC, purchased at an average price of $39,456.

This translates to an unrealized gain of 61.92%, or $6.1 billion.

It’s worth noting that while MSTR has outperformed Bitcoin itself (which is up 425% since 2020), it’s the company’s leveraged position that has amplified these gains for shareholders.

It’s also worth noting that Saylor regards the basic strategy as something anyone can replicate:
​

​

MicroStrategy’s performance becomes even more impressive when we stack it up against the tech giants that typically dominate market discussions.

Since August 2020, MSTR has outperformed the ‘Magnificent 7’ — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla.

MicroStrategy currently ranks 306th in terms of market capitalization among publicly traded U.S. companies.

This puts it squarely in the middle of the S&P 500 pack, despite its outsized returns.

Entering the S&P on the back of buying BTC?

​S&P 500 heatmap​

With such stellar performance, why isn’t MicroStrategy already part of the S&P 500? The answer lies in the index’s stringent inclusion criteria.

To be considered, a company needs:

• A market cap of at least $11.2 billion — check.
• 50% of stocks in free circulation — check.
• A ratio of annual turnover to market cap of at least 0.3.
• Monthly traded value higher than 250,000 shares for six consecutive months.

MicroStrategy’s focus on Bitcoin and its issuance of convertible bonds have been hurdles. However, come January 1, 2025, new FASB rules on digital asset holdings could change the game.

If MSTR reports positive earnings on October 29, 2024, it could be a strong contender for S&P 500 inclusion, potentially adding $3 billion to its undistributed profits.

Flash in the pan, or new paradigm?

The company’s strategy is high-risk, high-reward, tying its fortunes closely to the volatile cryptocurrency market.

But, MicroStrategy’s journey since August 2020 has been extraordinary. Its 1,071% return has left the S&P 500’s 70% gain in the dust, challenging conventional wisdom about corporate treasury management and investment strategies.

The question now: Is MicroStrategy a outlier, or a harbinger of a new era in corporate finance? Time will tell, and Wall Street will be watching closely.

Just this month, Saylor announces MicroStrategy had scooped up another batch of BTC:
​

Michael Saylor⚡️
@saylor
MicroStrategy has acquired 18,300 BTC for ~$1.11 billion at ~$60,408 per #bitcoin and has achieved BTC Yield of 4.4% QTD and 17.0% YTD. As of 9/12/2024, we hodl 244,800 $BTC acquired for ~$9.45 billion at ~$38,585 per bitcoin. $MSTR https://www.microstrategy.com/press/microstrategy-acquires-18300-btc-achieves-btc-yield-of-4-qtd-17-ytd-now-holds-244800-btc


microstrategy.com
MicroStrategy Acquires 18,300 BTC and achieve…
MicroStrategy Acquires 18,300 BTC and achieves BTC Yield of 4.4% QTD and 17.0% Y…
2:7 PM • Sep 13, 2024
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Run an SMSF? New video for you:

Managing an SMSF can be painful, or it can be easy.

Navarre’s latest walks you through how to make it the latter.

Click to watch.
​

​

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy it.

If one of our dear readers forwarded this to you, welcome.

Invest in knowledge,

Thom
Editor, The Benchmark
​​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

September 23, 2024

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Three trends, one quarter

Dear Reader,

Three financial phenomena are colliding.

In the final quarter of 2024, we’ll find out who’s going to run the United States government for the next four years.

We’ll learn the impact of central bankers jacking up interest rates for the first time since 2020.

And, we’ll enter a period in which stocks historically perform well.

So, what can we expect to happen from here?

The fourth quarter trend

About three quarters of the time since 1945, the S&P 500 has risen in the fourth quarter of any given year.

In 77% of the past 79 years, to be exact.

Meaning the odds are decent that stocks pop between now and year’s end.

The market gained 26.29% total return in 2023, having been down18.11% in 2022.

At the time of writing, the S&P 500 is up 20% year-to-date, having just made new highs.

This historically robust quarter for stocks delivers, on average, a 3.8% gain.

These three strong months tend to follow the toughest month of the year:

But, of course, this is market performance in isolation.

And the market, as we know, is a measure for many things — not just what people are prepared to buy and sell stocks for.

Mark Hackett, chief of investment research for Nationwide Mutual Insurance, explains the factors feeding into this particular fourth quarter:
​

‘We anticipate continued volatility through November as investors await greater clarity on Fed policy, macroeconomic trends, and, of course, the upcoming election. However, our outlook for the end of the year remains positive. We expect a strong fourth quarter, driven by seasonal tailwinds, diminished election uncertainty, and Fed [rate cuts].’

The ‘seasonal tailwind’ he’s talking about is the market’s historical tendency to rise in Q4, most of the time.

Just to be clear, most of the time does not mean all of the time.

A 77% chance stocks go up is just another way to say a 23% chance they go down.

The past gives us perspective, but it doesn’t predict the future.

As for the election and the Fed, well, let’s take a look.

The election year trend

On November 5, the world will know who’s going to be running the United States for the next four years.

Who wins the election will, no doubt, have an impact on the stock market.

But exactly what impact?

Take a look at the chart below.

It’s the S&P 500 up until a couple of months ago, compared to the average of every election year performance from 1949 to 2023.

​

The market is already trading way higher than your average election year.

Maybe the Q4 trend and the Fed’s anticipated rate cut is going to drive those lines apart even more.

But back to who runs the most important economy on the planet.

If I asked you which candidate was going to be better for the financial markets, you might say Trump.

I would have, until I found this from the WSJ:

The Dow Jones Industrial Average has risen at an annualized rate of 8.2% under Democratic presidents.

For Republican presidents? Just 3.2%.

Adjust for inflation, and those numbers come to 3.7% and 1.4%, respectively.

​Source​

Democrat presidents, on average, are more than twice as good for stocks than Republicans.

Of course, correlation does not imply causation.

But with the Democratic candidate polling higher, at the time of writing, than the Republican, could that imply another tailwind for stocks going into Q4?

Fed makes hotly-anticipated interest rate cut

Last week, the Federal Reserve cut interest rates by half a percentage point.

It’s now 4.875%. The Fed states they want to get that down to about 2.9%.

While it’s not a simple case of inverse correlation, we can say that, generally speaking, stocks go up when interest rates go down.

There are exceptions, of course, but generally this is the case.

The initial reaction was no exception.

​Source​

​Source​

The real question, beyond the initial market reaction, is how the expected trend of continued rate cuts will impact the stock market and economy.

(The economy, historically, takes longer to respond to interest rates than the markets, which can price in sentiment about the future pretty much instantly.)

Some expect the market to soar from here.

​Source​

Only time will tell if this rate cut marks the resuming of what some believe is a secular bull market, or will merely apply a weak handbrake to what others believe is an inevitable recession.

But for the quarter ahead, the stage would appear set for a historically strong final three months of the year.

How to check an investment strategy is working

Navarre’s latest video walks you through how to make sure your investment strategy is working using the Navexa Portfolio Tracker.

Check it out now:

​

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy it.

If one of our dear readers forwarded this to you, welcome.

Invest in knowledge,

Thom
Editor, The Benchmark
​​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

September 16, 2024

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The new railroad across America the world

Dear Reader,

Most people think the Great Depression started with Wall Street’s notorious 1929 crash.

This is because most people have short memories. Few bother digging into history very far.

As a Benchmark reader, you are clearly not one of these people.

Sometimes, we can learn more about the present and near-term future by paying attention to things that happened a long time ago.

Especially when those things perhaps seemed implausible in their time.

Today, I want to take you on a ride to the 19th Century.

More specifically, a ride that starts with great promise and winds up running off the rails into chaos and ruin.

​AI train wreck​

The promise & peril of new tech

The United States of America would not be what it is today had the railroad industry not taken off there in the 1800s.

The railroad allowed the industrial revolution early in the century to explode out of the northeast of the country and propel settlement and developments in the west.

Journeys that previously took months now took only days; the frontier was wide open.

The first passenger and freight line opened in 1827 and gave rise to nearly 50 years of continuous building.

Until, that is, the Great Depression few today remember. More on that in a second.

​The first transcontinental railroad​

It didn’t take long for speculation and regulation to poison the pure promise of the railway revolution.

Building railways cost lots of money. This meant borrowing, over-leveraging and rampant speculation.

This speculation began to influence the industry itself: While there were plenty of short railways initially, most of these were folded into trunk lines due to a fast-developing financial system based on Wall Street’s appetite for railway bonds.

(Credit to Thomas Pueyo at Uncharted Territories for the summary.)

As so often happens when speculation runs wild — especially concerning a novel and significant technological development — consequences quickly followed.

The other Great Depression

After the American Civil War, the railroad boom went to another level — companies laid 33,000 miles, or 53,000km, of track in just five years.

Grants, subsidies and speculation fuelled the boom.

The railroad industry become one of the largest employers in the country.

Over-expansion hit hard. Mountains of money became tied up in projects that offered no immediate return.

The market for railway bonds collapsed. The companies that had borrowed all the money couldn’t repay it when the banks came calling.

In 1873, 55 railroad companies failed. Another 60 collapsed inside 12 months. Development and growth fell off a cliff.

This triggered a chain of bank failures and closed the NYSE.

Strikes, riots and protests broke out.

The contagion spread to Europe and marked the beginning of two decades of economic pain for Britain that became known as the Long Depression.

​Schwarzer Freitag (Black Friday) on the Vienna Stock Exchange as the railroad crash hit Europe​

Until 1929, the US knew this crash as the Great Depression, when the subsequent crisis stole the moniker by setting a new standard for financial crisis and economic strife.

So, Reader, 150 years on, what can we do but observe the parallels?

AI = 21st Century railroad?

We’re living in the AI boom times.

The market is projected to more than double in the next few years.

NVIDIA — current king of the AI jungle — recently became worth more than most nations’ GDP.

Here’s some parallels between the AI and railway booms.

Rapid growth and expansion: The AI industry is currently going through explosive growth, with an expected annual growth rate of 37.3% from 2023 to 2030.

Rampant speculation: The AI market is already commanding substantial investment, with the market size expected to grow from $454.12 billion in 2022 to around $2,575.16 billion in the near future. Analysts are currently mid-freakout regarding how far NVIDIA and the other big tech companies can go riding the AI wave.

Transformative impact: Railroads revolutionized transportation and commerce in the 19th century, becoming the largest employer outside of agriculture. Similarly, AI is poised to transform pretty much every aspect of life and business.

Overexpansion concerns: The railroad boom led to economic overexpansion, with most capital invested in projects offering no immediate returns. While the AI industry hasn’t faced a similar crisis, there are concerns about the rapid proliferation of AI technologies and their potential economic impacts.

Competition and market saturation: Many railroads overbuilt, leading to ruinous competition for freight traffic. In the AI industry, we’re seeing a proliferation of AI models and applications, which could potentially lead to market saturation and intense competition.

But that’s not all.

​Watercolour Van Gogh by AI​

Perhaps most alarming of the parallels is the cost to build AI products.

According to Thomas Pueyo:
​

‘ Foundation models are the software that power OpenAI’s ChatGPT, Anthropic’s Claude, Meta’s Llama, Google’s Gemini, and the like. It’s very expensive to make them. Today, it’s in the order of hundreds of millions of dollars. In the not-too-distant future, it will likely reach billions, and within a decade, it might reach a trillion.’

What that means, is despite AI’s seemingly limitless promise and potential, it actually costs loads to produce.

And that cost is only going higher.

Take a look:

​

This has a lot to do with the bullishness around NVIDIA — they produce most of the chips that make is possible to build AI.

Will AI send the market off the rails?

‘History doesn’t repeat itself, but it does rhyme‘, as Mark Twain famously said.

He also said ‘denial ain’t just a river in Egypt‘.

Well, this being one of the more dense and expansive Benchmark emails I’ve written to you, I think it’s only appropriate I defer to a higher intelligence to try to give you a takeaway insight.

At least, that’s what I tried to do.

I asked my current AI tool of choice, Perplexity, this question:

‘What’s the likelihood that the AI boom crashes the economy in the next five years?‘

This is what I got back:

​

Let’s hope this crash doesn’t spiral into a stock market and economy-wide contagion that dwarfs our current definition of Great Depression and consigns 1929 to lesser-known history.

Quote of the week

‘In the 1848 gold rush to California, most gold diggers didn’t make much money, but the shovelmakers made a fortune. NVIDIA is today’s shovelmaker.’

— Thomas Pueyo

Earn dividends? You should see this…

Navarre’s latest video covers a massively misunderstood aspect of investing.

This common mistake once nearly led him to sell a stock he’d made a great return on, thinking it had lost him money.

How does that happen, and how do you avoid such mistakes?

It’s actually very simple. Check out the video here:

​

That’s it for The Benchmark this week.

Forward this to to share the insight with someone who’d enjoy it.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Invest in knowledge,

Thom
Editor, The Benchmark
​​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

September 8, 2024

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Teetering stocks & the harsh reality of not owning them

Dear Reader,

This week’s email is a shameless chart party.

One of our team here at Navexa kindly shared a treasure trove of fascinating charts with me recently, which led me down many different and thought-provoking rabbit-holes.

First up, take a look at this:

Risk is was back on the menu, boys

Source: https://www.chartstorm.info/p/weekly-s-and-p500-chartstorm-20-may​

What you’re looking at above is evidence that Wall Street’s appetite for risk has returned after a couple of years of fear and uncertainty.

At least, that’s how it looked at the end of May.

The S&P Global investment manager index had measured risk appetite and near-term market outlook returning to late 2021 levels.

Stocks were at or near all-time highs, and institutional investors were brimming with optimism.

Callum Thomas, who runs ChartStorm, noted that we’re in a ‘cyclical bull market’:
​

‘The takeaway or bullish suggestion would be that this cyclical bull is relatively normal, and also mid-lower pack… and most of all, looks like it still has time and space to go up to the right if history is any guide.’

Three months later, however, you can see just how fast sentiment can swing in the stock market:

Tech stocks flirting with bearish trend

​Source​

​Callum says of the chart above:
​

‘After failing to breach that key overhead resistance level, tech stocks have rolled over again — at this point now notching up a lower high. From a classical technical analysis standpoint this is not a good sign, you want to see a series of higher highs and higher lows to be confident in the bull trend, whereas a transition to lower highs brings into prospect the possibility of a bear trend establishing.
​
‘To remain constructive at all on tech stocks and by extension US equities as a whole, it is going to be critical for the Nasdaq to avoid making a lower low (and avoid breaching that rising bar of the 200-day moving average).’

I try, in this email, not to get too caught up in dangerous short-termism.

Stocks are going to do what they’re going to do. Up one day, down the next, irrational exuberance and panic dished out by turn as the great financial circus constantly unfolds.

So let’s zoom out now and go big picture.

Check this out:

Wage growth vs. stock market growth

​Source​

Work a job, earn money, save some, invest some, retire comfortably, right?

That used to be the dream for most people. For some, it perhaps still is.

But what you see on the chart above is the reality of working for money, versus putting money to work in the markets.

In the 1970s and early 1980s, wage growth more or less kept up with stock prices — in the late ’70s even beating the stock market’s performance by nearly 10%, imagine that!

But after that, as you can see, the stock market left wage growth in its dust.

From ’91 to ’01, there was a 200% difference.

Across the half-century of data represented in the chart, its clear that those who owned stocks built many times more wealth than those who relied solely on income from a job.

And speaking of jobs, here’s a lesser-talked about aspect of the relationship between the stock market and the employment market.

82% of U.S. jobs are not on the S&P 500

​Source​

There are 158 million people employed in the U.S. economy.

But only 29 million, or 18%, of them work for S&P 500-listed companies.

In other words, most of the U.S. workforce is employed outside of the biggest companies in the country — meaning the vast majority of the economy is in private, rather than public, markets.

Why is that? Ben Carlson shared a brilliant Sam Ro chart a while back that sheds light on this:

​Source​

Ben notes:
​

‘The stock market is mostly corporations that make and sell things. The economy is mostly the stuff we do with those things. Most of the time the stock market and the economy are moving in the same direction but they also diverge on occasion. The S&P 500 also receives roughly 40% of revenues from overseas. For technology stocks, that number is closer to 60%.’

And now, to our final chart of this week’s email.

This one might surprise you.

Buffett’s (relatively) late bloom as billionaire

​Source​

We tend to think of Warren Buffett as supremely wealthy. Which he is.

But we also tend to presume he was always supremely wealthy.

As you can see on the chart above, this is simply not the case.

Warren didn’t crack a billion-dollar net worth until he was more than half a century old.

It took him until his early sixties to hit five billion.

But then the power of compounding really started to go to work, and Buffett’s net worth began climbing steeply.

While the chart only goes up to 2019, today, Warren is worth about $139 billion.

He’s built that wealth, of course, by buying and holding shares in the highest-quality companies in the world (and by selling shares in his legendary holding company, Berkshire Hathaway).

Imagine what his net worth might be today had Buffett worked a job, instead of buying stocks and building businesses?

Now, if, like Warren, you’re building wealth by investing in the stock market, you’re going to need some specialist knowledge re: tax.

Specifically, you’re going to need to understand capital gains tax to a far greater degree than the average tax-payer.

Because, as you’re about to see, far too many investors get caught out by the three CGT lies Navarre exposes in his latest video guide.

Click the player to watch:
​

​

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy reading.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Invest in knowledge,

Thom
Editor, The Benchmark
​​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

September 2, 2024

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Your mind, your money
and my unsolicited TED talk

Dear Reader,

I never wanted to do this.

Write one of those ‘book club’ emails.

You know, the ones where the writer does the email equivalent of sidling up to you and chewing your ear off about ‘this fantastic’ book they’ve been reading…

How you’ve ‘just got to read it’…

Please.

If it’s so good why don’t you go back to reading it instead of administering an unsolicited TED talk.

With that, Reader, I hereby lower myself to the level of the book review email writer.

Technically, it’s not my first time, but the last time I wrote to you about a brilliant investing book, I did not have my hands on a physical copy.

Today, I’m going all the way. Here’s the offending article:

Luck, risk and the profound
power of financial subjectivity

​

The Psychology of Money isn’t your average investing or finance book.

If it were, I wouldn’t be writing to you about it.

Author Morgan Housel isn’t your average investment writer, either.

While most bestsellers in this space come from portfolio managers, economists, advisors or personal finance gurus, Housel was a journalist, columnist and analyst before he wrote his book.

He spent the best part of a decade at financial publisher The Motley Fool — competitors to my former employer, Agora.

I think this is what makes The Psychology of Money so good.

Because I know, first-hand, that analyzing and writing about the markets for independent publishers demands you look outside the mainstream for rare insights readers can’t get from the usual channels.

Having spent so long writing for such a business seems to have resulted in one of the finest, clearest books on investing and personal finance you’ll likely ever read.

You can sprinkle in his contributions to the Wall Street Journal as testament to his journalistic pedigree.

Part of the reason for this is that Housel hasn’t really written ‘a book’ per se.

Rather, he’s edited and collated 20 essays from his career, with the goal of shedding light on why we think and feel certain ways about money and investing.

Here’s three of the my favourite insights from the book.

The 0.00000001% mindset

What seems to make perfect financial sense to me might seem insane to you.

Such is the profound impact of our individual experience, that it largely defines how we think and feel about money.

Here’s one of many great examples:
​

‘The person who grew up in poverty thinks about risk and reward in ways the child of a wealthy banker cannot fathom if he tried…
​
​The stock broker who lose everything during the Great Depression experienced something the tech worker basking in the glory of the late 1990s can’t imagine.’

Housel reckons our personal experiences make up about 0.00000001% of what’s happened in the world.

But, they also account for about 80% of how we think the world works.

Nothing is what it seems

Housel explains the extent to which confirmation bias distorts our perception of success and luck (both good and bad).

Bill Gates is renowned as a pioneer of personal computing and a gifted businessman.

Turns out, he just happened to attend one of the only schools on the planet that had a computer.

Thanks to a forward-thinking teacher, Gates and his friends — one of whom joined Gates in founding Microsoft — got to play with a Teletype Model 30 computer as early as 1968.

Out of 303 million high school-age people in the world at that time, Gates was among the 300 who attended the school that had a computer.

When Housel interviewed Nobel Prize in economics-winner, Robert Shiller (of Shiller P/E ratio fame), he asked him: ‘What do you want to know about investing that we can’t know?‘

Shiller’s answer: ‘The exact role of luck in successful outcomes.’

The time dividend

University of Michigan psychologist, Angus Campbell, sums up the ‘common denominator of happiness’ thus:
​

‘Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.’

Money’s true value to us an individuals, Housel writes, is its power to give us control over our time.

Having worked as an intern investment banker and managing to last only one out of the four months he signed up for, Housel experienced what it feels like to be a time slave, working longer hours than most human beings could handle.

In fact, even doing something we love on a schedule we can’t control can turn that activity into something we hate.

Money can only make you happy when it hands you more control of your time.

This should be obvious by now, but I highly recommend you read The Psychology of Money — I’ve only scratched the surface of this book’s brilliance in this email!

3 ETF tax mistakes hurting Aussie investors

One way investors try to get back their time is by investing in ETFs for capital appreciation and income.

In principal, this is a great approach. But, there’s some pitfalls few investors know about.

Navarre just published his latest YouTube video explaining three ETF investing hurting Australian investors at tax time.

Click the player to watch now:
​

​

Quote of the week

‘The world is full of obvious things which nobody by any chance ever observes.’

— Sherlock Holmes

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy reading.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Invest in knowledge,

Thom
Editor, The Benchmark

​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

August 26, 2024

​

The early Brit catches the US tech boom

Dear Reader,

Stock pickers tend to get screwed.

​The S&P Scorecard makes it clear: 79% of active management large cap funds lagged the S&P 500 over the past five years.

Over the longer term, the numbers get worse — only about 12% of them beat the market over the past 15.

What about small-cap funds? Nope — about 90% lag the market’s performance.

Value stock funds? Even worse — 94% of them can’t beat the market.

You get the picture.

It’s statistically highly unlikely that you can earn better returns by selecting stocks than if you just bought an index fund.

Passive, long-term investing, which relies on the market’s 10.64% annualized return to slowly, but surely, lift all boats over time, has more evidence going for it than ever.

Seldom do modern investors aspire to strike it rich discovering the next big thing before everybody else.

Which is why you need to know about reclusive fund manager, Nicholas Sleep.

This mysterious investor did something few big players dare in today’s market — particularly those managing other people’s money.

And particularly, those from his side of the Atlantic.

Regulation hell vs. innovation heaven

​

​This explanation gives you a pretty good idea of the difference between Europe’s and the United States’ markets:

​

Increased regulatory burden has hampered Europe’s competitive position, hindered innovation and is particularly burdensome for small and medium sized companies.
​
The root cause is hard to identify. There are, of course, cultural differences between Europe and the US, but Europe also has more complexity with regulation, from both individual countries and the single market.
​
The formation and growth of Silicon Valley firms through the 2000s to the rapid growth we are seeing from AI firms today is evidence that the US has created an environment that fosters innovation.
​
While countless hours are being spent by software engineers in the US trying to outcompete each other for the next AI breakthrough, European law makers are apparently burning the midnight oil to prepare the first AI Act!

See how European stocks rebounded after the 2020 pandemic compared to US stocks:

​

You get the picture.

Innovation and growth happens faster in the US than it does on the continent.

It’s no coincidence most of the great investors and fund managers of our time all come from the same country.

Bogle, Buffett, Dalio, Graham, Lynch, Munger. All Americans.

So how on earth did a British fund manager manage to spot one of the highest-performing investment opportunities of the past two decades, before US investors cottoned on?

Here, Reader, you enter the myth of Nick Sleep.

Betting big in the early tech wilderness

Nick Sleep first worked as a fund manager at Marathon Asset Management. In 2006 he set up his own fund, Nomad, with partner Qais Zakaria.

Eight years later, they’d made a sufficiently gargantuan enough return for their investors that they closed the fund, returned the money to their clients, and disappeared.

How much money are we talking?

Here’s a snapshot of Nomad’s performance in 2013, a year before they shut up shop:
​

​

Before performance fees, they were outperforming the great Warren Buffet’s annualized 19.8% return.

As in, beating the greatest investor of the past 100 years, by picking stocks.

They did this, in large part, thanks to Nick Sleep’s visionary approach.

He pioneered something called ‘scale economics shared‘.

His thesis was basically that large internet businesses would use their rapidly growing revenue to make their services progressively cheaper for their customers — as opposed to simply paying it out to investors, or reinvesting it into their business (read more here).

But in the post-Dot Com bubble world of the early 2000s, Nick Sleep saw a way for the next generation of internet businesses to achieve massive growth by returning their profits to their customers in the form of ultra-competitive prices.
​

The early days.

Fund manager mic drop

At the time, this view was far from popular. It was too new, too unfamiliar — even to the historically visionary investors in the very country where such businesses were taking root.

But Nick Sleep saw the game evolving, and made his play.

Nomad bet big on a company called Amazon, while the rubble of the 2000 tech collapse still smouldered around him, buying in at less than $30 a share.

By 2007, the fund owned $55 million in Amazon stock.

By the time Sleep and Zakaria closed Nomad, that position was worth $1.2 billion.

At the time of writing, Amazon shares trade for $178 — nearly six times the price at the time Nick Sleep started betting big on his scale economics shared thesis.

Stock picking might be out of fashion, and notoriously difficult. But this story shows you that it’s not impossible — not even for a British fund manager, let alone a Wall Street heavyweight.

Nick Sleep virtually disappeared after Nomad closed in 2014.

His annual Nomad investor letters have become legendary among those who know about them (read all of them here).

Here’s 15 highlights:
​

Compounding Quality
@QCompounding
Nick Sleep is one of the greatest investors of all time.
People who invested with him achieved a yearly return of 20.8% (!).
Here are 15 things I learned from reading his annual letters:
8:48 PM • Aug 8, 2024
10
Retweets
70
Likes
Read 7 replies
​

Here’s one of my personal favourites, addressed to some guy named Warren upon Nomad’s closure:

​

New video reveals how to never worry
about ETF AMIT statements again

While you’re here, if you’re investing in ETFs in Australia, you’ll want to watch this new video.

He walks you through the ‘extremely important’ numbers you get with your annual AMIT statement from your ETFs — and the simple way to deal with them without having to stress at tax time.

Click the preview to play:
​

​

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy reading.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Invest in knowledge,

Thom
Editor, The Benchmark
​Track & report on your portfolio like a pro​

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All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

August 19, 2024

​

The Mexican carry trade

Dear Reader,

‘Most people thought black beans were olives,’ Steven Marks said of the average Australian’s knowledge of Mexican food in the early 2000s.

Over the next 20 years, Marks and fellow New Yorker, Robert Hazan, would change that.

In the process, they’d build a massive fast-food business that is now approaching $1 billion AUD in annual revenue.

Just this year, the business they founded to ‘educate the market‘ on good Mexican food became Australia’s most successful initial public offering since 2021, and the third-best for half a decade.
​

​

​

This week, The Benchmark takes a break from Wall Street to show you how a simple idea changed the Australian fast food landscape and became a stock market darling in the process.

‘Selling burritos and delivering on our strategy‘

Steven Marks was 23 when he landed what, for most aspiring finance bros, would be the dream gig.

He was one of two graduates to join Steve Cohen’s New York equities team.

Forbes estimated Cohen to be about the 30th richest person in the United States 10 years ago. ‘The hedge fund king’, as he was known, at one point personally raked in about $1 billion a year.

Marks had his feet under the desk for one of Wall Street’s heavyweights.

Fast-forward four years, and he was running a London trading desk, living the high life in Chelsea.

But, fast-forward another three years, and Marks was done.

The ultra-intense hedge fund life had taken its toll and lost its appeal.

So, he did what any self-respecting talented young professional does when their personal desires no longer match with their professional circumstances; he booked a one-way ticket to the other side of the planet with very little idea of what he’d do when he got there.

Initially, he wanted to build a hotel. That proved tougher than Marks expected. And while struggling to get this plan off the ground, he found he missed something from his New York days — good Mexican food.

Seeing the gap in the Australian market, Marks went all-in on enlightening his adopted country on the pleasures of authentic Mexican food.

Wall Street cash = main street smash hit

​Steven Marks​

Marks did four key things to get Guzman Y Gomez — named after two friends from his childhood in Brooklyn — up and running in 2006.

1. He invested ‘everything‘ he’d managed to save from his seven years earning mega bucks in the hedge fund world.
   ​
   ​
2. He ‘poached the best staff from Latin American restaurants and brought in chefs from Mexico‘.
   ​
   ​
3. He convinced his childhood friend, Robert Hazan, who had a background in fashion and retail (and therefore boots-on-the-ground knowledge of a type of business Marks did not) to become his business partner.
   ​
   ​
4. Marks and Hazan set up Guzman Y Gomez restaurants in ‘triple A real estate‘ locations, building a premium fast food brand rather than a ubiquitous, spread-too-thin empire like much of their competition.
   ​

The first store in Newtown, Sydney, spawned openings in Bondi Junction and Kings Cross within 12 months.

​The first Guzman Y Gomez restaurant in Sydney​

Six years later, GYG had 12 locations, expanding to Melbourne.

Another six years later, Australians were flocking to buy premium Mexican takeaway food at 100 spots across the country.

In 2013, Singapore got its first Guzman Y Gomez, and in 2020 the Naperville suburb of Chicago began serving customers.

Today, there are ~200 Guzman Y Gomez locations. The business has broken into Australia’s top 10 most popular takeaways, and makes $760 million a year.

Careful investment strategy paves
way for rare ASX IPO success

Marks and Hazan didn’t rush to accept money from investors.

Marks’ Wall Street experience taught him about being careful who he took money from.

He actually rejected several offers because he didn’t feel those looking to invest shared his vision for the business and brand.

Rather, he and Hazan kept hustling, running the business with their own money and its growing revenue.

‘So we just had to make it work, even when we were running out of money,‘ he said.

Finally, though, they struck a deal with the team behind McDonald’s Australia. This helped them fuel Guzman Y Gomez’s international expansion.

Then, investment firm TDM Growth Partners bought a $44 million stake in 2018, followed by Magellan Financial Group’s $87 million investment (Magellan subsequently sold its stake for $140 million — a 60% gain).

Then, this year, what started as a burnt-out ex-hedge funder’s reaction to Australia’s dire lack of quality Mexican food in the early 2000s hit the Australian Stock Exchange.

GYG packed full in Woolongong, NSW

Guzman Y Gomzez listed A$335.1 million of new stock (about a sixth of the company) for public trading.

It became the biggest first-day gainer by a large Aussie company since 2021 and the third best performing IPO in five years.

At the time of writing, GYG is up 4.61% since IPO, with a total market cap of A$3 billion — it was A$2.2 billion before it debuted.

​

Guzman Y Gomzez forecast a second consecutive net loss for 2024, but a profit in 2025.

The company plans to match the current McDonald’s Australia store count in the next 20 years.

That’s about 1,000 stores.

If you didn’t know what good Mexican fast food tasted like already, you’re about to.

To really get into the numbers behind GYG, check out this deep dive.

Quote of the week

‘Luck is the dividend of sweat. The more you sweat, the luckier you get.’

― Ray Kroc

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy reading.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Invest in knowledge,

Thom
Editor, The Benchmark

P.S. join me over on X where I post daily about the stories in The Benchmark, plus breaking financial news and events (click below):

​
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All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

August 12, 2024

​

Panic on the streets, or just in the markets?

Dear Reader,

Last week, panic struck.

This is what the internet looked like for investors last Monday:

​Source​

Rough.

​Source​

Brutal.

​Source​

Heavy.

But, we know the media gets plenty of mileage out of hype — particularly the negative type.

So, let’s look at the facts.

Last Monday:

• S&P 500 fell 3% — its worst day since September 2022
• The Dow was down more than 1,000 points, or 2.6%
• The Nasdaq wiped out nearly $1 billion in market cap

To top it off?

The Volatility Index hit levels not seen since the 2008 Financial Crisis and the 2020 pandemic.

Then again, Wall Street’s ‘fear gauge’ has been running haywire of late, so it’s not as straightforward as it might first appear.

But, all up, a pretty decent dose of fear, uncertainty and doubt for the stock market.

A week on from this bolt of panic, let’s look at the factors at play — and, of course, the bigger picture.

To fight inflation is to fuel unemployment

The cost of living crisis that took hold over the past couple of years stemmed, in part, from inflation.

Here’s US inflation over the past century:

​Source​

By mid-2022, inflation was the highest it had been since the 1980s.

In other words, the value of money eroded, sharply.

Which meant it became more expensive to live.

Which meant central bank intervention.

Interest rates, which had trended down since the 1980s — falling sharply after the global financial crisis and then the pandemic — rose again.

You can see in the chart below, we’re only just now back to pre-2008 interest rate levels:

​Source​

The Federal Reserve (the world’s most influential central bank), goes to war on inflation — too much inflation, at least — by raising interest rates.

According to Phil Rosen:
​

The Fed’s stated goal is a 2% inflation rate. But it’s currently more than triple that level, which means the economy is running too hot and consumers are spending too much.
​
​The Fed doesn’t explicitly say it like this, but a sure-fire way to crush spending is to raise unemployment — that’s why it’s bad news when the Fed sees more and more Americans joining the workforce each month.

In other words, central banks sometimes try to coax the economy into recession in order to reign in spending and bring inflation back to their target figure.

They expect unemployment to rise. But, in terms of what happened last week:

61,000 new jobs ain’t enough

On Friday, August 2, the Bureau of Labor Statistics reported that the US economy added 114,000 jobs for the month of July.

On the face of it, you’d think more than 100,000 new jobs would be a good thing.

That’s 3,225 Americans starting a new job every day of the month.

That’s growth, right? Wrong.

The part of this equation that spooked the markets last week was the gap between economists’ projections, and the reality.

Everyone thought there’d be 175,000 new jobs created.

Instead, they got a 61,000 shortfall.

It’s like when a listed company forecasts its quarterly profits.

They might tell investors they expect to make a billion dollars.

But if they then only make $750M, it’s the $250M shortfall that makes the headlines, not the actual profit.

And this, of course, is in part down to the stock market being a place where people bet on the likelihood of future outcomes.

Hence the fear, panic and swift erosion of billions of dollars in valuations across both stocks and crypto.

A perfect storm, or a bump in the road?

There were other factors driving Monday’s crash.

Japan’s stock market collapsed 12% — the most it’s fallen in a single day for nearly 40 years — wiping out all its 2024 gains.

This came as the Bank of Japan hiked interest rates. This, in turn, impacted the substantial ‘carry trade’ whereby US investors had become accustomed to borrowing Japanese currency at near zero interest rates and then buying up US-listed stocks in a bid for better returns.

Higher Japanese interest rates = less Japan/US carry trade = less money flowing into American stocks.

Add to this a (probably overdue) cooling in the hype around AI and the Big Tech companies that have been riding that wave since late 2022.

And, of course, let’s not forget Warren Buffett, whose Berkshire Hathaway announced it had sold half its Apple shares, preferring instead to boost cash reserves.

The Wall Street Journal published a fantastic piece last week weighing up whether this is a 1987-style market-only event, or the signs of a deeper, broader economic collapse.

According to James Mackintosh:
​

‘Just like today, in 1987 investors were on edge and ready to sell to lock in the unexpected profit. The losses are smaller so far, but lucrative trades have reversed, just as they did for the market as a whole in 1987.‘

Bear in mind that there are people pretty high up in the financial world who are convinced we’re in a secular bull market.

Check the chart below and read more about that here.

​

Thom Benny
@The_Benchmark_
This chart shows the 1950 and 1980 secular bull markets with the 2013 (current) one overlaid:
10:0 PM • Aug 5, 2024
0
Retweets
0
Likes
​

That’s enough heavy charts and quotes for this week.

I’ll leave you with one of the more insightful pieces of coverage I saw about last week’s short-lived (for now) market bloodbath, from satire news website The Betoota Advocate:

​

The story is meant in jest, of course. But make no mistake, the stock market has a lot of people on edge right now.

As always, only time will tell whether the bulls or bears are correct this time around.

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy reading.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Invest in knowledge,

Thom
Editor, The Benchmark

P.S. join me over on X where I post daily about the stories in The Benchmark, plus breaking financial news and events (click below):

​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

August 5, 2024

​

Google: 1998 — 202?

Dear Reader,

Alphabet is undisputedly one of the biggest and most influential businesses on the planet. For now, at least.

The holding company controls a group of tech firms that turn over $300 billion a year — about as much as the Finnish or Portuguese economies, and a fair chunk more than New Zealand’s, where I’m from.

Chief among Alphabet’s subsidiaries, of course, is Google.

Google has dominated the internet search landscape since the turn of the millennium and — for now — controls about 90% of the market.

Alphabet’s campus (source)

I say ‘for now’ because, like all stati quo, Google’s dominance is under threat.

This week’s edition of The Benchmark takes a look at the tectonic shift threatening Google’s place at the top of the tech pecking order.

Because now that the initial hype around artificial intelligence has receded, the reality of this new technology’s deep, permanent disruptive potential is dawning on big tech.

‘Senator, we run ads.’

To understand how Google attained its omnipresence, you have to understand its business model.

When you understand Google’s business model, you can understand why analysts think the company could be in trouble.

In 2018, this happened:

​Source​

Meta Platforms (née Facebook) founder Mark Zuckerberg (pictured above, smiling smugly) answered 84-year old Utah senator, Orrin G. Hatch’s question ‘how do you sustain a business model in which users don’t pay for your service?’ with the now infamous ‘senator, we run ads’.

The Facebook platform, of course, isn’t really free. Nor is Google’s search service. Or its email service. Or its mobile app store. The list goes on.

Alphabet makes about 77% of its money from advertising.

The model is to provide massively useful things to massive amounts of consumers for free, and then capitalize on this critical attention mass by selling it to business customers.

Google’s 90% of the search market equals 90% of the search advertising market. And, again, this dominance accounts for 77% of the parent company’s revenue.

Zooming out, Statista estimates that Google owns about 39% of the total global advertising market.

How long will that last?

The search wars begin

Large language model, or LLM, AI hit the mass market in the form of ChatGPT in November 2022.

Today, you have ChatGPT, Claude, Gemini (owned by Google, it’s worth noting), Perplexity, Bing AI, and more by the day.

And of course AI is hardly limited to chatbot form — it’s transforming pretty much every market and industry.

But where the AI revolution poses a problem for Google’s business is that LLMs mean people no longer need to manually use a search engine.

Hence headlines such as these:

​Source​

​Source​

Why sift through a search engine result page, clicking links and visiting pages to find what you’re looking for (viewing several paid ad placements while you do so)…

When you can get an LLM like ChatGPT to do that ‘manual search labour’ for you, and serve you the exact answer you want in seconds?

One of the signals that Google had prevailed in the early 2000s search engine race, was the company’s name became a byword for searching.

You don’t ‘search’ for something. You ‘Google’ it.

The same thing is happening with AI.

If you’ve not heard it already, it won’t be long before you hear someone tell you they ‘ChatGPT’d it’.

And Google’s search market and advertising market share isn’t just under threat from other companies and their AI tools.

It has, naturally, been forced to join the AI race itself, with its ChatGPT competitor, Gemini.

Which means that one part of Google’s business could soon threaten the part that’s made them one of the biggest companies on the planet over the past 25 years.

And it’s not just Google under threat.

Stack overflow, a tech forum, had its search traffic cut in half once its users realized there was a faster, more direct way to find what they needed:

​Source​

What does the market think of this?

AI sends investors hunting for small-caps

AI, as you probably know, has played a huge role in the so-called Magnificent Seven’s (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla) massive run-up over the past few years.

Take a look:

​Source​

Tech stocks well and truly took the share of the market’s gains.

​NVIDIA even grew to be the eighth biggest country in the world.

Now, it seems, the market is rebalancing a little.

In part, this looks to be about investors feeling that the mania surrounding AI has sent some of these tech giants a little too high.

But also, per the Bloomberg headline below, it seems that AI is creating even more exciting disruptive opportunities at the other end of the market.

​Source​

According to Axios, the Russell 2000 small-cap index spiked by more than 11% over just five trading sessions. The S&P 500 information technology sector sank 8%.

And, small-cap stocks remain well below their 2021 highs.

But the big tech stocks have made new highs for many months, almost forming their own market.

Watch this rotating, evolving, potentially status-quo shattering, space.

Quote of the week

‘Innovation accelerates and compounds. Each point in front of you is bigger than anything that ever happened.‘

— Marc Andreessen

That’s it for The Benchmark this week.

Forward this to someone who’d enjoy reading.

If one of our dear readers forwarded this to you, welcome.

Until next week!

Thom
​The Benchmark

P.S. join me on X where I post daily investing insights and breaking financial news (click the banner below) ↴

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All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.

July 29, 2024

​

Houston, we have a software problem

Dear Reader,

On December 31, 1999, the world stood at the brink of ruin.

The computers that ran the planet could only record the date down to two digits.

Instead of 1999, it was 99, and it couldn’t go any higher.

The fear was that when the new year rolled over, the machines wouldn’t be able to compute the new date correctly.

Everything would stop. The myriad systems the computers supported — electricity, transport, banking, everything — would collapse on the stroke of midnight, plunging the world into a new dark age.

The Year 2000 Problem, or Y2K, of course, amounted to very little.

A handful of quirky consequences cropped up, like this welcome screen display at a school in France:

Party like it’s 1900 (source)

It’s perhaps difficult to believe we could have been so worried about a couple of zeroes collapsing everything.

But this month, the world got a reminder of just how reliant we are on computers.

Channel File 291 and the blue screen of death

Texas-based CrowdStrike is a large cybersecurity firm that’s played a pivotal role in tracing and exposing some of the highest-profile cyberattacks of the past decade.
​
On July 19, they pushed a software update to clients all over the world.

Airlines, hospitals, banks, emergency services.

The update package, to CrowdStrike’s Falcon Sensor product, included a change to a configuration file called Channel File 291.

Channel File 291 doesn’t have quite the same ring to it as Y2K, or the Millennium Bug, but it wreaked about as much havoc on the world as we all feared back in late 1999.

It was this part of the Falcon Sensor update that triggered a ‘logic error’.

The error crashed the entire Windows operating system running on all the machines in question (while everyone working in cafés has a MacBook, the entire commercial world pretty much runs on Microsoft).

Thus, the world got a critically high dose of this:

The blue screen of death sweeps the West (source)

All the machines running the CrowdStrike product entered a ‘bootloop’, rendering them completely unusable.

The scale of the failure meant that commercial flights, television broadcasters, banking and healthcare services and even emergency call centres ceased to operate.

For millions and millions of people, the digitally-dependent world froze.

The disruption was vast and severe.

Cybersecurity consultant Troy Hunt called the incident the ‘largest IT outage in history… basically what we were all worried about with Y2K, except it’s actually happened‘.

Twenty-four years post Y2K, we were finally living the nightmare — all because of a file in a cybersecurity update package.

The damage wasn’t limited to the 8.5 million PCs and the many-times-more people trying to travel, or bank, or access healthcare or emergency services on July 19.

Businesses relying on the crashed computers took heavy losses.

​Source​

By the end of that day, CrowdStrike shares (listed on the NASDAQ) were down 11%.

At the time of writing, they’re down 32% from the all-time high they’d reached just a few weeks prior to the blue screen crisis.

Still, CrowdStrike is trading nearly 7% up for the year. Let’s see if that lasts.

CrowdStrike share price

And the fallout extends farther still.

Elon Musk shared on X that CrowdStrike has been ‘deleted from all our systems‘:

​

AirAsia CEO Tony Fernandes demanded answers and compensation for millions of dollars in revenue.

CrowdStrike’s competitors seized on the company’s failure and the resulting PR fallout to promote their own products.

The cyber criminals companies like CrowdStrike aim to guard against started sending phishing emails purporting to be CrowdStrike support and impersonating CrowdStrike staff in phone calls shortly afterward.

So the CrowdStrike crash reverberated far beyond the blue screen of death and the share price bloodbath.

Eliminating single points of failure

Mike Jude, research director at leading market intelligence firm International Data Corporation, reckons all of CrowdStrike’s competitors face the same vulnerabilities.

Cybersecurity firms have to push updates frequently. Otherwise, they risk falling behind new threats, which emerge constantly in the world of cybercrime.

​

‘This outage illustrates just how dependent we have become on cybersecurity solutions.’

— Mike Jude

Goldman Sachs analysts wrote that customers generally understood that it’s a question of when — not if — these incidents would happen.

The tone of resignation probably stems, in part, from the centralized nature of the CrowdStrike network.

One update. One product. Same operating system. More than eight million machines — and many times more people — impacted.

So what’s the alternative?

​

Many in the crypto and blockchain communities were quick to point out that over-reliance on centralized digital networks creates precisely these types of vulnerabilities.

One minute, you’re running your check-in counter, or bank, or hospital system like normal, and the next you’re facing the blue screen of death and unprecedented chaos and confusion.

According to SunnySide Digital founder and CEO, Taras Kulyk, the blockchain industry’s infrastructure of choice, Linux, offers immunity to such vulnerabilities.

According to Kulyk, Linux operates on the same principles as Bitcoin and the wider blockchain world; privacy, decentralization and individual empowerment.

Bitcoin ‘was completely unaffected because most, if not all, Bitcoin miners are using Linux-based frameworks‘, Kulyk said in an interview.

‘Banks globally have been shutting down because of this server issue, and yet, Bitcoin keeps hashing.’

Pro-crypto Senator Cynthia Lummis also noted that blockchains remained up and running during the CrowdStrike saga.

​

Vires in Numeris means ‘strength in numbers’ — a reference to the thousands of validator nodes that validate Bitcoin transactions.

Decentralization is a key promise for cryptocurrency and blockchain.

Decentralization in technology aims at providing a ‘trustless environment’ — one in which the network’s members reject any altered or corrupted data.

This form of network can also improve data reconciliation, reduce points of weakness, and reduce the likelihood of catastrophic failure — such as that inflicted by Channel File 291.

Quote of the week

‘Never trust a computer you can’t throw out a window.’

— Steve Wozniak

That’s it for this week’s The Benchmark email.

Forward this to anyone you know who enjoys growing their investing knowledge.

If someone forwarded this to you, subscribe here.

Invest in knowledge,

Thom
Editor, The Benchmark

P.S. join me over on X where I post daily about the stories in The Benchmark, plus breaking financial news and events (click below):

​
​Unsubscribe · Preferences​

All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.