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Brandon’s Charts of the Week

Posted: Brandon Arns

Every week, we read a TON of information. Blogs, articles, research papers…it’s our job to be informed about what’s happening in the market, economy, and society in general. Most people don’t have the time to sort through so much information, so we’ll do it for you. Every week, I will post some of the best charts, graphics, tweets, etc, that I find and put it here in a quick, digestible format. Enjoy.

 

This week, Forbes released their 50 most valuable sports teams of 2019. For the 4th year in a row, the Dallas Cowboys sit at the top at about $5 billion.

 

 

Every team in the top 50 is now worth at least $2 billion. In 2012, Manchester United was the only team worth that much.

 


 

This next chart is important. The Federal Reserve is expected to lower interest rates at least once before the end of the  year. In theory, this should be stimulative to the economy and as a result many investors believe that it’s positive for stocks. The thing people miss is WHY the fed would be cutting rates. The last two times they did, it was because the economy was headed into recession, which was followed by two 50% crashes in stocks.

 

 

Diversification to me is one of the most crucial elements of portfolio management. It is also one of the most misunderstood. Many investors view diversification as simply owning “lots of stuff,” but it’s so much more nuanced than that. The charts below are from a blog called Smoke and Mirrors from Demonitized, which highlights this issue. There are two portfolios, one of which appears to be quite diversified, while the other owns a single asset class.

 

 

 

However, as you can see in the chart below, the portfolio’s are nearly identical. In fact, the first portfolio was riskier and had a worse drawdown in 2008 (losing ~55% vs. 51%). True diversification means understanding the correlations between assets and the underlying risk factors that drive them.

 

 

Mauldin Economics has a great weekly newsletter about his views on the economy. In this week’s, he shows just how slow growth and productivity have been, despite the Fed’s best efforts to stimulate the economy.

 

 

The orange line from above is wage growth. Shown another way, the visualization below shows how we compare with the rest of the world when it comes to real minimum wage.

 

 

Below are the 40 largest University Endowments from 2018. Texas is well represented with both The University of Texas and Texas A&M in the top 10.

 

 

Endowments manage money very differently than individuals do, for a variety of reasons. Below is the asset allocation of the endowments, broken down by their size. As you can see, there is a huge difference between how the largest and smallest endowment’s invest, especially in regards to their use of alternative strategies (private equity, real estate, hedge funds, etc.).

 

 

This differentiated investing has served the larger endowments well in the last year. However, in the last 10 years the difference has been negligible. None of the endowments have been able to beat the S&P 500 over the last 10 years, but this isn’t really surprising. It’s been a great period for U.S. stocks, and little else has been able to add value over this period. My bet would be on the Endowments to outperform the next 10 years.

 

 

Beyond Meat (BYND), which makes veggie-based meat substitutes, IPO’d in May at $25. As of this writing its price is $222, nearly an 800% gain in 2 months. This crazy price movement has given the stock a lot of notoriety. Some context of how crazy the price seems to be is reflected in the tweet below.

 

 

Several baseball teams started putting nets up around the foul line recently. Injuries (and in a few cases deaths) to fans are starting to accumulate due to being hit by foul balls, so it may not be long before every stadium puts up safety nets. If you’re going to a baseball game and sitting in zone’s 4 or 5, pay attention! Study by FiveThirtyEight here.

 

 

And that’s it! I’m going on vacation next week, so no new charts of the week until I get back most likely. If you enjoyed, please share and subscribe. Thank you!
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