Tech stocks close out best first half in 40 years; The global stock market rally isn't as narrow as you think; Chris Brown's June letter; My friend's frightening experience with THC; Greetings from Italy

1) Near the end of 2022, a year in which the Dow, S&P 500, and Nasdaq declined roughly 10%, 20%, and 30%, respectively, I told my readers not to panic.

In my October 12, 2022 daily, I noted that "though most people fail to understand this, declining stock prices are good news for long-term investors. Warren Buffett explained why in his 1997 letter to Berkshire Hathaway (BRK-B) shareholders":

If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef?

Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?

These questions, of course, answer themselves. But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?

Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the "hamburgers" they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

In particular, I recommended shares of the beaten-down tech giants, especially the most hated one of all, Facebook and Instagram owner Meta Platforms (META).

META has been my favorite stock ever since I pounded the table on it in six consecutive e-mails from October 31 through November 7, when it was around $90 per share (see summary in my March 30 e-mail).

My bullishness proved prescient in the first half of the year, as the tech giants powered the Nasdaq to a 32% gains, its best first half in 40 years: Tech stocks close out best first half in 40 years, powered by Apple rally and Nvidia boom. Excerpt:

• The Nasdaq jumped 32% in the first six months of the year, its best first half since the tech-heavy index climbed 37% in 1983.
• Chipmaker Nvidia led the way, riding the artificial intelligence boom to a 190% rally.
• Apple jumped 50%, surpassing $3 trillion in market cap, while Meta and Tesla both more than doubled.

After such a big first half, I can't say I'm as bullish as I was coming into the year, but I'm still optimistic that stocks will finish higher by year-end.

2) Many skeptics highlight the fact that the market's gains had little breadth – for example, the 10 largest S&P 500 companies accounted for 76% of the entire index's 16.9% first-half gain. But, looking more broadly around the world, this wasn't as true globally, as this Financial Times column notes: The global stock market rally isn't as narrow as you think. Excerpt:

Globally, the AI narrative doesn't reflect what has become a fairly broad rally. If you assign equal weights to the MSCI Europe, Japan and the US indices, this is the best start to a year since 1998, Lapthorne notes. In dollar terms the Nikkei 225 is off to its best start since 1999.

The types of stocks driving the international rally are also very different, writes SocGen's lead quant. In Europe and Japan, value stocks have powered the gains, while in the US it's the usual growthy suspects.

3) In Thursday's e-mail, I highlighted Michelle Celarier's fabulous article in Institutional Investor about my friend Chris Brown.

Chris runs Aristides Capital, which is "the top long-biased equity hedge fund of its age (or older) based on risk-adjusted performance": Hedge Fund Manager Chris Brown Is Coming Out – and Fighting Back.

He just released his June letter to investors, which you can access here. Excerpt:

June was a much easier environment for us than May. Factor performance was kinder to our strategy, and smallcap stocks broadly participated in a rally. Although arbitrage was a particularly big winner for us, five of our six strategy buckets generated positive returns and positive alpha; the only laggard was our single-name short book, which was dragged down by several irrational rallies in highly-shorted, retail-loved names. Oddly, a couple names in our short book went against us due to massive buying by, wait for it... retail South Korean daytraders (lol), which goes to show you really never know what bizarre sorts of risks you might face when shortselling securities...

As any person who has seen the fanatical investors long AMC, or MMTLP, or CYDY, or
NWBO, or countless other cult stocks can unfortunately attest, it is extremely hard to deprogram people from cult beliefs. The human brain is such that facts do not matter when your "enemy" is the one saying them; to the contrary, research shows that exposure to "fact checking" or debunking from an entity believed to be of an opposing viewpoint actually solidifies belief.

4) One of my closest friends, who happens to be a doctor, had a frightening experience recently and gave me permission to share this anonymously:

I was at a family event over the weekend and unknowingly ate two chocolate candy bars laced with THC, the main active drug in cannabis. I estimate that I ingested 66 milligrams, far above the 1-5 milligrams that would be typical for a beginner.

It really affected me for 36 hours. The first 24 were especially scary because I had significant psychomotor dysfunction and spent the night in the emergency room as we tried to figure out what was happening.

At one point I had uncontrollable, shaking of my arms and legs, and my mouth, even when I was drinking water, felt dry.

I'm fine now, but I think the rest of my family will take a week to recover!

Please let everyone you know who has any THC-laced candies, gummies, baked goods, etc. to clearly label them and put them in a place people cannot casually get to.

I have no idea exactly what product he consumed, but when I Googled "THC chocolate," I found this image, so it's easy to see how someone could unknowingly ingest the drug:

5) Greetings from Trani, Italy! I flew to London Monday night and went to Wimbledon yesterday with my college friend Inci, whom I last saw at the tournament a year ago. Here's a picture of us:

Sadly, 75 minutes into a great match between Tsitsipas and Thiem, it started raining and never let up. After nearly three hours of waiting for the weather to clear, it instead started pouring and we finally gave up (we didn't have tickets to the two covered courts). Disappointing to be sure, but it was great catching up with Inci. 

Then, this morning I flew here for the annual Value Investing Seminar that my friend Ciccio Azzollini and I co-host. Joining us this year are my buddies Glenn Tongue, Gabriel Grego, Paco Carrillo, (Stormin') Norman Rentrop, and many others.

In future e-mails, I'll share the most interesting ideas and presentations I hear over the next two days.

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.