Dear fellow investors,
The most famous “Hail Mary” in American football history happened in 1984. On the very last play of the Boston College football game, an undersized quarterback named Doug Flutie threw a bomb into the end zone to teammate Gerald Whelan. Boston College had won the game!
We are very late in one of the greatest growth stock investing games in history. Technology, an investment sector with a few huge winners and mostly flame-out startups, has been on a roll dominated by the largest companies in the sector. These largest wide-moat monopoly stocks have feasted on nearly uninterrupted momentum.
However, this tech stock investing era included the cheapest interest rates in my lifetime, which came to a screeching halt in late 2021. The U.S. Federal Reserve Board recognized that inflation wasn’t “transitory” and raised short-term interest rates by 500 basis points over 18 months. The result was a bear market that hit tech stocks very hard in 2022.
As we argued in a recent missive, we are now in a bear market rally led by the same FAANG stocks which were at the forefront of the prior bull market era. This is the era of financial euphoria which Charlie Munger called the biggest in his career (75 years). But just like Boston College and many other teams over the years, they are attempting a “Hail Mary” to recreate the unmitigated faith in their common stocks. This long-shot/late-game pass is artificial intelligence and is known in short form as A.I.