James Klempster reviews a week of milestones: NVIDIA, whose market cap is around the same size as France and Germany’s main stock markets combined, reported results, Bitcoin broke through $100,000 and the war in Ukraine reached a potential new stage.
Hello, it's Friday 22nd November. I thought we'd pause for a few moments and reflect on what's been going on in markets this week. Overall, markets have ground up this week despite having a number of interesting bits of news flow thrown at them. The obvious place to start is micro news rather than macro news. It's company specific. It is Nvidia's results.
Normally we would not bother talking about a particular company's results in these sorts of videos, but such is the scale of Nvidia that it straddles the micro and the macro. Let me give you a flavour of how big it is. It has a market capitalization of $3.6 trillion, which is big enough to be meaningless in any conventional sense. Let me bring that to life for you. The size of Nvidia's market cap is roughly the same as France and Germany's main stock markets together, the CAC and the DAX. Combine those two indices together and you more or less have the same size as Nvidia, such is the scale of that business. It's quite extraordinary when you think about it in those terms.
Its results were pretty strong over the quarter. It had decent revenues. Still, there was a bit of disappointment coming in from the forecast for next year being a little bit weaker than perhaps was hoped. So there was a bit of a pause in the price over the course of the week. That's not a bad thing though as we've said before in these videos. It's a big stock. It's looking richly valued. A period of consolidation that lets the earnings catch up with the price is not necessarily a particularly bad thing.
Bitcoin close to record high
Otherwise, you may have seen the news that Bitcoin is getting close to being valued at $100,000 per Bitcoin. That'll be the highest it's ever been and a milestone obviously, a round number. Everyone likes milestone round numbers. It's something to get excited about. We've spoken about Bitcoin before in these videos and more generally, cryptocurrencies don't really strike us as a genuine investment. It feels more like speculation. There's nothing fundamentally valuable about it. We can't measure cash flows. We can't get a feeling for what its intrinsic value is. For us, if you fancy punting on it, that's something you can consider but don't think of it as a meaningful investment if it goes up in a rapacious way. It has gone up over the last few months and has certainly been catalysed by the Trump trade. If it goes up at that rate of knots, it can potentially go down at a similar rate of knots as well. So we don't think of it as a fundamentally driven investment.
Geopolitics are hard to predict
One fInal thing to reflect on geopolitics. We've had a number of things that are causing some concern, some volatility in markets and a bit of a drift into safe havens such as gold, the Swiss franc and German bund, which have been seeing support from a couple of things this week.
The first one was the severing of a couple of undersea cables, which seems unlikely to have been an accident and therefore an act of agitation by somebody. And then the other one, the one you have no doubt read about as well, which is the increase in the use of larger and more substantial weapons in the Russia-Ukraine conflict.
As always, we say in these videos regularly, geopolitical events are often tragic from a humanitarian perspective and difficult to predict, and so we would rather not make a strong claim to be able to predict these sorts of things or have any ability to forecast what's likely to happen. But clearly, it seems as though because Joe Biden's on the way out and it is presumed that president-elect Donald Trump will have a different stance on that conflict, it seems as though we're accelerating some of the aid and the permissions that were being held back for Ukraine, getting them in before Joe Biden's presidency ends.
We might well see a bit of a volatile end to the year if these sorts of escalations continue. At the moment, it's nothing to cause alarm in terms of the progress of markets. It's more a case of it being a source of substantial noise potentially. But again, to think about how you have less exposure to these sorts of risks, we come back to our old friend diversification. We've talked a lot about diversification in these videos, having lots of different drivers of returns in portfolios and having that distribution of different asset classes that will move in different ways in response to news flows such as these. So have a long-term perspective, keep a calm head and remain diversified in your portfolios.
That's it from me. Have a good weekend when you get there, and we'll see you next time.
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