A disciplined weekly review of the forces shaping risk and return.

Key Points

• Gold is up another 12.5% this week alone, bringing the 5 year change to slightly over 200%.
• Durable goods up 5.3% MoM
• Federal Funds Rate in at 3.75%, helping to curb inflation.
• Intel (INTC) recently posted earnings with Free Cash Flow per Share positive for the second quarter in a row.
• What I learned in the Marines: staying calm in chaos.

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Markets

• Gold continues to rip with 12.5% gain over the past week and now a 200% gain in 5 years.
• The S&P 500 is now leading the Nasdaq in 5-year change.

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Macro

Durable Goods

Up 5.3% Month over Month (MoM):

Durable goods orders are new orders for manufactured products expected to last three years or more. The report also includes shipments, inventories, and unfilled orders. Since the headline number can be volatile (especially from transportation/aircraft), analysts often look at orders excluding transportation (“core”) for a clearer read on underlying demand.

Federal Funds Rate

The federal funds rate came in at 3.75%:

I know inflation is a concern, as well as the issue of an independent federal reserve, but that’s a discussion for another time.

For now, inflation gets an impasse as rates stay somewhat elevated at 3.75%.

So What?

I think the federal funds rate is just right for now, and that Jerome Powell is doing a fantastic job. Inflation is still being addressed, GDP is growing, durable goods orders are increasing. I think this is another week of a strong signal for the economy. I’m still warry of the unemployment rate, however. People are starting to feel the effects of higher rates.

It was a slower week with major economic data releases. We’ll see more data come out in the following weeks.

I’m not sure what to think about gold performing so well in the last year, other than a loss of confidence in the dollar. However, I am not concerned.

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Equities

Intel Earnings

Intel had screaming earnings with a surprise to the upside. I thought it would be appropriate to show their Free Cash Flow per Share (FCF/S), as it is now their second positive quarterly FCF/S in a row. This hasn’t happened since 2022:

Intel has been in the spotlight recently for their turnaround efforts and investments from the US, NVIDIA, and others. It’ll be interesting to see if they continue to increase FCF/S or if they run into issues.

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Education

Free Cash Flow per Share (FCF/S)

Last week I chatted about Free Cash Flow (FCF), which is my favorite metric. This week we’re expanding it to Free Cash Flow per Share (FCF/S). Remember: FCF is what cash a company has left over after reinvesting in itself.

Dividing Free Cash Flow by Shares Outstanding is a great way to boil down the cash results from each share of the company. It’s a great way to answer the question “if I buy one share, what do I get?”

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Wealth

Concentration Risk

It’s fun on the way up, and brutal on the way down. The thing is most people who are overly concentrated in their portfolio are playing 2 games:

1. Build Wealth
2. Build Speed —> (Because concentration is the shortcut, until it isn’t)

Concentration risk shows up in all kinds of ways. It’s usually a great idea to ask “what might go wrong?” instead of “what if everything goes right?”

Concentration risk reduces antifragility¹ on the path of wealth creation.

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Quote of The Week

Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.

Peter Lynch

The thing with anticipating corrections is the investor needs to be lucky twice: getting out and getting back in. It also sets a nasty precedent that keeps people glued to consuming more “news”.

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Michael’s Corner

Calm in Chaos

One of the best lessons I learned in the Marines was to stay calm and focus on the job that was in front of me, no matter what else was going on: noise, stress, tiredness, cold, hungry, exhausted, or scared. At the time it was a pre-requisite, and now it’s an invaluable tool in my toolbelt.

The other great thing was the fact that the Marines trained us in what our job was, and they trained us so well that our confidence in that job was high.

Of course, things didn’t stop there. There was a cadence of alternating between two things: doing and chasing mastery. When we weren’t doing our jobs, we were doing everything we could to get better at our jobs.

This helped strengthen everyone’s ability to stay calm in chaos, because we were all chasing absolute mastery.

Fast forward 15 years and the principles are still the same:

• Stay calm in chaos
• Focus on my job (serving others)
• Pursue mastery

One of the greatest things about finance and investing is there is no shortage of things to learn, people to help, and areas to improve.

There is also no shortage of market panic every few years.

I hope you can stay calm with me on the next downturn.²

Have a great weekend,

— Michael

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Disclosures

This newsletter is provided for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Walsh Financial is a Registered Investment Adviser.

The content is general in nature and is not intended to be advice tailored to any particular person, circumstances, or investment objectives. Any references to individual companies, securities, sectors, asset classes, market indexes, commodities, or economic and market conditions are for general commentary and discussion only and should not be construed as a recommendation or a call to take any specific action.

This information is not intended to provide, and should not be relied upon for, accounting, legal, tax, or insurance advice. Readers should consult with their financial advisor and/or other qualified professionals regarding their specific situation and the then-current applicable laws and rules before making any financial decisions.

All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. This newsletter may include opinions, projections, or forward-looking statements (including views on economic conditions, market trends, or broad investment themes). Such views are as of the date published, may change without notice, and there is no guarantee that any opinions or forecasts will prove to be correct.

Information is obtained from sources believed to be reliable; however, Walsh Financial does not warrant its accuracy, completeness, or timeliness.

Indexes are unmanaged and cannot be invested in directly.

For additional information about Walsh Financial, including our Form ADV and important disclosures, please visit the SEC’s Investment Adviser Public Disclosure (IAPD) page at https://adviserinfo.sec.gov/firm/summary/337759.

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Footnotes

1. Antifragility is a term coined by Nassim Taleb in his book. I highly recommend it: https://a.co/d/3gZLIw1 ↩︎
2. If you received this by email, just reply and I’ll get back to you. ↩︎