On Aug. 5, we awoke to a market upside-down. Japanese stocks, so strong this year, had crashed, literally crashed, down 12%, a hideous decline, worst since 1987. Oddly, there was nothing wrong. The yen had strengthened, forcing investors who had borrowed yen to buy our stocks and others around the world to put up more capital. The margin calls of the traders who had borrowed the yen reverberated around the world. It’s hard to recall what the market looked like three weeks ago, but it is important to recognize several things: (1) The European markets led us down, we lost as much as they did down about 3%; (2) The Magnificent Seven mega-caps — we own six of them: Apple , Amazon , Alphabet , Meta Platforms , Microsoft , and Nvidia — declined roughly as much as the rest of the market; and, (3) except Nvidia, it dropped 6.4%, leading the big caps and calling into question its standing in the trillion dollar market cap club. On top of that, Warren Buffett had sold nearly half of his Apple position without saying a word about it. It’s a trade that had many rankled but no one wanted to say it out loud: Buffett had recently told us at his May annual meeting that barring something dramatic happening, he was happy with Apple as his largest position. Given the decline in Japan, you had to wonder whether something dramatic had happened. Otherwise, if you didn’t know any better, you wanted to question whether Buffett was selling when he was praising the stock. I think that it’s more of a case where you can’t hold anyone to their “word” about stocks, because everyone has a right to change their mind, including Buffett. Still, if you look back to that Monday, you have to wonder whether Nvidia and Apple are two stocks with no real backbone in them. Nvidia dropped from $107 per share to $98 in two days. Apple fell from $219 to $207. Both are Club stocks. They are our top two holdings, which I have long designated my only “own them, don’t trade them” stocks. Just a few weeks later, however, Apple was back at $226, though still down from its $237 high on July 15. Nvidia way off its high of $140 on June 2. To me, that day was a painful reminder of how people simply don’t trust, not the companies, but the stocks. That Apple could get knocked down so severely on Buffett not even making a comment that he felt it was prudent to scale back and that Nvidia could be regarded as a total pariah down at $107 after being loved in the mid-$130s for almost a full month, showed you that underneath these stocks was nothing but quicksand. The press coverage at the time of the yen-inspired selloff was largely about how tech was overvalued and how the Federal Reserve was still on the fence about interest rates. We have the latter pretty much a done deal, but what about the former? This is the week where we find out if all the torture of Nvidia shareholders was worth it, when the artificial intelligence chipmaker reports earnings after Wednesday’s closing bell. We know what we…
Read More: Why you must keep faith in Nvidia even if earnings fail to wow