Winners vs Losers

 Peter Lynch is famous for the quote “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.” This captures the problem with rebalancing into stocks that have fallen to maintain stocks with a certain percentage of a portfolio. However the S&P 500 is market cap weighted so it doesn’t need to rebalance based on price changes; it only needs to rebalance based on adding (winners) and removing (losers) stocks and changes in share count. The success of the S&P 500 is a great example of the value of that quote.

Terra crypto collapse

 The TerraUSD, or UST, stablecoin broke a $1 peg and fell to under $0.30. UST is an algorithmic stablecoin that maintains its value by increasing and decreasing the supply of another coin, Terra Luna. The Terra Luna quickly dropped from over $100 to fractions of a penny as its value collapsed with a supply increase from 340M to 6.5T. The Terra anchor protocol paid 20% APY on UST, and drove demand for the UST. Ultimately the peg couldn’t be maintained as UST size grew.

Link: WSJ

Tech M&A

 Five months into 2022, the Nasdaq-100 index is down over 25%. Tech stocks have been hit the hardest, which should lead to mergers and acquisitions by big tech. Elon Musk may take Twitter private and the CEO of FTX bought a big chunk of HOOD.