There is a future, but we don’t know what it holds. Seeking inspiration from the legendary investor Howard Marks, we will try to focus on a few little things we think we know and avoid all the rest: things like CPI, interest rates, economic cycle, pandemics, etc.

The only thing we know is that liquidity has been plentiful and interest rates have been ultra- low for the past decade. This situation is over, money has a cost and interest rates are back in positive territory in the foreseeable future. The implication for equity investors is simple: we need to be more careful with cash, balance sheet and operating margin. Until recently, it was, in a way, rational to be short cash and long debt. It could make sense to run a business at a loss. It is not the case anymore and it has serious implications investment.

“Only when the tide goes out, you know who has been swimming naked” and you need a bath suit, and in that case, it means a profitable, cash-generating business. The growth story in technology is still alive. But we are facing a tough road and it is wise to start the next stage with a full tank. That is an issue, or could become one, for many unprofitable technology companies. For those with high margins and strong balance sheet, like Apple or Microsoft, the future sounds fine. We also know that despite short-term cyclical headwinds, the semiconductor industry will grow significantly in the next decade with new key demand drivers such as smart mobility, smart energy, artificial intelligence, cloud.

The second thing we know is that many of these names are not expensive anymore, some are outright very attractive compared to competitors and looking at their own history.  For example, Taiwan Semiconductor Manufacturing’s (TSMC) Price Earning Ratio reached a 10-year low in September at 11X, not demanding for a global leader with a 68% Operating Margin. Warren Buffett knows that as well and just played by the book when he decided, last month, to buy a $4bn stake in TSMC.