Year-end 2023 Comments

Have a great 2024, amigos.

S&P 500 Snapshot: Index Finishes 2023 Up 24.7%

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Just using a simple 50 day/200 day moving-average trigger, we all should’ve gone long in early February (and then the index would’ve immediately corrected about 9%.)

I personally was long all year, as usual (I haven’t shorted since 2009¹ - cash is my short,) and I underperformed in 2023, after killing it in 2022, and that’s ok.

I don’t own any of the Magnificent 7, except Apple - indirectly - so I tend to zag when everyone else is zigging. I’m clearly not a mo-mo investor. I also have no angry clients calling me on the phone, never panic, and am reasonably patient.

I’m not very diversified, and don’t do much “trading” at all. That’s why I’ve never tried to give any hot investing tips here (you got any??)

If I did a stock-tout newsletter everyone would get bored to death (and probably go broke.)

I generally wait and watch, until - maybe it happens once or twice a year - when everyone suddenly decides they don’t love stocks. I’ll do some buying then. Usually what I buy drops more, so I’ll add to what I like, another cardinal sin of investing. Knowing when to sell is harder, and I have nothing to add there.

The last time I was feeling like things were really interesting was late-September 2022, near the October 2022 lows, and it’s been to the moon ever since. You can see here though that this latest run (until the last month) has been massively led by the Nifty-50, I mean the Magnificent 7, hence my underperformance:

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Back to that “Bullish Percent Index” I noted in September 2022, it’s at 81% today, up from 11% in early-October 2022. Everyone loves stocks now.

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For 2024 and beyond, I continue to maintain my long-term stance that stocks will fluctuate. As I said in the comments here recently, I find it hard to believe that the biggest mania in the history of the universe - so far - ends with barely a 25% index drop (having lived through TWO 50%+ SPX drops just in the past 20 years.) A big drop wouldn’t surprise me, but neither would a big pop. I know, I’m no Jim Cramer.

Also, housing prices are remain absurd, although that doesn’t mean they won’t get more absurd.

My current favorite pundit on housing is Melody Wright, who reminds me of some of the citizen journalists crying in the wilderness about the housing mania before this bigger housing mania, in the mid-2000’s. I called her today the “Real Estate Paul Revere,” and she gets a lot of grief for doing what she does (as do I on occasion. I think it means maybe you’re doing something right. Most people are very kind though.)

Maybe we could get back to less absurd house prices if we didn’t have this $2.4 TRILLION gorilla in the room:

And I’m seeing NFT promotions again. This is not a bottom.

Hard to fight that printing press, which I think in future years will be put into overdrive, so nominally it’s hard to ever be bearish. The Venezuelan stock market has done great!

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I saw this mentioned today:

I always greatly disliked Trump - or any President - tying himself to the mast of the stock market.

I remember this nonsense before the 2016 election:

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So tiresome. Here’s how stocks did during Trump’s Presidency:

Somehow we survived.

Despite the Fed’s recently rejiggered numbers, for most Americans, the stock market is either irrelevant to their lives, or insignificant.

The overwhelming amount of stock market wealth in America is held by the top 10%, and especially the top 0.1%, yet if you watch CNBC or Bloomberg you’d think it was the #1 most important issue for 330 million Americans. It’s not.

Old Fed Numbers (archived from 9/29/23):

Corporate equities and mutual fund shares by wealth percentile group

“New” Magic Fed Numbers. Same quarter and year:

Corporate equities and mutual fund shares by wealth percentile group

The Fed gnomes can monkey with the numbers as they always do (always to make things look better), but the song remains the same:

The Cantillon Effect

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Gold

As for gold, I’m with Jared Dillian:

“I am a long-term holder of gold. I don’t trade it. If I traded it, I would be broke.”

I do trade gold miners from time to time, and have had success doing that over the years. Mining stocks are for dating, not marrying.

I like to look for sentiment extremes in this (and any) sector.

e.g., Back in 2015 ALL gold miners were hated (0.00% bullish charts).

You may remember this fun period, when gold was nearing $1,000:

As for the dollar, I still accept them. The only thing I am 100% certain of (besides death and taxes) is that a dollar will buy less overall for me over time. Commodities in general - I am impressed with how the Horizon Kinetics guys look at the them, and inflation in general, so you can peruse their website on that.

As Jim Grant says:

"You never regain the purchasing power you have lost to inflation. There’s no such thing as deflation in modern monetary life.”

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Rates

Still quite an inversion we have here:

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Of course, historically, the real problems don’t start until after we being to un-invert. Be careful what you wish for.

U.S. Treasury Rates

We’ve finally - after so many years - normalized rates - and now everyone expects us to drift back to abnormality 7 times in 2024! Yay!

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I set up this Substack in December 2020, and slowly updated it, mostly during the various times I’d be “permanently suspended” from Twitter.

2023 was the year I started posting regularly, especially during my May-July Twitter suspension, when I thought I was done for good there.

I also began doing podcasts in 2023, starting with the inestimable Grant Williams (and Steph Pomboy!) I enjoy doing those and would love to branch out into a variety of topics, with hosts from a variety of perspectives.

Paid Substack subscriptions started in 2023, and if you’re reading this you are one of the subscribers, who I greatly appreciate (or you’re cheating somehow, but welcome anyway.)

On the advice of friend of the show Marc C., I don’t give nearly as much free stuff as I used to, although in my archive is a vast number of free posts. Periodically I may also “unlock” older posts for all to see.

I have today over 16,400 total subscribers on Substack, and about 4% of them are paid (you guys.) It helps make what I do seem more worthwhile.

I’m reminded of a great article by PdxSag:

“I think maybe 14% of the people in the world are capable of thinking for themselves, and 2-5% of standing up against petty tyranny."

I figure (hope) my paid subscribers are part of that 2%-5%!

I am constantly amazed at the background and quality of the people who seem to like what I do here and on Twitter. It’s sobering to be able to communicate with some of the smartest investors in the world.

Thank you for your support (and for what you have taught me, in the comments and emails).

Have a hopeful and healthy 2024.

“It would be wonderful to die sane.”

Frank Sheed

1. My last two shorts were Downey Savings and Indymac. On rare occasion I may buy puts as a hedge against capital gains.