Thanksgiving Thoughts

Dear Mr. Market:

Aside from extending our warmest wishes to you for a Happy Thanksgiving, we want to remind you that there is something else happening this time of year. We’re entering the strongest part of the year for the stock market as well as one that historically has the best chance to surprise everyone to the upside now that the midterm elections have passed.

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Head Nodders and Recency Bias

Dear Mr. Market:

“In the business world the rearview mirror is always clearer than the windshield.”

Everyone following the markets is aware that we’re dealing with global economic stresses, a bottle necked supply chain, geopolitical tensions, 40 year highs with inflation, rising rates, and literally the worst start to a stock market year since 1970. It’s got the entire crowd nodding their heads in agreement that these are some brutal times. We’re also clearly in an environment with much groupthink and division…but more on that later.

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Bear Market

Dear Mr. Market:

Simple title.

Simple reality.

That’s exactly where we’re at right now. We’re not going to wait for the financial media to announce it or tell us that it’s only a bear market if we officially drop -20% or more. The intent of this article is to explain not only what a real bear market is, and how this one has behaved differently, but also what to do next.

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The Stock Market Indicator that you won’t hear about…

Dear Mr. Market:

We’ll open this letter to our friend “Mr. Market” by stating one thing that will be very obvious in six to 12 months. 90% of people reading this article will have gotten it wrong. It’s not your fault though…it’s the way our minds are wired and the content we’re constantly being fed.

Regardless of your current market strategy it’s times like this that will test the most patient of long-term investors. We’ve written about this countless times but no matter what the sage counsel or stock market adage is, you should be rattled right now. We could be like most “perma-bull” financial advisors and try to data mine for all the reasons to stay calm or share positive anecdotes to convince you that now is the time to invest; it won’t matter though. Putting “lipstick on a pig” won’t help you nor the current market environment. Bad news and reasons to panic will be the headline for the weeks to come and there will seemingly be no safe place to hide.

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31 Reasons to Sell Stocks… (or maybe not)

Dear Mr. Market:

Have we started off the year with enough things to worry about? The 2020s have seen more than any horror script one would ever want to draw up. We’ve had an unprecedented global pandemic, a massive stock market crash, and now a war….and we’re just two years in! We’ve constantly reminded people that the stock market always has a boogey man hiding in the darkness. Even in the proverbial “good times” people have a natural tendency to feel as though the party will end at some point. To that point…they’re partly right; the party doesn’t necessarily end but it certainly takes a break before resuming.

Today’s article will be rather short, even though there is much behind it (and of course more to come as this story develops). We often talk about people having short memories but don’t think that the Ukraine and Russia conflict just started last week. Click here if you need to catch up on a conflict that’s been in flux since February of 2014. The point of our “letter to Mr. Market” today, however, is on what to do with your investments.

Much like Baskin-Robbins ice cream and their 31 flavors, we found a chart that you need to take a look at; it may not be as soothing as an ice cream cone but it can do wonders for how to put things into context. Below we’re sharing a chart that really want you to take some time to zoom in and reflect on each incident. How did you feel during each one? Were there any that you completely blew off or thought they were overhyped? Conversely, which one scared you the most into actually selling?

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Turn off your TV and enjoy your family, friends & some turkey!

Dear Mr. Market:

When it comes to the stock market it’s easy to see the road we just traveled; what’s more difficult is trying to assess and figure out where we’re going. In last quarter’s newsletter from My Portfolio Guide, LLC we put out a fairly bold prediction of the S&P 500 hitting 5,000 and the Dow Jones reaching 40,000 within the next year. Also included in that edition of “the Guide” (click here to view it if you haven’t already), we discussed some common behavioral biases that we’re all vulnerable to. As we head into Thanksgiving and then the last month of the year, the fear levels are beginning to mount again. There’s plenty to worry about, such as inflation, and speaking of that, it’s sort of like your in-laws visiting….They arrive earlier than you expected and stay longer than you’d like!

While we’re not telling people to be 100% into equities…it’s becoming more and more clear that for the foreseeable future there is no better horse to ride. We’re going to call this proverbial horse “Tina” and share why in a moment. Sure, our gold hedge is not providing instant riches but remember that is not why we bought it. Additionally, we’re seeing more and more people buying crypto as the “new gold” yet most can’t even explain what it actually is. We’d prefer to see Tom Brady pitching Subway sandwiches but now he’s doing crypto commercials. Bonds are awful and going nowhere (yet to some degree justified as part of your overall allocation). Cash is still earning “point zero nothing”. Real estate has exploded and bubbled upwards some more but does it feel smart to you to be the highest bidder on a property right now? All this leads us back to our horse TINA… There Is No Alternative.

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Cargo Ship Gridlock

Dear Mr. Market:

What’s the first term you think of when discussing the economy? Stocks, bonds, gold? How about Supply & Demand?

On a recent flight to Salt Lake City, Utah, we saw a “picture worth a thousand words”. Matt Pixa, founder of My Portfolio Guide, LLC, took this picture from the air and also went out to pick the brains of some contacts he has in the import/export business to help put more color to the canvas.

Long Beach, CA port

If you zoom in on the picture it almost doesn’t do it justice. There are almost 50 cargo ships waiting to unload but basically stuck out there for weeks. Why are all these cargo ships lined up and floating outside the Long Beach and Los Angeles ports?

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Good news = Bad news

Dear Mr. Market:

Last week was a microcosm of how stock market headlines can really lead you to hear one thing yet see another. For a while now we’ve been barking about how the FAANG stocks have artificially propped the market as there are some serious underlying health concerns. As a reminder for our newer readers, FAANG refers to the five major U.S. technology companies – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOGL). These household names have driven the markets and camouflaged some warning signs of risk on the horizon for quite some time. If you want a peek under the hood or a refresher on just what their impact, valuation, and market caps are relative to the broad market, please click here. (pay close attention to figure 18 which shows market cap with and without FAANG as well as Figures 13 & 14 for some relative earnings/revenue performance)

So…what happened last week? Why did the markets get hit so hard? It was indeed a rough week but then again not too many weeks feel all that bad when we take a quick look in the rear view mirror. (last year there were some mornings when the stock market was down literally -9% before you had your first sip of coffee) Albeit not a pleasant memory, don’t ever forget that (we’ll touch on why later in this article).

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Commodities Now! Too many dollars chasing too few goods…

Dear Mr. Market:

You’ve heard us barking about this before but as the world navigates its way out of the Covid-19 pandemic, it won’t be just the stock market that recovers. In many respects the market has mainly bounced back due to a lot of “sugar in the blood” from massive fiscal stimulus and has still primarily been led by some mega cap names. What’s brewing below the surface and actually could turn into something far more sustainable, is a boom in commodities.

Have you ever heard the expression “Even a blind squirrel find a nut once in a while?”

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All-Time Favorite Stock Chart

Dear Mr. Market:

It’s been a while since we’ve had to talk about you. The world has been focused on many changes which sometimes leaves you to quietly do your thing while we catch our breath. We’ve ushered in a new year, the United States has a new President and administration, and we’re finally seeing some light at the end of the tunnel with regards to the most surreal pandemic one could imagine.

How have you been… Mr. Market?

Up, down, sideways, and all over the place…That’s how.

Today we write you a quick note to share our all-time favorite chart as well as a reminder to all those investors who may fall prey to short-term memory lapses. The recent stock market sell-off is a great wake up call to the fact that markets obviously don’t just go up in a straight line. It’s a bit more than that though…

Below is our all-time favorite stock chart and we’re going to share why it’s important to look at this every so often.

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