A part of us cringes as we succumb to the pressure of having to write about the most recent worrisome headline. Why? It’s sort of like the Kardashians or trashy television personalities in general; the more you talk about it the more it gives some the perception that it’s worth talking about. Now, don’t get us wrong….theses recent headlines aren’t a cause for celebration by any means either but if it’s prompting you to cash out of the market, board up your windows, buy ammo, grow vegetables, or raise chickens in the backyard, you’re repeating an age old mistake. But… “the sky is falling” and “it’s different this time”, right? Not really, but rather it’s once again time to put things in perspective, look at data instead of narrative, facts over fear, and who knows…possibly find opportunities?!
And so are we… The world stopped pretty much everything at one point during the pandemic and sports were of course no exception. For true sports fans there was nothing more depressing than watching cornhole tournaments or empty arenas void of fans, sounds, and energy. Even if you don’t like or follow college basketball, we think you’ll enjoy what we pioneered and have put together.
We’re proud to say that My Portfolio Guide, LLC was the first investment firm to publish a March Madness investing bracket where we share our picks and match them up against each other. We break down and assign each of the four “regions” with an asset class and then pick teams (stocks) that we think have the best chance at doing well relative to others.
Not only is this “exercise” a way for us to share our ideas from a macro perspective, but it offers a fun platform to dig into a couple specific investments and themes we are following or excited about in the year ahead.
Click here or below to enlarge and see the entire bracket for 2023.
You’ve behaved fairly well after some insanely raucous behavior last year. You (the market) has actually surprised a lot of folks just barely six weeks into the year. While there is plenty of calendar left in 2023, we’re watching you and it’s simply interesting to see that half the room doesn’t trust your next move while the other half wants to… but still can’t!
The books are closed on 2022, and what a year it was! The past few years have brought the word “unprecedented” to a whole new level. Both stocks and bonds were down in 2022, which is extremely rare and actually only happened twice in the past 100 years! (1931 and 1969). We won’t rehash it all but it’s not just that stocks were down almost -20%, but rather that what was supposed to offset some of that drawdown, never did. Historically bonds have basically always mitigated some of the pain of stocks getting tattered but not last year. 10-year treasury bonds were also down -15% and if you want real pain, 30 year bonds got torched by almost -30%. Name a stretch in your lifetime that was worse? Even if you’re 90 years old…you can’t.
So, enough about what has happened but our focus today is on how this plays with your mind. Below we’ve written a list of all the financial media talking heads as well as economic experts who are notpredicting a major recession. Look through our extensive list of names and what do you see?
Oh wait…there are no names listed. Feel free to comment below or let us know if we missed anyone but rarely have we ever seen such an environment of groupthink that it begs the question…what if they’re all wrong? There have been some major economists who in times past have really missed the mark but for some reason they still have a platform and the ability to get your attention. In a future article (or letter to you, Mr. Market) we’ll do a little report card on all the “gurus” who somehow still command everyone’s eyeballs but often can’t correctly guess how many fingers they have. OK…perhaps we’re laying it on a little thick here but hopefully you get the point. There is too much groupthink going on right now and it’s times like these when it pays to take a little bit of a contrarian view.
We wrapped up January in surprisingly good fashion (again…almost everyone got it wrong but we’ll modestly remind clients we did not). Couple that with what is the proverbial “Santa Claus” rally period and you have some interesting history to look at. When stocks are lower the year prior, but gained during the Santa Claus period and first five days of January…we’ve seen a market average +27% the next year. Could it happen this time? Maybe not to that extent but if it doesn’t it will be the first time ever it didn’t at least go higher (nine for nine prior).
Now nobody said it would be smooth sailing (it rarely is). Expect a bit of a cooling down period as we now digest Q4 earnings season until month end. It also happens to be seasonally be a time for a natural pause or break with the back half of February being historically weak.
Regardless, barring some major unexpected calamity, this likely pause in the markets is a perfect opportunity to not only catch your breath (with Mr. Market) but also take a few chips off the table in areas you’ve been wishing you had earlier. For example, most people who had way too much tech on the way up got slaughtered in 2022 with the Nasdaq peeling off -33%. Now that we’ve seen a nice bump in tech stocks to start the year, why not sell some and reallocate to another area?
If you read the recent quarterly newsletter from My Portfolio Guide, LLC, you’ll note the areas we still like. Commodities are down to start the year…what a great place to be building a hedge if you missed their run-up prior. Along those same lines, what also helped our model portfolios last year (relative to what most people had outside of stocks and bonds) was gold. The dollar will retreat some more (unhitching the trailer) so we couldn’t be more bullish on gold being a key component in this environment. One more area that has slumped a bit to start the year are oil stocks (another rare bright spot in 2022). In typical human and emotional fashion, people somehow don’t want single digit multiple (i.e. cheap!) stocks with high yielding dividends. What’s not to like?!? Even Joe Biden told us earlier this week during the State of the Union that we’ll need oil for at least another 10 years…
Lastly, if you’re in the mood on making bets….Here’s a tip for all those watching the Super Bowl this Sunday. If you don’t have a dog in the hunt and are simply “hoping for a good game”…change your tune right now; you should want a blowout (perhaps not for entertainment value but for the market). In years when there is a single digit win during the Super Bowl the market only averages +5% and higher less than 60% of the time. However, on years with double digit margins of victory the market averages +11% and a 79% chance of going higher.
As silly as the “Super Bowl Indicator” is by the way, we did write about it last year (click here) and true to form…perhaps that’s why the market got drilled (kidding!). The Eagles are slight favorites but if you’re just an investment geek and want to root for a team…the football Gods all say the Chiefs need to win and ideally by 10 points or more. It likely won’t happen so enjoy the game and those expensive commercials. By the way, they used to cost advertisers a cool $1 million a few years ago for a primetime spot but are now upwards of $7 million! (and we have the gall to complain about $7 eggs?!?)
In a year where the stock market has provided zero safe places to hide…you may have changed, the markets certainly have, but one thing has not; the Permanent Portfolio.
We’ve reviewed the Permanent Portfolio before but believe it’s time to check in and provide an update on how it’s doing relative to the broad markets now as well as chime in on whether the strategy still has merit going forward. For some quick background, our first original review was written in June of 2013 (click here to see that). Most recently we revisited the topic with an update in November of 2020 (click here) as we climbed out of one of the wildest years in world history amidst a global pandemic.
If you didn’t hit the embedded article links above, the Permanent Portfolio is pretty simple at face value. The Permanent Portfolio is a seemingly basic portfolio allocation strategy created by investment advisor Harry Browne in the 1980’s and outlined in his book Fail-Safe Investing back in 2001. Here’s the secret (simple) sauce and how each asset class should do during repeatable economic cycles:
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.
Journalists write about you daily. Investors constantly think and talk about you. Analysts and economists spend their entire careers trying to figure you out. You’re a complex yet simple character, Mr. Market! All that said, today we want to share with our readers a substantial part of you that doesn’t get enough appreciation (pun intended). Let’s talk dividends!
Does the old stock market adage of “sell in May and go away” make sense? We’ve actually written about this one spring about nine years ago where we actually advocated taking some chips off the table, however it had less to do with a cute stock market rhyme and more due to profit taking. Where are we at now going into May and is this allegedly poor seasonal time of year appropriate to sell or perhaps not?
The investment world has not given us much of a break lately. Everything is down….everything…..except gold and emerging markets, but you saw that coming, right?!? Before we dive in, let’s just post some quick year to date numbers and then get to the football banter. Large Caps are down -5.4%, Mid Caps -4.2%, Small caps -5.9%, International -8.1%, and Bonds (which are supposed to shelter us from some of this near-term pain) are down -3.2%. Again, the only thing that is up YTD is Gold at +0.10% and Emerging Markets at +2.5%. Switching gears, allow us to lighten the mood and focus on something mildly entertaining (yet related to the stock market). Why should you be rooting for the Cincinnati Bengals this Sunday during Super Bowl XVI?
All kidding aside, and at the risk of upsetting any Los Angeles Rams fans, the AFC teams winning lately have been good for the bulls. What we’re talking about here is the Super Bowl Indicator. At a minimum this is a helpful article for you if you don’t have a “dog in the hunt” and your team lost weeks ago, never made the playoffs, or you could care less about football yet might be around people who do on Sunday.
In 1978, Leonard Koppett, a sportswriter for the New York Times, came up with the Super Bowl Indicator and for many years it was never wrong! Up until that point the results pointed towards NFC teams winning being the one that seemed to help the stock market the most.
It’s that time of year. Everyone has some stinkers in their portfolio and in a taxable account it’s a great time to evaluate whether one should offset that loss by taking some gains on your winners. If you followed any of Jim Cramer’s advice this past year you have some serious evaluating to do! The aim of this article is not a hit piece of Mr. Cramer but simply a word of caution and a reminder that (1) stock picking is often a futile endeavor and (2) If you are indeed going to follow someone’s picks it’s important to track them prior to blindly buying the next set of recommendations.
The stock market has provided many sayings and memorable catchphrases that people tend to regurgitate ; some have merit and some are just garbage.
If you’re a regular reader of Dear Mr. Market, or a client of My Portfolio Guide, LLC, you’ll know that our all-time favorite is “The four most dangerous words in investing are …This time it’s different” -Sir John Templeton. Here are some other all-time adages that you’ve undoubtedly heard:
“Buy low sell high” Uh…yeah, but easier said than done.
“The trend is your friend” Sure….until it’s not!
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks” -John Bogle
“Markets can stay irrational longer than you can stay solvent” -John Maynard Keynes
So…what does “buy the rumor and sell the news” mean? You probably know that the stock market is full of speculation, great stories, and chock-full of hidden nuggets as well as potential land mines. Even if you’re not an experienced investor or trader, at some point you’ll figure out that by the time your neighbor (you know the guy who never loses and is always up) tells you about a stock tip…the ink on the newspaper is already dry and that idea is likely stale.