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Open letter to investors Nov 20 2023
Greetings and salutations!
Wanted to update a bit on the markets. First of all I had a total knee replacement on Nov 8th and as always, the office staff and Jess covered me while I was in surgery. The next day, known as day one was brutal. The last 5 or 6 days haven’t been fun either but stayed away from the drugs mostly. On occasion however, they were absolutely necessary!
On to the markets: Hunkered down in T bills and the like may have avoided a negative market in the early fall and late summer.
This week saw a lower inflation metric float in. Now be clear, I do not think we will get inflation under control and look for an article on that soon that I will send to you shortly.
However the markets trade on sentiment, not reality. The markets REFLECT reality eventually but trade on the sum of the beliefs of all the traders in it on any given day.
That said, the most recent belief is the FEDS are done with interest rate increases. I tend to agree. But I differ in why I believe this. The FEDS believe inflation is abating but they are not sure. The RATE of inflation indeed may be slowing, but it’s still up. Sort of like a drug addict claiming he has kicked the habit because he has slowed his increasing dosage but still increases it with every fix.
Yea, it is sort of like that.
The news media and the public dissemination and analysis of the inflation data is very skewed in my opinion. Slowing inflation is not SOLVED inflation.
Inflation is still a very serious threat to both the markets and the consumer. The only way we would see relief is if we saw reduced prices, or what is called deflation. In that way we could get back to where we were. But with higher wages being demanded across many union fronts, wage push inflation is probably right behind the inflation we are already seeing.
The point is that not only have prices increased already damaging consumer pocketbooks, inflation may be slowing but it is STILL RISING.
That said, the markets are looking at the slowing inflation data as a good enough reason to make the markets run, at least temporarily. Therefore in a more aggressive stance as far as being in or out of a larger position of equities, we may have dipped our toes a little more into various stocks and indexes.
I will be, given my opinion of the markets, fast on the trigger finger to dump if indeed the markets turned down again. Nothing is guaranteed of course, we can only attempt to protect portfolios when it comes to events happening in the macroeconomic arena.
What may be our largest holdings, EIi Lilly, and Novo Nordisk, which both make the ground breaking weight loss drugs that also appear to help with other addictions, are gaining traction once again as each subsequent news announcement excites investors. We may continue to hold these as I think these drugs will drive prices much higher. My opinion of course.
Technology seems to be in rotation again, and we may be seeing the start of the Santa Claus rally. The Santa Claus rally is a theory that stocks rally going into Christmas because of the enlightened mood of investors. It is interesting to note that the news media’s claims that increased sales point to a healthy consumer. But remember, they do not count number of units sold, they only count the total nominal amount of sales. So we must ask ourselves, with inflation, it is fairly obvious that more money is being spent on goods and services because of the much higher prices we have seen with our inflation, but figure might not mean more units were sold. They don’t track that figure in the aggregate so we may never know. But we can use common sense. Higher prices means more money spent, and not necessarily more actual units sold.
I am of the opinion, that there have actually been fewer units sold, as we see a few percentage points of increase in total sales while inflation is running much higher than a measly few percentage points. It is the reason every year we see increasing Christmas sales, even as the economy may be spiraling.
But it makes for good news spin doesn’t it? Especially coming into an election year.
In my opinion sales volume should be replaced with number of units sold. That would give us a better indication of how the economy is doing.
For now, we will dip more toes in the proverbial waters as the market may be setting up for a mini-bull period as we move towards the holidays, yet always with an eye on the exit doors if necessary.
In conclusion, if anything has changed in your financial situation, or anything else that I should know about, please contact me. I will check back in a while. I am hoping this knee surgery recovery goes well and appreciate all the well wishes.
We will talk in a bit,
“Watching the market so you don’t have to”
Marc
Call me
(530)559-1214
