I’ve been re-reading “The Intelligent Investor” by Benjamin Graham. Warren Buffett called it “by far the best book on investing ever written” – crediting Graham with laying the foundation for his entire investment philosophy. The book taught me three powerful lessons: (1) above all else, investing is about protecting your capital; (2) investors should strive to pursue adequate and sustainable gains; and (3) it requires overcoming self-defeating behaviors (e.g., fear, greed and bias). The lessons could not be more timely given today’s excessive valuations.
Time to Forget About Recession Risks?
Known to many as the ‘bond king’ – DoubleLine Capital’s founder and CEO – Jeff Gundlach – is well known for his contrarian calls. This week on CNBC he made the comment that he feels that we will look back at Sept 2024 and say “this was the start of the 2024/25 recession”. If Gundlach is correct – the recession has already hit the US economy. Therefore, this would imply the jumbo sized cut from the Fed this week is already too late – and will do very little to course correct a rapidly slowing economy (especially given the 9-12 month lag effect of monetary policy).
Defensive Sponges Soaking Up Liquidity
After enduring its worst week since March 2023, the S&P 500 rebounded with its best performance of the year. From mine, this kind of week-to-week unpredictability highlights the futility of attempting to predict short-term gyrations. It’s not something I pretend to be able to do. My approach prioritizes a longer-term perspective – as it increases the odds of success. It’s near impossible to attempt to trade around Mr. Market – you can never know what his mood will be from one day to the next. Therefore I choose to maintain a cautiously invested strategy – where ~65% of my capital remains in high quality stocks.
Real PCE: Seeing Around Corners
As an investor, your job is to carefully assess the risks against the rewards. A large part of that equation is knowing exactly where we are in the business cycle. For example, consider the following questions: (a) do you think we’re at the beginning or middle of an economic advance (with more to go)? or (b) do you think we’re about to encounter a significant change in direction? and (c) if so, is that change for the better or for the worse? Your answer is very important. It’s far better to invest (or take more risk) at the start of the business cycle vs the end. Therefore, how will make that decision? How are you able to determine where we are? I will offer a market signal which is arguably more consistent and reliable than most indicators.
For a full list of posts from 2017…