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Charlie: More than a Brilliant Investor
“The best thing a human being can do is to help another human being know more” – Charlie Munger. Very few things will change your trajectory in life (and/or business) as much as learning and education.The more you dedicate your time to obtaining knowledge – the better you will be. But take it a step further… the pathway your life takes will be a function of the decisions you make. Which begs the question – how does one make higher-quality decisions and/or fewer mistakes? Charlie Munger offered us a framework of mental models to do just that… this will be his real legacy.
Cautious… But Invested
It’s a brave person who is short the market. Probabilities suggest we are headed higher in the near-term. For example, previous episodes of Fed pausing suggests stocks typically gain. My sentiment today is best described as ‘cautious… but invested’. To that end, one should always be invested to some extent. And whilst it’s always unwise to be completely remiss of the risks — it would be an even greater mistake not to have some exposure to higher quality risk assets and fixed income (at current yields)
Two Reasons the Fed Could Cut Rates
The latest set of economic numbers support a ‘goldilocks’ scenario for stocks. For example, durable goods orders continue to fall (a positive for inflation); and employment remains robust (a positive for growth). The question is what could cause the Fed to cut rates mid next year (given this is what is priced in)? I will offer two reasons… both of which I think are unlikely before June.
Why I’m Not Betting on a Soft Landing
With the Fed seemingly on pause and bond yields sharply off their highs – markets are optimistic. Equities have surged the past few weeks – up around 17.6% year-to-date. The S&P 500 added 10% in just 3 weeks! The narrative (as far as I can tell) is we’re headed for “soft landing”. But can we be so sure? Past experience suggests a “hard landing” is the more likely outcome. And absent other evidence, when the Fed hikes this much (and especially this fast) – we should expect one.