Quarterly Client Letter: Q4 2023
“I think that a life properly lived is just learn, learn, learn all the time.” Charlie Munger, 2017 Berkshire Hathaway Annual Meeting Investing in financial markets is a constant education. A year ago, a Bloomberg survey of economists forecasted a 65% probability of recession for 2023. As the year progressed, there were plenty of reasons…
Obsessing Over Interest Rates
Obsessing Over Interest Rates “The theory of interest bears a close resemblance to the theory of prices, of which, in fact, it is a special aspect. The rate of interest expresses a price in the exchange between present and future goods. Just as, in the ordinary theory of prices, the ratio of exchange of any…
Keep It Simple
Keep It Simple “I refuse to join any club that would have me as a member.” -Groucho Marx I was at a dinner this summer with other portfolio managers from wealth management firms in the Denver area to talk about markets and investing. When we were asked if we invest in private markets on behalf…
Rolling with the Punches
Rolling with the Punches The Federal Reserve has raised the effective Fed Funds rate over the past 18 months from 0% to 5.33%. The 10-year US Treasury Yield just hit a 15-year high around 4.30%. Mortgage rates are back above 7%. Source: YCharts via Peak Asset Management If we had known that this is…
Quarterly Client Letter: Q2 2023
“Hindsight, the ability to explain the past, gives us the illusion that the world is understandable. It gives us the illusion that the world makes sense, even when it doesn’t make sense. That’s a big deal in producing mistakes in many fields.” -Daniel Kahneman Imagine you are the chief executive of the Finnish tire maker…
Fool Me Twice: The U.S. Housing Market
Fool Me Twice: The U.S. Housing Market As markets internalized the risks of COVID-19 in March 2020, stock prices for home construction companies crashed (proxied here with ITB, the iShares U.S. Home Construction ETF). A precipitous drop in economic activity is historically bearish for home builders; perhaps in understandable fashion, investors rushed to sell their…
A Classic Bank Run
A Classic Bank Run By now you’ve likely seen the headlines or done some deeper digging into the recent collapse of Silicon Valley Bank (SVB). As of Sunday, March 12th the Federal Reserve (Fed), in coordination with the US Treasury and Federal Depository Insurance Corporation (FDIC), has implemented a new program to provide liquidity to…
Is the Bear Market Over?
Is the Bear Market Over? The better question might be – did the bull market ever end? When you pull back and look at long-term averages for stock market indices like the S&P 500, the pullback in 2022 looks fairly benign. The 200-week simple moving average (SMA) is still pointing up and to the right,…
Why We Own Stocks
Why We Own Stocks “Because profits go up 8% a year, and stocks will follow. That’s all there is to it.” -Peter Lynch The latest tug of war in the financial punditry is between the “recession camp” and the “soft-landing camp”. In the recession camp we have consumers and corporations lowering their plans to…
Not-So-Boring Bonds
Not-So-Boring Bonds At the top of 2022, we wrote that stock market multiples were precariously perched after soaring well above historical averages. Since then, multiples have pulled back to more benign averages: Source: J.P. Morgan Asset Management, Guide to the Markets, 12/15/2022 We had also noted that after a relatively calm year in the S&P…