Stocks peak about every 36 years, most recently in 1929, 1965, and 2000. This 36 year cycle can be traced all the way back to the earliest eras in recorded human history, back to Pythagoras and Plato and the Axial Age around 600BC. After each peak comes a period of decline (punctuated by bear market rallies) that typically lasts 16 years or so. Then, with the excesses of the prior bull period wrung out and investors most depressed, the next 20-year run to the next market top can begin.
Howdy, Bull-Riders:
I began this week's New World Investor with a 2023 performance review. I've reprinted much of that here, but I had to redact the stock symbols out of fairness to the NWI investors, If you'd like a monthly, annual, or Lifetime subscription to New World Investor, CLICK HERE.
2023 was a good year for the market but a disappointing year for us. Although I (barely) outperformed the S&P 500 Index, I lagged way behind the Nasdaq Composite. In part that was due to my bias towards smaller companies in a year the Russell 2000 did poorly, and in part to the biotech bear market that (A) just started to recover at the end of the year; and, (B), I underperformed badly. I spent part of the holidays thinking about lessons learned and changes to be made.
Digital Dominators
[Spreadsheet redacted]
One of my strengths always has been knowing when Big Tech stocks are cheap. Buying Apple at a split-adjusted $27.25 or Meta at $159.34 paid off bigly. Buying ▓▓▓ at $22.35 hasn't paid off yet, but it will. My long-standing prejudice against Microsoft kept me out of that major winner and I learned I need to be more open to a real change. I'll be recommending more Big Tech here as opportunities arise.
Small Tech
[Spreadsheet redacted]
Fastly and QuickLogic were the big winners here, with Velo3D the big loser. I've spent a lot of time reading VLD's SEC filings recently – there are a lot of them – and realized that as soon as they had disappointing revenue growth I should have cut and run. The new management is righting the ship but it's still revenue growth that is the key to a good outcome (more below).
Biotech
[Spreadsheet redacted]
Akebia, ScyNexis, and TG Therapeutics had good years while most of the rest were terrible. Investing in development-stage biotech is like venture capital investing – the losers show up early, while the winners can take years. I'm questioning if they should be in an investment newsletter at all.
Plus, I thought I was pretty good at identifying technologies that work and drugs that could get through FDA approval. The Phase 1 safety failure of Graphite Biosciences and the FDA's initial turndown of Akebia's vadadustat made me realize I don't have a real edge here. When Alethia Young, the highly-respected Wall Street biotech analyst, quit her lucrative job to become Chief Financial Officer for Graphite, I thought that was solid confirmation their technology worked. Nope.
I'm not going to recommend any new development-stage biotechs. I may look for the $1 billion market cap that can go to $100 billion, like Celgene and Regeneron, but that's about it. Of course, I will continue to follow all the current recommendations and still think their stocks will do very well in 2024.
Hyperinflation
[Spreadsheet redacted]
Gold had a decent year, up 13.2% and closing in on a new all-time high, but gold and silver miners did not. That's the opposite of what normally happens. When gold goes up, both gold miners and silver usually go up faster. Silver miners go up the most. I expect that pattern to play out in 2024.
Crypto
[Spreadsheet redacted]
Bitcoin and Ethereum really helped my performance this year, and buying ▓▓▓ at a 40%+ discount to net asset value was a rare gift from the market gods. With rumors of a spot exchange-traded fund approval next Wednesday and the every-four-years halving due in April, I'm staying long and strong.
International & Other
[Spreadsheet redacted]
China was not the place to be in 2023, although I think it will be if Chairman Xi wants to keep his head on his shoulders, not to mention his grift, err, job. Growing marijuana also was not a good business in 2023 and probably won't get better in 2024. But as ▓▓▓ disappears into ▓▓▓ I still think the stock will go up from here.
Oil
[Spreadsheet redacted]
My underlying thesis here is that global government and social policies discouraging fossil fuels, nuclear power plants, and copper mines are completely wrong and will create shortages of oil, natural gas, uranium, and copper, with the inevitable much higher prices.
The main overall lesson for me is that 49 recommendations are too many, so going forward I am going to use strength to exit stocks outside of technology. Again, if you'd like a monthly, annual, or Lifetime subscription to New World Investor, CLICK HERE.
h/t @charliebilello
Although “Cash” is fourth from the bottom in the graphic above, in 2023 there was a dash for cash:
h/t The Market Ear
So now US money market funds have total assets under management of $5.87 Trillion.
h/t The Market Ear
The last time money-market fund flows really reversed (2009) was a very good time to own equities and there was a "dash-out-of-cash" for the next three years.
The Fed meets again on January 31. I expect them to do nothing – High for Longer. How many tightening cycles has the Fed implemented in the past 40 years? And how high did the Federal funds rate reach in those cycles?
h/t @stlouisfed
All of the sell-side banks and other Fed watcher tip-sheets think the Fed's next move is a cut. But there's a wide dispersion of views about when the cuts begin (some in March, some in the summer) and how many cuts the central bank will deliver in 2024.
h/t @NickTimiraos
After near-record short-covering, “everyone is long.” Be careful out there! But in the long run, it's hard to be bearish on the US in a relative sense with the current global demographic backdrop.
h/t @EPBResearch
2024
I think we'll see a shallow recession this year, not big enough to convince the Fed to cut interest rates much. Wall Street thinks no recession yet five Fed cuts, even though those two things don't make any sense together.
h/t @CyclingMarcus
Here are the current 2024 year-end forecasts:
Oppenheimer 5200
Goldman 5100
Deutsche Bank 5100
Citi 5100
BMO 5100
RBC 5000
BofA 5000
UBS 4850
Barclays 4800
Evercore 4750
SocGen 4750
Wells Fargo 4625
Morgan Stanley 4500
Cantor 4400
JPMorgan 4200
Market Outlook
The S&P 500 lost 1.2% since my last update on December 22 and is off to a lousy start for the year. The Nasdaq Composite lost 3.0% as the “Magnificat 7” sold off. The SPDR S&P Biotech Exchange-Traded Fund (XBI) climbed 5.7% as the new biotech bull rolled on. The small-cap Russell 2000 dropped 2.9%.
The fractal dimension stalled during the last two weeks. While this could be another mid-40s reversal into a consolidation, I'm inclined to wait to see if the uptrend can continue.
Economy
The Atlanta Fed's GDPNow model raised its estimate of December quarter real GDP from +2.0% to +2.5% due to strength in both consumer and private domestic investment growth. This is no surprise to us, but it will be to the Blue Chip economists. We'll get the first estimate on January 25.
The shallow recession I expect starting early in 2024 will be a surprise to everyone but you. Especially the Fed. The number of job openings in the US continues to fall as economic activity slows. According to the Bureau of Labor Statistics, there were 8.79 million openings in November compared to 8.85 million in October, a three year low. Hiring suddenly cratered, falling 363,000 in November. That is the biggest monthly drop since July 2020 and is now far below pre-Covid levels.
h/t @AndreasSteno
Fear Sells
You might not realize it, but you just survived the 25-year Great Depression of 2008-2023.
“...I forecast that the U.S. would enter a depression from 2008 to 2022/2023.” Dent, Harry. The Great Depression Ahead, 2008, page 5.
Now get ready for the 2024 Great Depression.
Inflation MegaShift
We’ve gotten used to Instant Delivery on anything. Software, Uber, Online Food Ordering. You know what isn’t instant? Building mines. It takes 16 years to bring a new mine online. We need to drill NOW if we want a chance at electrifying the world.
h/t @marketplunger1
Coming Events
Wednesday, January 10
Short Interest - After the close
Golden Age Portfolio Update
This was a slightly down week for the portfolio as it slipped 2.6% as Wall Street tried to separate the suckers from the stocks they know will dominate growth to 2036. As my friend Keith Fitz-Gerald says: “Do what they do, not what they say.” There is much more to come in 2024, so put money to work - now. Let's dig in...
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The United States went from a tiny economy in 1800 to the world’s largest economy by the late 1800s, and yet critics of that monetary era would have you believe the country was in almost constant recession during that time.
h/t @LynAldenContact
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“The world is full of problems, which people are often very aware of. But most people have no idea about the many improvements we have listed below, and therefore they lose hope for the future and think the world is doomed.”
h/t @SteveStuW
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