David Snowball
Dear friend,
Welcome to the darkest and brightest season of the year. Each year we are reminded of a long and determined human impulse. It is to stare into the deepening darkness, the icy fields, the piercing winds and declare: Light the fire, invite your family, invite your friends, set the table. Tonight we rejoice together. ”
With not only Christmas but also Saturnalia, Yul, St. Lucia’s Day, Toshiba, Yalda’s Night, and many other festivals rooted in culture and tradition, the mid-winter holiday is basically an expression of gratitude. am. They occur during the darkest, coldest, and most dangerous times of the year. They arise in moments when we need others the most and they need us the most. No one grows when alone, with 14-18 hours of darkness every day. That is why, since time immemorial, we have chosen to open our hearts and homes, arms and pantries to friends and strangers.
Don’t talk yourself out of that urge.Whether your gifts are glittery (if people actually care, you’re sharing gifts with the wrong people) or whether your meals are perfect (Stouffer’s Frozen Macs and I love cheese). receive advice from ScroungeTell someone they make you smile, give them a hug if you dare, and go with a smile.
By the way, you make me smile. I am infinitely humbled (and delighted) to find that you have stopped by to see what we have been thinking.
Manage this market and prepare for the next
In November Vanguard Composite Stock Market Index (VTSMX) rose 8.3%, and those whose livelihoods depend on their willingness to invest ever more heavily in the stock market began celebrating a ‘market bottom’ and envisioning a sharp recovery in 2023. I’m here.
they Might be so correct. We don’t bet on it. Valuations remain historically high, and the recent rally hasn’t solved the problem. It’s not clear if the Fed is ready to ease the rate hike cycle, especially given November’s strong jobs report. Although he has had a “soft landing” at the end of the Fed tightening cycle, he has had only one such welcome result. Consumers are spending record amounts, mostly because they are saving less and piling up debt. Investors say he’s lost $22 trillion cumulatively in 2022 (the only bright spot is that Elon Musk personally lost more than $100 billion of him).
There is also the matter of the party that will take power in the House of Representatives in January. The St. Louis Post-Dispatch (November 27, 2022) compares them to infants and warns:
Anyone who might be offended by the comparison between an unruly toddler and a Republican House majority should consider the words of Missouri Republican Rep. Jason Smith. Smith recently said he expects Congress to use every tool to press the Biden administration on issues such as taxes, energy policy and borders.And the debt ceiling is absolutely one of those tools”
原文: Just as the Republican Party brought the government’s credit rating to its knees for the first time in history 10 years ago, Smith and his allies will again take America’s full trust and credit hostage to a series of partisan issues. I promise to do so.
In 2011, a Republic-led refusal to raise the debt ceiling triggered a Black Monday sale that wiped out $1 trillion in market value in a single day.
Our year-end 2022 issue unfolds four themes to consider. Previews of them:
- Respect managers who have cash to deploy: We previously described them as the ‘dry powder gang’, but here we go.
- Respect short-term and ultra-short-term bond investment capabilities in order to respond quickly to rising interest rates.
- Quality over high momentum, stable growth over aggressive growth, dividends over share buybacks Because all of these characteristics work better in markets that investors fear.
- identify opportunities Small caps (especially small cap values) and emerging markets (especially emerging market values)) because they are widely viewed as the last pocket of a reasonable risk/return balance on the planet.
Share the receipt and the name of the name. For now, the key is to remember that you can manage the current mess without hiding under a rock or missing out on the long-term gains that are still available.
In this month’s issue, Lynn Bolin outlines the outlook for a recession in 2023 and the tools to get through it, while Devesh Shah explores what to do and what to celebrate if you can’t find your magical manager, G. Shadow presents a record of the industry’s most significant changes over the past month. I present his Towpath Focus. This is off your radar, but it’s a fund that should probably be at the center of it, and it probably doesn’t matter if he’s one novice anymore.
dry powder gang check in
In 2017, it inspired me to consider The Dry Powder Gang. These are seasoned equity managers who embrace an absolute return mindset. In other words, they recognize that while stocks can be profitable in the long run, they can be utterly disastrous in the short term. As a result, they are managers willing to reduce their exposure to equities when their valuation becomes unreasonable and the risk-return calculation becomes sharply negative.
I described them as follows:
They are, in the truest sense of the word, the individual investor’s best friend. They’re the people who happily stick to stocks when you want to stick to the NFL Draft or the Cubs comeback. said and left. They are experts in reasonably claiming, “We got your back!”
In a world where interest rates steadily fell and then dropped to zero and equities had only two settings, high and high, it was hated by individuals and institutions. While some liquidated, most experienced substantial outflows, and many barely held up. At the market’s “nobody’s smarter than Kathy Woods” stage, most offered reasonable absolute returns, but rational managers started sneaking bitcoin into their portfolios just to stay competitive. Because of that, the relative returns were often terrible.
If you think the future will tend to be characterized by cyclical turmoil, not driven by across-the-board market upswings, then you need to consider whether it’s time to take a closer look at absolute return and absolute value investors. there is.
dry powder roster
style | evaluation | 2022 Peer Rank | |
Cook & Bynum cobix | Global Large Cap Core | five stars | Top 1% |
hennessy total return HDOGX | Large Cap Value, Dogs of the Dow | Three stars | 2 |
Pinnacle Value PV Fix | small cap core | two stars | 3 |
Frank Value FRNKX | medium core | Three stars | Four |
Palm Valley Capitalfunctionally an extension of Intrepid Endurance | small cap value | Five Stars, Great Owl | 8 |
FMI Common Stock FMIMX | small cap core | 4 stars | Ten |
intrepid small cap, Former Endurance ICMAX | small cap value | two stars | 14 |
FPA Crescent FPACX | flexible | 4 stars | 16 |
Blues BRUFX | flexible | five stars | 18 |
castle focus MOATX | Global Multicap Core | two stars | 26 |
Shelton Stock Income, Former Core Value EQTIX | stock income | 4 stars | 50 |
Weitz Partners III Opportunity WPOIX | multicap growth | Three stars | 92 |
Centaur Total Return TILDX | stock income | liquidated | |
Courageous and Disciplined Values ICMCX | middle value | Liquidated | |
Bread & Butter BABFX | multicap value | Liquidated |
Full Disclosure: Snowball owns shares of FPA Crescent and Palm Valley Capital. He previously owned Intrepid Small Cap, but when Intrepid’s manager launched a new company, he moved his investment to Palm Valley.
Thanks, as always…
From the good folks at S&F Investment Advisors in lovely Encino to Wilson, Gregory, William and the rest of William, Brian, David and Doug, a Happy New Year to all of our essential regulars.
Bruce & Silina (So happy to hear that we are making a difference for you. In honor of the one year anniversary of his death (Quick note: pick up the phone and call your friends. You I know people who have been distracting and laughing for years but I don’t make as many calls anymore I don’t know how many of those calls mean until no one can place To do.)
Please consider contributing to MFO. About 1% of our 18,000 readers participate. 1% plus 1 makes a profit. It’s tax-deductible and allows us to keep the lights on, increasing our chances of sharing end-of-year gifts with the people who make all this possible without compensation.
thank you!