Thursday, January 18, 2024

Morning Note: Yesterday's Log Entry, And the "Finer Aspects" of Value Investing (today's quote)

Keeping this morning's note brief, we'll just consider the message in yesterday's entry to our internal market log:

There are interesting (and, ultimately, eventual) dynamics possibly taking shape… Which would be the market maybe beginning to sniff out rising recession risk going forward.
This morning, for example, the “hot” retail sales number sent stocks reeling – with tech taking the biggest hit… That makes sense if the market is still on the good-news-is-bad-news (i.e., inspires Fed hawkishness) kick… Thing is, as I type (90 minutes into the session), staples and healthcare are in the green – utilities were as well initially, now modestly lower… That of course flies in the face of the strong-economy (fostered by strong retail sales) narrative that would typically have defensive sectors underperforming.

Today’s action comports with last week’s macro update where I touched on the weakening-economy signal emanating from the past month’s sector action.

And, after initially selling off on the retail sales news, long-term bonds are beginning to catch a bid this morning as well:

TLT (long-term treasuries) this morning:

XLP (staples):
XLV (healthcare):
Note, this morning, amid, once again, ugly breadth, and low jobless claims, has those defensive sectors trading near the bottom of the pack.

So stay tuned...

Asian equities were mixed overnight, with 8 of the 16 markets we track closing higher.

Europe's leaning green so far this morning, with 12 of the 19 bourses we follow trading up as I type.

US equity averages are mixed to start the session: Dow down 125 points (0.34%), SP500 up 0.31%, SP500 Equal Weight down 0.09%, Nasdaq 100 up 0.97%, Nasdaq Comp up 0.91%, Russell 2000 up 0.25%.

This morning the VIX sits at 14.41.

Oil futures are up 0.29%, nat gas futures are down 2.23%, gold's up 0.30%, silver's down 0.33%, copper futures are down 0.45% and the ag complex (DBA) is down 0.10%.

The 10-year treasury is down (yield up) and the dollar is up 0.15%.

Among our 32 core positions (excluding options hedges, cash and money market funds), 13 -- led by XLK (tech stocks), XME (base metals miners), FEZ (Eurozone equities), XLC (communication stocks) and XLI (industrial stocks) -- are in the green so far this morning... The losers are being led lower by XLV (healthcare stocks), AT&T, EWZ (Brazil equities), REMX (rare earth miners) and XLE (energy stocks).

"...the value investing discipline has certain finer aspects of what we come to realize and appreciate only with the passage of time and experience:

Knowledge is overrated. Wisdom is underrated.
Intellect is overrated. Temperament is underrated.
Short-term outperformance is overrated. Long-term adherence to one's investment philosophy is underrated.
Gross return is overrated. Stress-adjusted return is underrated.
Upside potential is overrated. Downside protection is underrated.
Maximization of returns is overrated. Avoidance of ruin is underrated.
Growth is overrated. Longevity is underrated.
Entry multiple is overrated. Exit multiple is underrated.
Price-to-earnings ratio is overrated. Duration of competitive advantage period is underrated.
Categorization of stocks into large cap, mid cap and small cap is overrated. Categorization of businesses into great, good and gruesome is underrated.
Being more frequently right than others is overrated. Being
less wrong than others is underrated.
Forecasting is overrated. Preparation is underrated.
Conviction is overrated. Simplicity is underrated.
Analytical ability is overrated. Personal behavior is underrated.
Having a high income level is overrated. Inculcating a discipline saving habit is underrated.
Competition with peers is overrated. Helping out peers is underrated.
Large personal net worth is overrated. Good karma is underrated.
Talent is overrated. Resilience is underrated.
Being the best investor is overrated. Being the most authentic version of yourself is underrated."

--Gautam Baid

Have a great day!

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