Dear Clients,
This is the finale to our 2024 year-end message. Please definitely take this one in. Feel free to skip to the summary video at the end. Thanks so much!!
Before we get to the dollar, I'd like to touch on what I'll call the "December Mess" of a market for stocks by quoting derivatives market specialist, and co-host of the uber-popular Market Huddle Podcast, Patrick Ceresna, as he charted the US equity market sector-by-sector during last week's episode:
In this year's year-end message Part 1 we touched on three investing rules to live by.
Essentially:
1. Control risk
2. Buy value
3. Be patient
So, while controlling risk may be accomplished in a number of ways, it's generally-speaking pretty easy, but it ain't free.
If we're talking diversification, cost comes by way of missing out on concentrated returns when a particular asset class, or, say, a small group of stocks realize outsized upside relative to the rest (à la recently, in record fashion!)... If we're talking insuring against massive declines in a given asset class, security or group of securities, there's the options premium we pay.
As for #2, buying value is easy enough, when you can find it, and of course you have to know how to measure it.
#3, patience, depending on who you are, can far and away be the most difficult rule to follow! Particularly when you see a given tech stock or, say, crypto currency, rocketing -- without you -- to the proverbial moon... Or, on the other hand, when it feels like the world is melting down all around you, and panic begins to grip your decision making process.
Ideally, if we satisfy #1 well enough, we can keep panic-driven reactions at bay... As they, along with greed-driven decisions, are inevitably the worst decisions investors make!
Here, in Part 3, we're going to focus primarily on rule # 2, buying value.
Dear Clients, this morning's commentary is VERY important to take in... start to finish... Thanks!
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
Dear Clients, please take a few minutes and take in today's brief video commentary.
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
Staying with the topic of US stocks for the moment: We can assume, with confidence, that the durability of the current bull market is largely due to the overwhelming consensus among investors that an economic "soft landing," and, with it, ever-rising corporate profits is essentially at hand.
A soft landing for stocks would presumably mean continued higher prices amid declining bond yields -- the proverbial best of both worlds, or, let's say, the ideal Goldilocks scenario.
1. Risk Control First: Focus on managing downside over chasing upside.2. Value Over Price: Buy for less than something’s worth. Quality means nothing if you overpay.3. Long-Term Patience: Success doesn’t happen on a schedule.
--Howard Marks
Or, simply:
Rule #1. Never lose money.
Rule #2. Never forget rule number #1.
--Warren Buffett
And the question we (at PWA) must answer yes to every single day:
