Bullish On Humanity

Brit Ryle

Posted November 28, 2023

Good day, 

I hope you all had a great Thanksgiving holiday! 

Mine was a whirlwind – flew out of the Jacksonville airport on the 7 AM to Baltimore- Washington International on Wednesday. My daughter’s flight from New Orleans arrived shortly before mine. My son picked us up and we drove to Baltimore so they could spend a little time with their mom. We made it to my hometown of Richmond, Va. around 7 pm.

Now this next part comes with a trigger warning, and I realize we may see a spike in cancellation at Pro Trader Today, but – we did NOT have turkey on the dinner table at my step moms house on Thanksgiving. 

My dad did everything he could to a turkey. Corned it, deep fried it, smoked it, butterflied and grilled it and turduck-ined it…Then he gave up, moved on, and we have carried his iconoclastic banner ever since…

So I covered two giant Salmon filets with crushed garlic (it’s darn near impossible to use too much garlic on baked salmon), a good bit of salt, less pepper and whipped up a sauce of anchovy paste, miso base, lemon and capers – applied after cooking. 

7 adults, we put down at least 8 bottles of wine (none for the 4 kids!) from the remnants of my dad’s cellar. The standouts were a 2008 and 2012 Drew pinot noir, a 2010 Turley zinfandel (the 2002 had gone bad) and a 2012 Booker syrah.

Yeah I know, red wine and salmon. Drink what you like: that’s another one of my dad’s iconoclast traditions that I happily carry on…

When You Have a Hammer, Everything Looks Like a Nail

I’ve been in the newsletter biz for 25 years of spectacular booms and gut wrenching busts. One thing you can always count on is that the bearish story will be circulated long after it is viable or appropriate. 

Even now, I see plenty of newsletter promotions predicting an imminent crash for the stock market. I know, if it bleeds it leads, and I expect a well-constructed doomsday story can make some money for the company. But the doomsday story probably won’t make you very much money. You’ll probably be pretty lucky to only be down your subscription fee…

And this isn’t just a knock on the newsletter biz. Plenty of smart-guy hedge fund managers lose big because they can’t shake their doomsday convictions. Once they get the hammer in their hands, everything looks like a nail…

You remember John Paulson? Hedge fund manager who made $15 billion for his firm by going all in on gold during the financial crisis? No?

That’s probably because he never got over gold. He kept up with the “markets gonna crash, buy gold” story. Back in May of this year, Yahoo! Finance published his Top 15 stock picks. 9 of them were gold stocks. 9! 

The guy went to Harvard Business School and the best he can come up with is gold stocks? I guess he missed class the day they talked about the power of compounding as companies consistently grow revenue and profit as they innovate products and streamline operations. 

But then, I’m not a billionaire, so…

Or maybe you remember Michael Burry. He’s the “Big Short” guy – made a billion shorting the mortgage backed securities that brought the global economy to its knees in 2008-9…good call. And he hasn’t been able to shake the doomsday story either…

Burry’s Big Short on Treasury bonds hit the headlines back in August. He risked $1.6 billion that bond prices would head lower. Turns out, that was pretty much the bottom. Burry reportedly lost 40%, or $640 million, shorting bonds at the bottom. 

Now I’m not telling you all this because I enjoy busting on hedge fund guys. I mean, I do enjoy it. A lot. Still, the bigger point is that, while yes, both Paulson and Burry made a lot of money from perfectly timed trades based on pretty insightful analysis…HOWEVER – the conditions that made these trades work were also perfectly timed, a perfect storm, to use a trite phrase…

Most storms don’t get to be perfect. Most storms just blow some stuff around, inconvenience everybody for a short time and then go away. The conditions for the perfect storm come around maybe once or twice in a generation. 

The rest of the time, great companies are innovating, appealing to a growing customer base, cutting costs and growing revenue and profits. 

You can roll the dice on a perfect storm trade if you want. But the slow and steady approach of investing in great companies is gonna win this race

Bullish on Humanity

I don’t know how much you follow the various economic and political surveys. Like the regional Federal Reserve Bank manufacturing surveys, purchasing manager surveys, consumer sentiment report, approval ratings for politicians, that kind of thing…

These surveys are pretty much terrible across the board. Everything sucks, the economy is in the tank, inflation is crushing us, businesses are gonna start failing, cats and dogs living together…

Except the hard data doesn’t really line up with what people are saying. You know Black Friday consumer spending was a record, right? So was the number of people flying somewhere over the holiday. 

Just this morning, Bloomberg put out this cool chart: 

Sentiment is at the bottom, hard data at the top. It’s easy to see the two sharp dips from the Great Financial Crisis (GFC) and the COVID shutdowns.

We’re getting sentiment readings that rival those from the depths of the GFC, while most readings from the economy itself are looking maybe not so bad, maybe even pretty good. 

Obviously, perception is subjective. And most adults in the U.S. have never encountered inflation like we did in 2022. Maybe it doesn’t matter that inflation has darn near returned to normal, or that wages have done pretty well…the image of 8% of inflation is still pretty vivid. 

And personally, I think the COVID thing is still weighing on our collective psyche. I’ll never forget the few years after the GFC – my kids were 8 and 6, and their mother and I were terrified that the U.S. job market had fundamentally changed and you better get a STEM education or you’d be up a creek. Those fears have certainly subsided, because the U.S. economy remains incredibly dynamic. 

I read a piece over the holiday weekend from a prominent finance/investment writer who said that the current state of dissatisfaction so many Americans feel about their place in the economy will drive us all to work harder to make our own lives better. And that dissatisfaction makes him “Bullish on Humanity.”

I bet sometime in the next year or so, the fog will lift from sentiment readings. All the angst from COVID and whether you’re vaxed or not will recede a little further, and John Maynard Keynes’ “animal spirits” will arrive and we’ll get a real ripsnorting bull market.

We’re certainly due for a change…

That’s it for me today, take care and I’ll talk to you on Wednesday…

Briton Ryle
Chief Investment Strategist
Pro Trader Today
brit.ryle@protradertoday.com
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