Weekly Paid Newsletter 01/16/2022
Market begins to erupt internally as we remain close to ATH
This week has uncovered inflation data that has spooked the world of financial markets. After the ISM manufacturing report for December came in below expectations, the Consumer Price Index (CPI) and Producer Price Index (PPI) data were expected to be subdued.
However, these have risen by as much as 7%. The last time this happened, society had a double-dip recession (the 1980s).
In US history, all inflation peaks have resulted in economic crises. In the world of finance, though, this time could be different. It doesn't look like it will happen.
The Fed will try its best not to let this happen, and, as it has always done, it will act late and badly. To avoid this, it is to cut by leaps and bounds the injection of liquidity from the markets and accompany it with rate hikes, which they even want to bring forward.
We always believe that having an uncorrelated portfolio gives us a wide range of possibilities and peace of mind as to what may happen.
We are reassured to see our portfolio up 5% in one day this week, simply because of a bit of panic in the markets, and we continue to wait until the markets pull back a little more.
This week Howard Marks has published one of his Memos (an absolute marvel), and although we will talk more about it later, it has made us think about how to make a "home run" in finance. (I quote):
Like so many things in investing, however, just holding is easier said than done. Too many people equate activity with adding value. Here’s how I summed up this idea in Liquidity, inspired by something Andrew had said:
When you look at the chart for something that’s gone up and to the right for 20 years, think about all the times a holder would have had to convince himself not to sell.
This reminds me of the time I once visited Malibu with a friend and mentioned that the Rindge family is said to have bought the entire area – all 13,330 acres – in 1892 for $300,000, or $22.50 per acre. (It’s clearly worth many billions today.) My friend said, “I’d like to have bought all of Malibu for $300,000.” My response was simple: “you would have sold it when it got to $600,000.”
Today there are a few things we feel comfortable holding. I would say that they are only with the funds we have in our portfolio and with the cryptocurrencies, we hold while we earn passive returns.
The latter allows us to have an asset in a cold wallet (Pendrive) that we compound year by year and know that we will not touch under any circumstances.
It is similar to the case of Amazon in 2000. Everyone knew that it would compound and that it was the future, but when it was at $10, who would not have sold at $20? Without a clear strategy (and holding VERY long term), it is impossible to make money.