Oy vey! It's rough out there, isn't it? I did a Zoom (ZM) call this morning with some of the folks who read this column and/or invest with me, and I always take more from those interactions than I give. By quite a large margin.
So, what I learned this morning is that -- forgetting for a moment about the inside baseball of Wall Street and the talking heads on FinTV -- the average person is not panicking about his or her portfolio. Yet. This is a weird situation to be placed in as an active portfolio manager. The list of my firm's model portfolios is below, and I have added a new spreadsheet I call the God Pod -- a reference to Exxon Mobil's (XOM) headquarters building in Irving, TX, which the company is abandoning for Houston - which summarizes the results from all the five separate portfolios (see below).
The common theme and one we touched on this morning was own companies that produce things that actually exist and are necessary for human beings to move and develop. Energy is an obvious one, and has powered HOAX to a nearly 100% outperformance versus its benchmark, Cathie Wood's sinking ARK Innovation Fund (ARKK) . The God Pod is showing the Stagger -- the relative performance since HOAX's inception on 12/23/21 -- between HOAX and ARKK at 95.73% as of this writing. When I hit the double, I am sure I will be very humble and low-key about it. Or not.
But as we talked about this morning, the narrative is changing. The majesty of the Metaverse is being replaced by the reality of the remarkable combustive power of the real Black Gold, the coal that is produced by Arch Resources (ARCH) and Peabody Energy (BTU) .
What's in? Cash flow. What's out? Dreams. That's the world we live in. It always has been, but the Disruption Mania that drove incredible stock market returns post-Covid was a little too conceptual for my taste. I like the real stuff. I like dividends. I like cash flows to support those dividends. I like commodities that due to chronic underinvestment are going to remain expensive by historical levels.
Inflation is here to stay. I don't believe this is a fad. Thus, the yield on the 30-year US Treasury note -- 3.073% as of this writing -- is simply not reflective of the inflation risk that is inherent in lending the US government - responsible for so much of the inflation through years of profligate spending - money for three decades. The markets have a way of correcting for mispricing. It's not always pretty, but it is effective.
Those are the key takeaways. I think this sell-off is entirely justified, and I don't think we have reached the panic stage just yet. We discussed gold this morning, and I think it is very telling that we haven't seen that "flight to safety" bounce in precious metal prices yet. Too much complacency, but another week or two like this one, and that will be dead.
This is repricing to adjust for higher interest rates, not a market freak-out. Be very careful who you listen to during a selloff. We had a great conversation this morning, and I am always willing to have one with anyone who will listen to my rantings. The WhatsApp group that we have to discuss the markets can be accessed via the phone number that is listed on top of my spreadsheets (links below. ) Don't spam me...but do tell me what you think about the markets. That is so helpful to me.
My model portfolios are here, plus DFNCE and God Pod.
