The markets were churning a bit in early Thursday trading, so it's time to revisit some of the key themes that I have been propagating this year for my firm, Excelsior Capital Partners.
Black Gold is the only real hedge against inflation. With OPEC+'s move to reduce its oil production target by 2 million barrels per day, and the Biden Administration's incredibly flaccid response of 10 mm barrels released from the Strategic Petroleum Reserve - covering a mere five days of lost OPEC+ production - the stage is set for, as George Harrison sang, a long, cold lonely winter for companies and individuals that rely on hydrocarbons for heating transportation or food production. That includes every human being on the planet.
Don't overthink it. Stay long energy, as exemplified by the superior performance of my HOAX model portfolio (up 51.6% since inception on 12/23/21, including reinvested dividends.) Hold fast! Don't worry abut demand destruction, focus solely on supply.
At the margin, thanks to Saudi and Putin and the large number of the 23 OPEC+ members that are simply unable to meet their production target (I am looking at you, Venezuela) supply is still a flashing green light for crude pricing. ExCap's strategy has not changed.
Higher interest rates make Big Tech uninvestable, and they may make some Little Tech names disappear. One of my proudest moments in my career was the creation of my model portfolio, FKBGT. I am not updating that free-to-all spreadsheet, nor would any sentient being mess with a portfolio that has returned 32.8% since its inception on April 13th.
But the real zeitgeist of the market is captured by another free-to-all (I am not doing trades in that portfolio, either) group of mine, DEATH. As a short-only portfolio, DEATH has performed relatively well, with a 4% gain - the net value of the shorts has increased that much - since inception on 5/11/22. But inside that 10-name group, there are incredible losers like SelectQuote (SLQT) (down 66%) and a few incredible winners-or losers for death-like Rivian Automotive (RIVN) (up 73% since DEATH's inception, but still down 64% on the year.) What does that tell me? Investors are still willing to overpay for names that are long on buzzwords (like "disruption") and short on cash flow. So, death is a win, but until it becomes a massive victory, this market has not found its bottom for 2022.
This is a behavioral thing. Investors simply have to adjust their worldviews. Not like Cathie Wood ( (ARKK) is HOAX's benchmark, and has posted a tasty 59% decline since HOAX"s inception date) but what I am talking about here are the folks that matter. Not the sell-side nitwits who claim to know Elon Musk's every thought while propagating moronic comments about Twitter (TWTR) and Tesla (TSLA) , but the people who actually invest the money. That's the buy-side. My background is as a sell-side analyst, so, trust me, I learned the buy-side well. I appreciate their incredible propensity for groupthink and herd-following.
We haven't seen a full move into risk-off yet, but the yields on the benchmark USTs (4.13% for 12 months, for instance) are so much more attractive than the S&P 500's 1.69% or the Nasdaq's puny 0.72%. At some point, your average fund manager just has to throw up their hands and lock in that 4% return, and leave the flying-autonomous electric-car plays to the retail bagholders. Fourth quarters are when annual bonuses are calculated. Don't forget that. Fund managers, or most of them, anyway, are human beings, too.
