Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

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Why It’s So Hard to Copy Charlie Munger’s Secret Sauce

By James Mackintosh, The Wall Street Journal, 12/1/2023

MarketMinder’s View: While this piece doesn’t offer a concise answer to the titular question, it makes an excellent point: No category of stocks leads for all time. Warren Buffett and the late Charlie Munger famously bought “wonderful businesses at fair prices” and held for many, many years—a classic growth-oriented, buy-and-hold approach. Their business model (adding investments to a holding company) doesn’t bear much resemblance to building and managing a long-term retirement investment portfolio, which usually has to do things like generate cash flow to support the investor’s ongoing needs. But it isn’t so much that their success is hard for individual investors to replicate. It is more that—as the piece discusses in detail—high-quality growth stocks lead at some times, and lower-quality value stocks lead at others. In discussing this, the article mentions several companies, and as a reminder, MarketMinder doesn’t make individual security recommendations—we are here for the broader theme of everything having its day in the sun and the rain only. To that end, the final third or so observes that high-quality stocks have done excellently lately, as they usually do when investors seek stable earnings in an uneven, slow-growing world. But then it argues the party will probably end soon as valuations get too stretched. Perhaps, and we can envision a scenario where value eventually takes the reins, but it has nothing to do with growth stocks’ valuations. They aren’t predictive, and multiple expansion is a normal feature as bull markets mature. Expensive stocks can always get more expensive, and cheap stocks can always get cheaper.


Is the Holiday Shopping Season Going to Be a Success? The Answer Is Murky

By J. Edward Moreno, The New York Times, 12/1/2023

MarketMinder’s View: There is plenty of good data and information here, including a look at Black Friday weekend sales (up nominally over last year, according to several measures, but not as much as goods prices excluding food and energy) and the observation that retailers finally seem to have a good handle on inventory levels after three-plus years of pandemic-related weirdness. That is key because, as the article notes, it means retailers could still enjoy some nice quarterly earnings even if sales don’t quite outpace inflation. Where this runs aground, in our view, is in recycling a bunch of long-running fears (e.g., resumed student loan payments, higher prices) to argue consumer spending is likely to weaken. We don’t dismiss the pressure these issues may cause for some households, but there is a very big mitigating factor: Wages have followed prices higher, and US households are overall in much better financial shape than before COVID (according to the New York Fed’s latest look at household credit). So we think American consumers probably have a lot more bandwidth than this gives them credit for. And if not? If holiday sales fizzle? Well, the holiday season is one part of one segment of consumer spending. Retail isn’t everything. Services, most of which don’t count in Black Friday or retail sales tallies, are the majority of consumer spending and US economic activity overall. Discretionary goods are only a small piece of the puzzle.


Fed Officials Shift Tone but Remain Wary of Markets’ Aggressive Rate Cut Bets

By Steve Matthews and Catarina Saraiva, Bloomberg, 12/1/2023

MarketMinder’s View: This is a tour de force in reading way too much into Fed policymakers’ views. Parsing several Fed statements and market-based indicators, it tries to gauge the likelihood of rate cuts in the near future. In our view, this is fruitless. Not only have markets proven for over a year that they don’t need rate cuts in order for a new bull market to thrive, but there is no—zero—way to know in advance whether they will happen. The Fed has a long history of changing its mind and U-turning on prior guidance. To wit, we are one day removed from the two-year anniversary of Fed head Jerome Powell’s announcement that “transitory” was no longer a good word to use to describe inflation, upending expectations for little change in rates and eventually resulting in the fast, steep rate hike cycle that began in March 2022. That is only the latest instance of Fed flip-floppery, and we doubt it will be the last. Thankfully, predicting Fed policy isn’t necessary since it is but one variable affecting one driver for stocks (the economy). So it is no great tragedy that it isn’t possible. And it all means you can spare yourself the boredom of diagramming sentences and trying to discern what each policymaker really meant by their chosen adverbs, adjectives, verbs and nouns.


Why It’s So Hard to Copy Charlie Munger’s Secret Sauce

By James Mackintosh, The Wall Street Journal, 12/1/2023

MarketMinder’s View: While this piece doesn’t offer a concise answer to the titular question, it makes an excellent point: No category of stocks leads for all time. Warren Buffett and the late Charlie Munger famously bought “wonderful businesses at fair prices” and held for many, many years—a classic growth-oriented, buy-and-hold approach. Their business model (adding investments to a holding company) doesn’t bear much resemblance to building and managing a long-term retirement investment portfolio, which usually has to do things like generate cash flow to support the investor’s ongoing needs. But it isn’t so much that their success is hard for individual investors to replicate. It is more that—as the piece discusses in detail—high-quality growth stocks lead at some times, and lower-quality value stocks lead at others. In discussing this, the article mentions several companies, and as a reminder, MarketMinder doesn’t make individual security recommendations—we are here for the broader theme of everything having its day in the sun and the rain only. To that end, the final third or so observes that high-quality stocks have done excellently lately, as they usually do when investors seek stable earnings in an uneven, slow-growing world. But then it argues the party will probably end soon as valuations get too stretched. Perhaps, and we can envision a scenario where value eventually takes the reins, but it has nothing to do with growth stocks’ valuations. They aren’t predictive, and multiple expansion is a normal feature as bull markets mature. Expensive stocks can always get more expensive, and cheap stocks can always get cheaper.


Is the Holiday Shopping Season Going to Be a Success? The Answer Is Murky

By J. Edward Moreno, The New York Times, 12/1/2023

MarketMinder’s View: There is plenty of good data and information here, including a look at Black Friday weekend sales (up nominally over last year, according to several measures, but not as much as goods prices excluding food and energy) and the observation that retailers finally seem to have a good handle on inventory levels after three-plus years of pandemic-related weirdness. That is key because, as the article notes, it means retailers could still enjoy some nice quarterly earnings even if sales don’t quite outpace inflation. Where this runs aground, in our view, is in recycling a bunch of long-running fears (e.g., resumed student loan payments, higher prices) to argue consumer spending is likely to weaken. We don’t dismiss the pressure these issues may cause for some households, but there is a very big mitigating factor: Wages have followed prices higher, and US households are overall in much better financial shape than before COVID (according to the New York Fed’s latest look at household credit). So we think American consumers probably have a lot more bandwidth than this gives them credit for. And if not? If holiday sales fizzle? Well, the holiday season is one part of one segment of consumer spending. Retail isn’t everything. Services, most of which don’t count in Black Friday or retail sales tallies, are the majority of consumer spending and US economic activity overall. Discretionary goods are only a small piece of the puzzle.


Fed Officials Shift Tone but Remain Wary of Markets’ Aggressive Rate Cut Bets

By Steve Matthews and Catarina Saraiva, Bloomberg, 12/1/2023

MarketMinder’s View: This is a tour de force in reading way too much into Fed policymakers’ views. Parsing several Fed statements and market-based indicators, it tries to gauge the likelihood of rate cuts in the near future. In our view, this is fruitless. Not only have markets proven for over a year that they don’t need rate cuts in order for a new bull market to thrive, but there is no—zero—way to know in advance whether they will happen. The Fed has a long history of changing its mind and U-turning on prior guidance. To wit, we are one day removed from the two-year anniversary of Fed head Jerome Powell’s announcement that “transitory” was no longer a good word to use to describe inflation, upending expectations for little change in rates and eventually resulting in the fast, steep rate hike cycle that began in March 2022. That is only the latest instance of Fed flip-floppery, and we doubt it will be the last. Thankfully, predicting Fed policy isn’t necessary since it is but one variable affecting one driver for stocks (the economy). So it is no great tragedy that it isn’t possible. And it all means you can spare yourself the boredom of diagramming sentences and trying to discern what each policymaker really meant by their chosen adverbs, adjectives, verbs and nouns.