And you misinterpret this how? That nugget of wisdom was uttered by Jerry Seinfeld to George Costanza in the 13th episode of Season Eight of Seinfeld. It really sums up this week’s market action. I just don’t see how anyone could possibly take recent economic developments, positively, but, hey, I don’t watch much FinTV.
It’s just a vast conspiracy out there to get people to think things are okay with the global economy, and therefore somehow stocks are attractive. They’re not. By any measure. With one exception: energy stocks. As oil prices jump in today’s trading, we are revisiting – like Jerry and George (in a different episode) going back to their favorite pizza place to play Frogger – the existential truth that has made my HOAX portfolio strategy such a winner.
ESG-mania has produced an environment in which a massive hoax – that the planet is melting – is used to excuse the overvaluation of companies that burn cash at the expense of companies that produce it. It’s not just energy, as Apple (AAPL) produces copious amounts of free cash flow, pays a dividend and buys back stock. So does Exxon (XOM) . Why on earth are you invested in companies that don’t?
The proof is in the returns. So, HOAX – including reinvestment (trades only available to my subscribers) has posted the flowing performance versus its benchmark since inception on 12/23/2021
The score: Jim: 1, Cathie: 0.
And that is all that matters. Because cash flow is all that matters. But there is such a parade of nitwits in the financial media telling you otherwise. I have been overwhelmed by the incredible response to my spreadsheets as Real Money features the links to them, with thousands of share requests.
As those share requests turn into subscriptions to my other products, I am momentarily overwhelmed by my offer to REPAY subscriptions to other newsletter publishers. That’s right, I am throwing my 2022 down the drain, just to build my base. In the short term that sucks, but the positive feedback from satisfied customers makes it all worthwhile.
Smart people read Real Money and with bright lights like the Rev Shark, Peter Tchir and Chris Versace contributing to the platform, I can say that smart people write for Real Money as well.
2022 has been the year of real defeating fantasy. Feel free to try and obfuscate about the future – ARK Invest actually just retitled their Head of Research as Chief Futurist… I couldn’t possibly make that up – and excuse performance. Peabody Coal (BTU) is up 103.9% year-to-date, Tesla (TSLA) is down 25.6%.
And if anyone (whose newsletter subscription I have not yet refunded) is telling you “Oh, don’t worry about underperformance, investing is long-term,” then you have my permission to ignore that person. We are in the mid-part of September and approaching the nine month anniversary of HOAX. That is enough time to make judgements as it’s a valid sample size.
The World Has Turned Because Money Is No Longer Free
Even the ECB removed its final 0% lending facility yesterday. The game has changed. The 12-month UST is yielding 3.58% as of this writing. In contrast, according to multpl.com, the S&P 500 is yielding 1.58%, and the Nasdaq yields less than half of that.
Not to get into CAPM or the equity risk premium or all those nerdy CFA constructs, but the cost of capital is higher now, so your returns need to be higher to reflect the greater opportunity cost of holding equities. That’s why – for my asset management clients, my readers, my subscribers, anyone unfortunate enough to occupy the barstool next to mine – I continue to preach the wisdom of income investing.
Every long-only portfolio I have ever created is yielding much more than the 3.58% yield of the 12-month UST. We have a cushion, even if it is marginally reduced. But if you buy Cathie Wood’s leaky ARKK, you have no cushion. You are entirely dependent on what other people will pay for those assets, and usually negative, cash flows.
That’s not how I roll. Bear market bounces come and go, but I called this bear market (I referred to it as Tech Bubble 2.0 in my Real Money column of February 18th, 2022) and I have yet to see any indications that we are inflecting. Interest rates are rising, the global economy is slowing, and so what’s not to like about US Tech stocks? Everything. Deal with it.
Excuse one final Seinfeld reference, but the only way to find serenity now is to invest in securities that pay you for the privilege of doing so. It feels good.