Vol. 4, No. 1 — The long and short of it
Vol. 4, No. 1 — The long and short of it
The year in review; Explaining why rate hikes are regressive; Italian stocks look cheap; Why stocks do best in January and July; The S&P 500 drops slightly to start the year; Value in soft drinks
Read time | 45 minutes
In this issue
Quote | Charlie Munger
Cartoon | Buy high, sell low
Valuabl | 2023: The long and short of it
Economics | Interesting times
Finance | La bella vita
Finance | Can February March?
Markets | A slight correction
Investment idea | Value in drinks
Quote | Charlie Munger
“We look for a horse with one chance in two of winning and which pays you three to one.”
Cartoon
Buy high, sell low
Valuabl | The year in review
2023: The long and short of it
A look back at Valuabl’s economic soothsaying and stock picking performance in 2023
It’s a new year and possibly a new you. While most people will break their New Year’s resolutions before the end of the month, stock pickers and armchair economists—an eminent group of which Valuabl is part—will march forward. Hopefully, your Valuabl subscription lasts longer than your gym one.
But, before we look to the year ahead, we should look at the year that was. In 2023, Valuabl published 25 investment ideas and a dozen economic predictions. While some of these haven’t had time to play out entirely, it’s still interesting to take a gander at how they did. So, how did Valuabl’s 2023 go? It was a mixed bag. The economic predictions published in these pages did better than the stock picks. While most of the investment ideas made money, they failed to keep up with the gangbuster performance of high-tech growth stocks.
Valuabl’s economic predictions did quite well last year. In this journal, amongst other things, your author argued that bitcoin wouldn’t replace fiat currency: it didn’t. Inflation would self-correct as it was cost-push driven: it did. America wouldn’t go into recession because interest rate hikes there would support aggregate demand: the economy boomed.
Valuabl also argued that lawmakers would raise the debt ceiling as needed: they did. The banking sector wouldn’t collapse despite some isolated duration mismatches: it didn’t. Non-fungible tokens (NFTs) are worthless, and the craze wouldn’t return: it didn’t. Rising Treasury bond yields wouldn’t collapse the financial system: it didn’t. And buying a house would get harder: it did.
Still, there were some big, fat, hairy mistakes. Valuabl argued that the housing bubble had burst: clearly, it didn’t—prices rose. Oil prices would rise on the back of Saudi production cuts: prices, in fact, fell. And Australia would go into recession: well, the country is in a per-person real downturn, so that’s only half right.
Reading economic tea leaves is fun and all, but the actual test is whether or not it makes you money. On this measure, Valuabl had a modest 2023. By arguing against the doom-‘n-gloomsters, Valuabl encouraged readers to stay invested. Readers who did this would have done well. However, traditional value investing was a laggard.
It was a great year to be long growth tech, but a bad one to be long global value. Investors in the Nasdaq 100 index of large tech companies made 54% last year, while the Russell 1000 Growth exchange-traded fund (ETF) returned 12%. On top of this, broader indexes like the S&P 500 index of big American companies and the MSCI World ETF each made 24%. However, value stocks did poorly. The Russell 1000 Value ETF lost 11%. Valuabl’s 2023 investment ideas made a paltry 1.5% on average from the publication date to the end of the year—better than the typical value index but still a ways behind the market.
This makes grim bedtime reading for value-oriented investors. Despite 15 of the 25 long and short investment ideas published in this newsletter making money last year, only 20% beat the market. These ideas finished the year trailing the market by ten percentage points on average.
The worst ideas were Contemporary Amperex Technology Co. and Metcash Limited. Each of these stocks lost money. While the best ideas were Euronet Worldwide Inc. and Ansell Limited. Each of these made a profit and beat the market.
While some of these ideas haven’t had enough time to play out, and their relative performance might change, others definitely have. That’s not to say these ideas are no good—some might still be worthwhile investments. But 2023 was, despite being profitable, a first-hand instruction on how tough it is to beat the market. You can continue to monitor Valuabl’s annual track record as it is updated here. ■
Economics | Explaining why rate hikes are regressive
Interesting times
Rate hikes are regressive. They take from the poor and give to the rich. Here’s why Robin Hood would be p***ed off
Heavier credit card statements were an unwelcome lump of coal under the Christmas tree this season. Higher interest rates have increased credit card bills and made mortgages less affordable—a central bank gift that’s more “Fairytale of New York” than “Jingle Bells”. They’ve also increased the size of the government’s interest bill.