2023 and Merry Christmas!

Thinking back 50 years or so, none of us imagined we would be living in a year called “2023.” It doesn’t even sound like a year. Sounds like a combination for a bike lock. Y2k and 9-11 are now distant memories. Time is moving on, and it seems faster and faster. Didn’t the old folks warn us about this!?

An old and wise saying; Success is not from timing the market, success is from time in the market. Paraphrasing Warren Buffett, he said; “You should be perfectly happy to go to the moon for 10 years while being invested.” In other words your current investments would be untouchable for 10 years. There would be no chance of making a mental/emotional error to your plan. hat sounds like paradise to me. We may prefer a better locale. 

The problem is that we can’t go to the moon. So we must train our minds to be the moon. We must stay here, listen to news and have the same outcome as the 10 year lunar vacation. You have to make your mind the moon (in a good way.)

So we boldly go not to the moon, but into 2023. What can we expect? Those who say they know, or guess, just can’t stand saying “I don’t know.” It is murder on a CNBC interview. TV guy: “So, Bob, what do you see happening in 2023?  Bob: “I don’t know.” TV guy: “OK, Bob we know that no one knows for sure what will happen but can you give us a guess?  Bob: “No.” They had Bob scheduled for a 4 minute interview and show 3 and a half minutes of outtakes from America’s Funniest Home Videos. 

Basically, I am with Bob, but it is human nature to have ideas or try to predict. Humans are pattern seekers, and many times find “patterns” where none exist. We will always try to predict. It is how we are built. In a single day, CNBC may interview several people who make predictions that are contrary to what the other people interviewed think. I used to think that given enough facts that intelligent, logical people, would come to the same conclusion. They don’t. They often come to very opposing positions with all the same information. Those who don’t fall on our side are not logical and vice versa. Just look at our last election! When will our losses recover? This chart is helpful.

Demand is officially down across the board. This will continue until prices start to drop steadily and across the board. American consumers are tapping the brakes on spending as the interest rates reverberate across the economy. We expect a fairly weak year. There is a slowdown happening, there’s no question about it,” Wells Fargo CEO Charlie Scharf

After two years of pandemic-fueled, double-digit growth in Bank of America card volume, “the rate of growth is slowing,” CEO Brian Moynihan

Savings accounts are being drawn down, the easy money is running out. I see prices going down slowly, and increases will stall and prices will start downward. This bear market is starting to get a little worn out. The average bear market is 388 days. This current one is 344 days old. The shortest was 33 days and the longest 929 days after the 2001 Dotcom bubble burst. Large cap tech stocks are at prices that are way below their value. The deals are everywhere.

Oil stocks are starting to regain full price and have kept many of us afloat in the last 2 years especially, with Exxon, for instance, up over 80%. Oil could have further to go because we won’t have full demand until supply chains heal. We also Healthcare has been flat for 2022. Food and consumer staple stocks have done real well with General Mills up 28.8% for instance. Discount retail has been good also with Walmart, Costco, Dollar General and TJ Maxx up a few points each. Much of the pain has been from the huge, well financed companies like Apple, Amazon, Google, and Nividia. They are priced as if we will never use them again. https://www.macrotrends.net/2526/sp-500-historical-annual-returns (year by year returns on the S&P)

2023 will end up where it wants to end up. There has only been 4 times when the S&P was down 3 years in a row. Two of those were during the depression. Another one was 1946-1948. The other 3-year-down period was the dotcom bubble in 2000 through 2002. Many lf you were invested in those years and contributing to 401k’s. You made a lot of money because prices got cheap while you were adding monthly. I think 2023 we will see the light at the end of the tunnel. In my opinion (guess) the market will be positive in 2023. I will never understand how the world destroyed our supply chain over a virus that kills less than 1% of the population.

There is good news. The years after bear markets have been great. The average 3 year forward return is +35%. The average 5 year forward returns is a gain of almost 80%.

Merry Christmas to all!

A Christmas verse from the book of Isaiah 9:6

For to us a child is born,
    to us a son is given;
and the government shall be upon[a] his shoulder,
    and his name shall be called[b]
Wonderful Counselor, Mighty God,
    Everlasting Father, Prince of Peace.

The amazing thing about this popular Christmas verse; it’s not about witnessing the birth of Christ. This was written 730 years before Christ was born. It was a prophecy from Isaiah. One small reason the Bible is an amazing book.

I pray you have a peaceful, joyful Christmas.

See you soon,