Nearing an inflection point 

As the year 2020 comes to a close, it feels like we’re at a major inflection point for financial assets. The world’s central bankers, hellbent on proving that printing money is the solution to all societal ills, have blown an “everything bubble” for the ages.

To protect our irreplacable savings, our first objective is to steer clear as the great monetary lab experiment blows up in their faces. Our second is to not lose sight of the many silver linings, not least of which is that bubbles nearly always create “anti-bubbles.” As momentum chasing investors funnel into a narrower group of hot stocks, they abandon large swaths of the market, leaving opportunity in their wake. This happened in 2000 as many “Old Economy” stocks bottomed in March precisely when the Nasdaq peaked at over 5,000. It is happening today, but on a grander scale.

Our investment portfolio is positioned to respect and exploit the following trends:

1.       Inflation is not dead. Precious metals will benefit and the global bond bubble will burst.

2.       The imminent death of fossil fuels is exaggerated. Commodities are entering a long bull market.

3.       Amazon.com is not going to put all retailers out of business.

4.       Value investing is not dead. Passive investing is not going to put all active managers out of business.  

5.       The population is aging and the genomic revolution just getting started.

6.       The risks of prolonged recession and a severe bear market are high. 

7. Political correctness will increasingly corrupt corporate cultures and consumer brands. “Get woke, go broke.”

8.       Migration trends away from high tax, high cost, high crime cities will accelerate.

9.       The economy will become more information-based and location independent.

“The intelligent investor is a realist who sells to optimists and buys from pessimists.”

— Benjamin Graham