Ben Claremon on being a contrarian investor

So much of being a good investor is being a contrarian...  To be a good contrarian you have to be willing to hold your position in the face of news that is not particularly good, because that's how you make a lot of money.

~ Ben Claremon, interview with The Accent Podcast, 43:00 mark, September 18, 2020

Ben Claremon on fear and greed

The reason why there will always be room for people like myself in this world is because people swing between greed and fear, and emotions dominate markets. 

~ Ben Claremon, "Wealth #2: Investing in Stocks like a Pro; with Ben Claremon of Cove Street Capital," The Accent Podcast, 13:50 mark, September 18, 2020

Ben Claremon on being a generalist

What I really love about investing as a career is that you're constantly learning.  Constantly reading, constantly learning.  And as I always say, as an investor you have to know a little bit about everything, because as a generalist... I have to know a lot.  I have to have a very broad understanding of different kinds of companies and business models, and then I can dive deep and understand individual companies... at a nuanced level.  I approach new business models and companies all the time with very little backing aside from pattern recognition, a lot of time spent analyzing businesses which give you a framework which you can use.

~ Ben Claremon, "Wealth #2: Investing in Stocks like a Pro; with Ben Claremon of Cove Street Capital," YouTube.com, 4:55 mark, September 18, 2020

Kevin Duffy on investing in retailers

Which retailers should weather a recession best?  Those which provide basic necessities and sell things at a discount.  As the late Mark Butler, founder of Ollie’s Bargain Outlet, used to say, “America has always loved the bargain.  It will never, ever go out of style.” 

Investors should also seek companies expanding globally, occupying defendable niches or riding tailwinds, e.g. the trend towards casualization in footwear and apparel. 

Valuations matter.  Struggles at the low-end are well known and baked into stock prices, less so troubles mounting at the high-end.  As pain works its way up the economic ladder, best to steer clear of those retailers exposed to the higher-income consumer.

~ Kevin Duffy, "Dead Canary in Aisle 7: Is the high-end consumer safe?," The Coffee Can Portfolio, p. 17, June 15, 2022

Berna Barshay on activist pressure on retailers

Companies have spent a ton of time and effort to get e-commerce operations in alignment with bricks-and-mortar stores when it comes to marketing and customer experience because they know it is the best way to build customer loyalty and increase share of wallet.  Why un-do all this work, work that was grounded in good corporate strategy… whether we are talking about Kohl’s, Macy’s, or any other company.

~ Berna Barshay, retail expert at Empire Financial Research, "Kohl’s, Guess and other consumer companies are facing off with activist investors. One expert says it’s a signal of optimism," MarketWatch.com, April 12, 2022

Berna Barshay on difficult environment for retailers

Retail, as measured by the SPDR S&P Retail Fund (XRT) is the worst performing sector this year, down 32% year to date – even worse than tech, as measured by the Technology Select Sector SPDR Fund (XLK). Take a look...

It has been the hardest operating environment for retail planners and buyers in the 24 years I have been following this. Between the supply chain clogs – which are still there, rapidly shifting consumer preferences, inflation, a hazy economic outlook, and consumers shifting their purchase timing... it's easy to get tripped up.

So while it is tempting to cast stones at planners for not doing better, and the stocks have been terrible, I think there are incredible bargains to be had not only at the mall later this summer... but right now in the stock market.

~ Berna Barshay, "Explaining the Retailer Inventory Glut," Empire Financial Research, June 22, 2022

Miles Kington on the difference between knowledge and wisdom

Knowledge is knowing that a tomato is a fruit. Wisdom is knowing not to put it in fruit salad.

~ Miles Kington, British journalist, musician and broadcaster

Jonathan Haidt on cancel culture

I'm a big fan of the philosopher John Stuart Mill who said, "He who knows only his side of the case knows little of that."  That is, in order to really understand anything we have to look at multiple perspectives, we have to have different viewpoints pushing against each other.  That's what we do in universities.  And that's what we've always done in my career as a professor, until around 2014-2015.  All of a sudden, it became much more hazardous to question.

If you questioned, if you even tweeted about a study that challenged the received wisdom on race, gender, transgender - there are a couple of sacred issues - if you even suggested there was another side, huge social sanctions would rain down on you on Twitter and other platforms.  And here's the key thing: When people feel even a little bit of intimidation, when they think, "if I speak up, terrible things are going to happen to me of unknown size" (it could be nothing, it could be a thousand tweets).  It's that little bit of intimidation - that's what makes people go silent.  And when critics go silent, the group gets stupid.

~ Jonathan Haidt, social psychiatrist, NYU Stern School of Business, "'Uniquely Stupid:' Dissecting the Past Decade of American Life," Amanpour and Company, 4:40 mark, April 18, 2022

Bill Fleckenstein on how the Fed has lost control

By pursuing the policies that we did - I'm speaking mainly from the monetary standpoint - there was a massive amount of behavior modification, in corporate American, ... government.  No government worries about budget deficits or solving problems.  They just kick the can because, why not?  Well now were going to come to the moment in time where... the interest expense of the U.S. government is going to be up a bunch... I don't think people have really gotten their heads around the fact that the Fed is not in control.

~ Bill Fleckenstein, Wealthion interview, 42:25 mark, April 28, 2022

Chris Wright on ESG-driven underinvestment in energy

I hope we've hit peak fantasy land.  I suspect the energy dialogue starts to get more sober going forward in this country.

~ Chris Wright, CEO of Liberty Oilfield Services (as quoted in "Drill, Baby, Drill Is Not an Option," Barron's, March 12, 2022)

Kevin Duffy: "Is the inflationary side of the boat getting too crowded?"

Is the inflationary side of the boat getting too crowded?  To quote Wall Street legend Bob Farrell, “When all the experts and forecasts agree, something else is going to happen.”  Some of these fears are justified, but many are overblown, at least for the foreseeable future.  Many factors driving up prices are in fact transitory, while others – namely high energy costs – may take years to fix.  Meanwhile, the Federal Reserve belatedly began addressing the problem by shrinking its balance sheet on June 1. 

Grab your popcorn, the next act in this play is likely to be deflationary.

~ Kevin Duffy, "Breaking Point: The interventionists lose control," The Coffee Can Portfolio, June 15, 2022

Kevin Duffy on the role of deflation

Deflation is the market’s instinctive response to a particularly insidious strain of monetary inflation: one that leads to asset bubbles.  The artificial boom is seductive, pulling in the retail investor at the end.  As the bust does its all-important work of rediscovering prices, redirecting scarce capital to its best uses, and restoring economic health, hopefully some lessons will be learned.  Chief among them: the great stimulus experiments of 2008 and 2020 caused this train wreck.  The interventionists have done enough damage.  It is high-time they are swept into the dustbin of history.  Vive le laissez-faire!

~ Kevin Duffy, "Breaking Point: The interventionists lose control," The Coffee Can Portfolio, p. 9, June 15, 2022

Stanley Druckenmiller on deflations following asset bubbles

Every deflation has followed an asset bubble.  And since the Fed has created the biggest asset bubble... in history and the broadest, even though a lot of air's been let out of the balloon, it's so big, I just have to be open-minded to the consequences.  So we've had two really bad ones in the last 100 years: the U.S. in the '20s and Japan in '89.  They're still suffering.  So it could be just no growth and sideways for 15 or 20 years, like '66 to '82 in terms of the markets, or it could be something more pernicious like we had in Japan.  Frankly, I don't know.  I'm just trying to be open-minded.

~ Stanley Druckenmiller, interview with John Collison, 2022 Sohn Investment Conference, 1:02:55 mark, June 10, 2022

Kevin Duffy on the seeds of the everything bubble

Most stocks peaked one month after Biden took office while large cap stocks peaked about 11 months later. The factors that create a stock market bubble take years to build up, so if you really want to understand what happened, you have to study that earlier period.

The sad truth is that government stimulus to fight a virus created this mess (but the seeds were planted earlier with the stimulus/bailouts of 2008). That includes checks mailed directly to people. Where did this money come from? The Federal Reserve "printed it," as its balance sheet more than doubled. This all happened under the Trump administration, but was supported by BOTH parties.

As for the quagmire in Afghanistan, this began under G. W. Bush and was continued under Obama and Trump. The chickens finally came home to roost. I'm not excusing the exit strategy, which was a typical government boondoggle, just pointing out that we never should've gone in there in the first place. This was supported by BOTH parties and 80% of the American people who wanted vengeance after 9/11.

People need to look in the mirror and take responsibility for these disastrous policies. Instead, they will blame anyone but themselves and the problems will get worse. As Einstein may have said (or not), "insanity is doing the same thing over and over and expecting different results."

~ Kevin Duffy, Facebook post, June 24, 2022

Charlie Munger on trust

Of all forms of pride, perhaps the most desirable is a justified pride in being trustworthy.

~ Charlie Munger

Dan Ferris on index funds

Psychologically, you've gotten used to buying every dip for the last 13 years going back to 2009.  Psychologically, you've gotten used to the fact that your bonds protect you from the drawdowns in your stocks.  And it's really hard to shake these.  We still have people saying, "Oh, the best thing you can do is just buy an index fund and hold it for the long-term, and Warren Buffett says to do it, so you know it's really good."  But Warren Buffett is a beneficiary of this status quo...  He's worth tens of billions of dollars because of this financialization...  So it's sort of weird to listen to somebody like that at this moment.  Nobody's right all the time and nobody's right forever.  And what looks like long-term wisdom of the ages can sometimes look really bad for awhile and I think right now we're learning that just buying an index fund and hanging onto it might not be the greatest thing in the world.  This might not be a great moment to double down.

~ Dan Ferris, Stansberry Investor Hour, 8:45 mark, June 21, 2022

Doug Casey on trends and inflection points

Trends in motion tend to stay in motion until they reach a climax.  At which point, anything can happen.

But unfortunately, at great revolutionary turning points in civilization—which we’re involved in now—things usually get worse even after the old trend stops.  This happened in Russia in 1917 and in France in 1789.  Just because the old trend finally runs into a brick wall doesn’t mean that things get better right away.  There’s a period of chaos after that.

~ Doug Casey, "Doug Casey on Why Woke Corporations Will Go Broke," International Man, June 14, 2022

Doug Casey on the impact of DIE and ESG on corporate cultures

The concepts of DIE (diversity, inclusion, and equity) and ESG (environmental, social, and governance) have inundated corporate culture like a tidal wave of sewage.  They’re viewed as being good, positive, and something that everybody should observe when they should be thrown out with the garbage.  They’re purely destructive. 

One of the causes for this, other than our corrupt education system, is that corporations today are usually not run by entrepreneurs.  Entrepreneurs, the founders, generally have one way of thinking.  Later, managers take over.  The company is then run by suits, heavy with lawyers and accountants. They’re what the French call “petit fonctionnaires.”  These are people with bureaucratic mindsets, better at backslapping and backstabbing than creating value, who come to consider themselves as masters of the universe.  It’s not good.

~ Doug Casey, "Doug Casey on Why Woke Corporations Will Go Broke," International Man, June 14, 2022

F.A. Hayek on Economics in One Lesson

No other modern book from which the intelligent layman can learn so much about the basic truths of economics in so short a time.

~ F.A. Hayek

Peter Buffett on teaching

Good teachers, in any field, do far more than convey information; they pass along something of themselves.

~ Peter Buffett

Jan van Eck sees Bitcoin eventually going to $250,000 (2022)

Bitcoin will go to half the market cap of gold, or $250,000 a Bitcoin, but that could take decades.  It's hard to put a time frame on it.

[...]

Bitcoin has a great future.  In 2017, I thought that the drawdown risk was 90%, which is dramatic.  I think that the maximum drawdown risk now is 50% or so.  That means it should have some floor around $30,000.

~ Jan van Eck, "A Bitcoin Bull's Bold Prediction," Barron's, June 11, 2022

Jerome Powell: "There's no sign of a broader slowdown that I can see in the economy"

You see continuing shifts in consumption, you see some sales going down, but overall spending is very strong.  The consumer's in really good shape financially.  They're spending.  There's no sign of a broader slowdown that I can see in the economy.

~ Federal Reserve chairman Jerome Powell, FOMC meeting, June 15, 2022

Moody's Analytics on the wealth effect

We estimate that the wealth effect on total consumer spending is 4.5 cents.  That is, for every $1 change in household wealth, consumer spending ultimately changes by 4.5 cents.  Close to one-fourth of the growth in consumer spending during the current economic expansion, and one-third of the spending over the past year, is thus due to the wealth effect.  The wealth effects are especially large for spending on travel and home improvement, and small for groceries and drugstores.  

The wealth effects are at their maximum one year after the change in wealth, and they are bigger when asset prices are falling than when prices are rising.  This suggests that if we were to suffer a major correction in stock price or housing values, consumer spending and the broader economy would be substantially impacted.

~ Moody's Analytics, "Weighing the Wealth Effect," March 2018

Jeffrey Frankel: "Economic activity is not falling" (2022)

Economic activity is not falling.  Quite the contrary.  It is booming.

[...]

At some point there will be another recession.  But the odds that it will hit the U.S. this year are nowhere near has high as people seem to think.  In a random year, the odds are about 15%.  Currently, they are higher than that.  But not much.

~ Jeffrey Frankel, Harvard professor and member of the NBER Business Cycle Dating Committee from 1992-2019

Dan Skelly: "We still don't see an economic contraction"

The first part of the bear was this inflation and rates and derating in the [P/E] multiple.  And we've seen that play out.  Multiples in the S&P are off 20% or so year-to-date.  The second part of it, in our view, is the earnings hit.  And so we have seen, obviously, blowups in some of those most acutely sensitive to over-earning in the Covid period - so the retailers of the world who over-ordered inventory and maybe have a little bit of skew to that lower-end income scale who's getting particularly impacted by food and gas today.  So we've seen that.  We think that that basically broadens out a bit more to some other parts of the market.  That being said, we see this being limited to a multiple and earnings hit.  So, yes, there's probably a volatile summer ahead of us, but we still don't see an economic contraction.  And with that, you're probably going to be limited to 5, 10% further downside [in the stock market.]

~ Dan Skelly, head of market research & strategy, Morgan Stanley Wealth Management, Bloomberg TV interview, June 10, 2022

Gloomy headlines on supply chain problems

“No End In Sight For The COVID-Led Global Supply Chain Disruption” ~ Forbes, September 3, 2021 

“Global Supply Problems Worsen” ~ The Wall Street Journal, October 9, 2021 

“Snarled shipping lanes could mean empty shelves come holiday shopping time” ~ New York Post, October 12, 2021

“How the Global Supply Chain Failed” ~ The New York Times, October 23, 2021

October 9, 2021

Janet Yellen: "There's nothing to suggest that a recession is in the works (2022)

I don't think we're (going to) have a recession.  Consumer spending is very strong.  Investment spending is solid...  I know people are very upset and rightly so about inflation, but there's nothing to suggest that a... recession is in the works.

[...]

I believe there is a path through this that entails a soft landing...  Is there a recession risk?  Of course there's a recession risk.  But is it likely?  I don't think so.

~ Treasury Secretary Janet Yellen, New York Times Dealbook event, June 9, 2022

Peter Atwater on how those at the top have leveraged asset inflation

The other place where I think there's been insufficient attention paid is to the excesses of those at the very top.  If you look at the extension of credit, for example, in the private banking space since the financial crisis, it's extraordinary.  A bank like JPMorgan has more private banking loans outstanding today than it has credit card loans.  So you have a massive amount of credit that has been extended, you have an oversupply of elite product providers, service providers, whether it's luxury goods, hotels.  The sense that the elite are different and will never succumb to any kind of a cycle is just mindboggling to me.  And so nobody has contemplated the biggest potential losses could be among the customers that have heretofore been the safest.

[...]

The whole mindset of the financial elite was "Don't sell it, borrow against it.  Because if I have to sell it, I incur an enormous tax event."  And so what they've all done is to keep borrowing against it in the belief that the valuations of whatever it was were permanent.  The art collection...  It's masterful tax strategy, but it is completely devoid of a connection to reality.

~ Peter Atwater, June 2, 2022

Christine Lagarde: eurozone can avoid recession (2022)

We are not in a panic mode. 

~ ECB President Christine Lagarde, interview from Davos, May 24, 2022

Tacitus on laws and corruption

The more corrupt the state, the more numerous the laws. 

~ Tacitus, historian

Bruce Kasman: "We don't see a near-term recession" (2022)

We don't see a near-term recession.  We see a global economy which actually does okay in the second half of the year with the U.S. slowing and the rest of the world dong somewhat better.

~ Bruce Kasman, JPMorgan's chief economist and head of global economic research, Bloomberg TV, June 6, 2022

Tren Griffin on Charlie Munger's multi-model approach

In Munger's view, it is better to be worldly wise than to spend time working with a single model that is precisely wrong.   A multiple-model approach that is only approximately right will produce a far better outcome in anything that involves people or a social system.

~ Tren Griffin, senior director of strategy at Microsoft

Peter Atwater on the parallel peak in stock and bond prices

What I think is underway, though, is a real reversal in sentiment that didn't begin this year, but began almost 18 months ago when you saw Gamestop and SPAC mania accompanied by record volumes of negative yielding interest rate bonds.  So you had this parallel peak in stock prices and in bond prices.  And that is an unprecedented moment in the markets.  We 've never seen this kind of coincidence before.  And so what I don't think investors quite appreciate is we're having an unwinding in both fixed income and equities simultaneous here and there's not going to be any place to hide in that.

~ Peter Atwater, interview with Stephanie Pomboy, Wealthion, 10:50 mark

Nicolas Carr on information overload

We're surrounded by so much information that is of immediate interest to us that we feel overwhelmed by the never-ending pressure of trying to keep up with it all.

~ Nicolas G. Carr, author of The Shallows: What the Internet Is Doing to Our Brains

Michael Rectenwald on the Davos confab

The annual meeting of the World Economic Forum (WEF) in Davos is perhaps the world’s most unpopular conference, and the WEF’s founder and chairman, Klaus Schwab, one of the world’s most despised figures. Often compared to “Dr. Evil,” the character Mike Meyers played in the Austin Powers series, and routinely likened to a James Bond supervillain on the internet, Schwab is seen as a messianic megalomaniac leading a nefarious cabal of world leaders and corporate heads into a future dominated by a globalist elite. 

A Twitter poll by TruthBoost asks, “Does the World Economic Forum make the world a better place?” As of this writing, 98.4 percent of respondents said no.

What is it about this confab and its leaders that makes the WEF and its meetings so despised? After all, the WEF is “committed to improving the state of the world,” or so says its slogan. As it turns out, most people don’t like having a group of unelected, self-appointed dictators issuing top-down decrees and recommending policies that restrict their freedom and infringe their rights.

~ Michael Rectenwald, "Davos Man Is at It Again: The 2022 Annual Meeting of the World Economic Forum," Mises.org, May 31, 2022

Nouriel Roubini on the odds of recession

That's why my point of view is that there’s a 60% probability by 2024 we will end up with a hard landing. 

~ Nouriel Roubini, "Roubini Sees a ‘Hard Landing’ for the Economy," WealthManagement.com, June 1, 2022

(Roubini said there has never been a time when both inflation rose higher than 5% while the unemployment rate was below 5% that the country didn’t experience a hard landing when the Fed raised interest rates to try to reduce inflation.)

Janet Yellen admits she didn't see inflation coming

I was wrong about the path inflation would take.  There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that at the time I didn’t fully understand.

~ Treasury Secretary Janet Yellen, "Yellen Says ‘I Was Wrong’ Last Year on the Path of US Inflation," Bloomberg, May 31, 2022

Leonardo da Vinci on art and science

To develop a complete mind: Study the science of art; Study the art of science.  Learn how to see.  Realize that everything connects to everything else.

~ Leonardo da Vinci