Stocks closed out their 8th gaining week last Friday on a surprise disinflation figure. Personal Spending was weaker than expected - a cherry on top for the inflation fighting Fed.
Embrace change. I can remember when I was a kid, and my parents would say something like “those were the days.” Of course, that followed some unconfirmed fact about the cost of a bottle of soda. In truth, my parents had a very different upbringing, but they too, had some interesting “back in the day” platitudes. It is quite natural for us to hold onto things from our past, especially if they were positive. No matter what part of this or the last century you were born in, life, in general, gets more complicated as the years of your life pile up. And I will give you that the world has gotten more complicated. That is not to say that each generation does not contend with catastrophic events. These days, we are simply bombarded with information. All of this… complication drives us to cling onto those things in our past, which gives us a sense of stability, control in the midst of tumult. I could be ranting about life in general, but what I am really referring to is investments and the financial markets. This is, after all, a financially oriented daily note.
I am sad to report that not a week goes by without my having a conversation with one client or another who is adamant about holding on to a stock which is taking on water… lots of water. For some clients, they simply refuse to sell and trigger a capital gains tax… even though the losses far outweigh the projected tax . For others, there is some sort of emotional attachment to a specific company at which they or a parent once worked at. I find myself saying things like “you must have really loved working at so-and-so to quite literally burn money in homage for it.” For others, they may have achieved great gains by investing in an industry or type of stock at some point, and despite the fact that the investment is no longer valid (that is a nice way of saying that the client is losing money), they stubbornly hold onto the portfolio with strong conviction that it is going to come back, because it always does… er… did. I understand that investing can get very personal. It takes conviction to succeed, but sometimes it gets too personal.
Sometimes it can go beyond a stock, a bond, or an industry. I remember when I was still a neophyte on Wall Street. I started out as an institutional Treasury bond trader. I bought some notes from a client and decided to hold on to the position. The market started to go down… in other words, I was losing money. A senior person on the desk… like my boss’s boss, came over and asked me what I was up to. I explained to him that I was long, and that the market was going against me, and that when it got down to a certain point, I was going to buy more and lower my cost basis. I said it with such confidence, even telling him the exact lower price at which I would buy more. He got noticeably cross, and then dressed me down saying something like “if you are so confident that the market is going to continue to fall, you should liquidate your position and short the market.” He paused, shook his head, and said “what are you [insert your favorite string of foul expletives here] stupid!?” To say I was embarrassed would be an understatement as the entire trading floor watched the event unfold. I quietly sat down, composed myself, liquidated my position, and shorted some similar note… and made lots of profit on the trade. I even bought more bonds near the bottom and made money when the market did, indeed, turn around. That, my friends, is a true story, and it stuck with me for the thirty-some odd years since.
Why am I bringing this up? Well, as the end of the year draw nigh, many of us take stock in ourselves to prepare for what next year will bring. What will we do different in 2024? Well, I am not going to tell you whether and which stocks will go up or down next year, but I can tell you with confidence, that things will be different than this past year… AND that they will change many times between January and December. Ask yourself. Have you looked carefully at some of those stocks that you have held for a long time? Have you considered using ETF’s? What stocks have you ignored because you were not familiar with a type of technology or service they offer? Are those mutual funds that you bought for your retirement account 40 years ago still valid? Will AI continue to drive tech stocks higher next year? What might be the new, new thing? Indeed, there are lots of questions. It is obviously too early to answer all these questions accurately, BUT THEY MUST BE ASKED. Don’t get stuck in the past. And finally, for the record, I remember when a bottle of Coca-Cola cost only 25 cents and it came in a glass bottle that needed a bottle opener to pry off the cap. I am quite sure that same bottle will cost at least $2.00 today… and there is not even a “cents” key on my keyboard.
FRIDAY’S MARKETS
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