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Santa Claus Rally in Full Force! 🎁

A year in review: what a roller coaster!

Author

GRIT
24 Dec

Hi Everyone 👋,

Welcome to the latest edition of your GRIT weekly newsletter! Today’s newsletter comes to you straight from Santa’s Workshop! 🎅🏻 🎁 So, if you’re sitting around with family today and itching for a little stock market recap, we are here to deliver.

GRIT’s BIG 3 of the Week:

  1. Genevieve’s Corner 👉 SANTA CLAUS RALLY IN FULL FORCE

  2. Matt Allen’s Corner 👉 THE INTELLIGENT INVESTOR

  3. Comin’ Up 👉 EARNINGS AND ECONOMIC DATA

1. Genevieve’s Corner

SANTA CLAUS RALLY IN FULL FORCE

Hi Everyone!

Santa Claus Rally in Full Force!

S&P 500 notches 8th-week winning streak. The longest in +5 years! 

Now, less than 1% from a record high.

Let's recap:

  • OpenAI in talks to raise new funding at $100 Billion valuation

  • Nancy Pelosi buys $5 million of Nvidia call options

  • NASDAQ 100 hits another record high

  • 88% chance FED will cut rates in March (according to Fedwatch)

  • Russell 2000 has gained 24% over the last 36 trading days, one of the biggest small cap rallies in history 

  • Galaxy Digital CEO says a Spot Bitcoin ETF will be approved before January 10th

  • Grayscale CEO says Spot Bitcoin ETF approval would unlock $30 trillion worth of advised wealth for Bitcoin

  • Gas prices in the U.S. fall to the cheapest level of the year

  • Record oil production in the U.S has left OPEC with its lowest crude market share (51%) in nearly ten years

  • U.S. debt reaches a new RECORD high of $33,883,845,835,556

  • FED balance sheet on pace to set a new calendar year RECORD for the most significant balance sheet REDUCTION in both dollars (-$827 billion) and % (-9.7%)

  • FED preferred inflation measure the PCE Index up +3.2% YoY in November. But, on a 6-month annualized basis, it’s only up +1.9%.

  • The “Buy Now, Pay Later” Affirm rolled out at thousands of Walmart stores through self-checkout. Affirm stock up +407% YTD

  • A record level of homelessness hits the U.S

  • 60% of Americans are living paycheck-to-paycheck heading into the holidays - The ability of US households to cover an unexpected $2,000 expense is at the lowest level in 10 years

  • FedEx stock is down -11% as Q2 profits missed expectations. Outlook lacks “visibility,” and Citi analysts called it “vague.” 

  • Nike is down -11% after missing sales estimates and cutting its outlook

  • Tencent drops -16% - most since 2008 (one of China’s biggest tech companies)

  • U.S. housing starts unexpectedly rising to a 6-month high! A remarkable 7+ standard deviation beat

  • U.S mortgage rates have fallen to a 6-month low

  • The share of Americans who are mortgage-free is at an all-time high.

  • Used car prices in the US are at their lowest levels in +2 years

  • Active managers had less than 25% exposure to equities in late Oct. This week, their equity exposure jumped to 97%

  • Adobe and Figma mutually agree to terminate the merger (Adobe to pay a $1B termination fee)

  • Electric scooter company Bird files for bankruptcy protection (peak valuation $2.5B)

  • Warner Bros ($28B) in talks to merge with Paramount ($10B) to create entertainment giant

  • Nippon Steel to buy U.S Steel for $14.9B, combined company will be 3rd largest global steel producer

  • RBC gets approval for $10 billion purchase of HSBC Canada

  • Apple removes watches from online store to meet US-ordered ban

  • Nikola founder sentenced to 4 years in prison for fraud

  • 58% of U.S households now own stocks, which is a NEW all-time high

  • Last Friday saw a historic event with investors putting a record-breaking $20.8 billion into SPY, marking the largest single-day inflow for any ETF in history!

  • All we wanted for Christmas was a new record high on the S&P... and we almost got it!

Happy Holidays to you all!

If you want to hear about my best investing hack ever… check out my FOX interview this week with our friend Charles Payne!

A bonus present this week is EVERY Major "2024 Outlook" from the World's Top Banks, Asset Managers, Private Equity & Consulting Firms Credit and Credit to Anthony Cheung for posting this on Linkedin.

Let's dive in!

BANKS (US):

J.P. Morgan Private Bank https://shorturl.at/eyzHK

Goldman Sachs Asset Management https://shorturl.at/mCSW1

Bank of America Private Bank https://shorturl.at/ajsv7

Wells Fargo https://t.ly/2bF1E

State Street https://t.ly/p47tE

T. Rowe Price. https://t.ly/e9b3d

TD Securities https://rb.gy/nnjx81

Charles Schwab https://rb.gy/lzcgh4

RBC Capital Markets https://rb.gy/0guz6u

 

ASSET MANAGERS:

Wellington Management https://lnkd.in/exnzD8_E

Legal & General Investment Management (LGIM) https://lnkd.in/e7hjAkx6

Deutsche Bank (Wealth) https://lnkd.in/efw_cwRd

Julius Baer (secular outlook) https://lnkd.in/eaN5EfJV

Cambridge Associates https://lnkd.in/eTHqAe4w

 

PRIVATE EQUITY:

Apollo Global Management https://lnkd.in/eCHMuRvV

BlackRock (Private Markets) https://lnkd.in/eiGcGCfy

 

BANKS (EUROPEAN): 

Lombard Odier Group https://lnkd.in/ePHr8mK4

Macquarie Group https://lnkd.in/enqQSUmB

 

AUDIT & CONSULTING:

Boston Consulting Group: https://lnkd.in/eDsnJRfQ

AND MAKE SURE TO UPGRADE TO OUR PREMIUM NEWSLETTER TO GET FULL BREAKDOWN OF MY 10 PREDICTIONS FOR 2024 COMING OUT ON DEC 31st 2023!

Genevieve Roch-Decter

2. Matt Allen’s Corner

THE INTELLIGENT INVESTOR

In preparation for 2024, I’m here to provide some inspiration to get you started for a prosperous year ahead! 🍾 The Intelligent Investor by Benjamin Graham is one of the best books ever written on investing, and everyone should be aware of its potential impact. Warren Buffett calls it: “the Bible of investing.”

It is a book that I personally read at the start of each year because it helps shape my investing focus.

The book will help you build a foundation for your investment thought process. It will not teach you how to beat the market. However, it will teach you how to reduce risk, protect your capital from loss, and reliably generate sustainable returns over the long run.

Let’s go over some of my favorite points about the book that will help with your investing journey:

1. Mr. Market

Mr. Market's job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You do not have to trade with him just because he constantly begs you to.

Benjamin Graham

Most people see a stock as a ticker symbol with a price. This is completely wrong. A stock is ownership of a business, even if you just have one share.

Enter in Mr. Market:

Think of Mr. Market as an irrational investor in a business you also invested in. He frequently changes his mind and quotes wildly different prices for your shares. (Everyday on the stock market)

When you invest in a stock, you must remember that value is what the stock is worth, while price is what you pay for the stock.

Why would you pay $75 per share of a company that is worth $50 a share?

For the investor who can stay calm, Mr. Market never forces you to buy or sell a stock from him. Mr. Market just allows you to do so each day.

You should be happy to sell to him when he gives you incredibly high prices. You should be happy to buy from him when he gives you prices at a big discount.

We must remember that people back in 1928 were not bombarded with news and stock quotes every day. However, this is not an excuse for us to trade our long-term account even more frequently. I firmly believe in not leaving your long-term account on your cell phone.

2. Insist on a Margin of Safety

No matter how smart or great of an investment idea we have, there is always that chance that we could be wrong. In the stock market, you will have events that dictate what happens.

However, we can minimize this risk by insisting that every investment has a margin of safety.

As I said before, you must remember that value is what the stock is worth, while price is what you pay for the stock.

Graham suggests that you want to invest in a stock that is 2/3 of its true value. (However, Buffett has changed this up some when he met Charlie Munger)

When you find a stock on sale by 66%, you have found a massive margin of safety. The stock has nowhere to go but up at this point.

The book gives a formula for finding true value:

value=current (normal) earnings x (8.5+2 x expected annual growth rate)

The growth rate should equal the expected earnings growth in the next 7-10 years. Please note that I use a DCF Model along with Warren Buffett. I am working on a spreadsheet for our premium investors that does everything for you. When I invest, I base my margin of safety on how right I believe I am in my thesis.

3. Risk and Reward are not always correlated

According to academic theory, the rate of return an investor can expect must be proportional to the degree of risk that he is willing to accept. Risk is then measured as the volatility of the returns on the investment.

In Matt Allen's terms, the higher the risk, the higher the reward.

(Why can’t academics just give a simple explanation?) 😂

Benjamin Graham disagrees with this statement.

Instead, he argues that the price and value of assets are often disconnected. Therefore, the return an investor can expect is a function of how much time and effort he brings to find bargains.

Let’s say we have found a stock worth $25 a share, but Mr. Market has it sold for $5. This means that in time, Mr. Market will eventually realize his mistake and sell it to us for $25. This is a 400% gain.

The person who researches and works hard to find a stock like this is taking less risk for a higher reward.

🎯 GRIT TAKE:

2024 will bring us a bunch of… upgrade to VIP to read the full GRIT TAKE! 🚀 Plus, get 70% off your first year’s subscription for our biggest sale ever! Offer ends December 31st at midnight.

Merry Christmas!

Matt Allen

3. Comin’ Up

EARNINGS AND ECONOMIC DATA

💰 Earnings:

Monday: Christmas Day

Tuesday: Mesoblast

Wednesday: SunCar Tech, Iris Energy

Thursday: Aegon, Manchester United

Friday: N/A

📈 Major Economic Events:

Monday: Christmas Day

Tuesday: S&P Case-Shiller home price index

Wednesday: N/A

Thursday: Initial Jobless Claims

Friday: N/A

Were you shocked at the 2023 bull market? 😳

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❝

Invest for the long haul. Don’t get too greedy and don’t get too scared.

Shelby Davis

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The author of this newsletter owns ETF’s (exchange traded funds) that may hold ownership interests in the companies discussed in this newsletter as of the published date of this newsletter. An insider to GRIT Capital Corporation currently holds an ownership interest in Apple Inc. (AAPL) as of the published date of this newsletter. The insider to GRIT Capital Corporation does not guarantee that they will maintain their ownership interest in Apple Inc. (AAPL) and may increase or sell such interest at any time.

Sources: (1) Three takeaways from Fed Chair Powell following July hike decision (Elisabeth Buchwald- July 26 2023): https://www.cnn.com/2023/07/26/business/fed-powell-takeaways/index.html 

(2) Microsoft Investor Relations (July 27, 2023): https://www.microsoft.com/en-us/Investor/default.aspx

(3) Mostly Borrowed Idea’s Twitter Account (July 25, 2023): https://twitter.com/borrowed_ideas/status/1684007357787918342

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