Heading into the last few days of 2022…
Nearing The Final Days Of 2022 …
December 27 (King World News) – Michael Oliver at MSA Research: … and lessons that investors in all asset categories should have learned in 2022.
MSA has been major negative (annual momentum trend negative) on the stock asset category since January or February, depending on the major index. We stick with that. Very early this year, and not far off the bull market price highs, the stock market joined with the already negative trends underway in U.S. government bonds, munis, and high-yield corporate bonds. In sum, paper assets that had been “inflated” for a dozen years due to free money policies in the developed economies were busted. Bubbles broken. And in the case of U.S. stocks, it was a massive, historic bubble in percentage terms…
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The 60/40% (stock/bonds) portfolio belief structure clearly failed in 2022. There were no paper assets in which to hide or to “balance” one’s portfolio. Believers were skewered from both sides of that mix.
And the bubble breaker was the Fed. After all, it had created the prior bubble, so it was natural they’d burst it with equal ignorance of free market asset pricing. Nice.
And that recurring bust process is underway again with its expunging of—puking of—bad decisions, mis -priced assets, etc. Errors spanning a dozen years that affect families, corporations, and governments. Now revealed. And the Fed won’t be able to cure it, though in 2023 they will try to resuscitate those assets. They’ll have no choice.
And if you believe you can’t fight the Fed, then you haven’t learned from the 2007 to 2009 collapse, or the 2000 to 2002 bubble break, or from what has already occurred in 2022.
The Fed declared war on inflation—or its very narrow view of what “inflation” is. And so net on the year while stocks are down 20 to 30%, T-Bonds are down 22% in price (much more since their actual downturn levels), and real estate (XLRE, ETF) is down 29%, the Bloomberg Commodity Index is up 14% (and it’s up that much despite being in a downside correction). And gold is now nearly unchanged on the year while silver is up nearly 4%. Something’s “not right” here if all year the Fed has been perceived as fighting “inflation” (again wrongly and narrowly defined by those academics), and yet we have the results as defined above.
There must be a larger reality out there—beyond what that the Fed thinks and wants economic reality to be. Ponder that.
2022 should have been a head-turning lesson for investors. And perhaps for some it was.
Gold & Silver
2023 continues to look to MSA as a continuing trend upside for gold and silver following the two-year holding pattern (yes, in broad strokes that’s what it was) and the resumption of the commodity uptrend (which we’re monitoring for a resumption signal). And of course a continuation of the paper asset bubble breakage—a trend event that will rip heads off central banks in terms of policy direction and perceived credibility.
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