The first quarter of 2024 saw the greatest gain for the S&P500 since 2019. It was up more than ten percent.
Despite the gains, the market continues to climb its proverbial “wall of worry”. And don’t get me wrong, there is plenty to fret about.
The ten-year bond is at 4.63% with mortgage rates above 7%. The monthly payment on the average house in America is almost twice what it was two years ago. And renting is no better. Rents have climbed for over 30 months in a row.
And don’t even get me started on cars. Kelly Blue Book puts the average cost of a new car at $48,759. Car insurance rates are also up more than 20% over last year. It is no wonder that credit card delinquency rates are the worst on record.
Inflation while dropping, is still stubborn. Food costs a fortune. I still can’t get used to the $20 hamburger.
Our political class is filled with louts and lunkheads. The military can’t defeat a bunch of sheep-herders with homemade drones. And if we have some sort of international strategy I couldn’t guess what it is.
We are in the Middle East due to some legacy of the oil crisis and yet we now produce more oil than anyone on earth. We are in NATO to stop the Soviet Union which has been gone for what thirty years now? We spend billions (trillions?) protecting sea lanes for a merchant Navy we no longer have to protect trade we no longer need.
The national debt is at all-time highs with few who seem to care. Social Security will run out by 2033. Interest will soon be our biggest line item. Our cities are being abandoned and left to criminals, drug addicts, and the homeless. The tallest building in St. Louis just sold for $3.5 million.
And yet the market is strong.
GDP is up 3.2%. Recession fears have faded. Unemployment remains remarkably low. Around 66% of people in America own homes, most of them at low interest rates and they are happy enough to stay put, thank you very much.
Stocks are just off all-time highs in a broad-based rally. Even gold and silver have gotten into the mix – with gold at $2386 an ounce and silver trading for $28.67. I’m hearing calls for $4000 gold and $100 silver from the same old gold bugs — though many who lived their heyday in the 1970s are in that great Fort Knox in the sky.
So where do we go from here?
I am sticking to my themes for the year: AI, energy, bitcoin and select emerging markets.
We’ve seen a boom year for AI with companies like Nvidia and other hardware makers flying high. I’ve made readers a lot of money from trades like C3.Ai (AI), and Palantir (PLTR).
Investors are now moving down the value path with data companies and electricity sectors seeing jumps. AI will use a lot of electricity and this will be supplied by traditional means like hydrocarbons with an ever-increasing push for nuclear.
I still like the oil tanker trade which is the most undervalued sector in the market with the possible exception of coal.
Bitcoin halfing is coming on April 20th which is just a few days away. You’d be happy to know that most of the gains in bitcoin have traditionally come after the halving day.
And lastly, the world moving away from globalization into trading spheres. Countries like Mexico and India will benefit. They both have a young, well-educated population just entering their work years and they will continue to pick up low-cost manufacturing from China.
All the best,
Christian DeHaemer
Outsider Club
