(PATIENCE IS UNDERRATED WHEN YOU BECOME AN INVESTOR)
December 18, 2024
Hello everyone
It’s the final week before Christmas. The market has been pausing before the Fed’s final meeting of 2024, which may be the catalyst for a year end rally. We will wait and see.
First, let’s look at the difference between patience and impatience. Warren Buffet reminds us that:
“The Stock market is a device for transferring money from the impatient to the patient.”
THIS IS WHAT IMPATIENCE LOOKS LIKE IN THE INVESTMENT WORLD
When I was reviewing the portfolio and wanted to slim it down earlier this year, I recommended to sell this stock as it was underperforming at the time. The lesson here -it is a mistake to interpret a period of underperformance as a reason to sell a stock. My patience hat must have been missing that day.
AND THIS IS WHAT PATIENCE LOOKS LIKE IN THE INVESTMENT WORLD
CrowdStrike (CRWD) suffered a severe crash in August due to a routine update to its cybersecurity software which had a malfunction. It sent around 8.5 million Windows-based computers crashing. The outage cost its largest customers around $5.8 billion. But (CRWD) has recovered.
And we see a similar recovery taking place in Snowflake, after its stock dropped from $240 down to $110 in 2024. In the spring of 2024, a string of data breaches linked to Snowflake sent a shudder through the cybersecurity community. The breach resulted in the theft of a significant volume of sensitive data from various high-profile companies. Analysts have also argued that (SNOW) lags rivals in developing AI related products. Add to this, a new CEO stepped into the company earlier this year. The stock has jumped since November when investors were surprised by the financial results it reported for its fiscal third quarter of 2025. The company had some big customer wins during Q3, which was an encouraging sign. Its customers signed longer-term contracts, and this is something that will continue to provide strong financial results in coming years.
WHERE BITCOIN COULD BE HEADING NEXT
Targets are $109k, $115k, $124k, $127k, $129k right up to $153k
THE PRO-BITCOIN NARRATIVE
Trump’s election promise was to establish a BTC strategic reserve and end Operation Chokepoint 2.0. Gensler has been replaced at the SEC with a pro-crypto Chair, Other sovereign’s/nation states expected to follow suit.
The corporates have dived into Bitcoin. Larry Fink, CEO of BlackRock, who originally ignored Bitcoin, is now a convert and sees it as an asset class. His ETF (IBIT) was launched in January this year and had around $10 billion under management after just a few weeks. Many tech companies are now considering treasury investment, along with 88% of S&P500 companies.
We are seeing more institutional investment in Bitcoin, and this should continue in 2025. Pension funds, Asset Consultants, and Global Asset Managers are now allocating to BTC to diversity Alternatives Exposure – so we could see 3% AuM as an average.
Family Offices and Retail Investors will continue to grow their exposure to BTC, either directly or via ETFs as part of a balanced portfolio included in pensions and endowments.
Crypto and Digital Assets have been legitimized as an asset class and are on track to be included across all investor portfolios.
Consider this:
Corporate Treasuries: S&P500 – 5% allocation => $40,000 increase in Bitcoin price
Institutions: Pensions & Insurance Co’s – 2.5% allocation = > $200,000 increase in BTC.
Sovereign Wealth Funds: 3% allocation => $500,000 + increase in BTC price.
AND WHAT ABOUT GOLD
While Bitcoin is rallying, gold is retracing. As bond yields move up, we tend to see a retracement in gold prices, so, in general, they historically have an inverse relationship.
Inside Edge Capital chart
As I have been saying gold has entered a correction and this could continue for some time. We could easily see the metal drop below $2600 and move toward $2400 area and below. I have suggested selling calls on precious metals’ stocks. Another way to play the bearish move is to buy the DB Gold Short ETF (DGZ).
QI CORNER
MARY ANN BARTELS BELIEVES WE ARE IN “THE GOLDEN AGE OF INVESTING”.
Sanctuary Wealth’s chief investment strategist thinks the market could grow by 20% next year and the S&P500 could be at around 13,000 by the end of the decade. Below I share parts of an interview she gave at the Barron’s Women’s Advisor Summit in December at The Breakers in Palm Beach.
Why stocks can gain 20% next year. “What I’ve studied in my 40 years is that markets don’t make a major peak until all investors are in and the market is levered. I find that through the New York Stock Exchange margin debt and we’re not even close. I believe between now and the end of the decade, we’re still in a secular bull market. My forecast for next year on the S&P 500 is pretty aggressive at 7,200 to 7,400. We can get 10% or 15% pullbacks.”
Super bullish through 2030. “I think the environment is still very bullish for the market to go up. I also introduced a target for the end of the decade for the S&P500 between 10,000 and 13,000. And that’s what I want clients and investors to focus on. I believe between today and the end of the decade, it will be one of the most profitable investment opportunities of our lifetime.”
Reasons for optimism. “At the end of the day, what drives stock prices is earnings, and earnings have been stronger than what most people have even anticipated. I think we’re still trying to figure out how AI is going to impact earnings. I think corporate profit margins will continue to grow. The other amazing thing and why I am so bullish on technology is return on equity. Warren Buffett always talks about return on equity, but Wall Street tends to talk more about P/E ratios. When we look at technology versus the S&P500, the broader index has an ROE of about 18% while tech and tech related stocks’ ROE is growing 30%.”
Favourite and least favourite sectors. “I’m very bullish on bans and capital markets. The Trump administration is expected to have more of a deregulated environment. M&A activity should pick up, particularly in the banks. I think banks will do well, but I’m more positive on capital markets. I’m negative on healthcare…Consumer staples look very weak. But cyclicals look good and that’s a sign that the economy’s going to grow in 2025.”
Expecting more gains for Bitcoin. “Longer term, if we create (government) reserves and make it a true form of a digital asset, it’s going significantly higher, even from where we are today…A hundred thousand dollars was where you kind of bob and weave. Now we’ve busted through that. So, the next target is $113,000 and the target above that is $150,000. Those are my near-term targets.”
Advice for individual investors. “For my entire career there’s always been some concern and what is perceived to be a reason not to invest in markets. And history has shown that staying out of markets is not what you want to do. If you want to grow your wealth, you have to stay invested…If you want to have retirement funds when you retire, you need to invest now and you need to stay invested. Dollar cost average over your lifetime.”
(It seems to me that Mary Ann and I have something in common in relation to our thoughts on the markets, on staying invested and dollar cost averaging).
SOMETHING TO THINK ABOUT
A HACKER’S ADVICE ON PROTECTING YOURSELF ONLINE
Keep all sensitive information (Passwords, seed phrases and so on) on paper and away from online 3rd party digital storage. Don’t click on random links or download random files.
Cheers
Jacquie
