Is it true? If there was one thing that was absolutely forbidden in my house growing up, it was telling a lie. Whatever we had done wrong that led to the interrogation would pale in comparison to being caught in a lie. Punishments would increase tenfold if we attempted to lie our way out of trouble.
As a child I didn’t always appreciate what my parents were doing, but I realize now that they were providing me a foundation built on the hard rock of truth. If I have a gift as an investor, it is the trait to always question the narrative and favor reality. This trait, which my parents instilled in me at an early age, has served me well during my more than 30 years in the investment industry.
It is also why I have found 2023 to be so frustratingly maddening. This year the market has been dominated by narrative and has largely ignored reality. However, as the facts keep piling on, the cracks in the narrative continue to widen. Eventually, truth will out. The narrative here is that we are heading for a recession because interest rates have risen. Every quarter this year Wall Street economists have predicted anywhere from zero to negative economic growth, and every time they have been embarrassingly wrong. The initial reading for last quarter was GDP growth of 4.9 percent.
Instead of celebrating and rejecting the narrative, the pundits said this must mean that inflation is still high so the Fed will do more, which will cause an even bigger recession…except that consumer prices were flat month-over-month in October, and producer prices actually fell. This means the year-over-year numbers were also lower than expected.
The market finally seems to be catching on. We have seen a strong rally that has also been broad-based. Small company stocks are up strongly over the last week, which bodes well. We knew this would happen eventually, because our view had the strong foundation of being built on actual data. The truth matters.
It is Thanksgiving once more, and we have much for which to be thankful. I am primarily thankful this year for the strong foundation that my parents gave me. We lost my 92-year-old mother on October 23, and my 94-year-old father followed her this week. One of the nurses who cared for them said she couldn’t believe the downturn in my father over the past month, and we explained that he was a 94-year-old man with a broken heart. In life, like in investing, we must take the good with the bad. There is no return without risk, there is no joy without suffering, and there is no gratitude without loss.
~ I am thankful that we base our investment decisions on facts and not narratives.
~ I am thankful for the strong foundation that my parents provided for my four siblings and me.
~ I am thankful that college basketball has begun, and that Duke has already lost a game.
~ I am thankful for our two children, who are keeping my wife and me very busy.
~ I am thankful that our son is getting his driver’s license and will be running errands for the family very soon.
~ I am thankful for my family, immediate and extended.
~ I am thankful for all of my friends.
~ Of course, I’m always thankful for Mama’s pumpkin cheesecake, though she hasn’t made it herself in several years, and this will be the first she isn’t here to enjoy it. I don’t think she will mind me eating her slice.
~ I am thankful for my Iron Capital team, whose loyalty, diligence, and excellence have helped Iron Capital reach the milestone of 20 years in service to our clients.
~ Finally, I am thankful for you, our clients and friends. Your trust in Iron Capital is our greatest asset and we value it every day of the year.
Chuck Osborne, CFA