End of Year Returns and Some Market Thoughts

It’s the last day of the year so now would be a good time to wrap up results, I hope within January I can get some type of real time tracker on the website but I digress. I finished the year up 52.02%, vs 28.24% for the NASDAQ, 25.08% for the Dow and 19.42% for the S & P 500. I look at this year as nothing to be proud of since these are the times that investors get complacent, start making mistakes and don’t realize them because anything with a ticker went up and to the right this year. I feel like I made some pretty great investments this year, but it’s hard to pat myself on the back without the thought that the only reason they were great was because of market tail winds rather than any of my skill. The global market cap hit $80 trillion in 2017 when you adjust Venezuela’s stock exchange, home prices on an inflation adjusted basis just so happen to be at the same level they were in mid 2004 and the CAPE ratio at the present moment has only been outdone by the tech bubble. US stocks continue to rise even as the Fed has raised rates and has said they will raise rates 3 times in 2018 while letting the bonds mature on their balance sheet as banks have to readjusted to not having an activist Fed playing a role in their markets.


If there was ever a time for tepidness and taking risk off the table now would be it yet we see investors continue to pile into stocks even as they acknowledge that stocks aren’t cheap. Charles Schwab came out and said that client cash as a % of total client assets hit 11.1%, its lowest since it started measuring the stat in 1995, even lower than 2000 when it hit 13.4%. I sort of shake my head when I hear pundits say there is money sitting on the sideline as I’m not too sure where this money is going to come from seeing as institutional investors according to NAAIM have more exposure to stocks than they did in 2006 surpassing an all-time high since they started their survey.


With years like this you hear a lot of investors preaching buy and hold, usually this is what you hear at the end of a bull market. Valeant beat the market up 36%, you read that right, Valeant, with its business model that’s still broken and more debt than I care to state crushed the market averages.


On the positive side, I continue to buy stocks I consider cheap and will continue to do so regardless of my feelings of where we are headed. The tax cuts will most likely keep investors happy for the time being, I’m more interested in how overseas money that is going to be repatriated will be distributed to shareholders. The corporation tax cuts don’t really interest me since most public corporations weren’t really paying 35% anyway neither do the individual tax cuts. I guess it depends on how you frame it $2,000 being added to you pay check sounds like a lot, but when you realize it’s an extra $40 a week. I find a tax cut 9 years into a recovery to be a foolish decision but because this post is already negative enough I’d rather not dig deeper than that.


I will leave you with one last sentence words that sum up my feelings going into the next year: Growth isn’t priceless, you’ll get what you paid for just look at Cisco in 2000 (I’m looking at you Amazon, Nvidia, Alibaba and yes even you home builder investors.)


Good luck in the new year.