Stock Picking is Alive and Well

Let’s get the formalities out of the way. Happy New Year. Hope you and your loved ones have a phenomenal year ahead and may the market makers bless your returns - Sneh

💡 Bullish Babble: Decoding Wall Street’s Lingo

There are always themes for the year when it comes to thinking ahead at the 2024 fiscal year and for me it will probably continue to be centered around the interest rate game. Inflation has persisted downwards now for quite some time. (careful.. don’t jinx it) — Core PCE for Q3 is at 2.00%, expected of 2.30%. Thus the Core PCE (Federal Reserve’s supposed favorite metric) has hit the Fed’s inflation target. Yet the Fed Funds is at 5.25%-5.50%.. are they too tight? Is this a question we should start raising? I think the theme of the year will revolve around the what is known as “real rates”. What are real rates? I’d love to explain.. “I thought the interest rate was already real Sneh! They sure feel real to me right now!”

Right now it’s looking like the Fed might achieve a “soft landing” this year and that means that you should start seeing your interest rates go down, mortgage rates go down, money should start to become a little softer to borrow and not so lenient on economic conditions as long as no black swan events happen. Here’s an overview:

• The Federal Reserve uses the federal funds rate as a tool to influence the economy. By adjusting this interest rate, the Fed aims to achieve its dual mandate of stable prices and maximum sustainable employment.

• Lowering the fed funds rate can stimulate economic activity by making borrowing cheaper, encouraging spending and investment.

• If inflation has fallen like we’ve seen and it doesn’t tick back up, the Fed has to act in a timely way, because if the Fed doesn’t lower the federal funds rate in response, there’s a risk of higher real interest rates. This, in turn, can have implications for borrowing, spending, and investment, potentially hindering economic activity.

• Higher real interest rates can act as a brake on economic activity.

• Consumers might be less inclined to borrow and spend, and businesses might face higher costs for financing investments.

• This situation could potentially slow down economic growth and hinder the recovery from a period of higher inflation and possibly even re-trigger it.

🧠 Bigger Ideas

As investors we should all be hoping for healthy market conditions and a slow churn upwards but in all honesty, I would love a Q1 dip in the markets. I’ve had some ideas on what I want to accumulate in 2024 and what areas of opportunity there are in the world right now. I think one of those things is the housing supply in the United States and the amount of people that want a house. This is a play on interest rates, it’s a play on the American Dream and a play on the younger generation starting to expand their reaches. Another interest rate play that I think can be beneficial that has the same sounds of the homebuilders trade would be midstream pipeline plays. The companies that have massive amounts of capital expenditure to create these pipelines and facilities to transport oil, energy, and natural gas will be pure plays on the soft landing interest rate narrative. Don’t rule out those bonds yet either… more on that next week. We’re talking zero coupons next week and what they could do to your portfolio. In summary: Yes it is a stock pickers market, it always has been it always will be. You just have to be looking in the right places and adding great cash-flowing business to your Lootbag. Accumulate, accumulate, accumulate.

📊 The Data Disco

Data is the driver for everything nowadays, whether it be data for targeted advertising, economic data, data for how many Chiefs games Taylor Swift attended this year, etc etc. I want this section to highlight statistics and key data points about the macroeconomy, interesting companies, market phenomenon, market history anything that gives context to you guys as to what the **** is going on?

A lot of what goes on in the markets and news can be followed by just “following the money”. Don’t listen to what “they” say listen to what “they” do. I came across this chart in October when the curved green lines weren’t even drawn yet. We were in a small correction in which I was leaning on this chart to be right, and to “show me the money” and sure enough it did. Within time the dollar peaked, the interest rate narrative flipped and the S&P started to follow the cycle that this displays so elegantly. I for one will be keeping a keen eye on this chart and see if it is good alpha going forward in future presidential cycles. I also see the combination of 2024 being an election year and an Olympic year being a very economically stimulating year as there will be a lot of advertising dollars flying around and influencing to be done, on social media or politically. In my experience advertising dollars makes the world go round…

🧠 Stocks Unboxed

“How do you know this ticker? What company is that? That’s what Stocks Unboxed is for. Every week we’re gonna go through and briefly overview a random company, its recent performance and anything regarding the company that could be viewed as a good first step to starting to dive deeper into unbox Illinois Tool Works ($ITW). Illinois Tool Works is in the diversified business of manufacturing highly engineered industrial products and equipment. It operates through the following segments: Automotive OEM, Test and Measurement and Electronics, Food Equipment, Polymers and Fluids, Welding, and finally Construction and Specialty Products. It’s competitors are ($PH) Parker-Hannifin, ($MMM) 3M Corporation, ($EMR) Emerson Electric.

🎨 My Chart Artwork(s) of the Week

In this new section every week I will attempt to show my best artwork from the week or any of the charts that I see that make sense to me and hopefully gives you the reader an idea as to how technical analysis is not always hocus pocus. Also, this way I can force myself to understand how to chart a certain security. It’s actually quite fun and once you get a feel for the markets beat you will have every time frame mastered. Put your 10,000 hours in first on watching the 1m SPY candles and you’ll earn my respect..

🖼️ The Art Gallery

I couldn’t have even begin to have started to draw on a chart starting this fiscal year 2023 but I now have somehow accumulated enough brain cells (shoutout to the longterm) to start drawing trend lines and levels on charts. It wouldn’t have been without learning and watching some of the best chartists I know. This section will be about highlighting opportunities in the market, and charts that some of my favorite market commentators draw up. I hope they provide insight as they did to me this past year. Technical analysis is not all you need to be successful trading or investing, but it is a great tool to have in your tool belt, you never know when you might see something.