“Great investing requires a lot of delayed gratification.”

– Charlie Munger

Good Morning,

History says February’s are weak months in the first year of a new administration. That does not necessarily mean they are down big. In a very strong recovery market – the early stages of a new secular bull market – it could instead just mean a choppy pause in the uptrend. Maybe all we see is some “down” and then some “up” – with the month ending within a few percent of where it started.

What should we prefer? Anything but straight up. Straight up quickly implies “easy.” Easy quickly draws a crowd – faster than one might expect as GameStop recently discovered. A crowd does – well, not that well, more often than not.

Yes – chop and patches of red ink will do nicely if we cannot seem to muster a week or two of real red ink. We saw last week that one day of red ink is all it took to pummel the crowd’s sentiment – while the temporary price setback was erased in 48 hours.

You want angst, you want gray clouds, you want a foggy horizon, you want perilous headlines. If we have collectively learned ANYTHING in the last 12 months of pandemic-land – it should be that perspective shift. Pockets of “terrible” and “it’s never been this bad” are wonderful value-builders for the long-term, focused, disciplined, patient investor.

Yes, and that is even when every electronic charge of your mind is pushing you in the other direction – fast.

Perspective

It is an important part of being able to trek through ugly periods like the one just lived. Are there more ugly periods ahead? You can count on it for sure. Will we make it through them – yes. Will the days be easy – no. Nothing good is, I was once told.

Like Charlie says above in the simple quote: Good investing does require a different perspective – no matter how many wolves are baying at the moon from the rooftops. Indeed, what we learn over time, the more wolves, the merrier for the long-term focus ahead.

Housing Example

The housing market is an example of a completely misunderstood aspect of The Barbell Economy® explosion ahead. Sure – it is easy to see we are running out of houses. The more you run out of houses, the more prices rise as demand surges. The demand is not going anywhere – except up…for years, not quarters. The comedy of the whole thing is the way the data are reported – and too many buy into it. Let me show you:

“Housing Takes a Step Back as High Prices Bite”

Sure – if you say so. The latest data last week showed a national housing supply of 1.9 months. Seven weeks – it is normally 26-28 in a “healthy equalized marketplace.” Instead of telling you that builders cannot build fast enough to sell to all the buyers – the press wants you to perceive something negative in the headline.

Their lack of knowledge is your benefit – on almost every bad headline. Think of it this way: If the press (not everyone but in general) were asset managers, they would have failed every year on record – and no one would use them.

It even works in mortgage data. This report hit the wires earlier this morning:

Here is what the headline left out:

“Applications to refinance jumped 11% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 59% higher than a year ago. The refinance share of mortgage activity increased to 71.4% of total applications from 70.7% the previous week.

The move was spurred by a decline in interest rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 2.92% from 2.95%. Points were unchanged at 0.32 for loans with a 20% down payment.”

In other words — thousands and thousands of people continue to use this “terrible environment” to save thousands of dollars each year – for the NEXT THREE DECADES” in their monthly budget.

That’s good — not bad.

Another example just hit the wires – jobs data. Going into the ADP report just released, the experts expected a smaller gain of 50,000 jobs….nope – they were just a bit off:

Notice also that the jobs data from last month was not -123,000 jobs which got so much bad press. Instead it was 40,000 less lost jobs.

As you might expect – instead of ringing in the great news, the CNBC crowd of “experts” wondered aloud, moments after the release, whether the Federal Reserve may be too easy on rates and that this data “could change that for the worse.”

I’m telling you – if you ever need comedy relief during the day – click on cnbc.com and the day will brighten with laughter. Oops – I better be quiet – they may try to cancel me. LOL

Good News Everywhere

Sadly, in many bad headlines, good news is hidden. We have broken down many of them for you over the years. There is a current rash of “data” being shared from opinion-driven headlines on various vaccines which are all seemingly designed to scare you and me into thinking we cannot beat this virus.

Wrong – and here is a better view of that confidence.

By the way – has anyone else noticed that the entire flu season has been eradicated? That’s a positive for sure – as we usually see tens of millions of hospital visits and sadly, 25-30,000 souls perish during a regular flu season. I mean, if there was every a time to eradicate the flu, I am confident we can all agree that during a pandemic is a perfect time.

Onward and Upward

It is easy to get lost in the droning on of bad news – day after day. Don’t.

There is an ocean of good news percolating in places where no one is shining a spotlight. The only real question we ever have to ask ourselves is this: are we willing to stand outside the bubble and see those elements or do we prefer to stay inside with “the crowd.”

“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”

– Yoda

Somewhere in the months ahead, this country – and we as a very fortunate population of people will come to a realization – several really:

We will soon sense that while 2020 was horrible for so many reasons – it was also a blessing.

While it seemed so painful and drove so many questions, it also provided light and many answers.

It highlighted problems and shed light on many new solutions.

Like finding a diamond in a dark mine – it provided a pathway to launch a foundation for sharpening our world into the global leader it is – and will remain so ahead. From bad comes wonderful. From stressful comes easy. From dark comes light. From setbacks comes setups for success. We must all retain clear thinking (leading-edge but clear) and believers in the better years ahead. It is the way history has always evolved for America – and God-willing it will continue to do so.

Earnings Still Beating

When we update you again at week’s end on the earnings data, you will see that beats continue at stellar levels – and forward earnings continue to increase. This will eventually set the stage for a solid Spring – and then you know what is coming: all the chatter about the summer swoon.

Bring it on friends.

Our best years are ahead – and I don’t mean one or two years.

In Closing

It is understandably difficult and a bit of a mind-game to get your arms wrapped around all of this good news when the media is pouring bad news into your life with a double-barrel firehose.

Sadly, this dichotomy is unlikely to end anytime soon and the stats above prove it for you.

We must all remain diligent and prepared to always stand tall against the storms. Standing apart from the crowd permits one to always be ready to do what most will not.

The largest week in the flood of the earnings season is dead ahead.

Make no mistake: The fear-mongering march will continue as the headlines pounce on anything about a miss here or a miss there – or my favorite, the “Yeah, they did great but can they keep it up?????” syndrome.

Corrections and setbacks serve a role – they build your value for the next run – and we are unlikely to get very many of them in the years ahead.

Even when they hurt in the near-term, they create the gains of the long-term.

Next Steps!

Stay focused on what many will not see. Think above the clouds. Try hard to not get lost in the fog. See the horizon which is far beyond – and vastly more beneficial – than the headlines.

And know this:

  • Every challenge of 2020 made us all stronger.
  • Every setback of 2020 made the future reward for the patient, long-term investor better and more broad-based.
  • Every bad headline of 2020 hid the better horizon ahead from too many.

Many storms will still arrive on our shores – and then they will pass.

It is our job to help you remain focused on your pathway. We are more excited about that today than ever before.

  • The future is brighter than currently perceived.
  • The Decades of Disruption ahead carry massive opportunity…

For the prepared, patient and focused long-term investor.

Buckle up and pull that harness tight…this ride is just getting started.

You’re missing out!

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