Navigating The Sh*t Show That Is 2024

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by quoth the raven
Saturday, Jun 15, 2024 - 19:10

Submitted by QTR's Fringe Finance

This was the score on my 24 Stocks to Watch for 2024 heading into the back nine of 2024, as of May 24, 2024. 

At the time they were edging out the S&P by 2.538% and were up 14.318% for the year, heading into Q3. 

I’ll provide a full update on my thoughts about these names as part of my award winning “Trading the Sh*t Show” series*, with my thoughts on most of the positions at some point in July.

This article laid out more about why at the beginning of the year I believed citing rate cuts as a bull case is a fool's errand.

The main themes I was picking names for at the beginning of the year were as follows:

  1. Geo-political unrest from hot wars. I continue to see risk for the global economy and the world from the ongoing conflicts in Ukraine and the Middle East. Not only do these conflicts have the potential to drag other nations into them, metastasizing across the globe, but they also had and will have financial consequences for the United States, which is involved in subsidizing these wars in both locations. Continued empire building is the last thing the United States' fiscal policy needs right now, and the longer these conflicts drag on, the more of a negative effect they will likely have on the financial condition of our country. The wild cards here are the United States presidential election and whether or not China will attempt to take Taiwan. I think the latter hinges on the former, although there is a case to be made for China making its move before President Biden is potentially shown the door.

  2. Bifurcation of the world in general. As a result of Russia's attack on Ukraine and the subsequent seizure of hundreds of billions of dollars in Russian FX reserves, the United States and the West have drawn a line in the sand between them and the BRICS nations. Globally, countries are aligning with either NATO and the West or BRICS, China, and Russia. As the delta between these two sides of the world continues to widen, the chance for profound catastrophic conflict grows. I’m not saying World War III is going to happen in 2024, but I am saying that the setup for it looks clearer each passing day. Along with challenging the Western way of life, countries like Russia, China, and India have made it clear that they want to challenge the US dollar — and they control a lot of the world’s commodities (especially oil). For the first time since the 1970s, Saudi Arabia is trading oil in a currency other than the US dollar. Russia, China, and India have also made marked declarations to trade and settle in local currencies. The central banks of China and Russia have been stock-piling gold. There is as much risk of a conflict economically, and through the means of cyber warfare, as there is of a military conflict, in my opinion. At some point, our creditors are going to call our bluff, and the treasury market could dry up. It wouldn’t surprise me if 2024 is the year for this.

  3. The US is unlikely to find a needle in the financial haystack. As everyone enjoys their holidays and looks forward to the new year, very few people seem to understand how precarious the United States' financial position is. Not only is our debt to GDP soaring at around 120%, but our government and the people in charge have made no marked effort to arrest and cauterize the problem. On the contrary, we continue to spend money we don’t have aggressively and have bet everything on the heavy favorite that the US dollar's reserve status is going to hold up. As anybody who lays chalk in the sports betting world knows, heavy favorites often come in, but they don’t always come in. With the stock market overvalued on pretty much any historical metric you can find and interest rates at 5% with no Covid-style helicopter money coming down the pipe, conditions for another year of economic and financial status quo and complacency can only be met by finding a needle in the financial haystack. While TV news anchors crow about a soft landing, the reality is that the plane hasn’t touched ground yet and what nobody seems to understand is that Jerome Powell is tasked with landing a B-52 bomber on the head of a pin. And as strategists need an excuse to continue pumping the stock market, all the major market industries are banking on now is hope. Stocks have pulled forward the idea of rate cuts, and we are once again just closing our eyes and hoping that animal spirits—hereafter referred to as figments of our fucking imagination—continue to drive stocks higher. I think we are overdrawn at the good news bank and are going to need to make a substantial deposit at some point soon.

  4. Inflation or deflation surprises. Despite spending the last decade publicly admitting that inflation is a mystery and we have no idea how it works, how it is created, or why we need or don’t need it, we have somehow felt confident enough to declare victory over it. I find the irony of that hilarious. I don’t know which situation is more likely, but in the coming year I don’t think inflation is just going to mellow out at 2% and hold that line because Janet Yellen keeps repeating it over and over, as if that is the solution to conjuring up the sought-after result. Rather, I think inflation will either surprise us and tick back up again, especially if the Fed starts to ease and liquidity in the economy frees up a little bit more or – the slightly more likely scenario in my opinion – 5% rates and the lag of the last two years of hikes will continue to grind the economy to a halt, and we might even see deflation. This would usher in de-leveraging and a thirst for liquidity that might have everybody selling everything that isn’t bolted down. Ultimately, the deflationary scenario would eventually result in even more quantitative easing because the Fed would be able to say that they are trying to bring inflation back and trying to jumpstart the economy while saving the stock market at the same time. In both situations, it’s tough to envision a scenario where the Fed doesn’t return to some type of emergency easing over the next 12 to 18 months.

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Finally, just this week I wrote about why I thought the bull market just died, why Cathie Wood may be the worst investor in history -- and why I think the market is skating on dangerously thin ice as a result of Apple, Nvidia and GameStop heading into late June. 

Now read:

Again, you can view my 24 stocks' performance here.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page hereThis post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

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