Author: Bill Smead

[…] History would argue that we have years of higher oil and gas prices ahead of us, especially if the Communist Chinese release their population from its COVID-19 imprisonment and start competing on the world economic stage. Therefore, we are making every effort to over-weight our oil and gas stocks despite their stock market success in 2021 and 2022. […] 

[…] What was going on in 2012 that made home builders so depressed about their future? What should you have done in 2012 with the shares of D.R. Horton (DHI) and Lennar (LEN) in response to the NAHB survey? What is going on now for home builders which makes them so uncertain and depressed about their future? Lastly, how should we as investors react to this sentiment? […] 

The era of the dynamic sales growth tech company, with a religious quality to its leadership, appears to be over. Who are these mega-dynamic leaders? What was the key to their extended success in business and the stock market? How long will it be before these former powerhouse stocks get interesting again? In other words, when will Humpty-Dumpy get put back together again? […] 

[…] Newton’s First Law of Motion states that an object in motion tends to stay in motion unless an external force acts upon it.

In the year 2022, we have been reminded how efficiently the stock market facilitates moving money from impatient people to patient people. A bull market in stocks tends to stay in motion unless an external force acts upon it. In this case, the external force is the price of money. […] 

[…] What does this review of the “Sir John Templeton Way” tell us about the current bear market that we are sitting through?

First, shares purchased between now and the end of this bear market are likely to get rewarded in the future. Second, the shares we own today trade at very low multiples of earnings, book value, and free cash flow. It doesn’t matter in a market suffering indiscriminate selling, but it should matter a great deal over the next 5-10 years. […] 

Thanks to reading Spencer Jakab’s book, “The Revolution That Wasn’t”, we’ve been thinking about what it is like to be in a short position when overwhelming demand affects prices. The Strategic Petroleum Reserve (SPR) was created for our National Defense and/or a temporary crisis in oil production. So far, it was effectively used by President Biden to calm oil prices down when they hit $120 per barrel. The Reserve currently holds around 500 million barrels of oil, down from the normal 700 million barrels. […]

[…] This bear market is designed to punish mass foolishness in everything from FAANG stocks, glam tech stocks, high price-to-sales up and comers, meme stocks, SPAC/IPOs, cryptocurrencies and the list goes on! We even revived the meme trading in the recent bear market rally. Why are we sure it is a bear market rally? It was led by the same foolishness that triggered the bear market in the first place. Investors are gluttons for punishment in this cycle. […] 

We believe one of the hardest things to do in common stock investing is to hold winners for a long time. This is especially true with what are normally cyclical industries. In our view, we are suffering through the “slings and arrows” of a major price correction in the secular oil bull market that started in the spring of 2020. Is this the end of oil driving the inflation problem, which has led the Federal Reserve Board into a major tightening cycle? Is this the shortest bear market to cure a financial euphoria episode in history, and should we all go back to nothing but FAANG stocks? […]

We are getting questioned constantly on how long this bear market in U.S. stocks will continue. It’s a reasonable question, and as we always do, we look back at the most similar situations and view the depth and length of the most analogous bear markets of the last 60 years. […]