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  • Martin Sosnoff

Nobody Asked Me, But……

With due respect to Jimmy Cannon, the great sports journalist back in the fifties.

By yearend, Trump is tried on charges of insurrection and subversion. He catches a 20-year sentence.

The country wallows into recession while the FRB drives Fed Funds to 5%. High yield bonds sell at a yield to maturity over 10%. Trading is very light. Nobody cares.

Warren Buffett halves his commitment in bank stocks, from approximately 20% of assets to 10%. Buys new oil paper, specifically, Exxon Mobil.

General Electric trades down to $45 from over $60. Its yield still insignificant. Analysts’ consensus remains at neutral. Nobody cares.

Meta Platforms cuts back spending on R&D and new hires. Nobody dares project its numbers, but the analysts’ consensus goes from positive to neutral.

Best acting stock group is utilities. Earnings power holds up and dividends ratcheted up. Few money managers show any interest.

Bank stocks sell down to 12 times forward depressed earnings power. All profit centers weaken, particularly Wall Street trading and underwriting. Wealth management is hit by negative performance. The traditional ratio of 60% equities and 40% fixed income fails to preserve assets. So much for their pie charts! JPMorgan Chase no longer sells at a big premium in its group. Vulnerable.

Deep cyclicals like aluminum, copper, and steel fall back to lows set early in 2021. Earnings power minimal. Nobody cares. I’ll buy back this paper some months out.

Note NASDAQ Index variance of more than 1,000% on the upside and then 80% downside shrinkage

Growth stock valuations wind down. Price-earnings ratios decline from over 2 times the S&P 500 Index to 1.5 times. Stocks like Amazon, Meta, Alphabet and Tesla all underperform. Microsoft outperforms, on good relative comparisons. Its earnings hang in.

Oil holds over $100 a barrel. Too many geopolitical variables impacting supply, worldwide. Most money managers remain underweighted. The sector advances to over 20% of the S&P 500 Index. Buffett carries a heavier investment in energy than in banks.

Most hedge fund managers continue to underperform. Aggressive operators like Ark Innovation see sizable asset redemptions. Shopify, 23% of its assets, disappoints with scant recovery after its 80% slide.

The country remains saddled by our fumbling president, with no imagination. He could get rid of student debt with a new Peace Corps. Serve a year and we’ll x-out your debit balance.

GDP heads towards zero in 2023. The country finally gets enormous deficit spending for infrastructure projects. All this comes too late to matter next year.

Biggest problem becomes deflation, not inflation. The economy stagnates. Politicians too slow to grasp and react to big picture realities of recession. Sole investors who sleep soundly hold a bunch of 2-year Treasuries.

Dig back in time to the real estate induced bear market of 1973 – ‘74. You’ll see how low stocks do sell at. Don’t forget 2008 - ’09, either, when banks went crazy, writing home mortgages with mythological coverage. Remember, too, that Citigroup required a 1 for 10 reverse split. Merrill Lynch had to be merged into Bank of America while Lehman Brothers got no bailout by the U.S. Treasury and Federal Reserve Board.

The battle for investment survival turns easier, perhaps 12 months out when everything negative has happened that’s going to happen.

Remember, too, that nobody promised you a rose garden.

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