April 4th, 2024

This report is for the first quarter ending March 31st, 2024. The Standard and Poor’s 500 rose 10% and the broad stock market saw gains of roughly 7% during the three-month period. Interest rates rose, the ten-year Treasury now pays 4.3% compared to 3.9% at the end of December. Oil remains near $80/barrel and gas prices have been falling. Plentiful natural gas is extraordinary cheap at $1.8/MMbtu. Gold is at record levels, up 7%. Residential Real Estate prices are showing some weakness. Commercial Real Estate is confusing as big city office space occupancy remains low and very large debt maturities are on the near horizon. Bitcoin surged higher by 60% and trades at $70k +/-. Inflation remains under the spotlight at 3-4%/year. The most recent GDP number is a robust 3.4% annualized.

A concentrated group of very large corporations in various industries have seen 300%, 500% and sometimes 1000% increases in stock price appreciation in a period of months. An aberration? A melt up or buying panic? What’s going on? How could such an extreme miss-valuation take place in todays public markets? Take Facebook (Meta) for instance, one of a small group of behemoth corporations valued in excess of one Trillion dollars. Seventeen months ago their stock traded at $90, it recently traded hands at $500. Or how about Nvidia up 10-fold in short order and now valued in excess of Two Trillion? Talk about fear of missing out! These are not short-lived highflyers promoted by boiler room whispers, they are the largest companies in the world! Dozens of sponsored corporations whose stocks are analyzed and written about by the best Wall Street analysts were apparently undervalued by 500%. Most of these stock market darlings appear poised for further gains as their current prices are quite reasonable. If this level of inefficiency is present on the mega cap level imagine the disparity and opportunity with smaller publicly traded companies. Cloak Advisors has long argued that equity markets are under priced and that the average stock remains unappreciated. A relative handful of glamour names have played catchup as their true value becomes evident, but the broad market is just beginning to percolate.

The investment landscape is a debate. The trick is to separate the reality from the promoters. If you want to sell gold coins or survival food packages then you paint the world as a chaotic, war torn, indebted and overheated morass. If you’re a Wall Street operator you will hype or degrade a particular stock or sector to suit your objective/position. Politics are no different. Depending on who is speaking we are either succeeding valiantly or failing miserably. Many disheartened Americans consider Washington politics an abject failure when in fact the system is running on all cylinders. Politicians and especially their regulators are best kept at arm’s length, they are very busy right now fighting amongst themselves and that’s a good thing. Meanwhile back at the farm opportunity abounds. The perception is that stocks are at an all time high. They aren’t. Several measures or indexes are at new highs, but they are badly skewed, measuring primarily the meteoric run up of a small number of over achievers.

What ever happened to that good ole midwestern work ethic? The Chairman of Federal Express says America has become a social Democracy not unlike France or Greece. It is estimated that 70% of the Federal budget is comprised of transfer payments. In other words, wealth redistribution. Food insecurity is the next drama being hyped on college campuses, one in three are starving according to the networks. Food banks cropping up at the student union. Hope they’ll be ok! Speaking of unions, Dartmouth’s men’s basketball team has voted to unionize , joining Local 560. Fifty thousand students are suing the Federal Government because their loans have not been paid off as promised. There are now 23 million Federal employees, a new threshold! Shoplifting is now referred to as an industry with revenues over 4 Billion. Crime rates reportedly down but theft under $1000 is no longer a crime. Traditional retailers have everything under lock and key driving consumers to shop online. This just in….certain Rap stars have been having wild parties with erotic dancers, some say it went even further! Don’t worry the DOJ is investigating. Denver is now training EMT’s how to treat psychedelic overdoses. Automobile manufactures now offering fee based software services and updates. The monetization of car owner ship is here.

The more things change the more things stay the same. Ignore the alarmists, the truth lies some where in the middle. The bank now pays 5%, the economy is advancing, there is work for anyone who wants it, and the stock market has room to run. Its springtime after all. We suggest remaining seated for the upcoming election cycle, helmets are recommended. The financial picture is complex and bifurcated but will likely surprise to the upside. We are in our element. Leave the driving to us. We anticipate a successful trip, but road and weather conditions can change quickly. As always contact us for help or questions. Securities, Insurance and Real Estate. We appreciate your business!

Cloak/abq