Weekly Reflection for December 22, 2023

The Week - An Update in Charts

The stock market indices ended the week higher, even after declining sharply on Wednesday due to profit-taking and fears about a softening economy pushed prices down. All three indices are near all-time highs but see charts below to get a sense of when we were "here" last.

It's been a long road of nearly 24 months since the S&P 500 was this high. The index is less than 1% away from its all time closing high of 4.796 in early January 2022.

The NASDAQ still has a little farther to go before recapturing its November 2021 high. It is still about 6.6% shy of reaching 16,057 again.

The Conference Board, a global non-profit think tank, has been putting the Leading Economic Index (LEI) together for decades. Measuring both financial and non-financial data, the purpose is to give an indicator of an economy's strength. Per the LEI, conditions in the U.S. have been weakening for well over a year.

There has been the slightest uptick this fall, which might be due to the stock market strength over the last two months. The S&P 500 performance is one of the three financial indicators measured, and the only positive contributor to the index in November.

Buying a car has been a bitter experience for many Americans ever since the pandemic. First there was a shortage of cars available, and then prices for new and used cars spiked. Now loans are very expensive. Per Bloomberg, new car loans average 7.4% and for a used car the rate is 11.6%.

More Americans than at any time in the last 30 years are falling behind on their payments and many of those also have negative equity, meaning they can not sell their car for as much as they owe on it.

The sales prices on existing homes are slowly rising again, per November data. Since homes are usually under contract a month or so before they close, the November prices include buyers from September and October who had to make offers when mortgage rates were still going higher. Only in the last few weeks have rates been falling and are now below 7% for a 30-year loan.

Real estate agents are cautiously optimistic that 2024 will be a strong year for home buying and selling.

Either the recession is very fashionably late or it will not show at all, at least if you are guided by the interest in people "googling" the word "recession".

The National Bureau of Economic Research (NBER) is the non-profit group that we rely on to make the call that a recession is upon us or has already occurred. Although there is still a lot of economic pain due to the historic increase in interest rates, the fall out has not, yet, been widespread.

The Simple Rules

As we barrel towards the end of the year, it is hard to avoid well-meaning ideals and aspirational essays, even for those who do not make “New Year to-do lists” or vow to get better at some thing or things.

As for us at Serene Point Advisors, we are always trying to sharpen the tools, process and offering. Charlie Munger, Warren Buffett’s right hand man who passed away last month at age 99, has always been an inspiration and a man of sage advice. And lists. In honor of his life, here are what he called his “simple” rules for a long and happy life.

* Embrace Lifelong Learning: Life is a continuous learning journey and there are numerous ways to gain knowledge, from formal classes to podcasts and videos. Notably, Munger valued reading as a fundamental practice, once stating that the wisest individuals in his life were avid readers.

* Cultivate Discipline: Munger valued the transformative power of small, disciplined habits. Associate with reliable individuals and fulfill the commitments you make. Building trust through consistent reliability, whether in business or personal relationships, can yield substantial long-term benefits.

* Watch Your Bottom Line. Do not over spend your income. Keep an eye on your debt and rising expenses. Have a safety net. Have guardrails on your finances. There will always be someone with "more" but keep your focus on you. You will be happier.

* Make Thoughtful Investments: Keep it simple by knowing and understanding what you own. Real gains come not from frequent buying and selling but from patient waiting. Additionally, Munger suggests investing in businesses resilient enough to withstand some economic adversity and avoiding those that are poorly run.

* Avoid Negative Influences: Seek out trustworthy connections and avoid toxic relationships. In addition, avoid envy and avoid resentment. Munger said that removing negative influences from one's life was a crucial life lesson.

So simple. Thanks, Charlie.