To The Moon

It is hard to predict when and to what extent is the coming recession. Public and private spending make up the GDP (of the economy). US government spending contributes to about 37% of the GDP and the balance is 63% from the private sector. Goods make up about 77% and services about 23% of the same GDP (mix of public & private). The fact that most of the S&P500 companies are global companies will also add to the complication of revenue and profits from across the regions. That is why some companies split the earnings into regions & countries to better account for the revenue, profits, costs & also the gains/losses from foreign exchange. Fiscal spending What the market does not see as data is how government fiscal mismanagement is clocking up expenses paid to interest on treasury bills and bonds. I present both so that we have the data to navigate through this nervy market. The market can be doing well but it looks like the government is messing it all up with debts. We are also aware that there are many who buy into ETFs or indices due to the good gains. It also means that we are buying both good and not-so-strong businesses (for example in the S&P500). Some of us are using monthly DCA. Whatever the outcome, there will be regular buyers. This in itself may cover up the actual performance. It is not wrong to invest in ETFs or indices. Just that some of the failures all masked up. The USD Devaluation Some have put up a case about currency devaluation. M1 money supply went from $5T pre covid to $20T now. This is not the only source of USD as there are M2, M3, etc. I do not know the extent of devaluation. but what is of concern is that the current prices are not reflective of the value. I am not adequate to predict the extent or when the next correction will come. Just saying that news media, analysts are not helping with the outlook. I recommend caution despite the bull runs evident in NASDAQ. In my simplified understanding, for the economy to do well, the volume of export/import (with monetary value), amount of debts, PMI & LMI, should be trending in the right direction. I have my concerns in banking, CRE and an overall decline in both PMI and LMI. The job numbers were "corrected" consistently to the downside too. We need the US to be doing well as the global currency and the same for the rest of the world as we recover from Covid. We need to end the Ukraine conflict cause the only winner is death. With student loan repayment starting in Sep, the Fed needs to fund its estimated deficit of $1.5T for FY23 and CRE facing refinancing in 2H, it can be a tough 2nd half. When the US does not have enough buyers for their bonds, they have to turn to money printing. There will be companies like Microsoft, Tesla and Alphabet which can remain strong and create great value but there are just part of the market, not the economy. How to factor macro into our investing It is hard as we are witnessing the gradual erosion of a global economy (and currency) for the first time. If people do not have confidence in the currency, a bear scenario could see these investments suffering both forex losses and price drops (from a coming recession). However, being global companies also mean that the risks are diversified. With so many moving parts, I revert back to value investing: buy great companies at good discounts. Being great companies, they would also recover better than the rest. For Macro, it has revealed weaknesses in the economy and thus, some hedging is recommended. How can we manage the negative news in our investing The news is a starting point to trigger more research. I have been digging up data separately, looking beyond just GDP, unemployment and inflation (PCE). I have added import/export volume, LEI, PMI, LMI, debt, and real estate into my considerations. In the long term, the market is a weighing scale - where long-term value outweighs the short-term sentiments. In essence, a typical US household spends 26% on tax, 31% on property, 15% on transport (and cars) & 12% on food. The revolving debt & default from these categories are red flags for me. If the blended earnings from Q1/2023 S&P500 drop 9%, we should be expecting a similar movement in the S&P 500 index. When there are enough people embracing the bear thesis, the market can drop quickly. Conclusion A bearish outlook does attract its fair share of audiences. In this case, we need data and objectivity to help us navigate in such uncertain waters. For long-term investors, we like the quote “The time in the market is better than timing the market”. We are also looking at the unprecedented erosion of a global currency (USD). We do not know how much value could be lost due to inflation and forex losses/gains amidst a trying economy. We need global leaders like China and the US to work together, not against one another. There is still time and space for all to collaborate and prosper together. ‌@TigerStars ‌ ‌$S&P 500(.SPX)$ ‌