Random thoughts on 2024

Happy Thanksgiving to All.

I know it is early to think about 2024, but… These are not predictions, well refined thoughts, rather initial thoughts. Generally I believe in “strong opinions held loosely

1 - Interest rates might drop sometime in 2024, resulting in fixed income gains
2 - 2023 saw Magnificent 7 gain enormously, For ex: AMZN up 75%, NVDA 234%, META 184%, Goog - 58% AAPL - 47.7% MSFT - 138%, TSLA - 90% I expect some profit taking in Mag-7 the new year. Could present some opportunities especially early in the year. If you are sitting with these kind of profits, would you be taking some profits?
3 Now 2023 Index gains masked lot of stocks under performing. I am not in the camp of only Mag 7 made money (for ex: homebuilders beat SPY) Some of these under performers might see some life, for ex: declining interest rates might favor REIT’s in 2022 the REIT Index declined by 27%, in 2023 (so far) -2.2%; Some sectors like this could see gains viz-a-viz index (especially if Mag-7 see some pull backs); I think we may be entering from Index investing to stock picking. Remember Mag-7 are trillion $$ market caps’ how much more their market cap can grow? On the other hand they can pull down the index due to their huge market cap.

I have few other themes. I will add as I develop further thoughts on them.

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  1. Financials specifically Bank stocks. I have been posting about banks here for sometime. Today’s move reminded how much Bank stocks have declined this year and can move in 2024. I was initially bit concerned that if the economy faces any headwinds it will impact their loan book, requiring higher credit provisions and NII may come down. But valuation should allow some banks to do better. I own Citi, BAC, & WFC on big banks. Of course KRE.

Jim Bianco argues “Bull markets don’t die of old age, but something has to kill them, and interest rate is not going to kill it” At this time, everyone is expecting the markets to go down but it keeps moving up. If the markets keeps moving up then RSP, the SP500 equal weighted index may do better than SPY. How exactly I am going to incorporate this in my trading/ investing is not yet clear to me.

One thought is go short SPY and go long RSP the same $$$ or just go long RSP

I have reduced all and in some accounts sold KRE completely. I have raised my cash to little over 40% and when some of the covered calls get assigned it will go even further up.

Need to re-assess and looking for new ideas.

Days like today hurts. The meta shares I sold 45 days ago and $100 ago… can’t believe it. I should have just stayed fully invested.

Everything i sold has ripped up… cash cost me already 5% performance. sigh.

Me and JPM are “sorry for our cautious approach” :frowning:

Kingran, always enjoy your posts, esp those with self reflections…Are you feeling there is more to gain here? Or is it too late, and we might be catching the top…I am not planning to make anymajor purchases, been there, done that and had learnt my lesson…but it is remarkable to see the run some of these have had, and to note what comments the wall street smarts were passing on stocks like META, GOOG, AMZN etc just a year or so back…you cant make up this stuff! Oh, I did follow you on the Citi covered call for jan 2026, back in 2023 when u mentioned it…It is deep itm, but I am totally fine…I get my dividends, and they can have the shares when they want…or I hold the shares, if it tanks…

The market has rallied strong, but market breadth is very poor. Even in the top 20 SPY stocks, META and NVDA is responsible for 50% of gains. I will sit tight and wait. Powell has clearly indicated the rate cuts are not going to be as soon as the market expects. As the rate cuts are delayed, market will have tantrum and it might present opportunities. Waiting with 40% cash.

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