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Why I’m excited for 2023. The New Reality. How to play it.

It’s clear. This is a very different world. Very different.

Until recently, interest rates were low. Ultra-low. And the value of assets sky-high. Super sky-high. Think tech stocks in November last year with their nose-bleed P/Es.

Now interest rates are skyrocketing, central banks (and the Fed) are sucking money out of the economy and asset prices are tumbling.

That’s The New Reality.

For me, the great news is that I can earn nearly 5% totally risk-free on my cash — which had been burning a hole in my pocket for much of 2022.

The interest on short-term treasuries gives me money for living while I await the inevitable arrival of distress assets. They are coming because someone (many people) bought assets with too much variable debt — skyrocketing monthly payments — that were increasingly not covered by rents.

And made more urgent — by people choosing to work at home and shopping malls being eaten by online.

Patience then is in order. Especially as I’m not investing in stocks — other than shorting them.

Reasons? The same I’ve said a hundred times in the last few months. But nobody could say them better than David Tepper. Here’s the headline from BusinessInsider:

Billionaire investor David Tepper is shorting the stock market heading into 2023 for one big, obvious reason: The Fed

Says Tepper,

It’s not just the Fed’s raising interest rates poses a threat to the stock market. It’s also its balance sheet reduction plans, as it reduces its massive $8.6 trillion balance sheet by $95 billion per month. With the Fed shifting to selling bonds rather than buying them, that sucks liquidity out of markets, and stocks love liquidity.

And what’s more, Tepper highlighted, it’s not just the US Fed getting tight with its monetary policy, but central banks around the world. The Bank of England and the European Central Bank are both in tightening mode with the projection that they will continue to hike interest rates next year.

“I got everybody tightening and telling me they’re going to tighten more, and I got markets that just don’t believe it,” Tepper said. …

Tepper said that higher interest rates also mean tough competition for other assets, like stocks, given that an investor can collect an attractive risk-free return of about 4%-5%, and that return rate is likely to go higher next year if the Fed continues with its hikes.

“I hate when I have coordinated tightening. We have coordinated tightening. I got three other central banks telling me they’re going to do more,” Tepper said. According to data from Bank of America, central banks around the world have raised interest rates nearly 300 times this year.

“They’re not happy to have asset inflation here. What am I supposed to do, fight them?” Tepper said. And that’s exactly why Tepper is not particularly optimistic about the stock market in 2023.

“I’m leaning short on the equity markets, because I think the upside/downside doesn’t make sense to me when I have so many central banks telling me what they’re going to do, what they want to do, and what they expect to do,” Tepper said. “This is going to be a tough level to talk about robust returns in the next year, particularly when you have the Feds in such a tightening mode.”

You can read the full Tepper interview here.

Big lesson: Don’t try to catch falling knives — no matter the “logic” you hear on BubbleVision.

Tasteless, but funny

+ I bought a Christmas tree.
The seller said “are you going to put it up yourself?”
I said no , I was thinking of the living room.

+ I don’t carry a Donor Card.
I find it too depressing the number of women who rejected my organ while I was still alive.

+ My grief counsellor died recently.
Luckily he was so good I didn’t give a sh*t.

+ Went to my pre-ejaculators support group this morning.
Apparently it’s tomorrow.

Why Grandpas hate iPads

Eleanor and Peter paying their grandpa (i.e. me) oodles of attention.

But they do pose well

Here are the other two, Sophie and Zoey, in the Ashcombe Maze & Lavender Gardens, in Shoreham, Victoria, Australia:

The Best Logic

Dorothy and Edna, two “senior” widows, are talking.

Dorothy: “That nice George Johnson asked me out for a date. I know you went out with him last week, and I wanted to talk with you about him before I give him my answer.”

Edna: “Well, I’ll tell you. He shows up at my apartment punctually at 7:00 pm, dressed like such a gentleman in a fine suit, and he brings me such beautiful flowers! Then he takes me downstairs. And what’s there? A limousine, uniformed chauffeur and all. Then he takes me out for dinner; a marvelous dinner, lobster, champagne, dessert, and after-dinner drinks. Then we go see a show. Let me tell you Dorothy, I enjoyed it so much I could have just died from pleasure! So then we come back to my apartment and he turns into an ANIMAL! Completely crazy! He tears off my expensive new dress and has his way with me three times!”

Dorothy: “Goodness gracious! So are you telling me I shouldn’t go?”

Edna: “No, no, no… I’m just saying, wear an old dress.”

The perfect Christmas gift

One year, I decided to buy my mother-in-law a cemetery plot as a Christmas gift.

The next year, I didn’t buy her a gift.

When she asked me why, I replied,

“Well, you still haven’t used the gift I bought you last year!”

Christmas in Australia

It’s perfect tennis weather on the Mornington Peninsula, Victoria, Australia.

But no snow. We’ll pretend.

Happy holidays Enjoy the kids. I am. — Harry Newton