How I Got My Readers Through 2016 (Part II)

Yesterday in Part I, we tackled the idea of financial commentary that is rooted in historical awareness and contextual information about the present, as opposed to making big calls about the future.

We also reviewed some of your favorite posts from the first half of 2016, and how this site dealt with the big market moments. Read it here in case you missed it.

Below, we begin at the midway point, post-Brexit:

Q3

Let’s get this out of the way – Brexit was awesome for the stock market. Imagine you were out there shorting stuff or “swinging to cash” ahead of the referendum? Man, you would’ve looked like a genius for all of 20 minutes. And then your celebration would have turned to horror…

Best. Crisis. Ever.

By the summertime, modern portfolio theory was being completely subverted by some of the stranger trends we were seeing in the markets – notably, bonds being used as stocks, stocks being used as bonds and a rally taking place in the absence of anyone buying…

The Laws of Capitalism are Being Rewritten

We had a freakout over the Fed in late summer. This is par for the course. We couldn’t have known then what we knew by early December – that the rate hike this year would become an afterthought given what bond yields would do ahead of it. I was somewhat calm, as you see by my post’s title…

Dow Decline Signals End of Western Civilization

The Wells Fargo scandal burst wide open and, at first, my jaw dropped at the extent of it. I don’t know why I was surprised at all, given how much we talk about incentives here…

WTF WFC

My friend Bonnie Baha, the global director of credit for DoubleLine, passed this summer in a shocking accident that took someone very special from the world…

Bonnie

The blow-up of Valeant this summer was not at all surprising to anyone who had followed along with the media coverage as the story began to unwind. The short-sellers had this one nailed, way ahead of the investigative journalists. The Street’s analysts were incredibly slow to this, with the stock falling 90% from its prior highs. The most surprising thing about the whole debacle was the fact that Sequoia, one of the most storied and respected value investing shops of all time, had gotten caught up in it, with disastrous consequences…

Caesar’s Wife Must Be Above Suspicion 

I realized that Trump was going to win back in July. This was one of the things you had to get right this year. The other thing was that it wasn’t going to matter – we’ll get to that in a moment. Here’s the moment of my realization…

“When the crisis is invented, the solution is simpler.”

Q4

Authorities managed to detect and break up an active management ring. Maybe the hatred of active management had gone too far, finally, by the time I wrote this…

Authorities Break Up Active Management Cell 

But here are some suggestions for the actively managed mutual fund industry to survive the index boom…

in which Downtown Josh Brown saves the mutual fund industry

Just ahead of the election, people were talking about doing some wild shit with their portfolios. There was a ton of bad advice out there. Hopefully, my readers didn’t take the bait…

How to become a “2% Investor”

This might be the most consequential thing I’ve ever said to my younger readers, of which there are many…

Start Now

I was pretty sure that Trump would win in the summer. By the time I got back from a trip to London, I was certain of it. The blokes there really turned me on to the idea that the polls were just a collection of lies and that it all goes down in the DM. I made a bet with my partner Barry…

My election bet with Barry 

Trump wins. Here’s how I reacted to it…

Off the Lows ™ 

Then the markets reacted to the end of the campaigning – favorably. Stocks ripped higher. People who don’t understand how markets work, to this day, are referring to the post-election run as the “Trump Rally.” But they’re wrong. It’s a re-certainty rally and it would have happened no matter who won, so long as there was a clear winner and a concession by the other side. All of the trends – better econ data, rallying yields, bank stocks strengthening, etc – were already in place. November 8th just sped them up…

If You Remember Nothing Else, Remember This 

By year-end, we were looking at a great year for small caps, mid caps, large caps and even many EM stocks. Which may have caught some people off guard, considering the fact that 2016 had began as the worst start ever to a year for the US market. It’s important to remember that how a year begins contains no information about how a year will end…

“The Worst Start To A Year Ever!” 

Finally, given the run we’ve had, a lot of people are now concerned with valuations. As well they should be. Valuation is not a great timing tool, but it is a good gauge for what future returns are likely to be. However, we need to understand the bigger picture on valuation – which is that the baseline has been trending higher for decades…

How we respond to client concerns on valuation 

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I want to thank you all for reading the site this year. I hope some of this stuff has been helpful for you. 2017 will undoubtedly bring all sorts of reasons to panic, cheer and everything in between. I’ll be here with you through it all, hopefully saying interesting, informative things as it all unfolds.

Cheers and thanks again for sticking with me!