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Will the Fed Falter?
Stan Druckenmiller, SpaceX, Andy Constan, Elroy Dimson, Antti Ilmanen & More!
The Idea Farm
November 24, 2024
Together With
“If you dig a hole and it's in the wrong place, digging it deeper isn't going to help.”
Research
Morningstar - Mutual Funds & Unicorns (22 pages)
When analyzing mutual funds’ foray into owning pre-IPO private companies over the past ten years, Morningstar finds that mutual fund managers do not appear to be skilled private-company stock-pickers and have poor timing.
SpaceX, which accounted for 38% of all mutual fund assets invested in private companies, is responsible for mutual funds’ net gain on their private-company investments. Absent SpaceX, mutual funds have collectively lost about 1.3% on their private positions.
GMO shares an update on deep value stocks, which is their highest conviction idea and are trading at a valuation in the bottom decile of its history relative to the overall market.
Long-run Asset Returns (38 pages)
Elroy Dimson, Antti Ilmanen, David Chambers, and Paul Rintamaki look back over two centuries to analyze the historical returns across the major asset classes of stocks, bonds, and real assets. They also discuss the benefits and pitfalls of these long-run data sets.
Commodity futures, US stocks, and US bonds, 1871–2022. Source: Dimson, Marsh, & Staunton.
Quantica Capital - The Additional Benefits of Trend-Following when Interest Rates are High (13 pages)
In an environment with higher cash rates and shifting stock/bond correlations, trend following CTAs may be more attractive relative to bonds.
As of October 2024
Facts & Figures
There are 50 mutual funds (with over $72 billion in assets) distributing between 14-52% in capital gains this year. Link
Florida has 8% of the US population and 78% of homeowners litigation. Link
Workers missed an average of 19.4 days because of illness in Germany in 2023. Link
In 45% of U.S. opposite-sex marriages, the wife earns as much as or more than her husband, a share that has roughly tripled over the past 50 years. Link
75% of inbound containers (that is, those coming from overseas) actually return to their origin empty, according to DAT Freight & Analytics. Link
Gold has outperformed stocks and bonds since December 1999. Link
The strong start for stocks in 2024 has contributed to the highest solvency measures in over two decades for US corporate defined benefit plans. Link
Source: Michael Cembalest
US households have 48% of their financial assets in equities. Link
Unlike the the 2000s tech bubble, the rise in megacap stocks has been supported by strong fundamentals. Link
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Podcasts
 9/27/24 - 76 minutes | From changing market dynamics like the rise of next-gen nicotine products to the industry's resilience against regulatory barriers and moral opposition, Maile explores the key drivers that have allowed tobacco to defy long-term negative trends. |
 11/6/24 - 58 minutes | Renowned investor Stanley Druckenmiller shares his approach to major trades and offers a unique perspective on today’s market, discussing inflation risks, AI, and the role of the Fed. |
 11/14/24 - 46 minutes | Constan explains why he believes the Federal Reserve is at risk of losing the long-end of the bond market, which would lead to a reacceleration of inflation and a hard landing for the economy. |
What Else Is Happening
Meb Faber spoke with Joel Nagel about how to play defense with global asset protection. Apple | Spotify | YouTube
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