2022: Year In Review

Performance

I closed 2022 down 13.52% in the active account tracked on this substack.

Global stocks, as measured by the VT ETF, ended the year down 18.01%. Of course, based on how folks discuss the market, you would think that the market is down 60%.

The Market & Macro Nonsense

The speculative frenzy of 2020 & 2021 finally ended this year, as happens to all speculative frenzies. Tech stocks that previously reached dizzying valuations have since collapsed. I used the decline as an opportunity to buy the tech stocks that met my criteria.

The pin that pricked the bubble was the Fed’s aggressive tightening in the face of inflation. If it weren’t the Fed, it would have been something else. An environment characterized by celebrities picking stock tickers with scrabble pieces was probably not going to end well.

Heavy questions weigh on investors’ minds. Will the Fed be able to defeat inflation? Will the aggressive tightening result in a recession this year? How deep & lasting will the recession become, and how will the markets respond to it? Will the Fed continue tightening? Will the Fed cause a terrible deflationary recession, and will they go back to ZIRP and aggressive easing to fight it? Will the Fed engineer a soft landing where inflation eases and the economy keeps roaring, as Greenspan did in 1995, and led him to be declared a maestro?

If you’re expecting answers to these questions, you’re reading the wrong substack.

I don’t have any idea what’s going to happen next. No one knows how this will shake out. Anyone who claims to know the answer is either an idiot, a charlatan, or both.

Here is what I know: I own a portfolio of growing businesses with free cash flow generative moats. Most of them will be worth more in 2033 than they are today. I purchased them at attractive prices. If we have a recession, the prices will get more attractive. If we don’t get a recession, the prices will get less attractive.