Holiday Message - It's People & Process (Not Predictions) That Matter

Holiday Message - It's People & Process (Not Predictions) That Matter
Inflation, bear markets, and data are all temporary, but the right people, partners, process, principles, and philosophy (life or investing) are not only timeless but ultimately the real paths to “success” in all its forms – most importantly a life of purpose.

FIVE THINGS YOU SHOULD KNOW

1. Equity Markets – were mixed this week with U.S. stocks (S&P 500) down -0.10% while international stocks (EAFE) rose 0.73%.
2. Fixed Income Markets – were lower with investment grade bonds (AGG) down -1.38% while high yield bonds (JNK) fell -0.29%.
   
3. SBF Granted Bail – on Wednesday, disgraced FTX founder and former CEO, Sam Bankman-Fried arrived on U.S. soil to face a Manhattan federal court judge. After being arrested in the Bahamas on fraud charges weeks ago, SBF has been released on bail of $250M (one of these largest pretrial bonds in history). His close FTX associates have pleaded guilty on criminal charges and are to work with prosecutors on uncovering SBF’s schemes to defraud investors.
4. Congress Has Spoken – today (Friday), the U.S. Congress passed a massive $1.7T government funding package to shore up national security, domestic spending, and send roughly $2B to Ukraine. $858B have been set aside for the military, per Republicans request, and $772B has been allocated for education, health, and veteran programs, per Democrats request. Speaker Pelosi has called this a, “package for the people”, and the measure will be sent off to the President’s desk for approval.
   
5. Key Insight – [VIDEO & ARTICLE] Inflation, bear markets, and data are all temporary, but the right people, partners, process, principles, and philosophy (life or investing) are not only timeless but ultimately the real paths to “success” in all its forms – most importantly a life of purpose. This year has only served to reinforce these founding principles of our firm with an investment process/philosophy that has once again served our clients well and a focus on community that has brightened a dark market year with many moments of fun and joy.
   
   

INSIGHTS for INVESTORS

I actually drafted a couple commentaries this week, not that I had the time, but as I woke up this morning, none of them felt quite right. Every week in preparation, first and foremost for my primary job of overseeing almost one billion dollars, but also with the knowledge that I’ve committed the firm to these weekly letters, I “ingest” a ton of different data, analysis, and insights from various commentators. I try to distill it all down to determine a) is there anything we need to do or any way we need to be thinking differently and b) what might you all want/need to know.

I was loaded to bare all the above, when after a few “conversations,” I realized the most important message I wanted to convey during the holiday season of what’s been a challenging year (and in many ways few years), is that it isn’t predictions or analysis that get us through such times, but discipline and most importantly, people.

As many of you know, my family and I have been (and still very much are) traversing a very challenging path after the loss of our third child. My life has been defined in large part by “sucking it up” and being as self-reliant as possible. However, our loss combined with a world spun upside down by the pandemic, this year’s bear market, and even the tremendous success of the firm the last few years has forced me to confront my limits, frailties, and shortcomings in a very real way that I trust will help me to be a better husband, dad, friend, and professional in the years ahead.

It's also been a wonderful reminder of just how much you all mean to me and my family, and of course, that the Lord is always right by our side especially in the toughest of times.

While this had been on my mind a lot of late, the extra nudge to share these vulnerabilities (not my first instinct) came from a conversation with my wife and a holiday message from a dear friend and client.

As I came out to the kitchen this morning, I found my wife working hard (and courageously) on getting out at least a few Christmas cards this season. A simple act for most people most of the time, but one she understandably hasn’t wanted to confront the last few years.

We held hands as I read the letter she had written to include which stated in part, “The Lord has blessed TEN Capital with advisors we call our best friends and clients who treat us like family.”

A little while later I opened my laptop to check my emails only to find the following message awaiting me, “Just wanted to take a minute and wish you both a Merry Christmas and Happy New Year. When I looked for an investment firm a few years back I was looking for a company in Spokane that I could trust to help build my wealth for the future and ultimate goal of retirement. What I didn't intend on was finding a firm that I would become friends with the advisors and whom I'd look forward to visits on a personal and professional level. I sure have enjoyed getting to know you both, your coworkers and families. I appreciate your events and time together as a community. I'm looking forward to 2023 and more events together and continued financial success. Thanks again for the part you both have in my success. Best wishes for the holidays and year ahead! Stay safe, healthy and warm.

Partners and process are important to guide us and keep us on a disciplined path during the inevitable challenges life and markets, will throw out at us. But faith and friends are what sustain and inspire us.

I’ve known these things for some time but have come to understand them much more deeply the last few years.

To all of you that have been so kind and such an inspiration to the team and I the last few years, a very sincere thank you.

In closing, inflation, bear markets, and data are all temporary, but the right people, partners, process, principles, and philosophy (life or investing) are not just timeless but are ultimately the real paths to “success” in all its forms – most importantly a life of purpose. This year has only served to reinforce these founding principles of our firm with an investment process/philosophy that has once again served our clients well and a focus on community that has brightened a dark market year with many moments of fun and joy.

Merry Christmas and Happy Holidays,

Tim and the team at TEN Capital

DATA, JUST THE DATA

Data points this week included:

• U.S. Jobless Claims – extended by 2K to a claimant count of 216K for the week ending December 17^th. This was below forecasts of a steeper rise to 220K and continues the narrative of a tight labor market, pushing back against Federal Reserve projections. The four-week moving average has fallen by (6.25K) to 221.7K.

• U.S. GDP – for the final Q3 GDP reading, the economy grew annually at 3.2% and fully rebounded from two consecutive quarters of negative growth. Consumer spending rose 2.3% and nonresidential investment rose 6.2%, thanks to equipment and intellectual property. Net trade boosted up the higher reading with exports up 14.6%.

• U.S. Housing Starts & Permits – dipped (0.5%) MoM to an annual adjusted rate of 1.42M in November. This follows a (2.1%) dip in October and is slightly lower than the 1.4M forecasted for the month. Single family housing starts fell (4.1%) to a rate of 828K while multi-family units jumped 4.8% – the highest since April of this year. Permits tanked (11.2%) from the previous month to an annual adjusted rate of 1.34M – rising prices and interest rates continue to lay downward pressure.

• U.S. Existing Home Sales – contracted (7.7%) to an annual adjusted rate of 4.09M. This is far below forecasts of 4.2M and marks the tenth consecutive month of falling sales and is at the lowest levels since May 2020. The median existing home sales price is up 3.5% YoY to $370K. Unsold existing home supply has declined for the fourth consecutive month to 3.3 month’s supply.

• U.S. New Home Sales – unexpectedly jumped 5.8% to an annual adjusted rate of 640K in November and marks the highest growth in sales in over three months. The median home price of a new home sold came in at $471.2K with the average sales price at $543.6K. New home supply is at 461K, or an equivalent to 8.6 months of supply.
• U.S. Personal Income & Outlays – rose 0.4% MoM in November, slightly down from the 0.7% rise in October, but in line with forecasts. The increase can be found in increases of compensation in private wages. Personal Consumption Expenditures rose 0.1% MoM which is the least since July and the core PCE reading came in at 0.2% marking the same reading as last month.
• U.S. Durable Goods Orders – contracted by (2.1%) MoM in November and marks the sharpest decline since April 2020 and was lower than expectations of a (0.6%) tumble. Excluding transportation, orders came in 0.2% higher thanks to machinery and computer/electronic products.