33: FOMC Minutes, Core CPI, Internet Gem Find

The latest FOMC minutes and CPI data have given investors plenty to digest this week. With the Fed hinting at future policy moves and inflation still running hot, every data point is being closely watched for clues on where the economy is headed. Amid all the chaos, it can be difficult to separate the signal from the noise.

What's New

1. My latest quarterly letter is out. You can read it here: Quarterly Letter - Q1 2024. I dive into a lot on this one. I think it's worth taking a look if you haven't already.

Quote of the week

"Essentially, you want to understand the company as it is today by looking at how it evolved. I believe that history goes to the heart of why a company is successful: Was it really good? Or was it just really lucky?"

Michael Shearn, The Investment Checklist

Markets

Gold outpaces both the S&P 500 and the Nasdaq on the week and in the last 6 months.

A quote comes to mind here:

I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.

Charlie Munger

Further, I've commented heavily yesterday on my thoughts regarding timing the market. Timing the market is a fool's errand. When we zoom out ever-so-slightly, we see that the S&P 500 "big decline" is only back to levels seen approximately 3 weeks ago:

The point remains: stay the course.

Economy

I'm paying close attention to the FOMC and the economy. We aren't out of the woods yet (we'll never be out of the woods) and that's ok. The point is to pay attention to the world around us so we can be prepared for wise action at the right time.

Core CPI

Core CPI came in slightly higher:

Everybody seems to know it: inflation is sticky and definitely not transitory.

Below you can see I selected "food at home" vs "food away from home". Notice how much the food at home price changes fluctuate significantly more than food away from home:

There's no takeaway here other than "hmm. That's interesting."

FOMC Minutes

Here are the 5 most important points (IMO) from the minutes:

1. The Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.
2. The staff economic outlook was stronger than in January, primarily due to higher projected population growth from immigration.
3. Participants discussed slowing the pace of balance sheet runoff, with most participants favoring reducing the monthly pace by roughly half.
4. Participants judged that the policy rate was likely at its peak for this tightening cycle and that moving to a less restrictive stance later in the year would be appropriate if the economy evolves as expected.
5. The Committee reaffirmed its strong commitment to returning inflation to the 2 percent objective and agreed to carefully assess incoming data, the evolving outlook, and the balance of risks when considering future adjustments to the target range.

You can read the full minutes here: The Fed - Monetary Policy: (federalreserve.gov)

Sectors

It's been a heck of a week across the board with Financials taking the cake with -3.5%:

Internet Gems

I found a new blog that is instantly one of my favorites: How startups beat incumbents (asmartbear.com)

It's highly relevant, actionable, and high-quality. Here's what the home page looks like:

It's a high-quality blog, and one that I instantly subscribed to after reading 1 post.

Portfolio

Here is the current portfolio with performance: