Chicken Little a failure?
A senior Goldman, Sachs & Co. executive recently said, "I'd be retired if it weren't for Terry Burnham." He is right in that I have been resolutely bearish for more than a decade while risk assets have soared. The best approach would have been to buy crypto, the second best, buy any risky asset, and, pulling up the rear, Chicken Little's portfolio - my real portfolio.
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| Chicken Little has been wrong for a decade |
Chicken Little vs. the Dow
Since inception, $1 invested in Chicken Little has become $1.20, while the same $1 invested in the Dow Jones Industrial average has become $2.41. That is a huge difference.
Chicken Little has been wrong in one of two ways. First, $34 trillion in debt and $8 trillion in e-printing of money may not create the financial ruin I have believed. Second, ruin may still be coming, but the timeframe has been much, much longer than anticipated.
In either case, any investor would be much richer if he or she had ignored my sky-is-falling views.
Trapped by Fear
As long as Federal Deficits continue to be extremely large, and US Debt sits at historic highs, I will not be optimistic about risk assets.
US debt, relative to the size of the economy, is now at all-time highs. More than at the end of World War II, more than after the Civil War, more than ever before.
Furthermore, this government deficit spending, and massive debt build-up, is occurring when conditions are nearly optimal (see 2019 post, deficits can become HUGE).
First, the US is not in a recession. Second, even though the debt is high, the cost of servicing the debt is low because interest rates are low. Third, the US is not in a large-scale war and expenditures on the military are very low relative to the size of the economy.
We are spending like crazy during easy times. Hard times are coming and the deficits will increase further.
Can risk assets continue to go up in price as the US is crushed by debt? Perhaps. However, I cannot be a buyer of risk assets because I believe the sky will fall. Thus, I am stuck in a low risk financial position until I die or there is a crash.
December 2023 performance
The Dow Jones Industrial Average soared 4.84% in December 2023. The Chicken Little Portfolio gained 0.35% from its short-term treasuries. For all of 2023, the Dow gained 15.80% and Chicken Little gained 2.05%.
December 2023 was a positive month for all asset classes. All major assets classes are now positive for the year including long-term treasuries. Bitcoin has more than doubled this year. An investor in bitcoin earned more in 2023, than they would have in a decade invested in US stocks. In short, more risk, more money in 2023.
January 2024 portfolio position
The Chicken Little portfolio remains positioned for collapse. Three small trades in December 2023. First, a small position in ethereum, Second, a foothold in gold, Third, a small short equity position.
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