March 2024, Chicken Little Portfolio Performance

Missing out on free money?

The Bull Market continued through the end of March 2024. Chicken Little remains scared of financial doom and continues to miss out on huge gains in the stock market. The pain trade remains painful. 

Bear (and chickens) are hungry 

March 2024 performance
The Dow Jones Industrial Average rose 2.24% in March 2024. The Chicken Little Portfolio gained 0.94% from its short-term treasuries, and being long a bit of gold and ethereum. 

Mar 2024YTD 2024
Chicken Little0.94%2.63%
Dow Jones Industrials2.24%6.01%

March 2024 was a broadly bullish month. All major assets classes up solidly with bitcoin continuing to lead. The only loser, year to date, has been long-term Treasuries as interest rates have ticked up a bit. 

AssetSymbolMar 2024YTD 2024
Dow Jones IndustrialsDIA2.24%6.01%
Non-US StocksEFA3.38%5.99%
Emerging Market StocksEEM2.73%2.16%
US Long-Term BondsTLT0.46%-4.00%

Brief version of the bear case

The US Federal Government is spending much more than its revenue. Consequently, cumulative US Debt is the highest in history in absolute dollars and percent of GDP.  
The massive run up in debt is occurring in times of plenty. Unemployment is low, the US spends very little on the military.  

We are spending 4% of GDP on the military, half as much as during President Reagan's term, and one-fourth as much as during the early parts of the cold war. Our primary nation-state competitors, Russia and China, are increasing military spending while we shrink. 

Finally, the cost of servicing the debt is historically low because of the Federal Reserve's low interest rate policy. The Federal Reserve says it cut rates to help the economy; The direct effect of low rates is to hurt savers and help borrowers - the biggest borrower in the world is the US Government.

In 2023, the US government deficit was $1.7 Trillion or 6.3% of GDP.  A massive deficit in the context of no recession, under investment in the military, and low interest cost expense. 

What will happen when the US has a recession, increases spending on the military, and pays higher interest rates? The answer is massive, historic deficits (see post HUGE DEFICITS).
Are Chicken Little's fears correct?
Does it matter if my fears of financial collapse are correct? Yes. The world of high real interest rates, high unemployment, and depression will be unpleasant and may involve significant social unrest and warfare.

From a personal investment point of view, however, what matters is that I believe the bear case, not that is going to come true. The reason is that because I am afraid, I cannot own risky assets. 

In November of 2016, I correctly predicted that Donald Trump's election would be good for stocks (see full post). Here is an excerpt:

The election of Donald Trump and Republican House and Senate is great news for US companies, and, as compared to Hilary Clinton, good news for the stock market. Thus, a Trump rally in stocks is rational. 

Based on my bullish analysis of the 2016 election, I  bought a small amount of stocks, but ending up making no money. Why did I make no money? Because I was a weak hand and every time there was some decline in stocks, I sold my holdings.

To make money, it is necessary, but not sufficient, to have conviction in your position. Because I fear a rise in real interest rates, and a fall in asset prices, I cannot own risky assets. My fears prevent me from making money on buying assets, even when I am correctly bullish as I was in 2016 in predicting the impact of Donald Trump on stock prices.   

So right or wrong about the apocalypse, I sit in my financial bomb shelter cowering in financial fear. 

April 2024 portfolio position
The Chicken Little portfolio remains positioned for financial apocalypse. Two small trades in March of 2024. Increased the position in gold and trimmed the ethereum position. ETHE, the ethereum ETF was $17 in January and $36 six weeks later in early March. 

Previous month's report          Subsequent Month's report

Chicken LittleDow Jones Industrials
2024 (through March)2.63%6.01%
2015 (April through Dec)-2.49%-0.27%
since inception (3/31/15)23.61%167.60%

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