Warren Buffet’s partner, Charles Munger, died recently at age 99. He had a quick, dry wit, and was known for his insights. The italicized quotes that follow are his, the rest is me speaking.

  --“I didn’t get rich by buying stocks at a high price-earnings multiple in the midst of crazy speculative booms, and I’m not going to change.”

The market of 2023 was led by a handful of large tech companies, often referred to as the “Magnificent Seven.” These few pricey stocks made up more than half of the gain in the S&P. If, like me, you did not own these stocks (or enough of them), then, like me, you trailed the averages.

It is very disappointing, and difficult on the ego, to watch the S&P 500 climbing sharply while my accounts bounced along barely above even.

  --“You need patience, discipline and agility to take losses and adversity without going crazy.”

Adversity…hmmm.  I don’t think that I am going crazy, but it is frustrating. Many times in these missives I have said that time is the investor’s best friend. And Charlie agrees:

  --“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”

I do have the patience gene, but there is also a competition function to my mental and emotional makeup, and I do not like to be so significantly behind the averages.

The concentration in a handful of stocks means that market breadth is narrow. For me, and so many others like me, to again become competitive versus the indices, we need the market to become broader.

I believe that the threat of recession was what made those seven stocks so popular, as they are viewed as having businesses that would weather any downturn in the economy. So perhaps, if we can maneuver a “soft landing” (that is, inflation coming under control without a recession) then the market can broaden out and maybe –just maybe-- my stock selections can perhaps begin to again offer competitive returns.

Late in the year the Fed hinted that it might actually cut rates in 2024. This is something that many had been anticipating, and the markets rallied strongly after that suggestion from the Fed. I am not one who saw cuts coming, and I was in the camp that did not believe in a “soft landing.” One has to be wrong once in a while to keep one’s ego in check.

  --There is no way you can live an adequate life without making many mistakes.

At this point I can see that a “soft landing” is possible, even likely. It is a scenario that I rejected as little as a few months ago, and I will be happy if it indeed comes true.

  --“You must challenge yourself to consider opposing arguments. Especially when they challenge your best-loved ideas.”

So, if we do have a “soft landing,” does that mean that the “Magnificent Seven” will no longer lead the market? Will the market advance without that leadership? Will the lower-P/E stocks that I generally lean toward find favor? Who knows?

  --Acknowledging what you don’t know is the dawning of wisdom.

We never know, except in retrospect, so we will have to wait and see.  But, like Charlie, I am not going to change my ways.

Finally, one of my favorites, “The big money is not in the buying and selling, but in the waiting.” Words to live by. Rest in peace, Charlie.

I wish you a happy and healthy new year.