Friend of Fringe Finance Lawrence Lepard released his most recent investor letter this week, with his updated take on the monetary miasma spreading across the globe.
For those that missed it, Larry also talked with me on my podcast just days ago. I believe him to truly be one of the muted voices that the investing community would be better off for considering. He’s the type of voice that gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.
Larry was kind enough to allow me to share his thoughts heading into Q4 2022. The letter has been edited ever-so-slightly for formatting, grammar and visuals.
This is Part 1 of his letter. Part 2 can be found here.
In the third quarter, virtually all asset classes went for a roller coaster ride – a sharp bear market rally in July and August, followed by a vicious sell off in September as the Fed continued its Hawkish tone at Jackson Hole in late August and then raised the Fed Funds rate in September to 3.00-3.25%. Recall that as recently as February 2022 Fed Funds was at 0.0-0.25%.
Year to date through 9/30/22, the S&P 500 and Nasdaq are down -24% and – 33%, respectively. Gold and Gold Miners (GDXJ) are down -9% and -30% year to date, respectively. Bloomberg’s US Aggregate Bond Index is down -15%. Only the Bloomberg Commodity Index (broad commodities like oil that are benefiting from inflation) is up year to date (+13.5%).
The Fed’s hawkishness has caused an enormous amount of wealth destruction. As the chart below shows, US stocks and bonds have created a drawdown of $18 Trillion in the US equity and fixed income markets, far worse than 2008 and 2020’s market value destruction….
…click on the above link to read the rest…