Happy Festivus: Let's Put a Bow on 2023

Ho Ho Ho... rejoice! Another airing of the grievances! And a hard look at the man in the mirror.

For the second consecutive year, we’ll be celebrating Festivus the only way one should; with an airing of the grievances!

Happy Festivus: Let's Put a Bow on 2022

During last year’s Festivus ceremony, I took the “experts” to task and highlighted what I feel has been a “golden era of grift.” Twelve months later, I can safely say almost nothing has changed! If anything, the world is only getting more drunk.

• Former US presidents removed from primary ballots

• University presidents plagiarizing their way to the top and urinating all over philosophical consistency

• Once respected financial publications printing flat out lies

• Known-liar Senators parroting those lies to further a political agenda

• Karens and shit-disturbers championing the destruction of the very freedoms they enjoy

And this has all been just within the last few weeks! The truth is, if you look hard enough for something nasty, you’ll eventually find it. But as each year passes us by, we get just a little bit closer to the pine box. I would wager that most of the things that rile us up are largely beyond our ability to individually change. The only thing we can change is how we personally behave and interact with those around us.

Hopefully with the experience of another year of life, we can honestly look ourselves in the mirror as December comes to a close and say “I made you better this year. Good job.” Because at the end of the day, that’s all we really have control over. I can’t make you vote a certain way. I can’t make you buy certain things. I can’t make you think, act, or believe the way that I do. But I can show you (in a hopefully non-pretentious way) how I think, act, and believe.

So this year, Festivus is going to be a little bit different. Rather than looking out and pointing fingers, I choose to look within. While I certainly don’t think the performance of the publication portfolio is the proper way to measure my “personal growth” this year, transparency is always a great thing to strive for when you publicly talk about risk assets like I do. So here we go…

HSEP: 2023 Year in Review

At the beginning of the year, I launched the Heretic Speculator Equity Portfolio. “HSEP,” in short, because the world can never have enough acronyms. In the end, the portfolio has failed to outperform the S&P 500 in 2023. We still have four more sessions, but I’m pretty confident I’m not going to catch the index. I’ve actually taken the portfolio to cash and in the process of changing brokers for 2024.

There are several reasons for the failure to stay with, let alone beat, the index and I’m going to detail a few of them in this post. But I think the most straightforward way to summarize the overall problem would be to say HSEP suffered from an identity crisis for about 11 months out of the year. Something I was actually fairly concerned about when I launched the portfolio is the fact that it started with just $1,000. An account this small would have been fine if I had optimized it for fast growth, but I actually did the opposite.

When the year began, the portfolio started 100% cash. My intention was to scale into positions over time in an attempt to be responsible with my entries. This worked against me because the S&P 500 put up a 6% January right out of the gate when I barely had any positions on. I was essentially playing catch up the entire year and that ultimately led to poor decision making on my part.

The reality is diversification in an account this small is silly. When I was treating HSEP like an investment account earlier in the year, I should have gone heavier into the stocks that I actually featured in my detailed stock idea posts. Specifically, International Gaming Technology IGT 0.00%↑ and Spok Holdings SPOK 0.00%↑. Had I allocated to those names heavy and early, I would have outperformed the market and it wouldn’t have really been close.

And that brings me to another major problem with HSEP this year, for an account that I originally wanted to be for “investments,” I over-traded big time. Active management is hard. This is why index funds are so popular. It’s easier to just buy the SPX and forget about it. This does make some sense. Like Bitcoin, the equity market sort of seems to rally on whatever narrative it needs to justify higher prices. Beating that with any kind of consistency is tough to do. And my 150+ trades during the year certainly wasn’t the best way to beat a passive index over time.

In Q4, I made a drastic change to my approach and took the portfolio from roughly 8 positions down to 0. I stayed 100% cash for about a week while I got back into the tape and tried to get a better handle on my reads as a trader. As part of that, I got far more serious about timing, tactical strategies, and just “grit and balls” trading.

More importantly, I stopped trying to “be smarter” than everyone by shorting the market and instead just mixed it up with the stuff that I know. I closed the shorts in disgust. I took off the “value” investments like Molson Coors TAP 0.00%↑ and Standard Motor Products SMP 0.00%↑ - names that represent a thesis that I think may take years to play out - and I went long Gold ETFs and Bitcoin miners. The impact? HSEP went from up about 3% year to date after the first week of November and is now up a little over 14% with one week left in the year.

That 11th hour shift in approach is literally the only reason why HSEP is going to end the year where it is. And even then I was still arguably too conservative. Hilariously, had I stayed aggressive through the month, I would have actually beat the index. Maybe a microcosm for the entire year.

In 2023, I sold winners too early, held losers too long, got shaken out of great trades on dips, and just generally traded more like a guy playing to not lose rather than a guy playing to win. And the worst part? This behavior was exclusive to HSEP. I obliterated the market in my actual investment account and I did it without any Mag7 long exposure whatsoever:

Not to brag. But it was a good year.

S&P 500 up 24%, my IRA up 47%. There’s just no way to sugar coat this other than 2023 was a total breakdown in the value proposition that I want Heretic Speculator to offer. The portfolio that I didn’t share crushed it and the portfolio that I did share was a mess. I suspect there’s a psychological signal there that could perhaps be unpacked with a professional. Self-sabotage? I don’t think that’s it. More like trying to be something that I’m actually not.

It’s like I live for Omaha but I’ve been trying to show you I can play Texas Hold’em too.

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So 2024 is going to be different

I want to look December 2024 me in the mirror and say “good job.” The Heretic Speculator Equity Portfolio is actually getting an identity and the strategy behind how this portfolio is managed is going to be really simple.

Going forward, the sole focus of the account is to make as much money as possible. I don’t care about the sectors, diversification, or whatever narrative is driving gains in the broad market. I’m focusing on what I know. If you see individual stocks, it’s because they’re in industries that I have a strong handle on. Otherwise, I’m riding cycles and making straightforward bets. I’m embracing what I tell you in every email:

I’m a simple man who plays the ponies.

I’m also adding some important elements to Heretic Speculator premium membership. Those of you who are “full heretics” will have access to some of my automated data sheets that I find useful. For instance, bullion dealer premiums:

Live intraday Grayscale fund discount rates:

And I hope to build out a few more as well. I also really want to find a way to make the recently enabled chat feature useful for both free and paid subscribers. I’ve tried other chat apps in the past and I have to say, Substack’s needs work. That said, I don’t think there’s any reason we can’t still effort using it. Something that I’ve noticed in my early attempt at Substack chat is the threads with the most recent activity don’t actually go to the bottom of the feed the way they do in something like Discord. To counteract that, I’m going to effort new threads each week that will serve as the home to most of the charts that I share.

Merry Christmas

Finally, if you’re hosting friends or family this weekend and need a quick four hour playlist, I just made this one on Spotify SPOT 0.00%↑:

81 tracks. Only 4 of which are Hanson - I promised Queen Faybomb I’d include cuts from their Christmas album - don’t judge me. Childhood nostalgia… Happy wife….

I didn’t include Afroman though… begrudgingly.

Anyway, I hope you enjoy the list if you do decide check it out.

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So that’s the end of 2023 for Heretic Speculator. I can’t thank you enough for being here, spending your time with my work, and in many cases sharing with others. Those of you who fund this are amazing and I really appreciate you! I’m going to end this year’s Festivus post with the exact same final sentences that I ended 2022 with…

I consider myself a doomer optimist. I do think things will ultimately get better. Stay strong, stay positive, and try to be kind to each other. You are in control of your own destiny no matter what the people controlling the screens want you to think.

Merry Christmas! Happy New Year. See you in January.