Tolstoy, Mr. Lee and Pahom

By Jeff Kelly on October 25, 2024

There is a terrific short story written by Leo Tolstoy “How Much land does a Man Need?”.

The story was written in 1866 but applies today as well. I never read Tolstoy much until my daughter Nicole began reading Russian authors in upper school. She had a terrific teacher, Mr. Lee, who took a real interest in Nicole. I believe in many ways he changed how she thought about herself as a student. He helped her confidence and sparked a lifelong interest in Russian authors. I wish for every child to have a teacher in their life like Mr. Lee.

I reluctantly began to read some of the things she was reading. Tolstoy was a revelation. I loved it. I recently read the story referenced above. It was recommended to me by a friend. In the story, Pahom, wants to be a landowner. He boasts he wouldn’t fear “the devil himself” if he had enough land. He begins to acquire some land but wants more. He finds out about a place where he can buy all the land he can walk around in a day for 1,000 roubles. But he must be back at the end of the day, or he loses the money and gets nothing. He begins his walk, and the land is so beautiful. He wants as much as he can get. He keeps walking well past where he had intended to turn back. He eventually does finally turn around. On his trip back he sees the sun starting to set. He becomes worried he won’t make it in time. He fears the ridicule of people more than the loss of the land. He is dehydrated, exhausted and eventually terrified. However, he does make it back just as the sun sets. Taking the last step to the cheering of people from the town he keels over and dies. From the story:

“Ah what a fine fellow!” exclaimed the Chief. “He has gained much land”.

Pahom’s servant came running up and tried to raise him, but he saw blood flowing from his mouth. Pahom was dead!

The Bashkirs clicked their tongues to show their pity.

His servant picked up the spade and dug a grave long enough for Pahom to lie in and buried him in it. Six feet from his head to his heels was all he needed.

In the end that six feet is all anyone needs. As it has been throughout history. Yet we see so many, even those with more than they can ever use, sacrifice for just a bit more. They walk just a little further, bend the rules just a little wider, make the story just a bit bigger or simply buy a social network and commit the algorithm to do the work. It all ends in those six feet. Wouldn’t it be better to be there with one’s dignity intact?

The markets continue to move higher will little reason. I’m told by many the strength in the market is due to an impending victory for the republican candidate. While this makes little historical sense, that’s the narrative. I wonder what the big reversal today says. Maybe the narrative isn’t true! Imagine that! The good news is we will be past the election in about 10 days. Or will we?

The markets biggest worry is not which side wins. The biggest worry is one side attempts to undermine the outcome. Markets will always figure out ways to prosper. They always do. One of the many things that has made America great is we have a peaceful transfer of power.  Peaceful transfer of power is what is expected. Anything that interferes with that, by either side, is a problem. Let’s hope for the best but we must prepare for something not quite so good. Expect the rhetoric to ramp up from here and the volatility too.

We have the biggest earnings of the season next week. That along with the election news will keep us on our toes. It’s going to be a spicy 10 days.

CHARTS FROM THE WEEK PAST

Services new orders are still very good.

In contrast manufacturing numbers are still struggling.

New home sales hold up with many incentives.

Existing home sales in contrast still at all-time lows.

Bloomberg story mentions of “AI” are huge…sometimes I just say it to myself, over and over again, just to be cool.

Big tops in the stock market are often preceded by weakness in breadth.

That’s not the case right now. Breadth is great.

US Government is now spending as much on interest as defense.

Market trades great but be mindful of how expensive equities are to historical valuations.

Over the past 30 sessions, the S&P 500 has not suffered back-to-back down days.

It has rarely gone this long without at least small consecutive losses. The current streak ranks among the best since 1928. It’s even better on the Nasdaq, and similar streaks preceded one-year gains 100% of the time.

Interest rates have done nothing but go up since the Fed cut rates.

That’s not unusual but now we’ll see if they start back down or we have a real problem with resurgent inflation.

We spend so much on healthcare relative to the world.

Monthly supply of existing homes rose to 4.3 in September … highest since May 2020.

The reaction to earnings this quarter have been higher than anticipated.

A great slide.

We de-industrialized. Now we are industrializing. This comes at the cost of higher wages which is inflationary, no matter who is President.

Earnings season so far, S&P 500 179 of 500 have reported.

3.62% sales growth, 3.53% earnings growth. Not exciting numbers.

Nasdaq 330 of 3095 companies have reported.

6.27% sales growth, 16.67% earnings growth. Nice!

Russell 2000, small caps.

0.61% sales growth and 1.03% earnings growth. Poor.

Corporate bond yields the lowest premium to treasury bonds in 20 years.

If we want “to make America great again” maybe start by raising the corporate tax rate.

Due to high level of concentration, Goldman Sachs thinks the equal weight S&P 500 will outperform the S&P 500 by 8% annually over the next decade.

Ah. No it won’t. But you go Goldman, you go.

October S&P Global U.S. Manufacturing PMI up to 47.8 vs. 47.3 prior; Services up to 55.3 vs. 55.2 prior; Composite up to 54.3 vs. 54 prior … confidence in outlook over coming year recovered; inflation slowed and prices charged fell to lowest since May.

Global oil refinery closings since 2015 by region.

Closing refineries isn’t a good thing despite what those on the left tell us. It drives up the price of gas.

Buybacks are a major tailwind for the market.

2024 will be the biggest year ever.

3Fourteen Research predicting the S&P 500 goes to 7000.

Once you leave the constraint of valuation anything is possible.

Regional banks, small cap and the U.S. Dollar are labeled trump trades.

Only issue here is the U.S. Dollar declined 20% the last time he was President.

The next two charts show the market has stretched to extremes.

Can it still go higher? Of course. Just know when the parties over it could hurt for a bit.

The BofA bull/bear indicator puts us in the danger zone.

WEEKEND HOMEWORK

A very complete review of the Crypto Space.

State of Crypto Report 2024: New data on swing states, stablecoins, AI, builder energy, and more

American First rally at Madison Square Garden from February 20, 1939.

Another one coming up there next week.

A very good book. This story is something to think about the next time some random politician tells you we should be friends with Putin.

Alexei Navalny began writing Patriot shortly after his near-fatal poisoning in 2020. It is the full story of his life: his youth, his call to activism, his marriage and family, his commitment to challenging a world super-power determined to silence him, and his total conviction that change cannot be resisted—and will come. 
 
In vivid, page-turning detail, including never-before-seen correspondence from prison, Navalny recounts, among other things, his political career, the many attempts on his life, and the lives of the people closest to him, and the relentless campaign he and his team waged against an increasingly dictatorial regime. 
 
Written with the passion, wit, candor, and bravery for which he was justly acclaimed, Patriot is Navalny’s final letter to the world: a moving account of his last years spent in the most brutal prison on earth; a reminder of why the principles of individual freedom matter so deeply; and a rousing call to continue the work for which he sacrificed his life.

A big weekend ahead. World Series starts tonight, Yankees vs. Dodgers. I can’t stand it would be these two. I guess I’ll hold my nose and root for the Dodgers. Louise turns 1 next week. The year went so fast. I Gotta work on my health to be there for all the birthdays ahead. I have to get those workouts done and get my steps in. The weather is perfect here so going to get outside a bunch as well. I hope your weekend is terrific.