Thanksgiving is past, and the last of the leftovers are finally gone.
We are now in the first week of what I like to call the month of “I do not know.”
It is also often referred to as prediction season.
For the next six weeks, culminating in the delivery of the first of the two-part Barron’s Roundtable Interviews, a cadre of well-dressed men and women will parade across your television screen and give you very precise predictions about what will happen next year.
Everybody who has ever visited Wall Street will know very precisely, down to the decimal point, where the markets will close in December 2025.
They will also have an exact roadmap for you to follow regarding the economy, geopolitics, bond yields, and commodity prices.
Most of them will be wrong.
The few that come close to getting it right will be hailed as market wizards and financial geniuses.
Most of the geniuses will raise enormous sums of investor capital and proceed to deliver lackluster returns.
New crops of wizards and geniuses will appear every January.
I will also ask many of the same questions again in December:
What will bonds do this year? I do not know.
How high will gold go? I do not know.
Will the stock market go up? I do not know.
Will inflation return? No clue.
How fast will GDP grow? I couldn’t even begin to tell you.
What will be the best securities, industries, and stocks to own next year? If I had known that in advance, I would have been king of the world or in prison.
I can tell you what I do know:
The market is not cheap by any definition of the word.
We are trading at 30 times earnings, and the CAPE ratio is at nosebleed levels.
I can also tell you that we are in a strong uptrend with heavy buying pressure, so the market is ignoring fundamentals and valuations for now.
What will cause that to change? I do not know.
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Real estate is in the early innings of a long-term recovery, but it will not go smoothly.
There are plenty of office defaults and loan workouts still to come.
Multifamily growth will probably slow down, but it will still be a decent market.
If we are lucky, multifamily REITs will sell off due to some silly scare or other, and we can load the boat.
Barring some bizarre movie-of-the-week-level weird developments, Trump 2.0 will be fantastic for banks and stocks.
Building a portfolio of high-yield PE bank stocks like Peoples Bank (PEBO) should be profitable for patient aggressive investors.
The big winners in banking will be the smallest bank stocks that trade at bargain valuations.
Bank M&A should return in a big way under the new administration.
The supply-demand dynamics of the natural gas market are likely to begin changing in 2025.
Natural gas stocks with high yields should deliver fantastic returns.
The same should be true of royalty trusts and midstream assets like pipelines and storage facilities.
When we look away from banking, energy, and real estate, cheap stocks become difficult to find.
The bargain-priced stocks right now tend to be illiquid micro and nano-cap stocks.
While that is right in my wheelhouse, most people cannot stand actually having to own the business they invested in for longer than a few weeks or months at most.
Companies that trade for more than 10 times earnings, have no profits, and have a rising short interest ratio have caused them to lose bets in a very strong market.
Owning these stocks will be a disaster if we see some correction or collapse in stock prices.
The current list contains many of the market’s favorite stories, such as uranium, space, quantum computers, surefire cancer cures, and Alzheimer’s fixes.
Gains can disappear.
Once paid, dividends are yours and cannot be clawed back or taken away.
Collecting cash from your stocks will be a big part of beating the market in 2025.
Knowing that we all love free stock picks, Genco Shipping & Trading Ltd (GNK) is one stock that trades at a bargain valuation with a high dividend yield right now.
The dry bulk shipper carries loads of iron ore, coal, grain, steel products, and other drybulk cargoes all over the world.
The shares trade for 75% of book value and yield 9.8% right now.
I do not know what the markets will do in 2025.
I have no idea what the economy will do or whether it and inflation will behave like a choirboy or a mean-spirited six-year-old hopped up on sugar.
I do know that focusing on valuation, credit quality, and margin of safety (and dividends) can help navigate the path ahead profitably no matter which direction that path winds.
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