Wall Street strategists could not have gotten this year so wrong. A year ago, they were universally negative. I have been reading the releases of Wall Street strategists’ outlooks for stocks for over 25 years. And to make it even more comedic, Jerome Powell's press conference in mid-December caught everyone off guard. This move caused immediate panic among Wall Street strategists who have barely seen the ink dry on their freshly printed 2024 market outlook. Almost immediately, many firms sent out sticker updates amending their GDP forecasts and risk asset prices higher. While we think it can be fun to think about the various year-end targets for the S&P 500, we don’t spend too much time on those calls, because, unfortunately, it is wildly difficult to predict what stocks will do over such a short period of time. We’re much more interested in the underlying fundamental analysis and big picture themes behind those calls. It’s these forces that drive earnings and help us better understand what stocks will do over longer term periods of time. The reality is that we can’t control outcomes. The most we can do is influence the probability of certain outcomes through the management of risks, and investing based on probabilities, rather than possibilities, which is important to capital preservation and investment success over time. Having a very defined set of trading rules can help offset the risk of wrong information over time. These rules won’t offset all your investment risk, nor will they ensure absolute profitability in all scenarios. However, they provide a framework to mitigate the risk of a catastrophic outcome that permanently impairs your capital. The uninformed, uneducated consumer who doesn't know any better will take these forecasts at their word, and as usual, will most likely be disappointed. Price is what pays. Asset prices trend. Nothing else matters. Let me suggest this, as you sit down to read this year's batch of forecasts - read last year's forecasts before you take next year's too seriously.

For reference the S&P 500 currently stands near 4,755.

Should you have any questions or concerns, please feel free to reach out.

Portfolio Notes

(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral

(new) Aritzia (ATZ-T) At the beginning of November, Aritzia shares hit a low of $20.67, which meant shares have dropped 65% over the past two years. And down more than 50% this year alone. But guess what? The stores are packed, and the fundamentals are looking good. We still believe post-COVID ATZ is a much stronger player with substantially better and lower-cost real estate opportunities, revenue 2x pre-COVID levels, and enhanced brand awareness. Notwithstanding Q3E margin compression, headwinds should moderate sequentially as transient expenses normalize. But while women’s apparel and, more broadly, small-cap discretionary remain largely out of favour, in our view, ATZ is an excellent candidate for flow of funds on sector rotation in 2024. New Position in Core Portfolio.

Weekend Reading

Canadian CPI growth held at 3.1% in November As David Rosenberg said, "Strip out rents (a supply deficiency story) and mortgage interest (the BoC creating the very inflation it is fighting in a classic case of cognitive dissonance) and Canadian inflation is running at the grand total of +1.9%. Will Tiff catch a whiff?" RBC

Bill Gates Blog: The road ahead reaches a turning point in 2024 This year signaled the start of a new era. Here’s why I believe next year is an opportunity to shape the world’s next chapter for the better. GATES NOTES

How to Live an Asymmetric Life Graham Weaver Lecturer at Stanford Graduate School of Business and Founder of Alpine Investors, shares four ways to live an asymmetric life. WATCH

The State of Fashion 2024 McKinsey predicts retail sales growth of 2%-4% in 2024. MCKINSEY

Big Ideas in Tech for 2024 Smart energy grids. Programmable medicines. Voice-first companion apps. Crime-detecting computer vision. a16z previews big ideas they believe will spur innovation in 2024. a16z

The 50 greatest innovations of 2023 The 36th annual Best of What's New awards. POPULAR SCIENCE

Frugal vs. Independent by Morgan Housel Here’s an important distinction about people who spend less than they earn. Frugal, by my definition, means depriving yourself of something you want and could afford. Not wanting something to begin with because you get your pleasure and identity from sources that can’t be purchased is something entirely different. The best word for it is probably independent. COLLAB FUND

The Dangers of Survivorship Bias The error resulting from systematically focusing on survivors (successes) and ignoring casualties (failures) that causes us to miss the true base rates of survival (the actual probability of success) and arrive at flawed conclusions. SAHIL BLOOM

The Power of Sleep Routines In the relentless pursuit of success and productivity, sleep often becomes the first casualty. According to the CDC, more than ⅓ of Americans do not get the recommended amount of sleep. This oversight comes at a high cost, both personally and societally. LUMIDA

Mammon by Scott Galloway You may not agree with his views, but it is a well-written post. Everything you want to do at a company, including hiring employees, buying raw materials, and renting space, requires capital. Your shareholders demand a return on theirs, i.e. profits. A manager’s task is difficult, but simple: Allocate finite capital to generate a greater return than their peer group gets. And when the ROI-maximizing decision isn’t one that “benefits humanity,” capital wins. Sam Altman (OpenAI) may have his hands on the wheel, but he’s sitting on Satya’s lap as he drives. Capital is in charge. SCOTT GALLOWAY

The Insight: Conversations – Special Episode with Annie Duke and Howard Marks Special guest Annie Duke (former professional poker player, best-selling author) joins Howard Marks to discuss ideas from her book Thinking in Bets and Howard’s memo You Bet! They explore luck, decision quality, uncertainty, and more. OAKTREE

Seth Godin's True/Useful When we believe in something that’s useful but not true, it can serve a helpful purpose. The tooth fairy, perhaps. SETH GODIN