July Investment Letter: 63.6% Returns

The picks had a spectacular month, with longs up 22.9% on the month. Bringing them to 63.6% return year-to-date — a blistering 168% annualized.

Even the shorts killed it, making 7.8% return on the month. Bringing them to 29.5% year-to-date, or 68% annualized.

All in a month the benchmark S&P 500 (SPY) was down 1.3%. And is up just 8.7% on the year.

That brings annual returns to the following:

Markets Review

Broad markets are doing decent so far this year — not epic, but good considering the war. Even after the S&P’s tawdry performance last month it’s still up 8.7% year to date — 18% annualized. Which is about a third better than it’s done the past 15 years.

That’s been a surprise — you’d think with the war the S&P would be down for the year. But the reason is AI stocks, which are up so much they’re swamping everything else.

The darkest story this month — and this year — are hedges. Gold, silver, and Bitcoin had a brutal month, down 12% for gold, 22% for silver, and 20% for Bitcoin. Bringing year to date returns across them to minus 19%.

Some of the carnage in inflation hedges was reversion to the mean after a spectacular run-up due to runaway deficits. Bitcoin’s probably getting an extra hit since the hot money’s now playing in AI stocks and SpaceX.

But a lot was also rising inflation from the war, which scared the Fed off rates cuts, which hurts gold, silver, and Bitcoin since they don’t pay interest. This tempts investors into fiat today even they hate it in the long run since one pays the mortgage with today’s dollars.

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