Reader Mailbag: March 2025

Spring has sprung! And so has March’s mailbag. Off we go.

Setting aside the current market turbulence, how do we separate noise from facts when thinking about political developments and markets?

Intentionally and carefully. And this doesn’t just apply to politics—it applies to how we approach all news, the fruits of which you can see in our articles and the “What We’re Reading” section.

The first step is understanding how modern journalism works and what the business model is, which we say without passing judgment. Journalism has largely moved away from ad-based to subscription-based. This creates the incentive to play to the subscriber base to keep those dollars flowing, which generally results in coverage that is more biased, with more opinion bleeding into news articles. The old days where you had the opinion page and the news desk and a hard firewall between the two are gone (and probably never quite existed as modern society tends to envision nostalgically). Now, opinion regularly bleeds into reporting. Sometimes it comes as context, sometimes as quotes from chosen experts, sometimes people call it “news analysis.” The analysis always has a bias from training, experience and education. It is opinion-based.

So when we read coverage, we go slowly and carefully to sift opinion from fact. It is difficult to do, because most statements of opinion don’t come with the necessary qualifiers. Opinions often get stated as fact. So we are on the lookout for theories, hypotheses and viewpoints that are stated in declarative sentences. We put those in one bucket. Then in the other, we put the actual statements of fact.

And then, as much as possible, we go to the primary source material, be it the economic data release, legislation, Executive Order, research report or whatever else the article is covering. We square the facts presented in the article with the facts presented in the source material. We check for inaccuracies and also omissions. We decide for ourselves whether the statements of opinion match all the facts. And for good measure, wherever possible, we scale the data relative to GDP or whatever figure is relevant.

The goal, as always, is simple. News coverage represents sentiment (it both reflects and amplifies people’s feelings). Parsing out the facts—and the differences between those facts and opinions—helps us assess the gap between sentiment and reality, which is what markets ultimately move on. And then we delight in sharing our findings with you.

Hard work? Absolutely. Fun? For us, yah. (Although maybe we are sickos.)

What do you think is the next, new hot stock to take off?

No idea. Sorry! But that isn’t really what we do or how we think about investing. We totally understand the appeal of finding the next <<insert recently high-flying stock here>>. When we came of age, it was all about “the next Dell.” The one hot thing that, if only you had gotten in on the ground floor, would enable you to lounge on a yacht off Monaco for the rest of your life.

This isn’t a replicable real-life strategy, though. High-flying stocks are outliers. The thing about outliers is that they could just as easily be outliers to the downside. And the one can switch to the other pretty quickly once the core thesis to own gets priced in, or the market changes, or management changes, or or or. We have also observed that there can be a lot of fallow years before the hot stock finally gets hot.

Investing isn’t a get-rich-quick game. It isn’t speculating. It is about the long march of compound growth and market-like returns helping you achieve your long-term goals. Hot stocks and heat chasing are distractions that risk veering you from this endeavor into something that could prove counterproductive. A lot of it is trying to find a needle in a haystack that may pay off years from now, too far out to accurately assess supply and demand and industry winners.

We think it is much wiser to build a diversified portfolio around probabilities than to take a concentrated position based on possibilities. Hence, we look for stocks that demonstrate traits of the category we are after. That allows you to blend a portfolio around those categories and others that behave differently. We know this isn’t the glamorous answer you wanted, but we think it is the right one.

Is high international ownership of US Treasury bonds a problem?

Not in our opinion. We often see statements, usually about China, saying foreign ownership of Treasury bonds means “they own us,” as if the US is an indentured servant forced to do their bidding … or else.

This isn’t how bonds work. US Treasury bonds don’t have a call feature, so bond owners can’t demand immediate repayment. Their choices, always, are to sell or hold to maturity. For every seller, there is a buyer. If any international entity were to try to dump Treasurys en masse, a couple things would probably happen. One, the sudden supply influx would knock prices temporarily, giving buyers a fantastic discount and forcing sellers to accept a much lower price. That doesn’t affect the US government and its funding at all, presuming it isn’t issuing bonds at the time, but it does hurt the seller. Two, the selling country’s currency would probably skyrocket, wreaking havoc for businesses there and creating some societal discontent.

China has actually sold down its holdings in recent years, but very gradually, probably for these reasons. And as it has sold, others have bought. The world loves US Treasury bonds. Loves ‘em! They are the world’s deepest, most liquid fixed income securities, important to investors globally. Not just governments seeking to invest foreign exchange reserves, but also pension funds and other large institutions. Lastly, for all the focus on overseas owners, most Treasurys belong to domestic investors and the Fed.