…for stock market investors, anyway.

We still have a few weeks left in the calendar year. For professional investors, however, there’s little that anyone can do to substantially the full-year results. And the market itself will effectively shut down in another week or so, as weary trading desks go into holiday mode and accountants take over to close the books for the calendar year.

(an aside: I always liked to monitor the last week or so of the year. Lots of weird stuff tends to happen in thin markets. So it’s fun. And there are times that taking the other side of a trade from desperate last-minute buyers or sellers can be very lucrative. So maybe I’d get a slap on the wrist for messing with the yearend process (I never did) but clients would be wealthier.)

I’ve found by far the most useful thing to do in December, though, is to try to firm up at least the outlines of a strategy for the coming year. Three thoughts so far, two of which are continuations of what has worked well in 2025:

–in Japan during the early 1980s export-oriented industrials were eating the rest of the world’s lunch. So the OECD forced Japan to revalue the yen upward by a lot. This dramatically shifted the heart of the economy–and the stock market–away from export-oriented industrials that had been superstars to purely domestic firms and importers. It took at least a couple of years for most investors, domestic or foreign, to understand this, even though the change was plain as day. The mindset change needed to be successful was that dramatic.

The current Washington agenda, as I see it, exactly the same idea, only in reverse. Not necessarily intentionally, but still effectively. Holders of US Treasuries, foreign and domestic, see Washington’s current strategy for dealing with the large size of Treasury debt outstanding is to create inflation that will reduce its real value. Their response has been to sell the $US aggressively.

So we’re now in the opposite situation as Japan back then in terms of currency. I find it hard to imagine that the administration will change its mind. If that’s correct, investors should continue to concentrate on holding firms with $US costs (weak currency) and foreign revenues (strong currency)–and avoiding those with foreign costs and USD revenues. This has been, I think, the biggest key to equity investment success in 2025. Absent a change in Washington, this will continue to be the case next year, with maybe more domestic investors aware.

–a group of prominent US-based Holocaust scholars resigned their academic posts during the year and moved to Canada. As they were leaving, they warned they think the US is traveling down the same road as Germany did in the 1930s. I think this idea is at the very least a worry in the minds of professional investors around the world. If so, a software company, whose assets can get on a plane and move from the US to, say, Canada in a day will trade at a higher multiple of earnings than a firm with large plant and equipment located in the US. …hence, at least part of the appeal of the big AI software companies, as well a chip designers who use TSMC in Taiwan for manufacturing.

–cutting against this idea is the concept that everything has a price where it’s an attractive investment. The combination of tariffs, engineered currency weakness and ICE-created fear has put companies with US revenues and foreign costs in a particularly bad spot, both operationally and in stock market performance. For consumer companies in this position, however, many have powerful brand names built up over many years through a ton of advertising/marketing expense and the creation of powerful distribution networks.

The key insight of Warren Buffett as an investor, and still a valid one, is that although these intangible assets have great value, they appear on the firm’s accounting statments only as costs. In other words, they’re shown as subtractions of value. At some point, these beaten-up companies will become takeover targets. And in the meantime, some have high enough dividend yields to be regarded as quasi-bonds. For what it’s worth, I’ve begun to shift a bit to this sort of name.