"The Pain Has Just Begun" For Risk Assets Heading Into 2023

I’m extremely excited to bring you today a substantive and engaging look at the world of macro from one of my favorite commentators on markets, Harris Kupperman, heading into 2023.

I’m extremely excited to bring you today a substantive and engaging look at the world of macro from one of my favorite commentators on markets, Harris Kupperman. Harris released his fund’s Q4 2022 letter over the weekend, and it contains a wealth of thoughts and ideas - not only on Harris’ individual positions - but on the state of markets and macro in general.

In this quarter's letter, Harris reflects on 2022, which was a historically difficult year for most investing strategies. He discusses his fund’s approach to inflection investing, winners and losers and how their Event-Driven strategy generated considerable Alpha for investors in a challenging environment.

For those that don’t know him, Harris is the founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection. Mr. Kupperman is also the chief adventurer at Adventures in Capitalism, a website that details his investments and travels.

I find Harris’ opinions - especially on macro and commodities - to be extremely resourceful. I’m certain my readers will find the same. I was excited when he offered up his latest thoughts to Fringe Finance, published below.

Please also make sure to read the disclaimer at the bottom of this post.

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As 2022 is now complete, I’d like to focus on the five core trends that we were invested in during the year, zeroing in on the fact that not a single one of them worked—which is something of a rarity during my career.

To start with, our “Russian Adventure” (for lack of a better term) has been a disaster, costing us approximately 770 basis points net of fees. While I’m hopeful that this may be reversed at some future date, there is zero clarity on when or if we will ever have this capital returned to us.

Our exposure to legacy media (primarily print and radio) transitioning to the digital space was also rather disappointing. While these businesses made considerable progress in terms of growing their digital businesses, declines in their legacy businesses accelerated in some cases. Meanwhile, fears of an advertising recession during 2023 hurt the share prices of our investments.

Our four current positions have declined between 24% to 46% during the course of 2022—though we did not own two of them at the start of the year. Clearly this performance was far from ideal—despite the strong underlying trends toward a digital transformation remaining intact.