If you were bulled up over the last couple of weeks, I can’t blame you. I watched the happy talk on the mainstream media and all the “how can we be in a recession with gas prices and housing prices falling?” chatter too.
But bear markets have rallies too. Just for your edification, here is a year-to-date chart for the S+P and Nasdaq futures.
They are moving in the wrong direction if you are looking for long-term profitability. Anyone with a retirement account that has a buy and hold strategy has lost money and if you were an active trader, you probably lost money too. Only the shorts made money and it is illegal to short in a retirement account. That is unless you buy puts.
The Joe Biden Economy is killing retirees, the middle class, the poor, and even the upper middle class. The devastation is across the board. That’s why Mr. “10% for the Big Guy” is trying to buy votes. My friend JLM has a nice blog about it here.
The question becomes, if you have some cash is there anything worth buying? After all, you just got a chance to buy some stocks that are beaten down.
I don’t think now is the time to rush in and buy with both hands. There are some ominous signs out there. Electricity and Natural gas prices aren’t going lower and winter is coming. The Federal Reserve has been transparent about its actions which are good. Powell is doing a helluva lot better job than Janet Yellen ever did.
Inflation is here to stay in the short run. The idiotic bill the Democrats passed called the “inflation reduction act” won’t curb inflation since it’s chock full of government spending and government spending is the primary fuel to fire inflation. They are pouring gasoline on the inflation fire. My friend and economist Craig has more at the prior link.
Craig writes, In other words, the intended consequences of this act, and others like it, will be virtually nonexistent, while the unintended consequences will be dire. “Died of a theory” will be literally true–especially for those unfortunate enough to be living atop the resources the demand for which will be stimulated greatly by western elites mesmerized by that theory.
I still feel confident that my targets of 320 in the SPY and $12k for Bitcoin are gonna happen. One of my old trading buddies continues to make money trading volatility at the CBOE. He’s never short by the way. You can follow him on Twitter @DCPcooks.
Now is the time to do some research. When you do research, it’s not just about the numbers or a chart. I think you need to envision what the world will look like in ten or twenty years. That’s where you might find value since the market doesn’t see what you see. For example, Andy Kessler bought internet stocks off the pink sheets that no one else wanted and turned $100MM into $1B. In 2002, if you bought Amazon you did well. You can make money in bear markets without being short.
What I wouldn’t count on is the Federal Reserve to add a ton of liquidity to the market artificially juicing it as they have been doing since 2007. They are tightening due to the crappy fiscal policy we have.
A lot of investors can invest in the private market but that market isn’t open to regular Joe’s. They have to use the public stock markets.
I don’t think that gold and crypto are inflation hedges. Ignore the ads on conservative television and when your friend whispers a crypto tip in your ear ignore them. I do think there is a future for crypto but this is a long, long-term hold and it is not for wealth building. It’s a speculative play for your portfolio so allocate accordingly. For example, I own Helium because I mine it. The price has tanked from $30 to $5 and I haven’t sold it nor have I bought it. I just hold it and we will see what happens. If it goes worthless, I don’t care because it doesn’t affect me.
That’s the thing with spec plays. If you can flush that money down the toilet and don’t need it to ring the cash register for you in the future, it’s okay to speculate. Essentially that is the ethos of angel investing.
I do think financial exchanges might be decent inflation hedges. Their prices aren’t really accelerating but they don’t get crushed in down markets either. Here is a YTD chart of CME, ICE, and CBOE.
Plus, the exchanges pay dividends and engage in buybacks. Their business gets busier during bear markets. But we will see how long that corporate financial strategy persists with the new Democratic tax scheme. That tax scheme is like a pair of cement shoes on the stock market as well.
I have heard people think about buying clean energy, but I don’t think that is the place to be. People will wake up eventually. That’s why old Warren Buffett is increasing his stake in Occidental Petroleum. There might be a play in lithium battery manufacturing and maybe in mining. I don’t think there is a real play in charging.
If you understand drugs and therapeutics, which I don’t, there might be some good plays there. My friend Michael Bigger loves $NWBO. It is a cancer vaccine.
You’d have to think if that works, it’s a big winner. If you can find some public names like that in the medical space, you might make some money.
Until we get realistic fiscal and tax policy we will just have to weather the beatings until they stop.
By the way, thanks ESPN College Game Day analysts, I think the Illini do well at home today.
Great article. Thanks for the links to your two prior ESG articles, which were also spot on.
Your writing is very concise and clear and reminds me of Thomas Sowell.
Many people feel the need to use too many words to get their point across, especially on Substack, so I appreciate your brevity and clarity.
SPXU calls. SQQQ calls.