Heroes
Posted on Sunday, October 15th, 2023
When I was a boy, I had the opportunity to meet one of my heroes, Willie Mays, the legendary baseball player. At that time, I was just 8 years old, full of excitement, and I eagerly ran up to him to ask for his autograph. To my surprise, he let the door slam right in my face. That encounter left me with a lasting lesson: Meeting your heroes can be a bitter experience. Over the years, I’ve had the chance to meet a few more of my idols, and for the most part, those encounters were enjoyable. Two of my favorite encounters were with Muhammad Ali and Jimmy Page.
Meeting Muhammad Ali was a fantastic experience, even though Parkinson’s had already taken its toll on him. I remember how his hands still moved lightning-fast when I put my own hands up to shadow-box with him. Jimmy Page, on the other hand, had an image of an enigmatic, guitar-playing figure associated with devil worship. However, when I met him, he couldn’t have been nicer. He was genuinely interested in the workings of the stock exchange and seemed honored to be there. He shattered my stereotype of him and came across as a gentle soul.
Unfortunately, one of my heroes, Jimmy Buffett, passed away last month, and I privately always wished that I would never meet him. I was afraid that meeting him would be disappointing. In the days and weeks following his passing, numerous tributes poured in, all echoing a common theme: Jimmy Buffett was exactly who he claimed to be. He was a man driven by a warm smile, a quick joke, or a long, usually hilarious story. In a single word, he was “happy.”
In recent weeks I have been inundated with people around me who just exude a positive attitude. One is my dad. I went up to see Dad last week as he wasn’t feeling so well. Much like Jimmy, my dad is the kind of person who cherishes a quick joke or a good story, and he’s always ready with a warm hug and a bright smile. Despite facing some challenges recently, he consistently maintains that unwavering positive outlook on life. His mantra? “One day at a time, kid.” I wish I had met Jimmy but with a dad like mine how can I be disappointed?
As we have written in the past, markets are assaulted by news every hour of every day. Why does the market move sometimes, and other times it is unaffected? It is all about positioning. Our proprietary signal that we have written about recently indicated that markets were not ready to handle a market-moving event, and we needed to batten down the hatches. When we get our signal we don’t know what the event is that’s coming. We just know that it is going to have an impact. Our proprietary signal has flashed red twice in the last several weeks. That doesn’t usually happen. It’s usually one and done and volatility comes roaring back. Does the double signal something more ominous approaching? I guess we will find out. We’ve never seen it before.
Fed chairs were out on their soap boxes this week talking about the market. They all pointed to the soaring 10-year yields and term premiums as indicators that the Fed’s job of tightening monetary policy had essentially been done. In other words, they hinted that there might not be any more interest rate hikes in the near future. Why? Markets were going down. Markets heading south tighten financial conditions. It does the job of the Feds for them. This has led to the market’s anticipation of the first rate cut from the Federal Reserve, expected in June 2024. Conversely, if the market begins to head higher it will be back to work for the Fed and HIGHER rates.
For the last 40 years, we have been in a more deflationary environment. At the end of the rate hike cycle, investors had done well to jump back in and buy stocks. This time might be a little different. The historical data tells us that in an inflationary environment, we should NOT buy the last rate hike. As a note, the S&P 500 is down 5.3% since the last Fed hike in July. In an environment marked by inflation, it’s anticipated that the broader stock market may face struggles while commodities and precious metals are expected to flourish. We saw this on Friday. While the broader stock market was lower our portfolios were higher due to our heavy concentration of oil and gold.
We are watching the bond market tick by tick. The bond market is acting as a governor on Congress’ spending. The monstrous deficit spending is causing a major pause in bond buying for investors. Our research leads us to believe that it is possible that we find a tradeable bottom in November 2023. This could lead to a rise in the 10-year rates, approaching the 5.25% mark.
The troubles in Palestine have the market on edge, and market participants are rushing to hedge buying puts, gold, and oil futures. Our emphasis on oil and gold has undoubtedly helped us out this week.
The S&P 500 closed at 4327. 4200 is very important. We are at an inflection point in the market and it is decision time. 4200 must hold. Small caps never go the bulls’ memo and are approaching a must-hold area. A breakdown there could send the Russell 2000 down another 20%. If small caps hold and the S&P 500 holds 4200 we will most likely rally into the end of the year. We are going to need to be very nimble here.
“Short term volatility is greatest at turning points and diminishes as a trend becomes established.”– George Soros
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.