Packed

Posted on Sunday, September 25th, 2022

That felt like two weeks. Seriously, with Diane traveling and the kids staying until Monday with the market screaming it felt like we packed two weeks into one. Well, maybe I will get to test my shoulders out next week in the gym and on the driving range. As I write this, I am saying it with the full knowledge that it is highly unlikely. It was a full week last week, but this coming week is the end of the quarter, and it will be jammed packed again. On a housekeeping note – next week there will be no blog as we will be writing our quarterly letter.

While the market has been holding out hope beyond reason that the Federal Reserve will just pivot dovishly and begin to lower rates the reality of the situation hit home last week. Powell set the record straight in his press conference as he warned that “the historical record cautions against premature rate-cuts,” and admitted that it is “very likely there will be a softening in the labor market.”

In my mind the selloff and change of perspective is a relief, in that, this market was never going to go higher for the longer term until everyone gave up on that idea. It’s when everyone expects something to happen that something else will. We are finally getting to the point where investors begin to capitulate – sell the market – and we can find a bottom. 

We have warned you of two things. One is that that the Fed will hike until something breaks. The second is that the politicians in DC will not let Powell break inflation. Breaking inflation inhibits their ability to inflate away the government debt and continue their profligate spending but it also unpopular with the electorate. High unemployment is unlikely to help any incumbent politician.

Chair Powell just announced another extreme interest rate hike while forecasting higher unemployment. I’ve been warning that Chair Powell’s Fed would throw millions of Americans out of work — and I fear he’s already on the path to doing so. Senator Elizabeth Warren (MA)

Things are starting to break. The British pound, the Japanese Yen, the German energy market. It’s not just the politicians that will stop Powell. The market has been pinning its hopes on the idea that the Fed would pivot dovish and markets would rally. Investors seem to be throwing in the towel. You get the feeling that the market is getting the message that something is about to break. That is usually the beginning of the end of the move lower. Time to make a list to bargain hunt. This week has the end of the quarter and a large options expiration. The trend flowing strategies are now short. The potential is there for a flush lower and subsequent short squeeze higher. Turnaround Tuesday?

Be fearful when others are greedy and greedy when others are fearful. – Warren Buffett

 

“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.