Refuse
Posted on Sunday, June 12th, 2022
I finally convinced my son to take a golf lesson! I have begged him for 10 years to take a lesson. He has only swung a club four times in his life at the range and his swing is naturally better than mine. He has never played one hole of golf! I have been playing for 30 years! The answer to my questions was always no. I asked why once and he told me that the game of golf was too hard. I have to agree with him but how do you tell a 12 year old that the genius of the game is that it is too hard. The greatness of the game lies in that fact that you will never master it and that it will teach you some of life’s great lessons. Play the ball where it lies means deal with what life hands you. You have to count all of your strokes. In life you don’t get to skip the mistakes you made. Above all, golf teaches you honesty, integrity and respect. How did the lesson go? He loved it. After 5 minutes the teacher asked again – You’ve never played golf? Nope. What other sports do you play? Kevin answered – “None.” I don’t think the instructor believed us. We will be back next week. A win for dad.
Investing is also a game that is incredibly complicated and can never be truly mastered or perfected. We have seen this range bound market coming for six months and even before that we saw inflation on the rise in the post pandemic period. So, what’s next? That’s always the question. It’s not obvious yet. We are still seeing the impact of the pandemic and the shutdowns. Everyone wanted TV’s and furniture. Companies like Target and Wal-Mart ordered tons to be delivered. Everyone has moved on. (Although, my daughter is still waiting of a couch and TV stand months after she moved in.) People want clothes and travel now. What’s next?- A hangover probably. A debt hangover. For now the consumer is saying in polls that the economy stinks but I think they mean inflation stinks.
Inflation is a battle that may go on for a decade or more. Oil companies refuse to drill to create more supply and green politicians in Washington refuse to acquiesce to less stringent regulations of energy companies in order to generate more supply. It used to be said that the cure for high oil prices was high oil prices. Oil companies would enact larger projects to get more oil out of the ground due to high prices. Not anymore. They have learned their lesson. The CEO of Chevron this week told the CNBC audience that he felt that a new refinery will never be built again in this country. That will not help contain inflation and we need to invest our portfolios accordingly. To get inflation under control we need to get the price of oil lower. The results of the midterm elections will do nothing to increase supply of oil. A resolution in the Ukraine would. That would help the economy more than anything that the Fed can do. The Fed will keep raising rates until something breaks in the bond market. We are already getting close.
This may be one of the most important weeks of the year. The Fed meets this week and June 17th is a big date on the calendar as the June options expiration will be massive. It will reset the market. That unlocks the market in either direction. The market has little to no liquidity and that will only get worse as the summer drags on. Markets could have large moves in either direction. The action after Labor Day will have more meaning than it does now. We closed Friday at 3900 on the S&P 500 and 1800 on the Russell 2000. Round numbers means the computers and options markets are in charge.
It seems strange to think we could find the bottom so quickly but things are moving faster. A recession could be called by the end of this month. The lower we close on Friday the more likely we bounce. The higher we close on Friday the more likely the selling isn’t over. It’s time to think about what comes next and where to profit. Things are moving quickly perhaps the low end of the 18 month range comes this week. We are prepared and hope that the markets make it obvious.
“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.