Wow!
Posted on Sunday, November 5th, 2023
Wow! What a week! I had the great pleasure of going down to my golf club to watch some of the best college golfers in the world play. It was eye-opening! These kids were hitting golf balls at what seemed like inhuman levels. I have been playing golf for 20 years and love it, so it was incredible to witness what these girls and guys can do with a golf ball. Golf used to be a fat guy smoking a cigarette. These players were natural athletes. I think that I need to work on my game some more.
Wow! That was also an ample description of the stock market. I told you we were in negative gamma. Negative gamma cuts both ways. This is what we said last week.
Negative gamma has us inclined to watch for a reflexive bounce, which could get legs into the end of the year… Year-end sentiment could easily take over in this negative gamma environment. Remember, it works both ways. Volatility up and down. Not just down. They could just as easily rip the market higher on little to no volume. We try to prepare for both.
Volatility goes up AND Down. Our signal first hit about nine weeks ago. Since then, volatility has ramped higher. The rally this week was because so many were underinvested and were forced to buy. The other impetus was the end-of-the-year rally which is very much feared by those under-invested or short. We said we were going to have to be nimble. We bought some bonds, and we bought some stocks this week. I expect the market to hold on here for the rest of 2023. I don’t want to chase but mid-month we should see some pullback. 2024 is going to be another story.
The economy is getting rough, and we still see a recession in the first half of 2024. It wasn’t just payrolls that disappointed this week: so did the unemployment rate, which rose to 3.9% from 3.8%, vs expectations of an unchanged print. Since recent lows in April, this measure is up by 0.5% points, effectively cementing the next recession per Sahm’s rule.
Regarding wages, we find more proof that the labor market bubble has burst, with wage growth in October just 0.2%, down from the upwardly-revised 0.3% in Sept and below the 0.3% estimate.
The markets are reading STAGFLATION.
Rally into Christmas and then the New Year brings changes. Cyclical bear and secular bull. I hope. Looking only for a fat pitch while trying to stay nimble and patient.
“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.