THE Moment
Posted on Monday, October 26th, 2020
I am writing this on Friday afternoon as I will be busy all weekend. My favorite golf tournament of the year is this weekend at our club. Five nine hole matches over two days with your partner against other teams from the club. I have to say I have chosen my partner wisely and he has gotten us to the finals the last two years. The real winner this weekend is usually the weather. The October weather in Georgia just cannot be beat. I will put fall in Georgia up against fall in New England any day. Keep your fingers crossed for us.
We mentioned in June of 2018 that Bitcoin would become interesting when it fell 90% from its highs of $19,000+. Well, it looks like down 82% from its high will have to suffice. Bitcoin is interesting again. We have noticed from patterns in the market that bitcoin was attracting interest from buyers and there was a building pressure for it to move higher. We didn’t know why. Quite frankly, we often see the pressure in the market first before we see the narrative. This week, Pay pal, the digital payments provider, announced that it will now provide a crypto currency platform. You don’t need to know what that means but the takeaway is that it makes bitcoin that much easier to use. This was a moment – maybe THE moment where bitcoin became legitimate. Legendary trader, Paul Tudor Jones, was on CNBC this week talking his book when he said that bitcoin is only in the first inning and is going to go much higher.
“I also made the case for owning Bitcoin, the quintessence of scarcity premium. It is literally the only large tradeable asset in the world that has a known fixed maximum supply.”
“I think we are in the first inning of bitcoin and it’s got a long way to go,” PJT said.
The election is having an outsized effect on markets. It seems as though markets are betting on a Biden sweep. I have to say that I think they are wrong. I see Trump winning in a close one. No emails please. It’s not a political opinion. I am looking at several key data points to predict the election. One data point is simply that an incumbent is difficult to beat. Most incumbents win reelection. Two – when the stock market is up in the 3 months before Election Day the incumbent party wins 87% of the time. The S&P is up 5% since August 3rd. Three – the Gallup poll of “Are you better off than 4 years ago” tends to predict the winner and Trump’s approval rating there is a positive 56%. No incumbent since 1984 has ever polled above 47%. The only incumbent to lose is George Bush. He was the only incumbent to poll less than 40%. Lastly, the number of newly registered republicans in key swing states like PA, NC and FL outnumber the newly registered democrats (in the post 2016 election period) to a degree that would swing the election if those newly registered voters go to the polls and vote as they registered. The real wild card is the unemployment numbers since Covid took over and if Trump loses we see Covid as being the factor that turned the tide. Not taking sides just deciding which way to bet. As we see a tremendous amount of people (and Wall Street) predicting a Biden sweep we felt the need to get our opinion out there. What’s the sense of predicting an upset and not telling anyone? We just wanted to get it on the record. Reilly’s Rules- When everyone thinks something is going to happen something else will. As an aside, going back to 1928 the incumbent party has only lost three times when the market was higher going into the election. The last one was 1980. The time before that was 1968! Crazy! There is that year again.
If the street is leaning Biden then we could see volatility increase if Trump wins. We could also see a melt up in prices if there is not a contested election as the street has tipped its hand and has bought protection against that outcome. Gold is holding its levels and that has us sticking to our positions. It needs to rally soon for the bulls to gain back control. We continue to believe that we are stuck in a range for the S&P 500 for the time being. We have been of the thought that we are 10 months into another 2 year consolidation range between 3140 and 3500. It is interesting to note that we came across research from Morgan Stanly and Mike Wilson’s team that evidently, since August, they have been preaching that we are in a range for the S&P of 3100-3500. They advise that investors stay patient and favor new money entering at the bottom end of that range. It’s nice to know when you have an idea that the people you respect see it that way too.
Stay safe.
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.