Money isn’t Everything – Solve for Happy
Posted on Sunday, August 26th, 2018
We read an amazing article this week from Mo Gawdat former engineer at Google X. After the loss of his son, Gawdat began to seek what brings happiness. As a financial advisor we are well aware of the studies that show that once our basic needs are met additional funds do not make us all that much happier. So what brings happiness? Solve for Happy is his effort to advance the cause of happiness in people’s lives. Take a minute and read this article by way of CNBC. We think you will be happy that you did. Check out his website.
Gawdat boiled down what he saw into “one simple equation, which basically says your happiness is equal to or greater than the difference between the events of your life and your expectations of how life should behave,”
Back to markets. While we think that the chances of a currency crisis is rising in their probability we also see US markets as being pressured to move higher (especially in illiquid late summer markets) as more capital chases a return here in the US. We read everything that we can get our hands on from Charlie McElligott over at Nomura. His writing, while highly technical, provides some great market insights. Here is the money quote from his latest report this week.
WHY SEPTEMBER SETS-UP FOR A POTENTIAL MONSTER EQUITIES/LARGE ‘MOMENTUM’ RALLY – By Charlie McElligott, head of cross-asset strategy at Nomura
All-in, this sets the table for what I believe could be a “grab” month in U.S. Equities through the month of September and into mid-to-late October; HOWEVER, this then leads to an “overshoot” potential once folks have taken net exposures back significantly higher, as my view has continued to be that by late-October, we should again see heightened cross-asset volatility off the back of negative impact of what will be a large “Quantitative Tightening” impulse via the Fed / ECB / BoJ in this window.
Charlie is clear that he thinks the bulls have the ball. What could slow this market? Charlie touches on that as well. The market has priced in another rate increase from the Fed next month. With that baked in the cake the question the question remains of where do they stand on reducing their balance sheet? According to Charlie, that schedule is very light until late October/early November. That may give bulls more room to run for the next six weeks. Note his “however”. A breakout here could lead to a reversion in late October/early November.
We are still focused on high and rising short positions in US Treasuries and gold. Those positions tell us that perhaps investors are leaning too far out over their skis in some areas. Whenever everyone thinks something will happen something else will.
We felt that the bulls needed a close above 2865 and they got one on Friday. One close does not a trend make. We insist on two. Monday could be the clincher or the deal breaker. I am leaning towards the bulls as they have the momentum. We could be breaking out of our 2018 range. We are still underweight but less so. Careful not to get whipsawed in the late summer markets but there is a sense of FOMO in the markets. Fear of missing out as the bears are on the run. Small and mid cap stock breakouts look more powerful that large caps. The Chinese have taken some turns in the currency market which have stabilized the Yuan and given relief to Dollar bears. That has in turn helped the Chinese and US stock markets as well as commodities. Currencies from Turkey to China to Brazil are the canaries in the coalmine.
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
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
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.