In Check
Posted on Sunday, September 20th, 2020
I am really enjoying reading Morgan Housel’s thoughts on money. The quote that struck me this week is from an interview he gave in a press tour for his new book – “The Psychology of Money”. Reilly’s Rules – Keep your emotions in check.
Behavior is the most important side of investing. You can be the best stock picker in the world, have the most sophisticated economic forecast and models — be a financial genius — but if you don’t control your own relationship with greed and fear, your ability to take a long-term mindset, whom to trust, and how gullible you are, then none of those financial skills will matter. – Morgan Housel
The election has everyone on edge it seems. I had several client conversations regarding the election this week. One piece of research seems to have spurred a good deal of that conversation. Several weeks ago a Biden consultant put out a note that said Trump will win decisively on election night while Biden eventually wins after all of the mail in votes are counted. This is an electoral nightmare which Gore v Bush pales in comparison. Fortunately, the Founding Fathers thought of this and outlined very specific plans that will decide the election. Giving me faith last week that this will all work itself out was the history of Gore v Bush. In the 2000 election the Supreme Court pushed the case to the front of the docket and passed down their decision on the very day necessitated by law to keep the election process running smooth. That was what I said to clients last week. That was before Ruth Bader Ginsburg passed away. The Supreme Court could now be deadlocked at 4-4 – and you said how much worse could 2020 get? Hold my beer.
The great part about the election is it’s a known unknown. Markets are preparing for volatility around the event even if the event takes months to reconcile. Wall Street is actively hedging risk in that time frame. That itself is bringing down risk surrounding the event. We have brought down risk over the past weeks. So, Wall Street is preparing. The virus – no one had much time to prepare for that event and that was why the response was so violent. If you can keep your head when all about you are losing theirs….
I have been referencing the CNN Fear and Greed Index for months. This builds on what Morgan Housel mentioned. If you can keep your fear and greed under control you can profit. You have to combine risk management AND the soft skills to be successful and the Fear and Greed Index helps you keep those emotions under control. CNN Fear and Greed Index is back down to a reasonable 52 which is considered Neutral. The bears have pushed their advantage as it was another tough week. It is to be expected as September and October are rough months seasonally. The election has people on edge and the death of RBG has kicked 2020 up a notch – if you can believe that. S&P 500 closed at 3319.There is support at the June highs of 3234. We would not be surprised to see the market sell off 15% from its peak. That is on par with the Gore v Bush fiasco. That brings us to 3049. 3000 on the S&P 500, if reached, will act as strong support. We suspect that we could be 9 months into another 2 year consolidation range between 3140 and 3500.
No blog next week as we prepare our quarterly letter.
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.