Vote?
Posted on Sunday, October 18th, 2020
My daughter came home from college to vote. How about that? I guess someone was listening during all of my civic speeches at the dinner table. I always say I just love spending time with my kids. We don’t even have to do anything. It’s just time well spent. Four of us stood on line for one hour to place our votes. We didn’t all vote the same way either which is encouraging. I keep preaching to them to think for themselves. Don’t just watch the propaganda emanating from CNN or Fox. Watch them both and compare. Think for yourself and figure out where the truth lies. The next time that I will see her is Thanksgiving. At least it’s only about 5 more weeks. The Rona situation at college seems like it is pretty much behind them. My daughter told me that only 60 kids tested positive last week and the feeling on campus is that they have reached herd immunity – at least the sorority and fraternities have. There’s hope for us all.
If you get a chance to read Howard Marks’ memos please do. It is time well spent and will only increase your investing knowledge. In his memo this week he is back to his previous position that he had been stating in 2018-2019 – Move forward but with caution. Marks feels that, while asset prices are not at bargain levels, historically low interest rates justify holding assets for the time being. We agree with Marks and see valuations high from a historical perspective. When valuations are in the highest quartile of history that tells us that returns will be lower and volatility will be higher (vulnerable to negative surprises). It justifies having more of a dynamic portfolio rather that just simply buying and holding. I think Marks would agree.
…when uncertainty is high, asset prices should be low, creating high prospective returns that are compensatory. But because the Fed has rates so low, returns are just the opposite. Thus the odds aren’t on the investors side, and the market is vulnerable to negative surprises. – Howard Marks Oct 2020 Coming in to Focus
We think that there is a new game in town starting Monday. While we have drifted higher on heavy option action the next few weeks hold a few speed bumps. The option gurus that share their research with us are of the mind that this week’s option expiration resets the game and volatility is most likely coming back. They see our current situation akin to late 2018. In late 2018 we saw the market selloff 20% over the last three months of the year hitting their lows on Christmas Eve. We see a similar scenario that could easily play out like that again. We fondly remember buying the lows on Christmas Eve 2018.
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. The S&P 500 closed this week at 3483. We are growing firmer in our belief that we are stuck in a range for the S&P 500 for the time being. The options market holds the key for now. We see volatility growing into the election and the end of the year. We suspect that we could be 10 months into another 2 year consolidation range between 3140 and 3500. We will be looking to add on weakness in the lower end of the range.
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.