Grateful
Posted on Sunday, April 30th, 2023
While all had been quiet, I was shocked back to reality this week. I received word of the death of an old golfing buddy. He was only 58 years old. We had known each other for over 15 years. He had a big personality. I loved seeing him at the golf course or running into him at the store. He would always give me such a warm greeting. He just clicked with people. You always knew when he was in the room. He was loud and fun. I always left feeling a little bit more energetic and excited about life. He was a Philadelphia Eagles fan, but I didn’t hold that against him. We met not long after I first moved to Atlanta, and I still didn’t really know anyone. I was trying to get into golf and was practicing quite a bit, but I had never played in a golf tournament – ever. It turned out that his partner had to pull out at the last minute. He saw me on the range and asked if I would like to play in the tournament that weekend. We played together and we won our flight. The best part of the weekend was that he pulled me in. He knew everyone and he introduced me around. I met more people that weekend than I had in the previous 9 months. I’ll always be grateful for that. Thanks Ronnie.
According to the Bank of American analyst Michael Hartnett – on average, US recession have started 6 months after inversion of 3m10s curve & 11 months after inversion of 2s10s. Guess where we are? – 6 months and 10 months. Sounds like the recession is right around the corner. As the recession begins the yield curves will begin to steepen. The 2s10s have started but the 3m10s has not budged. There is always something different in every market but keep an eye on the 3m10s. Hartnett makes a very interesting observation. Speed of yield curve steepening was very quick in disinflationary cycles (1990s-2020), much slower in inflationary cycles (1970s-1980s); if recession imminent, the ongoing inversion of 2s10s (rather than positive-sloped) strongly suggests this is an inflationary cycle & fits with “sell the last rate hike” analysis.
The market just seems like it is being dragged higher. Most investors are trying to sit on their hands and wait out the recession but the computers and 0DTE options traders keep lifting the market. They are being led by a handful of tech stocks. The thing that worries me is that the transport stocks and semiconductors are not playing along. If this were a sustainable rally, then those two would be reaching for new highs. The push higher is due to systematic strategies and could be further exacerbated by FOMO if those on the sidelines lose patience. Oil is struggling. China’s reopening is not a barn burner. Credit is tightening and housing prices are starting to fall. These are all indicative of a recession. Recessions are generally not good for stocks and the last reading of GDP was just over 1.1% down from 2.6%. Things are not going in the right direction and bankers are slowing loan growth. I’ve been here before, like in 2007. I sold my house in June of 2007 waiting for a crash, but the market just kept chugging right along for another 6 months. The market can stay irrational for a long time but in addition this is the most telegraphed recession in history. When everyone is prepared for something to happen – something else will.
“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
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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.