A Bit Shocking
Posted on Sunday, February 28th, 2021
It was a long week as we went up to NY to say our goodbye to Aunt Pat. It was a beautiful service that honored a great lady. It was strange being back in NY for the first time in a while. It was like being in a different world. The first thing that I noticed was the small squad of national guardsmen as we disembarked the aircraft. They wanted the low down on everyone’s travel plans. A bit bizarre. We got the feeling what it must have been like landing in Argentina in the 1970’s. Suffice to say we are happy to be back home.
The market had bit of a strange week as well. While it looked pretty bad it was nothing more than a blip on the radar. In fact, while the market and news media were raising red flags the market was down only 2.4%. What had the market hopping? – The boring, sleepy old bond market.
This is what we had to say last week on the bond market.
Bond yields are rising which is okay if a rising economy is the cause. They also need to rise slowly as to not shock markets. Too fast and the market will panic.
Well, bond yields began to rise too quickly last week and investors began to panic sending the stock market lower. The bond market sold off so aggressively it appears that it is now about to set up a counter rally. That should help markets and in particular technology shares. That might be it for tech though. Last week we told you that Amazon and Apple and Tesla are the ones to watch. They have reached out to new highs but were not able to hold them. Higher bond yields makes for lower technology stocks. They might regain some ground in the next couple of days but that trend will probably not last. The market has moved to commodities and that trend appears to have staying power.
Market is due for some consolidation and this might be a good spot for it. Biden and the gang in DC are trying to pass another stimulus bill. They may have a hard time passing another if the bond market throws another tantrum. The CNN Fear and Greed index is at a Neutral 48. At least we have moved off of the Greed section. We have been watching LQD as an indicator of the corporate bond market. We said last week that below $133 could be trouble. We closed the week at $132.27. It got as low as $129.78. That is another tremor. We still only see small tremors right now but they are growing in size and number.
The path of least resistance is still higher with a possible 8-10% drawdown in the near term. Since we wrote that last week, we are down 3.5% from the highs so we are half way there. Watch Tesla. Games are being played behind the scenes there. It appears some are trying to enact the opposite of the Game Stop saga and looking to drag Tesla down the same way investors pulled Game stop up.
For our friends that are worried about what is going on in Washington. Warren Buffet had this to say in his letter this weekend and we agree.
In its brief 232 years of existence … there has been no incubator for unleashing human potential like America,”…“Despite some severe interruptions, our country’s economic progress has been breathtaking. Our unwavering conclusion: Never bet against America.” – Warren Buffet Annual Letter 2021
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.