Cushion the Blow
Posted on Sunday, May 2nd, 2021
It seems as though tax season just won’t end. Tax season is probably our busiest time of the year. Clients inevitably have questions when it comes to their taxes and I speak to a good amount of the tax preparers. April 15th is supposed to be the end of all that. 2021’s cruel little twits so far is that we get another month of tax season. Lots of complaints this year over how much people are paying in taxes. It is all so bifurcated. There are people writing big checks to Uncle Sam and people receiving extra stimulus checks. In talking to my own tax preparer we went over my daughter’s taxes. One of the questions that she had for me was – did my daughter receive a stimulus check? I went over the account and realized that she did, in fact, receive two stimulus checks. She didn’t have to fill out a form or wait in line. They just sent her two checks which went directly into her bank account. They just stick money in your account. Crazy days! A total of $2000 in case you are wondering.
Last week we talked about inflation. This week we are looking at shortages. Chicken and golf balls are the latest added to the list of shortages. I don’t know why chicken is in short supply but the golf ball shortage has to do with the plastics used in its construction being in short supply. Titleist, the leading golf ball manufacturer, has put a halt on production of its cheapest balls. I better stop losing so many of them. When the pandemic hit we knew that it would impact supply chains and create inflation and… here we are. What’s next? Extreme inflation in food supply leads to conflict – the war kind. Maybe not here but geopolitics are going to have our attention for the next 18 months
Markets are due for a rest. The big FAANG stocks reported earnings this week and most of the reports were stellar. Amazon, Apple, Facebook all had great quarters yet the stocks barely budged. What gives? The market looks tired and many are making summer plans. Sell in May and go away?
The rollover of options this week presents a real opportunity for volatility to return. The options market had the market pinned down but next week presents an opportunity for things to perk up. In the past we have told you about a client with a particular knack for the market. He was a seller this week taking down exposure. Never all in…Never all out he says. His exposure is down to 45% in equities. I see things a bit different. 95% of all stocks are above their 200 day moving average. That is not normal and at that extreme we would expect some sort of pullback. We are playing the pullback by choosing to stay invested. At 95% things investors are very positive and investors are chasing stocks. If stocks fall there will be buyers to cushion the blow.
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.