Final-Ly
Posted on Sunday, November 14th, 2021
The pressure, the anticipation has been building all week. Tension is running high in the Reilly house. Things are so tense I am writing this note on Saturday instead of our usually Sunday composition. What could be so important? Tennis is huge in the Atlanta area and we love competition in the Reilly house. This Sunday is a big one, probably the biggest. Diane has made it to City Finals with her tennis team! She has been playing tennis since we moved to Atlanta over 14 years ago. By my count she has played on 84 teams with a shot at City Finals. She finally made it!! Keep your fingers crossed for us on Sunday. Hope we come home a winner.
We have written in previous months that all the big firms were bearish while the market ignored their prognostications and continued to march higher. We noted that inflation was coming before it was fashionable to fear inflation. Now, we see inflation everywhere. We noted that inflation was not transitory when all said it was transitory. Now, central bankers are admitting inflation is going to stick around for awhile. We love to take the contrarian view and catch a trend change. We think inflation is going to continue to be a problem as central banks lack the political will to respond. The next trend change is the downward trend in the price of gold. We have ratcheted up our gold allocation in recent weeks and would love to add to it if price confirms our thesis.
We think that more people should fear a melt up in stocks. Small cap stocks have broken out of their recent month’s long trading range. That is a feather in the bulls cap. If small caps were to suddenly reverse and move lower from here that would be very negative for the market. We do not think that is the higher probability. A higher market is the higher probability and the pain trade as investors will be forced to chase as they seek to keep pace with their benchmarks as 2021 comes to a close.
Every major brokerage house is still bearish. We have our eyes on the exits but we don’t think that it is time to go home. As we love to learn from history we would remind you that in the last few months of the internet bubble the NASDAQ composite doubled in value months after we ran for the exits. We have no desire to repeat that mistake. Greed is running high and option buying by retail investors is pushing the market higher. It is also crumbling the underpinnings of the market. Volatility is going to be the word for 2022 but I think the bulls keep the momentum until 12/15/21 and the big options expiration. We are seeing very nice gains. We are getting nervous. We have one eye on where the exits are located but for now the markets continue to march higher.
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.