Me and The Dalai Lama
Posted on Sunday, July 26th, 2020
As I awoke from my birthday nap (It’s next week. Don’t worry you didn’t miss it. I just can’t nap when the markets open.) I was informed that it had been the first time that we were alone in the house since the pandemic started. The kids were out buying school clothes. Oh well – Maybe next pandemic. Thank you to all who are going to wish me a happy birthday. That is very kind and I wish you a happy birthday as well. You see I have been negligent on that friend effort as I have sworn off Face book as it just gets us agitated. That was right after I un-followed everyone who had posted their political opinion. That left me with just the Dalai Lama on my friend list and his birthday was last week. We have been toying with the idea of changing the blog’s name to Reilly’s Rules. That would be Rule #1. Stay off social media. It’s the new smoking. Happy birthday to all!
For months we have seen the stock market priced as a call option on an economic resurgence fueled by government largess. We saw things this way. If the government was going to basically guarantee payroll for the entire United States thru its extra $600 a week in unemployment if the virus subsided before the end of the unemployment program then there would be say 13 months of payroll in a 12 month year. Here we are and July 31st is set to come and go and the virus is still plenty powerful. The call option has expired or has it? We definitely see Congress passing more benefits. It is an election year after all. But first perhaps there is room for a little political backbiting. Congress wouldn’t use the American people and the pandemic for political gains. Would they? If Congress can’t get things together and guarantee more benefits by the end of next week then the market may hit a speed bump.
If Congress does put forth more benefits in a bill next week then it begs the question – When do these benefits end? It is an election year and incumbents would like to be reelected. You can now begin to see our point on fiscal stimulus and monetary policy. The monetary heroin cannot ever end and it is now a political issue. The Fed is no longer independent of Congress. There will be no political will to end the spending and easy money policy. The cure will be worse than the disease. Who could have seen this coming? Why do you think gold is doing so well?
While the market did reach above 3250 last week its failure to hold its gains give the bears a chance to announce their presence with authority. A lack of benefits bill out of Congress could give bears the ammo they need to push back towards 3000. The S&P 500 was down less than a full percent last week while our gold holdings did very well. They were up another 5% last week. We think that it is about time for gold to simmer down a bit and consolidate but won’t be upset if it heads higher still. We are still stuck in a wide trading range on the S&P 500 between 3000 and 3250. The chart gurus would say that a trading range will most likely break out the way that you came into it. That would be higher and measure out to 3500.
Stay safe and stay off Face Book.
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.