Pay Day
Posted on Sunday, February 27th, 2022
My daughter received her first paycheck this week! She is really proud of herself and I think a bit relieved. The bills were piling up. Welcome to adulthood! I remember my first paycheck. In the depths of the recession of 1990 I had an executive at A&P take pity on me after meeting him at a golf tournament. He heard my plight and within days I was working as a bread salesman. A week prior I didn’t even know that was a thing. I only knew that I had a job and I could pay my student loans. My middle son was questioning whether he was on the right track in school pursuing a political science degree and what kind of job will he be able to get. I told him my bread story. Sometimes you just can’t plan out your life. As John Lennon said – “Life is what happens to you while you are busy making other plans.”
Someone at the White House probably should have had a plan for this Ukraine thing. Kicking Russia out of SWIFT is probably not the best idea. We will see the aftershocks tomorrow morning. SWIFT is a banking system used to exchange funds. Take out a player who has hundreds of billions in assets and someone is going to be left without a chair when the music stops. This wasn’t well thought out. Longer term Russia and China will get together to create an alternate system. This was the nuclear option and everyone knows you just don’t go nuclear. This will have a ripple effect for decades to come.
While it is easy to get wrapped up in the day to day headlines investing is much easier when we step back and take a less emotional approach. We have been saying for weeks that we have entered a trading range for the next 15-18 months. Our approach is that we are in a range from 4000-5000 on the S&P 500. We are still in negative gamma and that means markets will be volatile until that clears. We didn’t know about Ukraine but we did see that equities were having trouble moving higher and price action had cooled. That let us know that the bears were back in charge. Sit back, relax and enjoy the ride. We have got this. Our exposure is underweight equities and is most especially low to the riskiest equities. The March 16th Federal reserve meeting and the March 18th options expiration have the chance to cool markets and reset to positive gamma. This is the big lesson. Try to stay unemotional. It’s not easy. I had so many people in unexpected places talk to me about the market and Ukraine. The news media is pumping this one big time. Turn off the news. You will be a better investor. We have to continue to look at the big picture and not get stuck in the day to day minutia.
Opportunity Knocks- Historically, (since 1960) you will see a 5% correction in the market just about every year.
A 10% correction happens in 5 of every 10 years.
A 20% correction happens in about 2 of every 10 years.
A 30% correction happens in about 1 of 10 years.
We got close to our downside target of 4000 then the market ripped higher. For last week the S&P 500 actually finished higher on the week. The Dow Jones was up over 800 points on Friday! That is actually NOT a good sign. Markets only go up 800 points in bear markets. So, if you didn’t know it before – let me tell you now that we are in a bear market. We will see extreme swings and will be looking to take advantage of the volatility.
As we said last week – For now, we sit tight, secure in that knowledge that we are underweight equities in general and mostly devoid of the more troublesome areas of the market while being long the better performing areas such as oil and gold. Hang on to your hats.
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.