Pulling Weeds
Posted on Sunday, March 21st, 2021
It’s back to basics month here at the Reilly’s. It is like the basic infrastructure of the house has decided to fail all at once. In the last couple of weeks we have had the water line into the house spring a leak and we were put notice that the heat pump in the basement is on its way out. $7500 later… The house is getting older. Ahhh! – The joys of home ownership. We have been in this house almost 14 years now! It is amazing how time flies.
As far as Reilly’s Rules we are headed back to basics. One of the basics in investing is like gardening. There is a time to pull weeds and a time to water the flowers. In investing that means selling our losers and adding to our winners. Speculation in markets has been rampant of late and money has been flowing like water. We have said over the last few months that things seemed a bit too easy making money and you know that makes us uneasy. Time to pull some weeds and get ready to water the flowers.
This is what we had to say last week.
Our antennae is up and looking for trouble. …There is an old saying on Wall Street. “Buy the rumor. Sell the news.” The end of the pandemic is near. Investors have bought the rumor. Will they sell the news? Another famous Wall Street saying is “Sell in May and go Away”. I think we are early but our finger is on the sell trigger.
Our trigger finger is getting itchy. All of the signs of froth are in the market. The current regime sees historically elevated valuations, record margin debt, heavy speculation in stocks and large money flows in equities. I have even seen signs of people abandoning bonds in a flight to equities to reach for yield. Well, markets and euphoria can run farther that you think but our proprietary signal is getting close to calling for at least a pause in the euphoria. We will know more early next week by our signal is very close to getting triggered which would indicate at least a 10% drop in equities. It might be time to buy some insurance against the drop. Caution lights are on. Doesn’t mean it isn’t a buying opportunity or that this is the end of days. This could be the pause that refreshes.
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.