Suspended Belief
Posted on Sunday, June 5th, 2022
Diane and a friend were talking this week lamenting that their last child is headed off to college. She is the mom of my son’s closest friend. It just so happens that this is also their third and last child going off to college in the fall. Diane said that she feels like she has been laid off from her job. I thought that was so interesting and insightful. It was a very interesting way to state the feeling – laid off. It comes with a sense of anticipation or suspended belief. What comes next? The last one is leaving the nest. She feels like her job just ended.
When one door closes, another door opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us. – Alexander Graham Bell.
There has been a lot of talk this week of layoffs especially in the tech sector. This week we saw the highest amount of announced layoffs since 2020. The jobs market is the key. If anything can stop the Fed from tightening and drawing the market lower it is the unemployment figures. They are also purposely targeting asset prices. Bringing stock prices down is all about a tighter monetary policy at the Fed. It really won’t do much to slow inflation but when the only tool you have is a hammer…
I have to say I love watching bear markets. While they are not easy on the portfolio I must say that they are the most thought provoking of markets. Right now we are in the midst of a bear market rally. I do not think the selloff is over. That could have been a bottom but I don’t think so. We are seeing massive deleveraging in the hedge fund area which is encouraging. There are several portfolio strategies that are poised to be buyers. This bear market rally could head higher than you think. That’s what makes bear markets so interesting and hard to predict. We will be taking off risk at the higher end of our trading range. The higher stock prices go the more the Fed will be given room to tighten policy.
The June options expiration will be massive. That unlocks the market in either direction. The market has little to no liquidity and that will only get worse as the summer drags on. Markets could have large moves in either direction. The action after Labor Day will have more meaning than it does now. We hit the lower end of the trading range that we predicted at 3800 and bounced. We are almost back to the middle of the trading range. Hedge funds deleveraging means that a capitulation selloff may not come so we must be prepared for that as well.
June 17th is still a big date on the calendar. Bear markets go further and faster than you think. Middle of the range is 4300 on the S&P 500. We closed Friday at 4108.
“Short term volatility is greatest at turning points and diminishes as a trend becomes established.”– George Soros
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.