June 26, 2020
“I Didn’t Like the Set-Up…”
You may have gotten about a hundred trade confirmations today (sells, not buys). There are a bunch of really good reasons we cut just about everything by 50% today. They can be summarized by the headline: “I just didn’t like the set-up…”
If you paid even a little bit of attention these past few weeks, you saw the kind of volatility that makes the hair on the back of my neck—which is now really long and completely unfashionable (my hair, not my neck)—stand up. And I don’t like my hair standing up; I want it to sort of laze around in a cool and relaxed manner as if it just had a massage. So anything that causes hairstanding, I try to 86 ASAP.
So, there’s that.
There was also the money-flow picking up and leaving the market; too many sellers = decline in share prices. This is important to keep in mind: the stock market is just like any other market—it runs on supply and demand. Too much supply? Prices go down. Lots of selling = too much supply.
The money we anticipated flooding the market as a result of the Federal
Reserve Fire Hose… well, it hasn’t really showed up in any great amounts. It’s double-parked over by the Treasury Department, leaking just a little as it waits for a 1/8th % increase in T-Bill yields. “Never fight the Fed”? Ha! It never even showed up. It might get around to the market someday. Maybe.
It’s also the end of a quarter when many large portfolio managers “rebalance” their holdings. Read: Big “Sell” Orders.
And it’s summer when, a lot of the time, the market goes up and down like that feather at the end of “Forrest Gump” and enters fall right where summer began.
We are definitely established in a sideways trend—and there seem to be a
whole lot of things determined to keep it there. These trends eventually break out… or break down.
We are also witnessing an increase in infections, with threats of another
shutdown. It’s already happening in some states and localities. Businesses that just reopened may be closing… again. People who just went back to work may now be going home… again. And not everyone can work from their kitchen table. We will probably get another shot at the “work from home” stocks. We’ll see.
So, we cashed in a bit and preserved the nice profit we’ve been building since late March.
Warren Buffet’s Rule Number One: “Don’t lose money.” It’s also his Rule
Number Two Through Infinity. Some people think he’s lost his edge; I think he may have just gotten smarter. Those two things look a lot alike.
Our Rule Number One?: “Always Do What’s Best For Our Clients.”
As always, I pray that God richly blesses you and your family and animals!
Best Wishes in Peace and Joyfulness,