Good Afternoon,

The title today of your morning note is designed to prove a point.  “Altitude sickness” is real in markets.  The higher they go, the scarier they feel and the worse our emotional response to an errant headline.  New all time highs lead to knee-jerk reactions on any bad news.

Shoot first and ask questions later becomes the name of the game.

In recent weeks, any number of terrible events were set in place to make sure “the top was in.”  Currently 5 large Wall Street houses have “10%+ correction” warnings out to clients – and all have been broadcast on CNBC and the like.   Suggesting one “remain cautious” is now vanilla advice, for little more reason in some cases than, “the market is just too high right now…”  LOL

Really?  I guess I missed that “rule” the day they were teaching rules at investing school.  My point?  Angst is heavy in the crowd – each tick upward and it gets heavier.  The clouds are gray and a pall sits over the horizon.  No one can really put their finger on it – but lets suffice to say, the fear mongering has worked and is deeply embedded in the crowd psyche.

One knows this not just by the constant droning on of problem after problem but in this age old advice: follow the money.  Right now, most of the crowd’s money is sitting in the bank.  Yes – to the tune of $21 Trillion ++.  Cash money.  Doing nothing at all.

…other than making people feel “safe” from that ugly old stock market.

Deceptively Strong

The media has engineered so much fear in the minds of many that there is a glazed look in their eyes when you say “record earnings again.”

Let’s go to the tape – and by the way, this is before the three busiest weeks of the Q3 season get underway

 

The highlighted column above is the current quarter being measured as reported.  Notice is began the quarter a little under 2 weeks ago at $429B.  We have already seen a rise of $22B + and the busy part has not arrived yet.  We stand by our original thoughts – in the end, we will meet or exceed Q2.  Note also that the green bars in the future are also rising steadily

 

Note the highlighted section again – also rising, showing YOY growth rates.  They started Q3 a couple weeks ago at 26 and 10 respectively.  Steady as she goes

 

It is not just the quarterly YOY growth rate – the entire annual calculation is expanding as well – and we still have the rest of Q3 and all of Q4 to add to that tally.

The bottom line?  The analysts crowd is spooked.  You thought you were nervous.  Imagine being a crowd that gets paid a ton to be wrong about 90% of the time.  Hilarious.  Yet, they still remain reticent to “post” higher expectations.  It seems it is safer to be short on your number than ahead of the game.

Inflation?

Play a little experiment in your mind:  when political winds blow and suggest to the business owner that you are cruel (or dramatically worse) if you don’t raise pay rates for all parties, exactly what do you think will happen?  Simple right?  Your prices have to rise to pay additional costs.

So then why are many totally shocked to see that inflation arises in that case?  Play another little game:  If you change laws that require shutting down finding crude oil in one country, supply falls.  That same country then sees a dramatic increase in the use of crude oil as they are let back out of their home.  Why would anyone be surprised that there is a price squeeze?

Can you say “dominos?”

The politicians – red, blue and everything in between – always forget the dominos.

The Good News?

Remember – the human mind interprets good or bad.  The market thinks better or worse.   Yes, confusing – but that’s why they call it “investing” and not “fun.”

While everyone and their brother is telling you that (hyper)inflation is here and will burn us alive, companies feeling the internal stress of inflation are already attacking it.  How?  With technology and efficiencies.

Look what’s coming

 

Recall that roughly 24% of that 88 million person, record setting generation, is still under 20 – and you get a sense of the deflationary wonders headed our way.  We have more 25-year-olds than any other age group.  Our best years are dead ahead.

Check The Headlines  

Let me give you a list you won’t see – but are true:

We have never been wealthier.

We have never had a lower debt load on costs

$5-a-gallon gas is (fortunately) not remotely the same as it used to be

Companies have never had higher earnings

Companies have never had higher cash flows

We have collectively never had more money in the bank

I could go on – but ask yourself this:  Why in God’s name would the media want to leave these helpful little tidbits out each day from the downpour of crap they throw at you every 24-hour period?

So Now – The Next Monster?

You hear it every hour of every day – the supply chain.  Recall our notions since the early parts of this pandemic:  everything will change.  It will look like fire and brimstone while it is unfolding but when the dust settles, a very big gamble will have turned bad.

China will see significant losses on the global stage.  The US will see significant gains – not because of politics because they couldn’t be less business friendly.  No, we will see gains because of our people, because of our “we are not going to lose” attitude, because it is in us to overcome, rebuild, learn, expand and step forward – always forward.

Like we have always said, no matter how ugly it might look sometimes, America is in the business of overcoming – and business is good.

In Closing

Somewhere in here we can expect maybe one more punch in the gut and a last phase of choppiness.  Why point that out?  Easy:  it is likely to be the last for a good bit.

They say never sell a dull market – and things have gotten dull, almost as if yet another record earnings number has become “boring.”

Buckle up and pray for that last setback, more fears and higher angst levels.

The best is still ahead.

 

Until we see you again, may your journey be grand

and your legacy significant.