“Remember that the stock market is manic-depressive.”

~ Warren Buffett

 

Good Morning,

It is very easy to forget the opening quote today during stressful, and short-term, disconnections in pricing and value perceived in markets. 

As often noted, there is no more powerful force than an emotional twitch which then triggers a domino effect and a series of reactions.  

This latest frenzy erupted from Fed minutes that were already three weeks old, further indicating the emotion-triggering nature of the selling and re-entry into the all-too-boring trade range, noted often now.  It also highlights the “altitude-sickness” we often reference.  The bigger numbers get, the “scarier” they feel and the broader / hastier pockets of retreat.

But – Guess Who Is Not Selling?

Insiders…those who operate companies, those who own large stakes in companies, those whose net worth is often directed by the long-term value of those companies. 

Yes, it is the very same companies we are being told in the media that are under “so much stress” because interest rates may actually rise by 100 basis points over the next 4 Fed meetings beginning in March of this year.

You tell me which sounds more logical?

The too fickle nature of an investing audience which is already so terrified that they have accumulated over $21 TRILLION in cash and bank accounts?  Or, those men, women and teams actually running, building, directing and creating the future of Corporate America – inclusive of the massive change afoot on all fronts

 

Excuse me for the idea that the image inserted is not exactly straight.  I have taken a snapshot from Barron’s with my trusty iPhone.  I apologize for the slight angle in advance.  Here is the point:

There is effectively NO insider selling.

There has been little – if any – insider selling for many months now.

Today’s latest reading encompasses all the fear-mongering about rates right up into the weekend.

The data is inclusive of all those ugly tech stocks too – and each and every stock which has been shellacked in the ensuing couple of weeks to kick-off 2022….so there’s that : )

The Point?

Who do you think knows, sees, understands and can properly comprehend / define better how things are really unfolding out there?  

Further – did we forget that since 2008-2009 – and the huge deflationary forces ignited during the Great Recession –  we have been trying to create inflation? 

Did we forget that “inflation” did not exist prior to the Global Pandemic Shutdown and the driving reaction – and true need to completely dismantle and rebuild a global supply chain, protecting from further events like what we have lived through during 2022-2021 and into 2022?

If so, there is a message: 

It is time to get a grip on your emotions…and work very hard to understand the difference between The Barbell Economy® realities and the fear-mongering, mind-numbing, goal-crushing media business model. 

I am sorry in advance if you sense a twinge of anger. 

Alas, my tone at times comes from a complete disrespect for witnessing decades of BS, spouted by an unending stream of experts in a choreographed flow of “insights” which rarely, if ever, have even a semblance of the long-term thinking we must endure as investors – on the proper pathway to your own wealth management goals.

There is an old saying on the floor:  sometimes you eat the bear – and sometimes he eats.  In the end, it is never as bad as it feels – so long as we remain patient and disciplined.

So – again, the opening quote today holds great merit.

By the way – the insiders have to tell everyone when they are selling. 

Warren does not – but my hunch is that he is not either. 

So why is the crowd?

More vital for all of us is to note this:  what in crowd psychology / sentiment history would ever lead one to believe that following that reaction was a wise, valuable, productive experience to participate in at all?

There is ZERO history that the “crowd” figured out a top – ever – first.  None. 

No matter how many data points you look at – no matter how many charts over the years we share – the results are the same:  They are the contrary indicator when operating / acting on group think

When they are terrified and selling and running to cash – opportunity is building, foundations are solidifying and the future rate of results is adjusting upward.

The surprise then here?

Even as we watch equities “adjust” for the greatly feared rate increase, the churn is blinding most from the expansive landscape ahead. 

Yes, I know as I type those words and as you read them – “seeing it” can feel cloudy at times.  Short-term thinking will not be productive at times – which is why this is called investing over time – and not “fun.”

Upside earnings remains the surprise.

Better margins remain the surprise as kinks in the system are steadily remedied.

Tech capex remains the surprise as they still can’t build enough chips or implement enough tech.

Suggesting that somehow less tech and growth tools will be used in the future to meet ever-burgeoning demand from our Demogronomics® themes, because rates may rise from 0% to 1.75%, more than 20 months from now is, well, let’s be polite and leave it at – unproductive.

Does that make it easy to dig through as the emotional media model screams loudly and incessantly in our ear? 

No – of course not.

Slugging Through The Mess

There is no doubt that near-term churn events like we are kicking the year off with, lead one to feel like they are mentally walking through quicksand at times.

Further, the trade range aspects continue to draw back in price action as the churn proceeds.  Those points are below:

The NASDAQ is standing at prices seen in August 23, 2021 almost to the closing tick (last summer)

The S&P 500 now stands at the same price level as back on November 4th, 2021

The DOW settled in at the same levels last seen on November 1, 2021 – but that was AFTER touching levels seen back on August 16th – during the trade session.

In other words, the internal adjustments have put us in a spot where we have been “essentially” jogging in place for several months.

And yes – fear ratchets back upward as all of this unfolds – setting the stage for a brighter horizon once the fog clears.  One can only allow the earnings season to now unfold as price action has set the stage for a very, very mundane set of expectations. 

This is a good thing my friend

 

In Summary

The Q4 earnings season is dead ahead.

Quietly, increases are staged into the numbers – even as price action is sloppy.

As tough as it feels near-term, long-term targets suggest we must let this storm pass – just like the others.  There is little doubt that the analyst community will remain significantly behind the 8-ball on the “earnings picture reality.”

I would not be at all surprised to see misses enter the 75-80% range again.

Buckle up, stay patient, remain focused on the long-term pathway ahead.  The ugly start to the year probably has some more work to be done – setting the stage for the next valuable foundation from which we leave this base camp –  and continue the trek up this mountain.

 

Until we see you again, may your journey be grand

and your legacy significant.