Good Morning,

Sell in May and go away got a strong start – but in our view should dissipate fairly soon. As noted for a couple weeks in advance – the rally should have gotten “a rest” as the headwinds of the calendar collected.

Oddly, earnings are not as bad as assumed – but – admittedly, the worse numbers will be Q2 – hinting that mid-July to maybe mid-August will provide the next major setback window in time as we wash that through the system.

There is a wide swathe of outcomes possible – and in the end we will need to adapt to and be patient with them in the near-term. The important – and more (actually most) difficult thing to do will be to recognize that the underlying forces have not changed. The powerful currents driving the US forward in the world, strangely enough, have only been solidified.

Finally, as expected, the nasty “Monday-morning quarterbacking” has begun in earnest. Little forward movement is being covered – but the media nastiness, talking-head “expertise” (read: personal opinion sold as expert knowledge or news) and political divide seems to never take a break.

It behooves us all to read the facts and gain a sense of the true data unfolding. If we do that collectively – I have a sneaky suspicion we may (I said may) begin to feel better – and more confident of just how much we are making headway on many fronts.

Just like our Mom told us when we were kids – It is always darkest before the dawn.

Even as Warren Buffett noted over the weekend – this is tough for sure – BUT – you cannot stop the people of the United States. He called it “The Magic of America.” We agree with him – knowing in advance that only the patient and disciplined will stay on their pathway, focused on the long-haul concepts -even when it looks and feels really ugly temporarily.

Let’s review a couple things:

“QE4ever” is once again being misunderstood as to its purpose and effects. No – it will not cause “runaway inflation” anymore than the previous bouts of QE during the Great Recession.

Indeed, it is highly likely that the same reaction we have seen for years will continue. We don’t have an oversupply of anything. On the contrary, we will not have even tighter supply pipelines before.

Liquidity has skyrocketed – cash in the bank has surged along with fear levels. These are the same footprints in the sand we saw in in 2008-2009. Yes, the monster seems larger – but it did back then as well. Each monster is always bigger than the last. Heck, you cannot even remember the constant hour-on-hour chatter of The Tariff War for all of 2019 – which was only 4 months and a week ago.

A few dispersed thoughts in no defined order:

I know that some of this is repetitive – but in the near-term we are sort of like in that “Groundhog Day” scenario. Sadly, it is this very scenario one wants when defining a window of time where long-term investors can pick through the rubble and then, patiently, hold on for the long-haul.

You will hear a lot of “well, the future is just not clear right now…” That is correct – the future only “feels” more clear based on our internal confidence. Rest assured, I can tell you exactly when the “future will seem more clear” to the mass audience: a DOW anywhere above, say, 38,000 to 40,000 and up.

“Risk is high.” Yes, risk is high – it is always high. It just feels different after price dislocations have taken place.

“Many business won’t ever come back.” You bet – that is right – but many new businesses will start and birth entirely new growth curves. For small business – this pandemic has provided for what public companies call the “kitchen-sink-quarter.” Anything you didn’t like about your past business will have an excuse for change in this window of time ahead.

I could most easily been proven wrong but when we do get a vaccine – much of what we think will never change – will indeed – change again.

The net net of the near-term:

These next few weeks should present continued weak spots – and we will, for sure, see portfolio changes being made. This “throw everything out with the bathwater” process has brought to bear many new opportunities for the long haul in value.

It has also highlighted – to a very high degree – that Tech will most assuredly lead the way here – and into the future. Every single company will need Tech. Every part of our life will be influenced by tech tools being birthed in the midst of this dislocation.

In the end, as this dust continues to settle, the pathway ahead gains its own clarity through several layers of one’s own personal viewpoint(s):

If your goals are tomorrow, next week, or next month – one is correct – risk is high – and the view is more than just foggy. But here is the deal – a proper financial and wealth management plan would have already seen those needs be met – well outside of the market – and therefore not something that should provide one immediate risk or concern.

Time is one’s risk defining factor – not market volatility. Please recognize that.

Yes, things will change – things will adapt – but even change and adaptation carry with them an equal number of positives.

Right now – all you are hearing in the media is the negatives. Please recognize that as well.

No – it is not easy.

No, the road immediately ahead will indeed bring with it the strong temptation to think darkly of the future.

Accept that as part of the pathway we must always follow for long-term investing goals.

Now – A Reminder on Cash in The System

Hidden in the mess is that the shock absorbers are now larger than at any point in the part….so are cash levels in savings. This will only get a mild dent in it – at new record highs.

When looking at this chart – ask yourself this question: If you went to sleep during Christmas time in 2018 (about 16.5 months ago) and woke up today, the market levels would be roughly the same (other than tech). Would you think the end of the world had arrived?

I suspect not…

The chart above shows the 3-mo annualized growth in bank savings and demand deposits. This is another way of demonstrating how strong the demand for money has become (off the charts strong) – given the uncertainties of the virus and the economic shutdowns – and driven by fear of same.

Note that the best time to be a long-term investor is when references to “uncertainty” is most covered and heard often.

The good news – if one is willing to look at it – bank reserves (health) are also at record highs.

I will update the Index charts tonight for tomorrow’s note and you will see the trade range borders beginning to form – even as the red ink feels new.

Last but not least – once again, not the issue at hand – we are likely seeing the crowd misunderstand the “disconnect” between markets and the economy with references to the market being crazy:

We live “now” – the market thinks “next.”

Be assured – like we say at the end of many of our videos – in the New Economy ahead….

Everything is going to change…and that is already underway

Remember – the 2020’s and 2030’s are set to be, structurally, a replay of the 1980’s and 1990’s

Stay Safe and Healthy

Please remember – we are here to help as always.

Try very hard to reduce your stress – as we all work through this together.

Together is how our ancestors built this country.

Together is how we will conquer this enemy and carry us all into the New Age ahead.

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