“What we learn from history is that people don’t learn from history.”

~Warren Buffett

 

Good Morning,

Don’t mind me – that noise you hear in the background is me shuffling around for the screwdriver that will unlatch this locked window so I can scoot out onto the ledge.  Given it is 20 degrees out this morning, I won’t have much time to contemplate so I will just panic, do something dumb and then…

Ok, Ok – I am joking.

Happy Black Friday.

Gosh, do I hate writing about how we should pray for one more corrective wave before the next leg up – and then, well, it happens.  Never kick a gift horse in the mouth as they say.

Soon, you will be glad we are getting one more setback.  And the ugliness dead ahead?  Like I said – it’s a gift.

Patience and discipline.

This one brought on by?

Yes – you guessed it:  Covid.  In South Africa.  It’s exactly what I suggested in a client review Zoom on Wednesday afternoon:  “Absolutely assure yourself that the moment the data show the current Covid D variant fears are subsiding, there will be another Covid variant ‘found.'”

I stated it not to say anything negative.  I stated it to make sure those on the call understood something vastly more important:  Be absolutely certain there are more variants.  Power is a terrible thing when concentrated: it is one of the most toxic drugs known to mankind and improperly used, it destroys more than you ever contemplated.

The other element to learn from it?  Do not wait around for good news – as though it will somehow arrive, get any coverage and then “direct the stock market” for you.  It never works that way.

The Good News?

Once you go to war with a monster, the second round of battle is easier.  The third a bit better.  The 10th?  Almost robotic in response.

There is even better news though:  Today’s expected shellacking of prices comes just a day after the latest AAII sentiment survey release.  And man, was that data good news indeed.

…read ’em and reap:

What I suspect is the more important theme for long-term investors to recognize is that a consistent rise in market levels has been unable to drive sentiment higher along with it.  As stated before, this comes from many things which have converged in our society.

The latest reading of 33% says that two-thirds of the audience is NOT bullish even as we sit just below all-time highs, with records set in almost every vital financial category.  (it will be more than 2/3’s after today)

Current levels are also interestingly, a full 20% lower than the reading set as November dawned.

Inflation?

One thing I have learned in 40 years of doing this is that when the noise gets the loudest on a particular topic, the odds are great that the fever is breaking.  In the days following the “hottest inflation read” in 40 years, we are watching bond rates fall 17 basis points over a 48-hour period, from 1.70% to 1.53%.

Now, the 10-year Treasury chart above has a vast amount of data in it, which should provide a positive feeling for you as we peer into the dimly lit future.  Recall of course, that we do agree with Yogi, “Making predictions is tough, especially when it involves the future.”

Anyway, I digress in my post-Turkey comedic effort.

The chart is a 5-year chart.  I am fairly certain – on a pretty consistent basis – that millions of gallons of ink and far too many moments of life have been spent fretting over “rising interest rates” during the entire 5 years.

For the record – they are – right now:

a) Exactly where they were in the summer of 2016

b) Lower than they were at the start of 2020 (purple arrow – pre-Covid)

…in the midst of the “hottest inflation in 40+ years”, again, according to the experts.

Yes, we suspect rates may rise a little as we get through the pipeline squeeze, already coming off boil in key areas.  Don’t fret though, once you get a full helping of the next variant – affectionately known as variant B.1.1.529 – rising rates will be the last of your concerns – as they fall.

One more thing on rates.  How many times have you heard that rising rates, for some odd reason, hurt tech stocks?

I have a word for that.

Lunacy…

They actually perform better on average in rising rate worlds – versus falling rate worlds:

And for those who prefer details, Bespoke provides a nice breakdown for each specific period noted:

…net, net:  there is plenty of “stuff” to fret over if you feel the need. One of the those items is NOT massive tech damage from rising rates.  Tech is indeed the culprit making it very hard to see rates rise at all, when all the dust has settled.

The Bottom Line

We covered it two weeks ago.  A last washout prior to a year-end run and into 2022’s next leg up would be a solid benefit for all.  Here it is – and it remains a benefit for those peering into the haze onto the proper horizon.  We must again stand tall during the storm – just as has been the case during every storm since I started in this industry.

Sure it’s tough sometimes – and yes – always frustrating.

This too shall pass – and when the train leaves the station, as it will, far fewer souls will be on board, making the next stage up the mountain a little lighter – until prices are higher.

Happy Thanksgiving Holiday week to you and yours.

Please enjoy time with family and friends…this mini-panic will set the stage for new opportunity.

Until we see you again, may your journey be grand

and your legacy significant.