“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”

– Yoda

Good Morning,

Yes, I know – suggesting that markets are on course in the middle of this crappy setback seems bizarre. Sadly, as all corrective waves do – things are getting bizarre. On a financial website I won’t name, yesterday, I read: “Jack, let’s hope we get a pretty poor jobs report. If it is blockbusters, the bond market won’t like that and more selling pressure will hit stocks.”

Yes, I kid you not. The very thing we have been hoping for over these months – a return of the job market health – is possibly upon us and now that is bad? Lunacy. Complete and utter lunacy.

On bonds, it is important to understand where we are in real-life. First, it should not be overlooked that we have been very clear on our view on bonds – don’t own them.

The old saying is true: “At record low rates never a lender be….” We have stated it over and over again. But here is the better picture:

The red dotted outline will highlight the 10-year bond world for the last 5 years. One year ago – almost to the day, we began the collapse of rates as virus fears and lockdowns began. For 6 months prior to that – current rates were the LOWS of the previous 6 months in a range between 1.55% and 2.00%.

Sadly, the experts seem to have forgotten that…and by the way – jobs were better than expected:

So now that the “bad news” is out – do consider this: since the collapse of rates into the pandemic lows of last summer, as fear was hitting its rabid peak as well, the US and the consumers living within it:

  • Have the highest household net worth of all time
  • Have more cash in the bank than ever
  • Are witnessing the highest level of technology benefits ever
  • Are living in the best world of medical service ever
  • Are seeing highest earnings growth ever – soon to be even better
  • Have the highest level of national income ever

And suddenly, the experts tell us even though we got through a pandemic together, that somehow, through all of it, the real culprit coming to get us is a 2.00% 10-year bond rate?

Please – know this – it will pass. Patient investors are witnessing the formation of yet another burst of fear which will – as it is dispersed and acted upon – build a strong foundation for the next leg up this mountain.

Our hunch? Maybe we see this chop into mid-March or so but recall, this is the type of setting you want leading into an earnings season – opposite of what we watched in late December and early January before the Q4 data started rolling in….way better than expected. Pray for a choppy March – sets the stage for a good Spring.

“You must not only learn to live with tension, you must seek it out. You must learn to thrive on stress.”

– J. Paul Getty

As you likely expected – the fear gauge is telling us exactly what you want. The crowd is really starting to hate stocks again.


Speaking of Better than Expected

The beat goes on as we bring the 2020 Q4 data to a close.

For the 492 S&P 500 companies that have reported Q4 results already, total earnings are up +3.0% from the same period last year on +3.0% higher revenues, with 79.3% beating EPS estimates and 75.2% beating revenue estimates. This is a notably better performance from the same group of companies in the first three quarters of the year.

Estimates for the current and coming quarters have steadily gone up, as companies reported better-than-expected Q4 results and guided higher. This helped sustain the positive estimate revisions trend that has been in place since the reporting season began.

The second chart below will show you how rapidly Q1 estimates have increased. Note the blowout increases expected when comping to the Q2 and Q3 for 2021. The expected $200+ targets for 2022 will soon be in the headlines.

Pray for corrections…they are positives, not negatives – even when they are painful in the short-run.

Buckle Up

Chop is here – and we will find ourselves working through that over the next few weeks. The results already unfolding?

New doubts, new fears, new monsters, new platform built for the next leg up as the spring dawns and the US builds into its already underway “new normal.”

So what now? Buckle up. The pace of change is going to be head-spinning – with plenty of gut-wrenching interruptions along the way.

Get comfortable with this process…it will be with us – forever:

Corrections and setbacks serve a role – they build your value for the next run – and we are unlikely to get very many of them in the years ahead.

Even when they hurt in the near-term, they create the gains of the long-term.

Yes, I know some of this is repetitive. Building muscle requires the same actions on a regular basis. Without them – atrophy sets in and it become easy to get caught up by swayed emotions. That becomes an even simpler trip-wire to trigger as prices trudge higher and higher up this very long mountain pathway we are on ahead.

The mind-game is even tougher to get your arms wrapped around when the media is pouring bad news into your life with a double-barrel firehose.

Sadly, this dichotomy is unlikely to end anytime soon and the stats above prove it for you.

We must all remain diligent and prepared to always stand tall against the storms. Standing apart from the crowd permits one to always be ready to do what most will not.

Next Steps!

Stay focused on what many will not see.

Think above the clouds. Try hard to not get lost in the fog. See the horizon which is far beyond – and vastly more beneficial – than the headlines.

Many storms will still arrive on our shores – and then they will pass.

It is our job to help you remain focused on your pathway. We are more excited about that today than ever before.

  • The future is brighter than currently perceived.
  • The Decades of Disruption ahead carry massive opportunity…

For the prepared, patient and focused long-term investor.

Buckle up and pull that harness tight…this ride is just getting started.

You’re missing out!

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