“Compound interest is the eighth wonder of the world. He who understands it, earns it.

He who doesn’t, pays it.”

— Albert Einstein

Good Morning,

I mean he wasn’t the sharpest nail in the drawer but heck, he had some good quotes : )

Seriously, hope you had a great weekend as the summer haze is just about officially burned off.

Back to the grind as they say – and wow is this mountain ahead a big one.  May indeed be one for the record books as it unfolds.  The media was all over the “come back from summer” opening week, with markets down all 5 days and an ugly flurry into the finish late Friday afternoon.

The headlines were almost comical at times:

“Market Dives for 5 Days Straight”

“Selling Defies Effort to Reverse Market Tailspin”

“Covid and Peak Earnings Fears Chop Market Down”

“DOW Plummets on the Close”

(note to self: we are about 2% off of all-time highs)

Lesson?  Don’t read this type of garbage anymore than you absolutely must.

September Blahs

Don’t fret, September is known for potholes.  Choppiness and air pockets are the thing.  Staying focused on the long horizon ahead is the bigger thing.  The Friday late afternoon scurry out of the markets is a prime example of what we can expect throughout the month.  And by the way, it is doing its magic – just what the doctor ordered.

…read ’em and reap


Recall the former notes.  We have consistently stated that the moment we see any red ink, sentiment wilts like a rose petal in the blazing heat.  A reading of 34 suggests that roughly 2/3’s of the sentiment in the audience is not bullish.  You get another week like last week, expect to see it in the 20’s if not lower.

The great news is that this is damn near a perfect sentiment set-up to be in as we head into the Q4 market activity and the Q3 earnings season.  It is almost always better to see market’s choppy and weak going into an earnings parade.  Why?   It sets the stage for the “oh, that’s not as bad as we feared” trade and upside surprises.

Pauses Are Great

Many may not realize that the broad stock market is pretty much in the same place as where we started the summer back on Memorial Day weekend.

The chart below shows we are falling within one percent of where we started the summer – in the broad market.  For the most part, gains during the summer were basically the tech world catching up from its slower start earlier in the year


Just focus on this:  patience permits the gains to come to you.  Long ranges of going nowhere break to the upside in most of history.

Shouting From The Rooftops

The next thing we were told to fear was the approaching (and assured) runaway inflation.  That has been the siren’s song for months now, even as 10-year bond rates hover below 1.3%


The bond market is not full of warm and fuzzy traders trying to keep rates low via some magical force.  They are hard-nosed investors and we can all rest assured on one thing:  if they saw structural inflationary pressures taking hold, the 10-year rate would NOT be 1.29%!

Recall we had suggested that coming out of the massive shutdown a squeeze was likely.  We also highlighted on a number of occasions that the fears were overblown as companies continue to be completely reshaped by technology and margins adapt much more quickly to cost pressure adjustments.

Today’s feared inflation report was another “gosh, that’s not as bad as we thought…” event.  The August consumer price index, came in less than feared.  August total CPI jumped 0.3% month-to-month, or 5.3% from a year earlier, below the 0.4% increase and 6.4% annual gain expected by economists.

Showing even more focused reduction of remaining pressures in the pipeline, the less volatile core reading (excluding food and energy costs) showed just a slight gain, up 0.1% and well below the 0.3% consensus increase expected.

The point is pretty basic.  Political decisions have driven up crude oil benefits for the producers of the world – on the backs of the US consumer.  That is not Covid related.  The food cost pressures are – especially in the meat and grain areas of our food chain.  We have plenty of both – but we must recall this comes from many, many plant shutdowns during the worst of the actions during Covid.

As difficult as that seems, we stand by that expectation that it will take 2-3 quarters to siphon off the pressures in most remaining areas.  The chip world will continue to be overwhelmed with demands from all sectors of the economy.

By the way – that’s a good thing.

One More Thing To Consider

Just a hunch here but while September – and sometimes October – are often the home for the annual “correction” so many fear and try to get around, the fact that we are witnessing light volumes and only intermittent selling capacity is a good sign.

Chop is sometimes more effective at burning away bullish sentiment that sharp days down.

Stay patient and disciplined.  The pathway is unfolding pretty much on track for the benefit of the long-term investor.  After all, no one on the planet in the investor audience thought we would ever be dealing with our “second pandemic variant” and be only 1-2% from all-time highs.

Buckle up as we burn in a new foundation for the end of year run to the finish line.

After all, in another 6-8 weeks, The Holiday Season prep will be in full force and 2021 data will be history.  All we will be fretting over then will be 2022.



Until we see you again, may your journey be grand

and your legacy significant.