“Fear incites human action far more urgently than does the impressive weight of historical evidence.”

-Jeremy Siegel


Good Morning,

Well, this week we have witnessed yet another lesson about speed and fear.  The manic-depressive process of the last many years continues.  A myriad of deep-seeded doubts remain – smoldering just under the surface.  As summer came to a close, we suggested “If you think anyone is too bullish, just give me a couple weeks of red ink and we will see the bulls disappear…”

Monday started the week and capped those “two weeks of red ink” – seeing the Fear and Greed index drop to 19 was a very positive sign.  Remember the tough part of this long-term pathway is that speed will pick up across the board.  Small air pockets will exist everywhere.  Sector “unrest” will be present almost all the time as the economy completely reshapes itself – from processes to output to supply chains.  Nothing will be the same,

Politics won’t change that, the Fed won’t change that, Covid won’t change that and China won’t change that – period.

The Requirements?

We learned yet another good lesson this week.  The reason a vast part of the audience receives roughly 30% of that the market actually delivers is because the emotional triggers of days earlier in the week cause them to miss the days later in the week.  We must always remember history is pretty solid on this one point:  The very best days of the market’s history fall within 3-8 trading sessions of the ugliest days of market history around 92% of the time.

Therein lies the fork in the road.  Without those positive days, one’s overall results over time – tend to plummet.  The “I will get out until things appear more clear…” is a fantasy that plays a trick on your mind.  Why?

Well, it seems smart and logical and it makes one “feel” comfortable and intelligent.

However, even lower prices will never make you feel “better” or lead one to think things are “more clear.”  Instead, that elusive “feeling” only comes from higher prices.  It only looks “more clear” once things have “recovered…”  The bottom line – selling low and buying even a little higher – will never get made up unless we adjust the fear mechanism.

I love this saying:

“Never bet on the end of the world because it only happens once.”

Think about that – and then get this thought in your gut – and I mean deep into your mind:  Think of all the things we have made it through.  Go back as long as you like.

The List is Long

I often note that when I started in 1982, the DOW was just under 950.  It has spend the better part of the previous 5 years – doubling – from the 1975 lows triggered by the recession then as OPEC created their oil embargo.  Gas prices here in the US set records – at 77 cents a gallon.  By 1982 when I started, headlines were clear:

“The US Economy Cannot Withstand $1.00 a Gallon Gasoline.”

What else did we make it through?

An endless number of angst-ridden political embarrassments, wrong-doings, failures and lies

A veritable laundry list of the worst natural disasters you could imagine

Several recessions since 1982

The Crash of October 1987

The recession of the early 90s, costing hundreds of billions in bad debt and over 1500 bank and thrift closures

The mid-90’s slowdowns

An endless array of tax law changes

Dozens of scares about inflation and deflation

Oil crashes

Real estate crashes

The Tech Bubble of 2000

The 9/11 Atacks

A 20-year war

The 2008-2009 Great Recession

Brexit, Parts 1, 2, 3, 4, 5, 6, 7, 7(a), 7(b) and 7(c)


The China Slowdown

The China Takeover

North Korea unrest

The China Tariff War

Ugly elections

More of the China Tariff War

The Global Pandemic Release & Shutdown

The wide-ranging list of variants from Covid

…the key?

The list never ends.  There are more disasters waiting in the wings as soon as any current Armageddon trigger is vanquished.

The Other Point Mike?

There is a point where one must arrive at this reality:  IF we made it through all of that – then what on Earth makes one so scared of the next monster?

History is our teacher on the ugly side of this path we must accept over time:  Yes, it gets ugly sometimes.  Over the last 40 years, we have spent 6% of the time in a recessionary window.  Six percent of the time.  That means we were not in a recession 94% of the time.

Odds are extremely high that the next 40 years will look very much the same.

America is in the business of overcoming, fixing, learning, shaking off setbacks, coming back stronger each time and then moving forward.

And friends – business if good…even when it feels bad.

So, let’s stay focused, patient and disciplined. 

It has worked for decades.

All the market is expressing right now is doubt about the robust nature of earnings (growth rates).

That’s ok – it is how trade ranges are built, why they serve the purpose they do and it defines how they unfold.

We are living through that now.

As Q3 releases begin, that story will be told in the same way as previous quarters.  Wall Street is set to catch itself behind the 8-ball again – but maybe not as badly as the previous two quarters?  Tough to say.  Let’s confirm the latest data:

Q3 Data About Set

The good news is the “warnings season” has been very quiet.  There could be a couple lurking out there but not likely many.

We know that the earnings picture remains strong, even though the growth pace is expected to decelerate significantly in Q3 and beyond as compared to Q2s 96% growth pace.  Recall, pre-pandemic shutdown wrench in the system, it was perfectly normal to see estimates fall into the last week or two before a season begins.  They would fall 4-5% and then see beat and raise processes unfold for the next 8 weeks.  We called it the earnings season “hook.”

Total Q3 earnings for the S&P 500 index are expected to be up +26.0% from the same period last year on +13.7% higher revenues. This would follow the +94.9% earnings growth on +25.2% higher revenues in Q2.

Of course, the pace of growth increases will decelerate.  After all, we are at never before seen records on all categories.  Keep in mind though, other positive features of the earnings picture from the first half, namely broad-based revenue momentum and a favorable revision trend, are expected to remain in place.

Rising cost pressures amid supply-chain disruptions and labor/material shortages will be the key disruptors so don’t be surprised if we hear a lot of chatter about margins.  They are on an upswing – the experts and media process will try to take your eye off that ball.  Yes – we have inflationary pressures.  The squeeze will take care of itself and set the stage for more long-term surprises to the upside.

Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +42.6% on +13.4% higher revenues in 2021 and increase +9.5% on +6.6% higher revenues in 2022. This would follow the -13.0% earnings decline on -1.7% lower revenues in 2020


Note 2022 and 2023 are showing 10% increases each year as well.  Given how poorly Wall Street has caught up with earnings reality, we can be somewhat comforted by the idea that those numbers are set to be shortfalls as well



Along with the trade range in the market, notice also that the growth rates for Q3 have also gone flat.  Yet another sign of fear and lack of confidence in the analyst world.  For long-term investors – get ready for the normal, earnings season “hook” to return.

In Closing

Have a great weekend.

Relax and stay focused on the higher horizon ahead.

Before you know it, all sorts of scary data will be unloaded upon us.  Right in the middle of Q3 announcements, desperate and wasted chatter about the Holiday Shopping Season can be expected.  That flood will intensify as October ages and the goblins of Halloween escape their coffins.

Buckle up, grab your popcorn and refresh your cold drinks.

Years more excitement lay ahead – indeed, our best years await our arrival.

Do not be swayed by the assured storms.  They will unfold faster than in the past – and that will make them “feel” more intense…but they won’t be.

Instead, they will just be continuing additions to the long list noted above of all the things we have made it through – together – with patience.


Until we see you again, may your journey be grand

and your legacy significant.