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Breaking Radio Silence...

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by: Bill Kort
Bill Kort
Long only, blogger, long-term horizon, macro
Summary

In my experience, focusing on the negative is not a good prescription for a happy life or success in investing.

Hints of a truce and resumption of trade talks began to emerge and we were off to the races closing last Friday at 3007 on the S&P.

It was an easing in the rhetoric and seeming improvement in the willingness to get back to the negotiating table that sparked the rally.

Actually, I'm breaking internet silence. "Radio" just sounds much more dramatic… like risking blowing a top secret mission. What I try to do with kortsessions is to blow someone else's secret missions… to give facts and perspective. That "someone else" is the media, and their covert mission, as it pertains to market news, is to keep you on the edge of your seat in rapt attention to their output. You are a rating point or a click. You are their raison d'être.

They keep that attention by playing to the old mantras, "if it bleeds, it leads" and "bad news sells." For some reason we, as human beings, seem to flock to it. In my experience, focusing on the negative is not a good prescription for a happy life or success in investing.

"Bond markets are flashing one big global recession warning" was the title of my last post, dated over a month ago, August 14, 2019. My reaction to this over-the-top headline from CNBC was, "You gotta be kidding me!" An intra-day low of 2821 on August 5, had marked the low of the trade-war-inspired decline that began in late July. On August 14 the index had made a bit of a comeback closing at 2840. These guys were still screaming what was akin to "fire" in a crowded theater. Of course, that all changed a nine days later with the president taking a more moderate stance on China trade issues. ("President Trump meeting with trade team at the White House amid tweetstorm that rocked markets")

Hints of a truce and resumption of trade talks began to emerge and we were off to the races closing last Friday at 3007 on the S&P, about 1% from the all-time high. Clearly, it was issues surrounding the trade kerfuffle with China and not Fed policy or interest rates that caused the sharp decline. It was an easing in the rhetoric and seeming improvement in the willingness to get back to the negotiating table that sparked the rally.

What should scare us now that trade is on the back burner for a couple of weeks (maybe)?

  • Up until last evening it was the upcoming Fed Open Market Committee meeting and the question: Will or won't the Fed deliver on another 1/4 point Fed Funds' rate cut? Based on the paragraph above I don't see this as a material issue, as rates are already very low and the Fed continues to be accommodative (not only the Fed but central banks around the world remain accommodative). CNBC thinks otherwise: "The stock market is poised to set new highs if the Federal Reserve delivers." They just cannot let go of this misguided train of thought.

  • The drone attack on Saudi Arabian oil infrastructure knocking out 50% of Saudi productions changed that scenario. This is not a new worry but with global oil in an oversupply condition because of the U.S. shale revolution, security issues with Mid-East oil supplies have remained on the back burner. This risk was always out there. It will be great media fodder but not the end of the world.

  • "Trump says US 'locked and loaded' after attack on Saudi oil supply." Fortunately, Mr. Trump added: "… the administration was waiting on Saudi Arabia to determine who they believe was behind the attack.

Parting thought:

We remain in a secular bull market

I leave you today with some quotes from one of my favorite reads, an independent investment advisor/professional investor who goes by the monicker "Fear and Greed Trader." F&G says, "I write to figure out what I think." I have been following his work for the past 5 years and I can attest that what he thinks has been spot on. His weekly piece is a great macro-economic summary that offers fundamental, investor sentiment and technical support of what has been a consistent secular bull market call.

  • "When the long-term trend remains in place, it is best not to try and outguess the stock market. Do so at your own risk. Stay the course."

  • "I like to make decisions based on facts, rather than emotions. The long-term trend is in place. Savvy investors know how to proceed."

  • "Monitor, assess, then reassess. Following that strategy has kept me "long" equities with no hedges in place. Those that have followed along are the only investors in the pilot's seat. Stay the course."

What's your take?

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.