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Back To Normal?

Terence Reilly profile picture
Terence Reilly


  • One thing that investors look for in this business is positive divergence.
  • If we reach the previous lows the numbers will not be as severe as the massive selloff in March.
  • The positive divergence and consumers headed back out to stores will help investors gain confidence - that and the trillions of dollars the Fed has printed.

I believe that man will not merely endure: he will prevail. He is immortal, not because he alone among creatures has an inexhaustible voice, but because he has a soul, a spirit capable of compassion and sacrifice and endurance.

- William Faulkner

The Governor of Georgia lifted our stay at home order on Friday. As I suspected, most people waited out Friday to see how things went but by Sunday it felt like things were back to normal. If you were wondering if people are going to go right back about their business I think today was an interesting start. Let's see if it shows up in the data.

The question keeps coming as investors ask why is the market up so much? The market is up due to systematic strategies that produce wave after wave of computer generated buy orders seeking to front run other investors. We think that this flow may be exacerbated by the thousands of unemployed who are at home day trading and feeding this drive by computer generated algorithms to push ever higher. Those systematic strategies flipped from short to long early last week. Late in the week they had a reversal of fortune and flipped from long to short putting pressure on the market.

We have said that humans have not been the drivers of this rally - machines have. Take a look at Warren Buffett. Markets are off 30% from their lows and the world's greatest investor has been a net seller! In his webcast this weekend he noted that he has sold ALL of his airline stock and not bought much of anything else. He is sitting on over $150B in cash.

To be fair Uncle Warren has hated airline stocks since he lost millions while investing in US Air years

This article was written by

Terence Reilly profile picture
Former Member of the NYSE, currently a Registered Investment Advisor, concentrating on developing long term investing portfolios for High Net Worth investors and families.

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Comments (5)

jprizzuto profile picture
agreed. the real story about uncle warren was that it was a mistake to buy the airlines in the first place. almost any novice investor knows that airlines are net destroyers of capital and have never made a good long term investment. anyway, cnbc milked every possible drop from that non-story into a strong warning about the direction of the economy. and then book ended that warning with warren's huge cash pile and NO large investment. i will bet anyone $10 that warren is on the prowl and will make a large investment in this down cycle.
h_oliver88 profile picture
A truly useless article with quite a few subjective opinion, which not really backed by any data to give reasoning for your opinion, or assumptions... sadly i wasted my time on reading it😅 Terence you can do better than this...
Wiekierc profile picture
"We think that this flow may be exacerbated by the thousands of unemployed who are at home day trading..."

This statement is either sarcasm or a severe detachment from reality. The unemployed pass their time by day trading?!
Ben Gee profile picture
Very few unemployed have the money to day trade. They spend their time worrying how to buy food and pay rent or mortgage.
Do you have any data or backup for how you believe machines are the ones buying? How do we know the public and top investors were all net sellers?
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