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Kirk Spano's Q4 2021 Outlook & Game Plan



  • Inflation is transitory, but the worst might be right in front of us for H1 2022, stagflation.
  • The Fed taper is very likely to cause stock and bond market reactions that are rather severe given heavy retail participation in the markets.
  • The high levels of margin and call option in the market, and now Millennials having learned how to bet on a decline, means a correction could be fast and steep.
  • The good news is that once the downward momentum has ceased, it will be a Great "Re-do" opportunity to buy the best performers with the best business outlooks.
  • I intend to be buy a few ETFs that have performed well the past 5 years when they are on the cheap.
  • This idea was discussed in more depth with members of my private investing community, Margin of Safety Investing. Learn More »

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My quarterly outlook and game plan is a simplified look at what the stock market environment and what I am planning to do about it. As with anything, we have to remain nimble and consider multiple scenarios

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This article was written by

Kirk Spano profile picture

25+ years of beating markets with less risk. Margin of Safety Investing. "The three most important words in investing are margin of safety." - Warren Buffett 

Get my Macro view and analysis of secular trends which led to my being named "The World's Next Great Investing Columnist" at MarketWatch. Join our investing group to get ETF asset allocation, top growth & dividend stocks, as well as, learn a simplified approach to option selling for making more retirement income.

I own and operate Bluemound Asset Management, LLC - a boutique registered investment advisory that manages and consults on 9 figures of wealth. I was lucky to have several mentors who managed billions of dollars, including, one who literally helped write the book on option selling. I have now managed money since the middle 1990s through several major market cycles. 

Over the years, I have worked with individuals, families, small businesses, private equity, real estate development firms, hedge funds, foundations and family offices. My "side hustle" is to raise money for and invest in private real estate developments in the $20m to $100m range.  

Since 2011, I have been widely syndicated and appear as an investing expert in the media. Follow my work, as I try to help you make great returns with less risk.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of QQQ, PBW, BRK.B either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (43)

panzer profile picture
watch the russell 2000, as a key canary in a coal mine. the gov workers will deploy a billion here or there, in various ways and means, to keep up the major averages....buying futures, buying the major etfs........but as you can see, the middle class of the stock markets, the 2000, is evidently harder to keep up, being less concentrated in the Big 7 names. When it breaks its 1 year channel, you will see the markets begin a major step down, and it is getting there, inch by inch, step by step. The gov workers have all their pensions in the stock market, so in an age of trillion dollar leftist special interest group legislation and budgets, it is foolish to think they will not spend some billions here and there, to keep their money up. I know I knokw, they cannot do it forever. But they will try. They give away trillions to their voting groups yearly, so why wouldn't they take 1/500 of that, to keep their pensions all tidy and nice? If they are fixing national elections, which is now an existential fact (leftist love that college word, existential so I thought I would throw it in), fixing or attempting to fix public markets is child's play. In fact, they already have this vast circuit breaking system (and god knows what else) to keep markets up, in times of true price discovery (they call it a panic, lol...it is never a panic when stocks go crazy mania higher, only when they go lower, LOL). And entire system of criminalality, stolen government, and as anybody who has an ounce of sense knows, CIA has been fixing elections as an instrument of national policy for 70 years, examples too countless to list, so you know they authorrized this recent domestic one. But here they have their own pensions at stake, so they are gonna call their financial brethren to keep the markets up, do what can be done, for as long as can be done, and then, watch out below!
Goomba69 profile picture
@panzer still shell shocked from WWII?
panzer profile picture
@Goomba69 wealthy from the stock market...
Goomba69 profile picture
@panzer you must be very grateful to be on the gravy train of the fixed public markets.
Solar, Wind, EV, etc. do NOT have to increase by huge multiple amounts to make a real difference in our energy costs of oil and gas.

This is highly related to the concept of Marginal Utility, and we only need to offset what would otherwise be shortages in oil and gas to make a big difference.

So if the demand for oil and gas is increasing by 1% a year, we need to offset that by an equivalent amount of Wind, Solar, and EV production, (i.e. increase by at least that equivalent to 1%) and if we can increase alternatives by a per cent and a half (1.5%), then we can get ahead of the game and really reduce our dependency on oil and gas.

Remember, it is the "action at the Margin" that counts the most - very similar to the stock market one might say.
enjoyed your article, it will be exciting to find out how the 4th qtr plays out and going into the 1st of 2022.
i have been building position in brk/b since feb 2020 and will have to watch how the oil/gas story plays. have been in epd since 2012 and used to down 8-9 years just collect div. put it into brk/b and some financials.
rtrdengineer profile picture
I like many points you discuss, but I disagree with oil and LNG. There are only so many windmills and solar farms that can be erected. Power outages in many places and rolling blackouts? No one has mentioned the windmill graveyards and solar panel life cycles. It also takes electric power to produce all this equipment and move it. Forcing utilities to shut down when the sun doesn't shine every day and the wind doesn't blow could be catastrophic. There needs to be an equilibrium of energy production, not just a political power grab of votes. No one can stop the political side, but I hope someone is planning for a future where energy is available. Extremes are dangerous as with government control.
Dale Roberts profile picture
It's OK, Fed says the economic growth is likely gone. 2.2% for Q3.


The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is 2.3 percent on October 1, down from 3.2 percent ...

The Fed does not have to worry about tapering or raising rates, the economy by itself can take care of any economic slowdown.

The only wildcard will be inflation of course.

My guess is that they will have to let it run hot it need be. They can't kill the stock market rally.

Help the rich, hurt the working poor will continue IMHO.

Dale Roberts profile picture
@Kirk Spano good post, I always enjoy your perspective. Hopefully retirees and near retirees have locked up some of their stimulus gifts (stock market gains).

I would suggest that traditional oil and gas might be a generational opportunity. And sure at some point those gains could be directed toward green ETFs. Maybe oil and gas has a good run for 5 or several years?

There is no viable green energy transition plan. It's mostly blah, blah, blah, remember. And unfortunately.

Underlying, the basket of companies in that green ETF loses a lot of money?

But sentiment and government support is on that side. Don't fight the free monies and regulation over time, perhaps.

I've been happy to trim some high flyers along the way. I have no problem adding to some U.S. stocks with decent value such as BRK.B (great stock market correction hedge with $140 billion in cash in good hands).

I agree, I'd go back into those names (my tech basket beats the QQQ) if we ever get a real correction again. If there is no correction, those profits fund semi retirement. Those profits work in concert with those ongoing higher prices and homemade dividends (sells for income).

And of course in Canada our stocks pay ridiculous growing dividends. The big banks are set to offer double digit dividend growth for a while when dividend and share buy back hold is lifted.

Happy to hedge inflation with energy and commodities, and our real estate.

Best of luck to all.

sgt.red.blue.red profile picture
There may be a selloff. But, you have to ask yourself, ‘where will these indices be in five years’? If you say higher, you’re correct. So, I’m not going to get all lathered up about some selloff. Retired (evil) white man. lol
Dale Roberts profile picture
@sgt.red.blue.red valuations say no real return for 10 years, for the stock market. Maybe you eke out a point or two, who knows?

The real earnings yield for the S&P 500 is currently negative.

Valuations matter over time.

I'd rather buy earnings. I've been trimming the expensive stuff (call it rebalancing if you like).

We might buy back some in the next real correction.

sgt.red.blue.red profile picture
@Dale Roberts If Warren Buffett sells out all of his equity holdings, I’ll be concerned.
Kirk Spano profile picture
@sgt.red.blue.red I think SPY has very limited upside this decade. 5000-6000 still late in the decade. Too many zombies dying slow deaths. QQQ, SMID caps, some EM and a handful of S&P stocks.
E.D. Hart profile picture
Howdy Kirk---thanks for the article, always entertaining, and informative. I have to respectfully disagree on oil---I see the natural gas price as pointing toward more power switching from gas to oil, as LNG is getting too expensive. I see a 6 month runway for that, perhaps $90 oil, but I digress.

Im gonna go out on a limb and say, based on your comments, that you poo-poh Elliot wave theory? I can't wrap my head around it when the logic of liquidity and QE is staring me in the face.
Kirk Spano profile picture
@E.D. Hart there’s validity to Elliott Wave because we keep panic buying & selling. BUT, it’s no better than RSI and monitoring divergences. AND, anyone who poo-poos fundamentals - which ALWAYS win out in the long run - isn’t doing folks any favors. I do my best to think about companies & industries like a C level exec or business owner. From there I use very basic technical analysis to aid in scaling in and scaling out in a pretty measured way. Fundamental analysis is the house, technical analysis is the door.
@Kirk Spano
RSI is very good, and its full interpretation is an art form.
Elliot Wave is anything that anyone wants to make it, and the varying explanations and interpretations are endless, and I accept it has some validity, but not enough for me, so it is in my third group.

And RSI alone is no where near enough so I support it with 12 other TI's (6 primary, 6 secondary), and another family of special indicators while recognizing where they overlap, and add little, but they all tell me something a little different in a slightly different perspective so they are worth it overall in total.

If you have a service that let's you overlay indicators visually that can be a big help when the right TI's are selected.
For instance, this is especially true (for me) when I overlay selected TI's with Balance of Power (BOP) , which I know that you like also.

Like you, I look at the full spectrum of conditions, and Tech Analysis is just a small part of it, but an important small part.
DWS1644 profile picture
What happened to your call saying oil never going above 60$? IMO you are overestimating OPECs supply capacity. Saudi is probably maxed out at 10.5M-10.8M. Anything above that for a sustained period of time can potentially damage their reseviors.
Dale Roberts profile picture
@DWS1644 Many calls now have oil in the $80 to $100 range at some point in 2022. Supply and demand. The longer term story is greatly reduced CAPEX as oil and natural gas demand grows.

We are not getting the green transition thing right. If we get it really wrong energy crush turns into energy crisis.

Near term all of the cash glow is in traditional energy. The long term green story might take longer to play out than most think.

It's tough to throw money at a money-losing basket that has good growth potential.

I'm in with BATT for now.

Kirk Spano profile picture
@DWS1644 actually, I said oil would go to $80 in 3 articles, but realized it was capped ex-short term events because demand growth is about to be over. I said range bound oil & expect average price around $60.
Kirk Spano profile picture
@Dale Roberts new battery tech is so good, cheap and lacking REO that the next 3-5 years will see utilities transition to solar & wind even faster.
Don’t see interest rates rising before 2025. Too much inflation pressure
That twitter thread was an interesting read. If I didn’t know better I would believe markets exists just so large institutions can charge their management fees at the expense of everyone else’s returns by introducing unnecessary volatility.

Dumb question…Could the “unnamed institution” referenced in the thread also be market makers? If so, wouldn’t they just be shifting money from investors in a fund within one division to another division within same institution? Or am I being too cynical? It’s not like I’ve been given any reason for cynicism over the years.

Kirk Spano profile picture
@Humble_Modesty JPM, GS, MS… ummm, how do I say this right, they’re all a little shifty.
albertciampi profile picture
So should old retired guys like me go to 100% cash? I’m at 21% cash now but have had a gut feeling for awhile that will not be enough. Also I need the other 79% earning income to pay the bills. What to do.
mdfuller_OR profile picture
@albertciampi great question to ask ... only you can answer
i can tell you what i've done (>60 retired, yet to claim social security) ... if you're interested send me a personal message.
Kirk Spano profile picture
@albertciampi I never rec 100% cash because we’re fallible. I think selling options is very smart using weekly RSI charts. Also, there’s always good stocks on discount. T, VIAC, CMCSA. Usually a few in some unfavored group.
A lot in there to digest, interesting thought process. Thx
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