Monday, November 21, 2022

Morning Note: We Find What We're Looking For -- OR -- The Sage Gas Station Attendant

Anybody looking for signs that the worst is over for stocks can indeed find what they're looking for:

1. The latest inflation data says it's peaked.

2. Fedheads say they'll move at a slower hiking pace going forward.

3. Q3 earnings season turned out just fine, and outlooks don't scream end-of-the-world right here.

4. Mid-terms resulted in potentially fiscal-spending-stymieing disinflationary policy going forward.

5. China is clearly efforting to migrate away from its zero-covid policy and stimulate its economy back to life.

I could definitely squeeze more positive juice out of the global setup (Europe's recent equity performance and improved sentiment, for one), but the point I'm making this morning is that if you're an investor looking for evidence to support your bent, you'll always find plenty, I assure you.

Just as, anybody looking for signs that the worst is yet to come for stocks can indeed find what they're looking for as well:

1. The odds of inflation getting to the Fed's 2% target without a painful recession anytime soon are nil.

2. While Fedheads say they'll slow their hiking pace, they promise that they're nowhere near over, and that they'll ultimately take rates higher for longer than markets are presently discounting.

3. Some not-small players are beginning to lay off workers in droves -- what's that say about the present state of affairs?

4. Political gridlock could hamstring fiscal stimulus efforts should we indeed roll into recession in coming months.

5. China's covid numbers are spiking, with this weekend bringing news of the first covid-related deaths in months -- sparking immediate lockdowns in a city near Beijing that was believed to be a test case for the ending of virus restrictions.

And, yes, I could definitely squeeze more negative juice out of the bears' narrative, but you get the point.

As I ponder the world, and investor sentiment, in the above context, the following inspirational story comes to mind:

Family-1 pulls into gas station in the town they're moving to.

Father asks the attendant what sort of folk live in the community?

Attendant asks father what sort of folk lived in the community they came from?

Father says they were absolutely wonderful people... Great neighbors, friendly, always there for you, etc. 

Attendant says, "oh sir, you and your family are in luck, that's precisely the type of folk you'll find here."

Next day, Family-2, also new to town, pulls into the very same gas station.

Father asks that very same attendant what sort of folk live in the community?

Attendant asks father what sort of folk lived in the community they came from?

Father says they were the worst, the nastiest, of folks... Not the least bit neighborly, unfriendly, never offered a helping hand, etc. He said they were so glad to be moving out of that town!

Attendant says, "oh my dear sir, I so regret to inform you that the folks you'll find here are no better than the ones you left behind."

I know... you get the point... Gotta do our darnedest (particularly as investors) to keep an open mind, to see things as they are, not how our fears, our desires, or how our personal history/personality bent might otherwise deem them to be.

Asian equities leaned slightly green overnight, with 9 of the 16 markets we track closing higher.

Europe's mixed so far this morning, with 10 of the 19 bourses we follow trading down as I type.

As are US stocks, to start the session: Dow up 48 points (0.14%), SP500 down 0.30%, SP500 Equal Weight down 0.35%, Nasdaq 100 down 0.56%, Nasdaq Comp down 0.58%, Russell 2000 down 0.57%.

The VIX sits at 23.62, up 2.16%.

Oil futures are down 4.02%, gold's down 0.47%, silver's down 0.76%, copper futures are down 1.40% and the ag complex (DBA) is down 0.08%.

The 10-year treasury is up (yield down) and the dollar is up 0.77%.

Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), 14 -- led by Disney, long-term treasuries, Brazil equities, Dutch Bros and communication stocks -- are in the green so far this morning. The losers are being led lower by energy stocks, Albemarle, base metals futures, MP Materials and uranium miners.

"In situations with unknown probabilities and unknown states of the world, we are simply ignorant. This is the most extreme form of uncertainty."

Levy, Dan. Maxims for Thinking Analytically

Have a great day!

1 comment: