“Reversal on the Horizon” Stock Market (and Sentiment Results)

I’m writing this from Portugal this week – where we’ve had a trip planned for months to visit Lisbon, the Algarve and Sintra. If you’ve been in this game long enough – you’ll realize that the market and your trades will only go in one direction Trend (down) the moment you go on vacation! If you work in this field, you are laughing when you read this. By the time your flight lands on the tarmac, the selling pressure has passed and the markets have recovered, leaving you with nothing to do. Pain when you want to play golf, pleasure when you want to work. He has a sense of humor..

Sometimes it’s good to leave NYC and CT to get some perspective. In short, no one cares about the markets outside of Wall Street! They live their lives under the sunlight (I I think you know that good companies will sooner or later go to the upside.) Well, here’s my comment! But in all seriousness, the time difference is perfect. Hit the 18 holes before the market opens, get to work and then enjoy your family time for the rest of the day. Rinse and repeat.

As I keep my finger on the pulse of the markets, it is clear that things have extended to the downside and a reversal is on the horizon. If you’re trying to pin that today, I’ll be landing in Newark on Sunday!

MoneyShow “Internal Alternatives”

Today I joined MoneyShow’s special virtual segment on alternative asset managers. Thanks to Debbie Osborne for having me on:

Here were my notes before the session. You’ll see that the host took it in a casual direction:

*Please tell our audience a little about your company and investment strategy.

In simple terms, “we buy.” Straw hats In winter!” Durable, high quality, predictable Cash generating assets When they are temporarily weak or unfit. We usually have 8-12 companies make up 80-90% for the portfolio – and when appropriate, overlaying long-term derivatives to juicy returns without incurring material leverage. we take We may sell short positions from time to time when the risks are asymmetric in our favor We only express long premiums when we can limit the risk (for example, 1% of spending has an EV of 3-5x). As much as everyone wants to short sell now, I don’t think an environment where the M2 money supply is $3 trillion above the long-term trend is the right environment to do so!

* The low interest rate environment of the past 15 years has favored long-term assets such as bonds and growth stocks while challenging many value strategies. Eighteen months ago, everything changed, and dramatically. How has the emergence of inflation and the new central bank system affected your investments?

The simple answer is what you need to do now both of them. Last fall, when Tech/Semis was hated and out of favor, we bought large positions in AMZN, GOOGL, and INTC. Now that many value names are out of favor, we load names like GNRC, SWK, DIS, BAC, BABA, etc. We try to spend Less time on overall work and more time generating cash/performing the business. You will not buy an apartment building or farm (or any other cash-producing asset) based on this week Sell/call ratio And Fix level Is (an appropriate example)? We think about business the same way and buy when Mr. Market is in his manic mood.

• Ali and Tom, you’re both in Europe. Are expectations different there?

Europeans are generally more pessimistic. If you want to get depressed, read any market strategist from SocGen, BNP or CS (oops)!

• Do you expect an American recession?

I already got it in 2022.

*Please explain how you see specific market opportunities over the next 1-3 years. Where are the biggest opportunities and the most worrying red flags?

The biggest surprise between now and the end of the year is that… Defeat in bonds is It’s almost over. Hedge funds are Short, crowdedLong commercials. Demand for pensions They will come to secure a >4.5% return on their long-term liabilities. We would also not be surprised to see central bank intervention as we are at the ‘urgent stuff’ level for yields. The Bank of Japan intervened at last October’s lows to defend the yen, markets rose and the dollar collapsed. We wouldn’t be surprised to see a repeat of this procedure now. This has big implications: 1) Bond supply and yield compression will help banks, utilities, and REITs (all of which are just as hated as technology was last fall). 2) Emerging markets will skyrocket the moment this short-term dollar counter-rally stops.

The framework we use for the next three years is similar to the period 2001-2007 – the huge rise in emerging markets, value markets, and small caps. Quieter returns in technology (but they will be good).

* Short selling stocks is one of the most difficult tasks in investing, but it can be very profitable. How would you describe your short selling philosophy? Are there any specific traits or characteristics you are looking for or looking for?

Well above the historical average multiple with slowing growth and a downside catalyst.

*Some sectors ranging from banks to biotech companies tend to move together fairly closely. Do you typically prefer to buy individual companies or entire sectors in the long or short term?

Biotechnology (ticket/lottery basket sector – “deals and drugs as catalysts”), other companies company by company.

*Looking ahead to the next three to five years, what will be the biggest surprise for mainstream investors?

• the The market will rise much more than people expect Because of the housing/family composition of millennials (a pig in Python’s concept).
• China would see one final move upward (like Japan) in the late 1980s before collapsing from demographic disaster.

Overloaded with facts

From @SethGolden on Twitter: “All we hear is the savings rate going down, excess savings, and consumer pressure more than ever as student loan payments start up again in October… However, from Q2 to Q3, NAV increased Households ~$6 trillion while liabilities rose in value only ~$500 billion rose…as stock and bond market prices declined.”

Now let’s move on to the short-term outlook for the general market:

In this week’s AAII poll result, the bullish percentage rose to 30.1% from 27.8% the previous week. The downside ratio increased to 41.6% from 40.9%. Retail investors are afraid.

CNN’s “Fear and Greed” dropped from 25 last week to 19 this week. Investors are afraid.

Finally, the NAAIM (National Association of Active Investment Managers) index fell to 43.01% this week from 54.33% last week. When the tide turns, the “year-end hunt” will be in full force.

Opinion, not advice.