It has been about five months since my last update.
That’s nearly half a year.
At the time I had to step away from writing for a very important reason.
My father has been ill.
In fact, he has been ill for years but did not realize why. Now we know.
Over the last few years, every summer, dad would weaken and we thought it was a part of his general health problems, a slower and sedentary life - one that was too solitary (my fault in many ways for not helping him enough).
We thought it was a case of extreme imbalances in sodium levels. We treated it in the past and he recovered. This time he did not. In fact, dad worsened not long after I stopped writing here last year and he nearly died (we didn’t know that at the time but now I can say looking back how close we came to losing him).
After his 12 hours in the ER, he was admitted to a room and we later discovered that dad has a “mass” growing near his brain over the last few decades. It inhibited his pituitary gland which knocked his hormonal health right off its axis, his legs out from underneath him and is slowly erasing his mind and body in ways we didn’t expect.
Dad is home after an absence of four plus months. He can neither walk, nor care for himself as used to just six months ago. He’s stronger and can sit up in a wheelchair but he can’t stand at all so he can’t walk. Plans for radiation therapy that already have been shelved once due to a focus on rehab have to be scheduled … eventually.
This all unfolded while the world outside was also being turned upside-down by a virus colliding with a global culture initially unprepared to do more than incubate it, spread it around and now belatedly halt it.
We only just brought dad home out of a physical rehab facility last week. He came home a day after the rehab facility was locked down to visitors. I remain thankful to the certified nursing assistants (“CNAs”) who were there for him more than anyone else - they make medical facilities work and help keep patients alive, clean and safe.
The world turns because much of the world’s work is done by wonderful unsung heroes behind the curtains in every society, economy, industry, and walk of life.
You are here for investment and trading ideas. I will now write about that.
The markets have been put on reset. We are in the middle of the big reset yet again. I had one (still profitable for now) tech position bought at the end of Q4 2018 into Q1 2019. And cash.
I want to direct your attention to Mebane Faber’s share of Leuthold Group’s top down market metrics. That is our starting point from an investment point of view. The best values are in the small cap space (Leuthold references the S&P 500 Small Cap index). This does not mean that their prices have stopped falling and will move up now but I do like the idea of what can happen “after” - the future. We are in for hard times today and our job is to survive and make it through to the other end. Raise cash and save too.
Small Business is in trouble. Cash shortage is the crisis we must survive. (The same goes in the macro sense via a USD shortage - the dollar may get at least one more hard knock down but it likely picks itself up and smashes against Mr. Market’s front gates.)
(S&P 600 Small Cap Price/Cash Flow from Leuthold’s chart, shared by Mebane Faber. Meanwhile at the same time, on “Main Street”, cash itself is growing scarcer.)
The market has been in liquidation mode. Confidence has been (for now) shattered. Every projection has to be thrown out and revised. Every backward metric is looking back on conditions now gone. This does not mean that good times are over forever.
The present is awful but the future is beautiful. That is the one thought I hold.
The future of the 2020s could be one filled with new leadership as the incumbents, hold-overs and disruptors are themselves disrupted and displaced. Builders got to build. Let’s consider some bright thoughts - I need to at least.
Consider the great heights of Q1 2000, then a great decline, and then a great revival, and now another great fall… I don’t know how 2020 plays out. Markets come and go but (hopefully) we remain. I don’t know in what form these latest bailouts will come or what the results will be but I urge patience and to do your best to prepare to rebuild.
I have begun building again in other ways too. After a year of avoiding the giants of the most vanilla index of the Dow Jones - I will begin here too although they are not as cheap as the small caps, their balance sheets and likely better access to credit and capital is key. I will not bet the farm or so much as a chicken coop but I will begin a slow accumulation as my family figures things out and tries our best to help dad.
A decade ago, multiple talking heads - of up to 8 or more - would fill a CNBC financial crisis news segment. Now there are screens filled with multiple human beings - into the dozens and more - cheering each other up on Zoom and other group chats - and we can see them on twitter or join in. We all need the comfort of the crowd and be a part of a herd - it’s natural and not a bad thing to want company. In fact, this trend may grow: social group visual chat for work and community.
Microsoft is not what it was in 2000 (i.e. Bill Gates’ exit, Github and Groups)
People will still need to eat and comfort themselves. Domino’s and Uber(Eats).
What will become of Uber, which came of age in the 2010s, in the 2020s? Deliveries?
I mentioned USD earlier. The USDEUR pair may surprise if there’s a USD shortage.
You may wonder “but what of the massive bailouts”? Gold and crypto? Perhaps but every investment has to be done with an eye to being "long” the optionality of multiple ideas to increase the chances of having at least one survivor in that portfolio which takes your savings by the hand leads it forward to being able to pay future bills.
In trend trading terms the market’s multi-year long trend has ended. Liquidation follows - overexposed and over-leveraged positions must be flattened. Demand has been pushed forward into the far future, with part of that demand erased by closures, layoffs, and closings. The big money in long volatility and early shorts that succeeded are now closed. Cash and long time frames have become very valuable.
Now is the time to have cash for life and cash for future living (savings and investments). As a trend trader who sees that it’s dangerous to short at this time, that there are some longs already obvious out there (e.g. Walmart), I also recognize that another lumpy return strategy of value investing will prove more helpful. Start your shopping lists. I will think about a barbell of giant survivors and tiny plays on the future.
This was not a well written post but I will keep doing my best.
Good luck, and I wish that you and yours remain safe, healthy and happy. If you can, rest, remain calm, get some sunlight, eat well and be good to everyone.
A Hard Reset
I can relate more than you realize with your challenges caring for a parent. I too shuttered a blog to do the same and have decided instead to direct my attention to other writers, quality writers, for insight and inspiration. Life has a way of teaching us what's truly important when we least expect it. Today's world is a prime example. We can still pursue our passion of peeling back the layers of a market ever evolving, while putting true priorities front and center. As you have chosen to do. I look forward to reading your entries going forward and above all...tip of the hat for taking the time to care for your loved one.