June 17, 2020

Criticism Isn't a Strategy

“The best way to fight a bully is with confidence, it drives them crazy”



Today marked the first day in a while were the market traded tired rather than in a volatile frenzy. Much had to do with the constant back and forth between politicians and Fed Chairman Powell serving more as a political platform and distracting from what Chairman Powell was talking about. And on top of that the financial media seemed fixated on the newly minted Pindudes (as I call them) and their rallying cries of bashing criticism of the investing establishment and self-aggrandizing of their own limited experience. All of it more entertaining than interesting and of little distraction for one reason, been there, done that.



This week the biggest move was on the back of the Fed comments that were accompanied by decent economic data. But as both have to be taken in stride, the Fed is in a confronted space and the economic data that comes out is more a reversal of recent data than a predictive case for the future economy. Overall, the markets traded in more of a thoughtful manner than usual as it appears by most measures that reopening could meet pragmatic expectations, but more information remains to be seen. But as the broad indexes continued their upward trend the S&P500 almost went into the black for the year. This probably had something to do with growing investor confidence, but also as we get closer to the extended tax date, July 15th, it can be expected that new cash placed in IRA’s and other qualified accounts are also contributing. Overall, the market remains technically overbought, but need only to chop around for a few days to work off the pressure and resume it’s more positive tone. And in my opinion, I see little reason why it shouldn’t.



First Fed Chairman Powell commented that the Fed was prepared to maintain the current strategy of low interest rates, the purchasing of bonds and intervening in other ways, should it be necessary. The markets took the news negatively and gave the pessimists some vigor. However, as soon as yesterday’s Retail data for the month of May was released, coming in with an increase of 17.7%, but actually higher as the previous 2 months were adjusted higher as well. Overall, 20% was not expected by economists, but the markets welcomed it. But it didn’t stop there as Industrial production activity increased by 1.7%, the implication is the reopening of the economy will have a broad impact. As recorded above the genuine recovery is months off and more data will be needed, not just to rejoice or displease, but to present a more consistent pattern than what we now have. This week more data on jobs will come out and patience has never been a more precious strategy.


External Events

The markets have been able to avoid the distraction of the external events from reopening concerns, protests, and the reappearance of the concerns regarding the second wave of the virus. And I’ve often suggested that the endless tone of criticism is the strategy for disseminating the news. But now the distraction has hit home, with the Pindudes hitting Twitter to criticize nearly everybody and everything about the investing establishment while suggesting their now well documented leader wallows in his self-proclaimed genius. I find all of it as a curious source of activity, but with no real application to anything that I do, also amazingly easy to ignore. In part, because I’ve  often criticized many of the same establishment during my career, but also because the Pindudes are engaging in frantic long/short trading, a speculative game welcome by the young, as I was once, who are incentivized by the potential to take a small amount of money and grow it quickly. That is until the first time I lost it quickly and that’s where I remind the Pindudes; do you really think you invented trading and technical analysis? If so, the outcome will be as elusive betting on sports or politics. As I always point out, if anybody has ever figured out how to game the stock market, we’d all know who by now.

No comments: