October 16, 2020

Decisions Matter

 The person who claims to be indecisive is by definition decisive


When markets collapse or grow with irrational exuberance the narrative rarely falls on the importance of making a decision on both occasions. However, the narrative often ignores the scope of emotion that accompanies both circumstances if not outright distract from the question at hand. The unintended consequence of this condition is to lose perspective trying to understand the day to day descriptive. At its worst it also challenges your faith in what you thought you always understood. This is where, in my opinion, decisions matter. Why not be excited when markets go down and opportunities abound? Likewise, why not become skeptical when markets rise irrationally, and opportunities disappear? Every decision carries the risk of being wrong, allowing for the probability of an unexpected outcome of an investment whose validity can often come into question is where sometimes the best decision to make is no decision at all.


The broad indexes all finished the week in positive territory, supporting last week’s closing technical condition suggesting the market, as represented by the S&P 500, was overbought. Subsequently, it’s still overbought, and if the markets continue to trade higher the move will stretch some of those technicals just in time for the election. In the meantime, given the surge in GDP in the second quarter, reversing the first quarter drop, the expectations for earnings to be released in the next few weeks appear optimistic. It would be unsurprising that would result in a relatively flat market which should prevail until any earnings surprises pick up the volatility. Should that occur, while I’m currently looking for opportunities to add to exiting holdings, new ideas could always come along.


Since my last commentary, the economic scenario has shown continued lopsided growth. The consumer is strong, but not as strong, job growth is healthy, but there are still 10.018 million people continuing to claim jobless benefits. There is no arguing the condition of the economy is still controlled by the pandemic and the legislation that aims to address it, in some cases, irrespective of the economic outcome. But it’s hard to deny that spending is reasonably healthy as indicated in today’s Retail Sales data that saw a better than expected 1.9% increase. Much of the consumption included categories related to the booming housing sector along with sales at home improvement and furniture stores, both increasing last month as well. On the inflation front the Producer Price Index rose .4%, higher than expected.  Food prices rose 1.2% in September, while energy prices fell 0.3%. The Consumer Price Index (CPI) rose 0.2% in September, matching consensus. In both cases inflation is rising, along with steady growth in consumer demands, however, remains below the Federal Reserve’s goal of 2%, for now.

External Events

Bragging is in and I find it quite curious how many of my industries most notable pundits are sounding more and more like Pindudes, every day. The casual recommendation of stocks that appear more in line with short term jumps are the result of what’s referred to as operational thinking as opposed to strategic thinking. The process is fine for those with an outlook for the present, however I prefer to focus on the ends, as distinct from the means. Namely, I make an investment with the aim to capitalize on future outcomes while buffering short term distractions. In my opinion, investment choices can profit in either outcome is the strategic challenge the investor, not traders, focus on. I bring this up, because these days to simply speculate on a company that is consistent with any economic expansion that follows historical norms is ignoring the impact of  the pandemic and the current political climate will have an impact on how that expansion will unfold, which still remains to be a bumpy ride toward a cloudy horizon. And if a good idea doesn’t come along, cash, is nothing to brag about, but it’s always a good strategy too.

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