Reflection

This is mostly going to be a personal post, but first some market comments. Since my last post, there was only a slight pullback before major news was announced which was that Bessent was able to negotiate a "trade deal" with China. It's really just a temporary de-escalation for 90 days such that Chinese tariffs will be reduced to 30%. This was enough relief to result in the market to pop 3% the following day and we've added to those gains a bit more. On Friday night, Moodys downgraded US debt a notch to Aa1. They are the 3rd agency to do so since 2011. I won't get into this for now except for saying this, which I have said before...These rating agencies all had AAA ratings on subprime MBS just prior to the the GFC and since they were made to look like fools, they became tough guys to try and salvage their reputation.  So far, the market reaction has been ho-hum. In General, the market is even more so in an ST overbought condition, but the sentiment reset I pointed out a few weeks back is still firmly in place. That along with how the market has been relentlessly rising strongly suggests this is a bull market rally, not a bear market rally. however, I do suspect that 3% "Bessent gap" will get filled at some point this year. I wouldn't be chasing the market here.

I recently turned 48 and I've been reflecting on my life and certain things that have been happening recently. I must say that I am blessed. Lucky and blessed....perhaps they mean the same thing. I know I mentioned the following before. There have been multiple times in my life where I was severely off track both from a personal and financial perspective. There were several years in which I felt I was in a huge hole...holes that I put myself into for the most part for one reason or another such as being timid and shy, being too laid back without having any goals or a sense of urgency and lastly overconfidence which led to recklessness. Thanks to some luck and lots of resiliency I managed to get back on track for life.  Through the dark times I never had a "woe is me" attitude, I never embraced negative narratives,  I kept it together, I fought. What else can you do but fight is the attitude I always had when faced with a defeat or setback. I would never mope and feel sorry for myself. I never resorted to alcohol or drugs to cope, nor did I ever consider doing so. Instead,  I would do intense cardio. That was my drug. 

At 48 I have a family, a house that's paid off, a great job with significant prospects for growth and I'm in great health. My greatest achievement is my daughter who is beautiful on the inside and out. She is so precious to me which makes me feel so vulnerable. I would kill or be killed for her.  Now and then I can't help but feel a wave of anxiety. What if something happens that takes away any part of this good situation I find myself in? Part of this is imposter syndrome as a result of all the setbacks I experienced and part of this is due to recent bad things that have happened to clients, friends and family. In the past 2 years, numerous people I know have either unexpectedly died or fell seriously ill. I'm a logical person, a positive person, but I can't help but get a bit rattled by this, thinking what if I or someone in my immediate family are next? I have this one client, a sweet Italian lady who recently lost her adult child to cancer. He was my age. This is now the 3rd child this lady has lost in last 10 years. Yes, 3rd child. What do you say to someone in this situation? It's beyond horrible, beyond devastating. You want to talk about having bad luck? Woe is me? Fuck your bad luck. This is what bad luck really looks like. Me on the other hand, I feel almost guilty for the amount of good luck I've had over the years. 13 years ago my mom almost died of a brain aneurysm. She was only 56. There is a 50% chance of survival and if you survive, only a 34% chance that you won't have some sort of permanent brain damage. Therefore,  you have only a 17% chance of surviving a brain aneurysm without brain damage. My mom beat the odds. Aside from her not be able to recall a few minor memories in her past, she is totally in tact. How lucky was she? How lucky was I and my family? That experience really put things into perspective and made me realize the importance of not worrying about the small stuff, of appreciating the things that are really important to you, knowing that it can be taken away in an instant without warning. Recent events have reinforced this. I don't think I'm as resilient as I once was because things have been going so well and it's made me kind of soft. Also, I feel like I have more to lose now.  In 2022 when markets were rough, I had some sleepless nights. Even though my clients held up relatively well and weren't in a panic, I couldn't help feeling vulnerable. I couldn't help feeling that the career I had been building for the prior 5 years was going to fall apart and crumble through my fingers putting me back to square 1 like so many other times and unlike in the past when I've had major career setbacks, I don't have the time to recover anymore. Being young was something I knew I had in my back pocket when things weren't going well. "I got time to turn it around" was something I would say to myself. I don't have nearly as much time now if I fuck things up or if things go majorly south for some reason. Don't fuck it up. I something I tell myself repeatedly.  Obviously, I can't control the markets and must accept that bad shit, i.e. big drawdowns, are going to happen. I just have to ensure the smoothest ride for my clients given the risk they are willing to take, making tactical moves when warranted and be proactive by calling clients during bad markets to hold their hand through it. I did do this in 2020, 2022 and just recently. Lucky for me (yet again) my clients are easy to manage as for the most part they are financially secure, always take my advice and don't have a propensity to want to panic during bad markets.  I'm the one who is supposed to have the cool head during bad markets but it's hard not to get rattled to at least some small degree. Having my emotions "hostage" to the markets to some degree is the worst part of my job. This is a big reason why I do this blog as it serves as an emotional release as well as a way to express the logical part of my brain. Overall, I love my job which I know must be quite enviable. I'm making good money with lots of growth prospects, I get to work wherever I want, whenever I want and with whomever I want. In January I fired a client for the fist time as he is a moody prick who always finds something to complain about.  He was a large client too. I didn't give a fuck, because one thing I don't tolerate is having a relationship with a toxic or negative person.  I think this guy actually has bipolar disorder....not my problem anymore.  

Now I'm going to discuss some things that I'm wrestling with. Although I'm 48 I certainty do not look or feel it. Most people who meet for the first time think I'm in my early 30s and that's how I think and feel too. I keep myself in good shape. I can still keep up with guys far younger than me when I play soccer. I have cheated father time to some degree but the problem I'm going to have to face is that at some point father time will catch up to me.  Will I be able to make the transition from a young man to old man? It's really hard for me to accept that. There is this guy by the name of Bryan Johnson, also 48 this year,  who made millions as a tech entrepreneur. In recent years he has dedicated his life to taking extreme measures to ensure he lives as long as possible because he feels that within his lifetime, it's likely we will have the ability to become immortal as we find a breakthrough to slow down or stop the aging of cells and/or merge with machines. And so according to Bryan, it's absolutely critical to do whatever you can to don't die so that you make it this point of "longevity escape velocity" as he calls it.  Even before I knew of Bryan Johnson I often pondered the possibility that given the rapid pace of technological advancements, we may find a way to live forever. Can you imagine if that were to happen? I'm not holding my breath for that but I don't think this is a pipedream.  

For anyone reading this. if things haven't gone your way, my message to you is to continue to fight no matter what.  This doesn't apply to achieving things that are ridiculously unrealistic but for everything else, you have to keep fighting until the bitter end, no matter how many times you've failed. No matter what. Don't be negative even when things appear grim. Being negative does you no fucking good. Not one fucking thing. It will only harm you, holding you back while making you a miserable fuck. I've mentioned about how luck was a big part of my success, but I will say this....I would not have been in a position to get some of the luck I experienced if I was a negative, miserable fuck when I was down and out. If you're in a shitty spot, do whatever you can that's in your control to make your situation better, even with the smallest little things.  Fight right until the bitter end and if it still didn't work out at least you know you give it your all and not have to look back thinking I could have done this,  I should have done that. That would be an agonizing existence. I already feel some of that agony when I look back at things I should of done or said. It still hurts. But I try not to dwell on the past for too long. You can't go back you can only go forward. Just don't realize this when it's far too late. 

Strong rebound....so far so good but ST overbought now

My previous post pretty much pinpointed the exact point when the market staged a massive rebound. Basically, Trump is showing his willingness to water down his tariff threats. For example, he provided  carve outs for semi-conductors and electronics and he exempted auto tariffs for Canada and Mexico so long as they comply with the USMCA. He was privately approached by the CEOs of Walmart and Target who warned him of empty shelves and rising prices in the months ahead if he follows through with this threats. No doubt other big CEOs have gotten into this ear. Therefore, there's probably some hope or expectation that any tariffs imposed will be more gently administered to allow for companies to adjust. 

The market has now recovered all the losses post liberation day which is quite impressive. In my previous post I said to look at market action to determine whether a rally appears to be bear market rally or the start of a new bull phase. So far, it appears to the latter due to the relentless nature of it. Meanwhile positioning/sentiment is overall still firmly skeptical. AAII sentiment in particular has exhibited a persistent amount of high bearishness that is only comparable to the depths of bear market lows. Many correctly point out to see what these folks are actually doing with the money vs what they are feeling. They have indeed been pulling back their equity exposure, which is currently at 64%. This is not the same degree as the GFC but it comparable to the 2022 bear market.  Near the market peak, at end of December, equity exposure was 70%, likewise,  it was 70.5% end of December 2021 which was also the market peak. By end of October 2022 exposure declined to 61%. The currently allocation of 64% is obviously close to 61% but not there yet, but it could get there even if the market continues to rise or just holds as these folks may be inclined to sell into strength. Given the persistent high level of bearish sentiment, it would appear that selling into strength would be a strong possibility.

I have a friend who approves online trades for TD customers. He told me that during the liberation day meltdown he said the rush into money market funds was the most he had ever seen. Barrons conducted a survey of  money managers at end of March/early April which showed bearishness at at 30 year high... this was prior to the liberation day meltdown!  

BofA bull market indicator has had a notable reset

This indicator has been whacky as of late, not being in sync with other indicators. Keep in mind this is a global sentiment, not the US although these markets are usually highly correlated. Note the very low positioning of hedge funds. Hedge funds in particular, have been big sellers during this latest rout. 

The latest surge in the market has rendered it ST overbought, but that what you typically see when you get a bullish thrust from a correction or bear market bottom. A rare Zweig Breadth Thrust was triggered recently, which has strong bullish implications for the next 6 and 12 months. In fact, it has a perfect record for these times frames. 

I've seen some people on twitter debating whether this signal was actually triggered, but I saw a similar study from sentimentrader which gave the same message and so I am going to conclude the signal is valid. Of course, there's not guarantee that any signal is going to work this time and it does not preclude the possibility of significant weakness in the short term. 

I can certainly understand how one can be quite skeptical of any bullish signals.  After all, it appears almost certain that there's going to be significant economic weakness for the next  quarter or 2 given the collapse in container shipments and reigning in of capital spending as a result of the tariff turmoil. But this is widely known information isn't it? So, is the market in denial or could it be already looking across the valley to a more sanguine environment? Here's how the latter could transpire: Trump makes  "deals" or at least provides a framework which suggests tariffs aren't as bad a initially feared. Another possibility is that imposed tariffs either get bypassed or uncollected to a significant degree. The proper collection of tariffs is something that is not getting any attention. How are understaffed customs agents going to properly enforce the enormous amount of tariffed goods, many of which could have complicated tariff rates/rules applied to them?  Ultimately, the bullish resolution could be that somehow, some way the tariff threats turn out less than feared. It obviously takes a leap of faith to believe in such a narrative and the path to this narrative could very well have twists and turns, but here's the thing....if you wait for things to turn rosey again before deciding to buy you will probably end up doing so at all time highs. I said the same thing a few times from late 2022 to early 2023. You have to pay up for certainty. Back then the fear was that rate hikes were surely going to cause a recession. Now, the narrative is that tariffs are surely going to cause a recession. Then, just like now, it was difficult to go against this negative view. 

As always, I will defer to the indicators and market action and right now despite a ST overbought condition which is likely to result in some market weakness, it suggests to expect an optimistic resolution to all this turmoil somehow, someway at some point. It certainty doesn't feel that way (I certainty have strong doubts) but it rarely feels that way when there's a crisis of some sort. It requires a leap of faith.  I see lots of calls for a re-rest of the lows. While I expect there to be some ST weakness, I don't think we'll see a retest if the bull case ends up playing out....we'll just have to wait and see what happens.