Is it really stupid to be an optimist?

Americans closed yesterday to celebrate the end of slavery. The new holiday was invented by Mr. Biden and his vice president. What did you do during your tenure as president? “I created a holiday, fell off my bike and plunged the country into recession. Not bad. Whatever the recession is, it’s not over yet, although most investment bankers think it’s a miracle if we avoid it. However, yesterday one of the most furious members of the Fed, most motivated to raise rates, nevertheless explained that inflation can be beaten without completely destroying economic growth.

Audio dated June 21, 2022


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Cycle

The economy still has room for growth in the coming quarters, Bullard said. So we can start asking ourselves the question: Is it really that stupid to believe that we will get out of this and that somewhere in the coming weeks we will face the possibility of a lifetime? To face the S&P 500 reaching us, begging us to believe in it before returning to 6000??? It all sounds crazy enough to believe. Moreover, in three weeks we have basically learned to accept slaps and that the concept of “buy a dip” is reduced to something completely insane and unconscious. In the coming days, we will still have to keep our cool and perhaps know how to seize opportunities.

Looking at the investor’s emotional cycle, the well-known chart that charts in order: euphoria, anxiety, denial, fear, despair, panic, discouragement, and depression before returning to hope, relief, and optimism, we realize that today we are somewhere in a zone of panic and despondency. Perhaps not yet in the frustration phase as we still hear too many people claiming to be patient and “suddenly” become “long-term” investors when they entered the stock market six months ago to get rich earlier. . in the summer, buy a Lamborghini Aventador and go to show off on the Cote d’Azur. At this stage, we can still tell ourselves that there is a short way before we completely capitulate and move on to frustration.

Source: In Search of Alpha

Recession assessment

The problem we currently face is how to “value” a recession. The thing is, someone who is 100% sure that the Fed will do its job without screwing up will probably not have the guts to say so. Or not very strong. So, our job as an investor who will get rich (but not this summer) will be to figure out when the market prices will RECESSION. You don’t have to be an engineer at SpaceX or an electric battery maker at Tesla, you just need to read the papers and listen to what finance stars tell us. What financial market oracles think…

So afterwards, I admit you, they are not easy to trust as most of them have a track record closer to number lottery and scratch games than to a guy who actually found the solution to win every time. There are even some who have been fake for 25 years and they are (for now) still working as strategists. But no matter how effective they are, you have to remember that they have charisma and when they come to CNBC to tell us that it’s over this time and that we’ll all get through this, that the market will lose another one. 30% and that we’ll have to resell our Lamborghini Aventadors that we haven’t even received from the dealer yet. Well, we tend to believe them. Right or wrong, the future will show us.

However, when we look at what we are told or predicted, we know that for a recession to be REAL in prices, we need to go somewhere between 3000 and 3400. On the S&P500 – not on the SMI – it will be more of a recession, it will be an economic “burnout” if SMI gets to 3000… these extreme levels and the markets are completely oversold today. What’s in favor of a “kind of bounce” and besides, given the actions of central banks, imagine… in an ideal world… if inflation data in July showed that a rate hike was working??? And showed CPI down from… C’mon. Let’s get crazy: 2% compared to 8.6% last month? Do you represent?

Recessions in gray – Source: MacroTrends

Last big bounce before hallali?

At present, the atmosphere of the end of the world is being given, which can sometimes be felt. Between the war in Ukraine, the fear of seeing a $150 barrel, the famine that awaits us, the arrival of monkeypox, and the return of COVID this summer in the media, we can hardly believe that things are going well. But since we haven’t completely given up yet and we’re still not in the “frustration” stage, we can still tell ourselves that we might still have one last bounce before things get back to normal once and for all. we sink into depression and the urge to make Prozac sandwiches, Xanax milkshakes, and finish with Rum-Gin-Vodka, all in triple doses.

When we take the time to analyze the different stages of a bear market, we realize that there are three of them:

First stage : Some investors, a little more “thoughtful” than others, admit that, despite the surrounding optimism, the situation will not always be rosy.

Second stage : When most investors realize that things are not going well (probably where we are now)

Third stage : When everyone is convinced that it can only get worse. (the one where we’ll be in September)

It is clear that we have not yet reached the bottom in the medium term. And it hurts me to say it. But given the deeply depressing articles that can be found in the media this morning. Given that everyone, including myself, is trying to figure out when it will stop falling. I don’t think it’s silly to say that there could still be some hope for a rebound in the short term. And if there is a rebound, then it is foolish not to use it. Even if it means selling everything before heading to the beach this summer.

But what does he say???

At this point, you must be wondering why I am telling you all this. Well, actually, just like yesterday, the Americans were sedated, and the only thing that came out of it was comments from Biden, who is thinking about skipping oil taxes in order to reduce the costs of his fellow citizens, and also that he still has not understands why the oil majors don’t refine oil anymore, there wasn’t much to talk about. So it seemed more interesting to give myself a little hope by telling myself that tomorrow everything will be better – well, maybe not tomorrow right away, but “tomorrow, one day,” rather than talking about European markets pulling on themselves, but the fact that people looked at each other like clay dogs, only to imagine what will happen in France in the next 5 years, since no one will be able to make decisions anymore …

So it’s Tuesday morning and the week can really start. Asian markets are rising, Nikkei added 1.7%, Hang Seng slightly less. China is marking time, and futures rose by 0.5%. Bitcoin is at $20,000 but it’s not easy to stay there, with oil back to $110 and gold back to $1842.

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We are not drowning in the morning news, but note that Ursula Van der Machin, President of the European Union, insists that Europe must continue to develop alternative energy sources. It comes a day after Germany announced it would increase electricity production from coal-fired power plants because the anti-Putin boycott hurts Europeans more than Putin himself. There are also many articles that claim that after the parliamentary elections in France, the country has become ungovernable. This is a real surprise. Not to mention that the opposition is demanding the resignation of the prime minister.

As for economic indicators, they have nothing to put into their mouths. The balance of trade in Switzerland should not change the face of the world and then in the US we will have the Chicago FED national activity and the sale of existing houses – I again insist on the topic of real estate, but there are more and more of them. more alarms are ringing in every corner, suggesting that the pyramids are collapsing. 30-year mortgage rates keep going up again and again, and it won’t help knowing that the Fed will put on its coat in a month.

Currently, futures are pointing to a rebound – as long as it lasts, even if “condemnation” isn’t the first word that comes to mind. Well, I guess I stirred up the air enough this morning to keep quiet, so all I have to do is wish you all a good day and see you tomorrow in great shape. As usual.

May the force be with you! Till tomorrow !

Thomas Veye
invest.ch

“You miss 100% of the time when you don’t shoot.”

— Wayne Gretzky