Is it really unwise to be an optimist?

Yesterday, Americans were shut down to celebrate the end of slavery. A new holiday created by Mr. Biden and his Vice President. What did you do during your presidency? – I created a holiday, fell off my bike and put the country in recession. Not bad. Whatever the recession, it is not over, although most economists working in investment banks think it would be a miracle if we avoided it. However, yesterday one of the most brutal members of the Fed, the most motivated to raise rates, still explained that inflation can be overcome without completely destroying economic growth.

Audio from June 21, 2022


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Cycle

According to Mr Bullard, the economy still has room for growth in the coming quarters. Therefore, we can begin to ask ourselves the question: is it completely absurd to believe that we are going to get out of this and that, sometime in the coming weeks, we will face the possibility of a lifetime? To face the S & P500 who will contact us, ask us to believe in it before returning to the 6000 ??? It all sounds crazy enough to believe. Especially since in three weeks we have basically learned to slap and that the concept of “buying a pile” is reduced to something completely crazy and unconscious. We will still have to keep a cool head in the coming days and possibly know how to take advantage.

Looking at the emotional cycle of the investor, a well-known graph that displays in order: euphoria, anxiety, denial, fear, despair, panic, frustration and depression – before returning to hope, relief and optimism, we realize that today we are somewhere in the zone panic and discouragement. Perhaps not yet discouraged, because we still hear too many people claiming patience and the fact that “suddenly” they became “long-term” investors, while six months ago they came to the stock market to get rich earlier. in summer, buy a Lamborghini Aventador and go show off on the Cote d’Azur. At this stage, we can still tell ourselves that we are completely capitulating ahead and move on to discouragement.

Source: Seeking Alpha

Recession pricing

The problem we have now is to “assess” the recession. The fact is that someone who is 100% sure that the Fed will do the job without ruining everything, he certainly will not have the courage to say so. Or not very strong. Therefore, our job as an investor who will get rich (but not this summer) will be to find out when the RECESSION will be at market prices. You don’t have to be an engineer at SpaceX or a manufacturer of electric batteries at Tesla to do this, you just have to read the newspapers and listen to what the finance stars tell us. What do the oracles of the financial market think…

So, I assure you, it’s not easy to trust them later, because most of them have a track record that is closer to a lottery or scratch game than a guy who really found a solution to win every time. There are even some, they have been fake for 25 years and they (so far) have a job as a strategist. 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 this time it’s over and that we’ll all get through it, the market will lose another 30% and that we will have to resell our Lamborghini Aventador, which we have not even received from the dealer. Well, we tend to believe them. True or not, but the future will tell us.

However, when we look at what we are told or predicted, we know that in order for the recession to be REALLY in prices, we have to go somewhere between 3,000 and 3,400. The S & P500 – not the SMI – would rather recession, it would be an economic “burnout” if the SMI rose to 3000… these extreme levels, and today the markets are completely oversold. What speaks in favor of a “kind of rebound”, and in addition, given the actions of central banks, imagine … in an ideal world … if in July, inflation showed that raising rates works? ??? And showed the CPI down from … Come on. Let’s go crazy: 2% compared to 8.6% last month? Can you imagine?

Recession Gray – Source: MacroTrends

The last big rebound before halal?

Nowadays, given the atmosphere of the end of the world, which can sometimes be perceived. Between the war in Ukraine, the fear of seeing a $ 150 barrel, the famine that awaits us, the arrival of the monkeypox and the return of COVID announced this summer to the media, we cannot believe that things are going well. But because we have not yet completely given up and we are not yet in the stage of “discouragement”, we can still tell ourselves that we can still make the final leap before everything comes back once and for all. we are immersed in depression and the desire to make sandwiches with prozac, Xanax milkshakes and finish with a cocktail “Rum-Gin-Vodka”, and all this in triple doses.

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

The first stage : Some investors, who are a little more “thoughtful” than others, admit that despite the optimism of the environment, the situation will not always be rosy.

The second stage : When most investors admit that things are going badly (probably where we are now)

The third stage : When everyone is convinced that everything can only get worse. (the one where we will be in September)

Obviously, in the medium term we have not reached the bottom of the cup. And it hurts me to say that. But given the deeply depressing articles that can be found in the media this morning. Given that everyone, including me, is trying to understand when this will end. It does not seem foolish to me that there may still be little hope of a rebound in the short term. And if there is a rebound, it would be unwise not to use it. Even if it means selling everything before you go to the beach this summer.

But what does he say ???

At this point, you’re probably wondering why I’m telling you all this. Well, in fact, it was as if the Americans were behind yesterday, and the only thing that came out was Biden’s comments that he was thinking about skipping oil taxes to reduce the fees of his fellow citizens, and the fact that he still doesn’t understand why “oil” majors “do not process more oil, there was nothing to talk about. So I found it more interesting to give myself some hope, telling myself that tomorrow would be better – well, maybe not tomorrow, but “tomorrow, one day” – than talking about European markets that stretch and the fact that people looked at each other one like clay dogs to imagine what will happen in France over the next 5 years as no one will be able to make a decision anymore …

So, it’s Tuesday morning, and the week can really start. Asian markets rose, Nikkei grew by 1.7%, Hang Seng slightly less. China is stepping on the water, and futures are up 0.5%. Bitcoin costs $ 20,000, but staying there is not easy, oil returns to $ 110 and gold – $ 1,842.

News of the day

We will not dive into the news this morning, but we will note that Ursula Van der Machin, President of the European Union, insists that Europe must continue to develop alternative energy sources. This came the day after Germany announced an increase in electricity production from coal-fired power plants, as the boycott of Putin harms Europeans more than Putin himself. There are also many articles that believe that the country is unmanageable after the French parliamentary elections. This is a real surprise. Not to mention that the opposition is demanding the resignation of the prime minister.

As for economic indicators, they will not take much into their mouths. The trade balance in Switzerland should not change the face of the world, and then in the United States we will have the national activities of the Fed of Chicago and the sale of existing homes – I again insist on real estate, but they are no longer there. more alarms are ringing in every corner, indicating that the pyramids are collapsing. Rates on 30-year mortgages continue to rise again and again and it will not help, knowing that in a month the Fed will wear a coat.

Futures are now pointing in the direction of a rebound – as long as it lasts, even if the word persuasion is not the first word that comes to mind. Well, I think I’ve stirred enough air to say nothing this morning, so all I have to do is wish you a good day, and I’ll see you tomorrow in great shape. As usual.

May the power be with you! See you tomorrow !

Thomas Veylet
invest.ch

“You miss 100% of the shots you don’t make.”

“Wayne Greek.”