4/09/2020 Be sure to be a Buyer, not a Seller

Dear Participants,

If we are in a bear market, which we think we are, we should be nearing the end of this bear market rally.  This would be a time to incrementally raise cash and consider adding inverse stock positions.  If we go higher, consider doing so a bit more.  Remember the need to liquidate those positions when we see indiscriminate selling or if our thesis proves wrong and new highs are achieved.    

We reiterate our view that a long-term view should not be wholly abandoned as our views are just that, views.  We cannot predict the future.  If we go on to make new highs and the bull market continues, we wouldn’t want the majority off your portfolios to be permanently impaired.  However, if we are correct, and the Corona-Virus has in fact popped the debt-binge fueled historic and long economic expansion, we think it’s prudent to be prepared to buy when others are forced to liquidate. 

We find it difficult to predict the effectiveness of policy responses.  History cannot offer perfect guidance because policymakers did not have in the past the electronic means of interjecting nearly limitless liquidity at essentially zero cost at will.  While the policy responses will have some beneficial impact, they are not permanent in nature and there is,  in our view, no substitute to fully functioning economies.  We see many real headwinds and impediments to that particularly in view of the duration, extent, and nature of the expansion we view as having ended.  We are skeptical of the view that economic cycles have been successfully repealed by policymakers. 

Generally, the only time to buy financial assets for a fair price is under duress conditions. So, if this were to happen, as expected, be sure to be a buyer, not a seller.  

Good luck.   Please don’t hesitate to reach out if we can be of any help.