Good Day, There is so much turmoil in the market that it seems like it’s been a month since our last blog but in fact it’s only been a week. It’s almost like the market is a manic depressant. One day it’s on top of the world and the next day it’s full of doom and despair. So the question is really where are we at? This market has to be confusing for those of you that are forced to be investors through your retirement program. Heck, it’s confusing to those who trade it everyday for a living. While most of the professional folks in general know what they are doing they are still off balance do to the unprecedented unwinding of Federal Stimulus. They certainly want you to think they are in total control, but they are not. There’s a certain level of uncertainty in what they’re doing whether they will admit it or not and most of them won’t. You know what I say?? Pride goes before destruction and a haughty spirit before a fall. I’m not to proud to say I don’t know or that I don’t have a crystal ball. Ya’ll already know what I think about prognostication. Most of it is a waste of time. So I say again, where are we? Today we find ourselves on the rebound from yet another viscous selloff. Many market players panicked, packed up, and sold out. After all, a lot of the media was crying that the sky was falling as the 16th largest bank in the nation, SVB (Silicon Valley Bank), went belly up. Then immediately two more smaller banks followed suite. Why? Because a few depositors took to social media crying from the roof tops that everybody better get their money while they still can. They did this in response to SVB trying to raise some capital to shore up their balance sheet which was (at the time) in no danger of failing in the first place. This resulted in massive withdrawals which in turn forced SVB to raise capital to cover the withdrawals. This forced SVB to sell bonds. A lot of bonds!! This had to be done with bond prices at the bottom of the barrel. Remember, bond yields and bond prices move in opposite directions. So as interest rates and bond yields rose the price of bonds tanked and it was these bonds that SVB was forced to sell at a loss. They lost billions and as a result the bank failed. In their defense they bought US Treasury Bonds. The safest investment out there and they had a lot of them. In the end too many of them. Still, their balance sheet was in decent shape had they not been forced to cover a massive number of withdrawals. What does that tell you about the folks that made the false statements that the banks were ready to fail! Had SVB continued with normal operations there never would have been a problem. For the most part that’s the same problem that we have with folks posting speculative information about the stock market and causing in to sell off. It’s flat out irresponsible. Also, I would be amiss not to say that SVB backed a lot of the Tech Start Ups that were speculative in nature. That certainly didn’t help things, but the main culprit in their downfall was having to sell the bonds to cover all the withdrawals. So down our portfolios went again. The market tried to rally yesterday as the government stepped in and decided to bail SVB out dollar for dollar. Initially, deposits where only covered up to the FDIC insured amount of $250,000.00 and no more. However, the current administration decided to compensate the many large SVB depositors dollar for dollar. I find this interesting and wonder why they decided to do it. Will they bail out farmers in the Midwest the next time grain prices hit he cellar? I certainly doubt it and think it speaks volumes about their priorities. My question about all this government intervention first in the markets and now in the banking system is, are we watching the death of capitalism before our eyes? Where is all this going??? Okay, enough of that, fast forward to today. Market players are discovering that there are many banks that in fact have solid balance sheets and that talk of a contagion was way overblown. There are some regional bank stocks that are rising as much as 30 and 40%. My, aren’t the algorithm folks making some money today! So back up we go! Add that to a CPI report that was in line, and we are having a nice little rally. So, what is our strategy?? By the matter of fact, we do have one and it has not changed. It has been our contention all along that the bottom of this bear market was established in October. We view that bottom as support and do not think it will be breached. Therefore, we have positioned ourselves at 100/S and plan to maintain the position until the next uptrend. Our strategy is to watch the October support for the S Fund which is at 125 on the VXF. We do not believe it will fail. If it does, we will sell. So, there is an exit plan as well…. Once again, we believe that support will hold. Keep praying that God will guide our hand!! I am going to forgo the charts for today as the website is down for maintenance once again. That’s all for today. Have a nice afternoon and may God continue to bless your trades! Scott
