Dear Reader,
Problems are created to challenge the spirit in inducing itself to find a solution. But a solution may be temporary and not a one-time-fix. As we see today, there are ever-growing problems, solutions imposed, but results have not been substantial and more “V”, “W”, or “Swoosh” like. The problems we are facing today are numerous: the value of our dollar depreciating, interest rates at zero or below zero, a virus spreading with no end at sight, investments yielding no return, a global political catastrophe, government, personal, and corporate debt defaulting and increasing, and business models being tested to their limits and failing. Even when all research and analysis is telling you that their is a fault in the system and you shouldn’t be buying the market, people will. The Central Bank is buying treasuries from institutional investors to add more liquidity to the market, institutional investors have more cash available, and they will be forced to buy the market. They’d rather go down with the herd than go down by themselves. Last resort? The Feds run out of bullets or the stock market is nationalized. This week, the NASDAQ fell due to institutional portfolio re-allocation as well as risk-off selling. The new tension between the US and China is real, and COVID-19 is not slowing down. Precious metals are finally proving to be the haven and our currency is showing signs of weakness in accordance to the overall weakness of our nation. We are analyzing the entire market to see businesses that will not work in the new regime. Restaurants will have to innovate, schools will have to restructure, and consumer spending will be impacted by inflation, higher savings rates, and bumps in unemployment stimulus benefits. Which businesses will survive? Which businesses will become more valuable? Which currencies and assets will be worth more? Keep Climbing, The ACA Foundation One thing that I have learned is no process, no set of principles, no backstop, no hedges, and no luck can help you navigate this uncertain market. Gold has returned well this year (up 17%), but what if you believed deflation was going to occur or interest rates were going to rise? Gold would drop. Investor psychology is the most difficult to master. Staying cool and dry while a storm is hitting the market. This is what happened in March when the market dropped 30%+. So say you sold and held onto your contrarian views that the market was going to continue its deceleration. You would have been wrong with most markets returning to their former highs. Not many knew tech was going to outperform everything and nobody knew the abilities and capabilities of the Federal Reserve. So now you try to map out tomorrow's path. Virus cases are spiking again, US elections are coming soon, more small businesses are becoming bankrupt, the 10 year T-bill is decreasing, the Feds can't support the economy forever, a bubble is becoming larger in the credit and equity markets, a vaccine may be discovered soon, businesses and individuals may get more stimulus funding... As you can see, there is no right answer to what will happen. Something I have learned to do is to stick to YOUR process if you are confident enough in your understanding of current conditions and if you can take on the risk. But be careful in not being too emotional about your lack of understanding because nobody knows what will happen. There is a lot happening behind the curtain.
Dear Reader, The Market.
Current Risks.
Things We Have Learned Recently.
Reflation.In the past, we have talked about inflation, deflation, fiscal policy, and monetary policy to better understand the cyclical economy. Now rather than look at the individual factors, we will look at the whole picture. The United States and the world are in a period of reflation. Reflation is when central banks and governments provide monetary and fiscal stimulus to spur economic activity and inflation. This often occurs in response to a recession or to deflation. From a monetary standpoint, relegation begins when the Fed lowers interest rates and takes steps to expand the money supply, which we have seen occur on a large scale. From a fiscal policy perspective, reflation occurs after the government allocated funds or lowers taxes. We have seen this occur with the SBA loans. The steps taken to weaken the impact of a recession can lead to inflation. Inflation is much more preferable than deflation and is often a sign of strong economic demand. This means that demand sensitive stocks like consumer discretionaries, industrials, materials, and energy may outperform. Individual investors may also buy into high beta stocks and keep cash on hand to take advantage of any favorable opportunities. Dear Reader,
Growing up, being an outcast, being different, getting hurt, and not belonging drove me. I did not have my place, so I acted out and misbehaved. I have always been the quiet observer and I have always enjoyed spending time with myself. My confidence grew from knowing myself fairly well and from acting and learning from my experiences. I listened and looked and took in everything. Everything was a learning experience and I grew because of that. I have always known and felt that I thought and acted differently. I would think about things differently and I would think of different things, I matured quickly, I became independent at a young age, I always felt I needed to lead and take control, to not rely on anyone, I cared about the things I valued a lot, and I have known exactly what I want, but now it is being planned and executed with more detail. I was not very social, not very talkative, I preferred to be the last to act, I used to be afraid to speak because I would make mistakes, and I still do. Insecurity took something away from me that I can never get back. Learning to not care gave me tenfold of what I lost. Now, none of it matters because I realized what is truly important and valuable. It took time to develop into who I am now. It took curiosity, initiative, ambition, and love. It also took suffering, awkward moments, failure, and wasted time and energy; equivalently. I learned to accept and realize who I am, and I learned to figure out who I want to become. I learned to love myself, even when I loved others before I loved myself. I never cared for recognition or acknowledgement, and sometimes I failed by seeking validation. I never had the same values and focuses as others, and I always tried, and I still try to be different than everyone else. Because someone did it, I did not want to do it anymore kind of attitude. And I never cared for what people were doing and I never cared for people knowing what I was doing. My social connections are dismal which I am working on. I never was good at creating new, long-lasting relationships and keeping them. I am and was always too stubborn. Maybe it was my proudness or insecurity that handicapped me. The relationships I did create and that I did keep are valuable and lasting. And I take the effort in keeping up with them and making them feel valued. I never needed social connection because I learned to get everything I needed from myself. After so many times getting hurt and being disappointed, I learned this. My values, principles, beliefs, and ways come from my observations, experiences, mistakes, and readings on Stoicism, Oscar Wilde’s philosophy, and others. I have always been strong-headed and most of the time I would be more dramatic than I needed to be. I blame the lamp that fell on my head as my younger self tried to climb to new-highs up my dresser. I have always valued my time and I have found the importance in managing it well. Sometimes more than others. Learning, achievement, getting something right, and impacting others in a positive way has and will always make me happy. I have always told myself: you will do it and you will get it done like you always do, beat the system, stick with your system and believe in it, get off the grid, what’s yours is yours, and strive to become your best self. I have always found the last one to be particularly hard. I never understood why some people did not like me. I had the world to offer, and I would have given more. I always cared too much, and I would become irrationally foolish. I am grateful for all of those experiences because now I have a reason to give my whole self and a person to give my whole self to. Some that know me may say I am too arrogant or proud or stubborn or I think I am too good. Some others may say I am mysterious, unknown, I am there, I do my own thing, and then disappear. Others may say I am very mature, independent, established, successful, ambitious, driven, disciplined, hardworking, and focused. And a few have said I am scatter-brained. I will always have more questions than answers, I will always be attracted to the unknown, and I will never stop bettering myself. I have come too far to care what people think. Throughout time, I have met and learned from many people no matter the size or length of the interaction, and I have seen and done many things absent of the mundane. I remembered everything and I often recall on memories to remind myself so I may learn from it and have it be instilled. The biggest challenge I had was accepting who I am and where I came from. And that is why I may have run away or hid from my past. I definitely did not value it, but I am starting to come back to it and become reconnected. The problem was I experienced so much pain and suffering. A different kind of suffering than that that relates to hard work and success. I became so confused by what hurt me and I became so overwhelmed by the suffering from my not knowing that I became somewhat insensitive and emotionless. That created my loss of connection. Independence is good when dependence is not feasible, appropriate, or effective. I have always concluded my independence as not needing anyone, ever. No support, no guidance, no help… always thinking that I am right. And in itself created my desire for independence. But I forgone my main support system: my family. I have always been motivated by the reward of excitement. I never experience boredom because I have always something productive to do. And I can be with only myself for long stretches of time without going insane. I weight opportunities and decisions based on my overall feeling and comfort, and I always try to take the rational and most efficient approach regardless of the risk. There is not a day that goes by where I do not think about my future, where I want to be, and how I will get there. It often changes, my explanation may not be the same, my reasoning may have become more constructive and detailed, my purpose may have shifted according to my values and priorities, but I will always tell myself like I did with my eight-year-old self, “you will do it and you will get it done like you always do”. Keep Climbing, The ACA Foundation |
AuthorWHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now. Archives
July 2020
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