Another year has (almost) passed, and what a year it has been. There are some days where I find that 2022 has felt like an eternity – others where I find myself feeling like January was just yesterday. Time, and our perception of it, always fascinates me – but no need (or time) to expand on those thoughts here today.
Yes, it is that time of year for everyone’s favorite update. The one where I try to make sense of what has already occurred over the course of the year – and more importantly – what we are watching most closely for the year ahead. For our clients reading this, I have previously communicated my request (or compliance mandate in this case) accompanying this update, so please take a moment to email or call with the requested acknowledgement. I definitely appreciate your consideration and flexibility as we devote our time and energy toward navigating what I will describe in great detail below.
A preview of what to expect in this update. I will first delve into the “macro world” – describing and analyzing what we deem to be the most important economic/investment items of the day. I will then dive into a more “technical” discussion, where we will analyze what markets are (or may be soon) trying to tell us for the short-term. Next, we will discuss various asset classes and where we see potential opportunity or risk. Finally, I will generally discuss our positioning – a fancy way of saying I will attempt to wrap everything together to explain how and why we are positioning your monies the way we are.
Something new this time around. As mentioned above, all of my time these days needs to be devoted to navigating this environment. As such, I have absolutely no way of knowing how long this update is going to take me to finish. At the same time, we are entering into what I believe to be the most difficult part of this year to navigate. So much so, that what I will want to say or discuss might very well change as I am in the process of compiling this outlook. For all these reasons, I am going to be sprinkling into this update what could best be described as a “daily diary”. My hope is that this will not only allow me to update the conversation as we go, but also give everyone (who cares) a better understanding of what we are looking at on an ongoing basis, and how it may or may not ultimately affect short-term positioning. Finally, I would expect that it will prove beneficial to yours truly – as I have always found that writing thoughts (or emotions) is helpful toward adding clarity. Clarity is at a premium these days. I’ll look forward to your feedback as always…
Couple of notes before I begin. First and foremost, I will again be trying to keep this update both brief (I’ll fail) AND easy to read – while at the same time sharing enough information to make it worth your while to go through. I assure you, this is not always as easy as it might seem – which is why I mention it so often! As such, I am not going to spend 3 pages going through concepts of which I have already done so multiple times previously. That said, I would encourage you – especially those of you reading along for the first time – to visit the “blog” section of our website where you will find archived each and every update we have ever written. The good, the bad, and the ugly – it’s all there and nothing has been edited after-the-fact.
Fair enough? Let’s go!
All of the above was written on Wednesday, November 10th. Tomorrow is likely going to be an enormously volatile day for both bonds and stocks – as the latest inflation numbers are being released. I’m at 51% the numbers are “bad”, and both bonds and stocks get crushed – which makes me want more protection. The other 49% of me would not at all be shocked to see the numbers come in better than expected. Given the amount of short interest in the markets – and the lack of liquidity – who knows what kind of rally could ensue in either stocks or bonds (I’d guess much more violent in stocks). I do know that I hate these days. If the former occurs, I’m going to have the natural reaction of wishing I had more protection built in. If the latter, I’ll be wishing I didn’t have the protection built in at all. Most important, it’s likely going to create a lot of “short-term noise” – which is never helpful. All I know for certain is that my stress level will likely be 11 on the scale of 1-10 until the casino (market) closes Friday afternoon…
The Macro
Kind of sounds like a name someone would give to a new dance move that is taking the world by storm. “Do the MACRO – boogie, woogie, woogie…” Maybe I’ll have Gary come up with one and we can break it out at the Christmas party? After writing that blurb, I’m fairly certain that this year is the one that finally pushed me over the edge…
For some 40 years now, the United States (and most of the world) has experienced ever-declining interest rates, along with relatively low inflation. Not surprisingly, debt levels over this time exploded – and those assuming said debt included governments, corporations and individuals alike. It really isn’t rocket science – the less it costs one to borrow, the more one will be inclined to do so. This all came to a grinding halt – at least temporarily – late last year, then got worse during the course of this year.
The Fed and politicians adamantly told us last year that this newfound inflation was sure to be “transitory” – and would simply take care of itself. As we progressed into this year, it became obvious that this was not in fact going to be the case. The Fed finally began raising interest rates in an attempt to get inflation under control. It didn’t work, so they began raising interest rates even more aggressively – with little to no success to date. The rhetoric out of the Fed now is “we will keep raising rates – no matter what – until inflation is under control.” Sounds responsible. To be fair, we didn’t think they had it in them.
There is a problem though. As mentioned countless times before, the economy – and financial markets – do not like higher interest rates. Higher interest rates mean higher borrowing costs. Higher borrowing costs means less money to spend on other “stuff”. If interest rates get too high, one might even be inclined to sell their favorite tech stock (trading at 300x earnings) – and buy a treasury bond at 4% instead. And, oh yeah – remember that “explosion of debt accumulation” mentioned above, as interest rates went to zero over 40 years? Well, they ain’t rolling that debt over at 0% anymore – so I sure hope “they” can afford the new, much higher payments.
In recognition of these problems, stocks began to fall – and fall hard in many cases. But that is not the real story of 2022 in our view. The real story in 2022 is what happened to bonds. After all, bonds are supposed to be the “safe” part of one’s portfolio. The part that goes up when stocks go down – reducing one’s risk. The part that many institutions figured they could just leverage up on, in order to buy more of those tech stocks, and the bonds would serve as their buffer should stocks begin to falter. Anyone want to guess how this worked out so far this year?
Well, as of this morning, if one had just twenty percent of their money invested in stocks (as represented by S&P 500) -and eighty percent of their money invested in those “safe” bonds (as represented by Barclays aggregate bond index) – they are down on average somewhere between 14 and 18% this year.
To repeat, that is a portfolio of only twenty percent stocks. You can guess what portfolios with even greater allocations to stocks – including the “magical 60/40” portfolios we were told time and time again were the only way to invest one’s money – are doing. It has been an ugly year for sure.
As you might imagine, the calls came loud and fast for the Fed to back off and stop hiking rates. The volume and level of screaming by the talking heads on CNBC in the past 6 months has truly been something to behold. “The Fed doesn’t know what they are doing! They are going to collapse the entire global economy!” These are of course the same talking heads that had absolutely no problem with the Fed creating the problem in the first place – while a few of us repeatedly banged our heads against a wall, warning of what would almost certainly be the end result. If you think I feel any joy or vindication in writing that last line, I really don’t. All I feel is anger and contempt toward another group of politicians (they are) in no way acting in the best interest of those they serve. Well, unless one considers the Oligarchs their constituents, which would be accurate. I digress…
Moving on. If the Fed doesn’t back off soon, with the amount of debt out there and the ever-growing rate of financial instability in the system (see the UK pension debacle) – they are skirting the line of “breaking something big”. It was housing in the Great Financial Crisis. It’s usually large and over-leveraged financial institutions or industries. But when it happens, it’s usually ugly and it’s dangerous.
You might then say to yourself, “The Fed has to know this – they aren’t stupid”. I’d agree on the former, remain unconvinced on the latter – but what I think here doesn’t really matter. Here is the problem:
What do you suppose happens to inflation if the Fed suddenly pivots, and goes back to cutting interest rates?
Before I attempt to answer that question, let’s revisit another topic that we spoke about recently. By most all accounts, we have serious (and global) supply shortages of energy (and energy-related) and food (and food-related) commodities. When demand for anything – especially something as critical as food or energy – exceeds supply, prices will rise. When input costs rise, that causes end-product prices to rise. Simplifying, if you need oil to make a tire – and the price of oil rises – then the price of the tire will also have to rise. The more input costs rise, the more the cost of everything rises.
Now, I mentioned previously that I was in Vegas in October. I and anyone who was with me can tell you – it was packed. I talked to the bartenders, the dealers, the cabbies – anyone that would oblige – and they all said the same. Vegas has been as busy as any time in the past several years. Higher borrowing costs and significant losses in 401k accounts have apparently not even dented discretionary travel plans – at least using that small sample of anecdotal evidence.
Given this backdrop, you can begin to see a very important – no, the most important – point:
If the Fed wants any chance at getting inflation under control in lasting fashion, they have to kill demand.
No one wants to see or believe this, for fairly obvious reasons, but the Fed does not want stock prices going up. They do want the value of your home (and rental rates) to drop significantly. And they simply cannot let commodity prices continue on the pace that they have for the past 18 months. Since they can do nothing to control supply (only the moron politicians and their “ESG” can do anything about that, and even that isn’t enough now) – they have to kill demand.
So yes – as dumb and as incredible as it may seem – it is our view (and hardly our view alone) that the Fed has zero desire to bail out markets right now. I won’t go as far as to say they are actually trying to “break something” – but my lack of confidence in their track record makes me more than a little afraid of that outcome. Either way, the manipulation seems over (for now), and asset prices have reverted back to trading on silly little things such as earnings outlooks and the health of the economy. You know, acting like free-markets again. For anyone wondering, I do take immense joy in making that statement. We shall see how long it lasts…
Final and very important macro (boogie, woogie, woogie) note – markets don’t tend to bottom until well-after the Fed is done hiking rates. This makes sense, as it takes time for higher borrowing costs to filter all the way through the economy. Using history as a guide, we wouldn’t expect the real economic (and market) effects to be fully realized until next year (or beyond). Let’s take a look…
Dot Com Bust
As you can see above, during this period, the Fed “pivoted” to cutting rates at the beginning of 2001 – while the markets did not bottom for over 18 months afterward. Additionally, you can see (highlighted in gray area) that the recession did not officially begin until nearly 18 months after they initially began raising rates. Not my favorite time period to analyze since 9/11 certainly played a role…
Great Financial Crisis
MUCH better time period to study, as there are more similarities. Note again that neither the markets nor economy bottom until well after the Fed ends raising rates, and has already begun cutting them again.
Stagflation Period
Probably the period with the most similarities to today’s environment – but also the period most removed from today’s “reality” (imagine taking Fed Funds to 15%+ with $30 trillion of government debt??). Still, you can see similar patterns, albeit with more “noise”…
It’s Thursday morning, and the inflation numbers have been released. Better than expected, and both bonds and stocks are rallying viciously as result. I was wrong yesterday – the rally in bonds is actually greater than the rally in stocks, relatively speaking. Actually, it is rather breathtaking. Oil and commodities in general largely not participating – which is surely the market gods kicking me in the family jewels. On the other hand, the gold miners are ripping yet again – in line with what we would expect with the dollar and yields plummeting. Stocks have cleared two key levels that I am watching closely. As expected, it is largely the stocks / asset classes that have had the worst relative performance of late that are making the biggest gains. This seems to confirm that the reaction is a lot of short covering by the institutions that were “caught offside”. Short-term noise, but the levels are significant – the million dollar question remains whether or not the “big boys” are going to try to push this shit higher through the end of the year to try and make up their losses (and salvage their bonuses). Won’t be much time for writing today – in fact, this is going to be it. Time to update some charts and levels, and begin pondering if the levels warrant any minor positioning moves (which won’t occur today – WAY too much “emotion” involved in days like these). The best thing I could do is shut the computers down and go take a 6 hour walk - let’s see if I hold myself to that. In the end, this is the outcome we were hoping for between the two, as we head into the final month and a half of the year…
I lied. No reason to update anything now until the market closes and prices settle, so back to a little writing and I am then going to work out and walk for hours to clear the noggin. As expected, it’s just one of those days.
Circling back to the charts I just shared, what is clear in all of them (maybe less so in the “stagflation” period of the 70s) is that markets and the economy tend to be at their worst well after the Fed has finished raising rates, and began cutting rates instead. Not only is the Fed not yet back to cutting rates – they are still telling us that they are raising further in the months ahead. So, let’s play devil’s advocate and just assume that they change their mind, and that they are done hiking. According to history, unfortunately, the final pain in markets and the economy is still yet to come.
For those reasons, and today is the perfect time to be writing this, we are of the view that any rallies in the short-term remain of the “bear market variety”. I know I have mentioned these bear market rallies in the past – but is important to remember that the majority of the most vicious, short-term equity rallies occur during periods where the market trend overall is headed lower. Just like nothing goes up in a straight line, the same is true on the way down. Importantly, however, stocks tend to go down much “quicker” than they do on the way up – which is why never having too much risk in one’s portfolio at any given time is imperative.
Now, I am hardly guaranteeing that today, or any future rallies, are indeed of the bear market variety – no one will ever know for sure until long after the fact. Of course, this time could be different in terms of timing – and there are certainly plenty of variables in play. Indeed, the same could be said of any other period of market volatility in history. But when we combine our own analysis of the macro environment including interest rates, debt levels, valuations and inflation to name but a few – and then take into account the history of Fed hiking cycles as illustrated – our base case remains that we are unfortunately not out of the woods yet. Still, we will continue to monitor and listen to “what the market is saying”, and will adjust our thinking accordingly. This will be covered in detail as we discuss positioning.
Time to pause for a very important point. Many of you will tell me afterward that my tone is too negative. Well, I disagree. My job requires that I ignore “positive or negative” emotions as much as I possibly can, and instead focus on figuring out “reality”. In other words, my disdain for the Federal Reserve – about as negative an emotion as I could have – is not a reason to be either positive or negative on stocks. On the other hand, historically expensive valuations – almost entirely due to the actions of the Fed – are a very legitimate reason to have a more negative stance. Hopefully that makes sense.
More importantly, please read to the end. While I may be sounding a negative tone here for what we see coming in the short-term, I have not been this excited for the prospect of (responsible) long-term returns for a very, very long time. We are not there yet, but we are getting ever-closer I think…
I am glad that I kept writing today – intertwined with a brief conversation with Dave. As expected, the process helped me “clear the noise”, and I am now going to hold myself to shutting things off for the day and getting some much-needed exercise and fresh air.
Friday morning 11/11 – the workout, walk, hoops with the kids (and a few drinks with dinner) definitely did the trick. Feel like a new man this morning. Captured more of the upside yesterday than I had expected, which was helpful – and the managers employed all did their job well given the volatility. Well, all except the long/short manager – who for some unknown reason refuses to get flat ahead of these days when everyone and their mother knows is going to have crazy volatility. How you stay short heading into that is beyond me. Oh well. I find myself this morning now feeling part of the “consensus” (which always scares me) – guessing (and hoping) that stocks continue drifting higher for the next month, maybe until the end of the year…maybe even longer. No reason for any portfolio changes – assuming the L/S guys get their shit together. Oil bounced nicely this morning, right off the technical levels to the penny. Gold and the miners are getting toward what should be some massive resistance – that’s what I’ll be watching most closely in the coming days. Most important, have to make sure we are not caught offside by feeling too confident in our short-term view – especially in light of all of the potential landmines out there. Slow and steady, not emotional…
Before moving on to the next session, yesterday gave us a great opportunity to explain the basic “mechanics” of bear market rallies. Hedge funds, institutional managers and “trend-followers” will often attempt to make money by “shorting” (betting against) stocks, bonds or any other financial securities/asset classes. This is especially true (for obvious reasons) during periods of economic turmoil and when the markets overall are trending lower (this year). “Shorting” a stock entails “borrowing” a stock that you don’t own, and then selling it immediately - with the promise of buying it back at a later date. By selling it now, one would make money if they then buy it back at a lower price in the future. In essence, it is simply the exact opposite of buying a stock now, and hoping to sell it later at a higher price. If you are “short”, you want stocks going lower. If you are “long”, you want stocks going higher.
You may have noticed that yesterday’s rally was most violent in the areas of the market that had been hit the hardest during the course of the year – as well as a lot of individual stocks that are not necessarily in the greatest of financial shape. Was it a sign that everyone saw the inflation report, and decided that it was time to pile back into this stuff as if the worst is now behind us? Likely not. Remember, if you are short a stock, you are losing money if that stock goes higher. So if an investor (or firm) is “caught offside short”, and the market starts moving against them (going up), they may have to close their position in order to manage their downside risk. How do you close a short position? You have to buy the stock back. So if there is a lot of short interest in an individual stock or the market overall (there was), initial buying leads to more buying which leads to even more buying as the shorts try to exit their positions.
One of the “tells” that a market rally should be viewed with skepticism is when the most beaten down sectors and stocks are making the biggest gains – and the rally is abnormally strong. Once the shorts have exited, the market will often continue to drift higher – until such point when the shorts see significant value in the now higher prices to begin the selling again. Rinse and repeat. Make sense?
The Technicals
Before we start looking at some charts, let me remind you that the “macro” as described in the previous section is infinitely more important to our investment thesis and positioning than anything in a chart. That said, when we try to navigate around our macro thesis – and look at things in shorter-term timeframes (that’s me – not you!!) – the technicals can be important if for no other reason than everyone else is looking at the same thing. Once again, not going through a long description of what “technical analysis” even means – in truth, ask 100 investors and you will get 100 different answers. I’m simply going to go through it so that all of you can see some of the basic levels we are looking at and how we might use them.
Let’s start with a one-year chart of the S&P 500:
Two things to look at here. First, there are the “moving averages” – aptly defined as the “average market level for the period being studied”. The two most important – ones that every investor (or algorithm) look at - are the 50-day (pink) and the 200-day (black) moving averages. If the market (or stock) is trading above the level, then the moving average should be a point of “support” (will have a harder time going lower from). If it is trading below the level, then the moving average should act as a point of “resistance” (harder time going higher).
As you can see, the rally yesterday pushed us significantly above the 50-day moving average (near 3900). That’s a positive sign that stocks might continue to drift higher – especially if we do not fall back below that level and it properly acts as support. However, you can see that we are still well below the 200-day (near 4100) – and that should be a major point of resistance. If you look at the bear market rally that we had over the summer, it stopped on a dime right at the 200-day, before resuming the downtrend to new lows for the year. I kind of doubt it will be as “easy” this time around, but looks like we might find out here soon.
The second area of interest would be “trend lines”, as well as levels which had previously served as inflection points for shifts in market direction. I don’t have a good reason as to why trend lines work – other than everyone else thinks they are important. That said, they often do, so what do I know? The most important thing to us in the chart above is how both the 200-day as well as longer-term trend lines match up with some very important, previous levels of inflection (the horizontal lines). Consistent with our thinking above, I’ve got a feeling we will get through the 200-day – getting everyone in a frenzy – only to have the shorts take over closer to the main trend line (or even above if they really want to mess with us). We will come back to these levels in our positioning discussion.
Now let’s expand our timeframe a bit…
One could make either a bullish (positive) or bearish (negative) case for stocks using the above chart, though the bears would have an easier time making their case only because of the shorter-term trend. On one hand, you can see that the S&P bounced almost precisely off of the 200-(now week) moving average, as it has several times in the past. On the other, you can clearly see the resistance it met at the 50. Finally, the longer-term trend support is some 25% lower than where we sit today.
Ok, enough with the charts and lines. While they definitely matter in terms of short-term action – and therefore assist us in managing our risk exposure while navigating this mess - they are not at all what matters for a long-term investor. Reminder – while it might not seem it in the midst of market turmoil – we are in fact still focused on long-term over short. What matters most for the long-term?
Valuations. In other words, the price you are paying today for a security measured against its expected return of cash flow (earnings, dividends, etc.) over time.
Not going into another long discussion on Shiller PE – there are plenty to be found in previous updates – but it remains the most valuable valuation metric in our view. Doing some simple calculations based on today’s S&P level (4000) along with today’s Shiller PE level (29.3). Not cheap, and little long-term value based on history. Looking at our first point of potential support on the chart (3600) – approximately 10% lower from today - would put the Shiller at somewhere around 26.5. No thanks. Next, we have 3400 – about 15% lower – which would have Shiller at around 25. Still not impressed. 3000 – approximately 25% lower than today – gets us to around 22 on the Shiller. Not bad, especially based on recent history, but certainly not something to jump up and down about…
So let’s look at some levels not indicated on the preceding chart. Before I list them, see if you can use your newfound knowledge of trends and charting to determine what some interesting technical levels might be based on the chart above. I’ll give you a moment to draw your trend lines…
OK, time’s up. My two levels are 2400(ish) – a 40% free-fall from today’s levels – then 2100 (almost 50% drop). 2400 gets us to a Shiller PE of somewhere around 17.5 – which is 0.5% above its historical mean. I’ll say that again. If the S&P were to drop 40% from today’s levels, the Shiller PE would only revert back to its historical average. 2100? That gets us to around 14.5. Ok, now I’m getting excited – and we are about to make a whole lot of money going forward if history is any guide at all…
I can hear some of you now. “Come on Doug, you really think the market is going to drop another 50% from here – meaning it’s down some 56% from its all-time high?!” First off, the answer to that question is “no” – I’m not saying that is what the market is going to do. What I am saying, is that it is hardly out of the realm of possibilities. You don’t need a bunch of technical jargon from me to get there yourself – simply look at the chart above on the S&P for the past 3 years alone. If it can go up that much – with a “global pandemic” thrown in the middle and interest rates at zero – I assure you, it can go down that much too. I already laid the case from a valuation standpoint. And, oh yeah, the market has suffered greater than 56% peak-to-trough declines multiple times in its history (see only 14 years ago). This would not even be that surprising given the multiples from which we started. Painful for many, but not that surprising.
What would cause such a drop? Well, simply go back and re-read The Macro (boogie, woogie, woogie) above. That section could be 100 pages itself if I had the time to do so, but it’s enough for you to get my drift. Debt to GDP, valuations, political/geopolitical turmoil – all on top of a now hawkish Fed with a global economy entirely buried in debt? Yeah, that could do it. Again, I’m not at all predicting as much (I still don’t believe the Fed would allow it) – I’m just making the case that anyone taking excessive risk with their monies while ignoring the possibility is playing a fool’s game…
Different question – would I want this to happen? Loaded question for sure. Like any decent human being, I would not want to see the pain and suffering that would come as a result. That said, as this is what I do for a living and speaking purely from an investment standpoint – the answer is hell yeah. I’m confident enough in my abilities to navigate that type of scenario to where the opportunity on the other side would be massive. And yes – again purely from an investment standpoint – you should want the same. I doubt we will get it, but I think we are in the process of getting enough to work with between rates and any further turmoil in markets. As always, time will tell, and we will continue to work with whatever we are presented with. Moving on…
It is now Monday afternoon, and I’m getting to writing much later than I had hoped. Also spent much more of the weekend than hoped pouring over numbers and thinking through positioning for the rest of the year in my mind. Had to update some levels this morning – particularly oil and gold as both are bumping up against serious support or resistance levels after last week. Quiet market day – which is helpful for thinking without the noise. Bond market back from its one-day holiday, with yields slightly higher – again nothing glaring one way or the other. J-Pow apparently sent one of his minions out over the weekend to make sure the WSJ told the rest of us that they are none too happy with the markets last week. Not something to be ignored, but I’m not going to write more on it here as there will be plenty to say in the positioning part of this outlook…
The Asset Classes
Good Lord – I’m on page 13 (insert “hand-over-face” emoji here). Ok, with all of the moving pieces at the moment, it is near-impossible for me to do my asset-class “rankings” as I have done (begrudgingly) the last couple of years. What you will see below is a list of the asset classes that we are most focused on – and rather than ranking them – I am instead just giving our view on each. The biggest difference this year is that I am out of necessity breaking these views down into various timeframes as you will see described. Then, I will briefly go through each for context – which will hopefully make more sense out of the views as listed.
(Note: my “ultra short-term” views listed below can – no, likely will – change even during the course of this writing. There is a reason it starts with one day and goes out only three months – a lot changes fast these days…)
Bonds
If you had told me coming into this year that yields on 3-month treasury bills will have jumped from near-zero coming into the year, to over 4% as of this writing – I would have told you that you are out of your mind. If you had told me they would be over 4%, and the stock market was only down 15-20% - I would have asked to have you committed. Yet here we sit. Fascinatine times for sure…
You will note that there is only one “very positive” sentiment listed on the table above – and that is the short-term bonds. To be clear, I am referring to treasuries – corporates, municipals and other types have their own risks and opportunities, which I am not going to delve into here. But if you want to give me 4%+ on a “risk-free” treasury – with virtually no duration (interest rate) risk – I will take it all day long and twice on Sunday!
As we get into longer durations, however, the picture becomes less clear. On one hand, as described in our macro views, we don’t believe that the economy and/or markets can handle higher interest rates for any prolonged period of time. For that reason, we have a slightly more positive view longer-term as we think rates will ultimately end up lower than where they are today. However, and this is insanely important, it doesn’t mean that they can’t (or won’t) go higher first. Remember, bond prices fall when interest rates rise – and vice versa. The longer the duration (maturity) on your bond, the more sensitivity (and volatility) it will have to movements in interest rates. Do we think the yield on the 10-year could get to 5 or even 6% (or more) as the Fed tries to deal with inflation? I’d say unlikely, but the answer is still yes. I have little desire to expose myself to double-digit losses on my bonds when I can get 4% with virtually no risk – se we are keeping a neutral stance with longer duration bonds.
Stocks
Yes, I am lumping the entire equity universe into one category here, for the sake of simplicity. You will see that I listed a more positive stance for stocks for the period between now and the end of the year. We’ve got at least 30 days before the next Fed babble or inflation reports. Earnings season is largely over. This is usually a good time of year calendar-wise for stocks (though not necessarily during bear market periods). The dollar just ripped lower, and bond yields with it (or vice-versa). Maybe most important, liquidity is still shit – and there are a lot of institutional money managers that are trying to make up significant YTD losses. For all of those reasons, we wouldn’t be shocked if stocks kept drifting higher for the next month or two.
There are several things that could go wrong – not the least of which is that everyone seemingly overnight has shifted their sentiment from bearish to bullish after the market action last week. Always remember, the consensus is usually wrong – and the market seems to like to do whatever will cause the maximum pain for the maximum number of (short-term) participants. For those reasons and many more (all in the macro – boogie, woogie, woogie), we are hardly inclined to make any significant bets that our ultra-short-term projections are correct.
You don’t need me to reiterate my thinking for stocks headed into next year – I’ve already done that. The longer-term, “neutral” view in the space is largely such as you would have to tell me first whether or not we are right about next year. If we are right, then valuations at some point will become attractive enough to give us a more positive long-term view. On the other hand, if we are wrong, and stocks begin somehow going up in a straight line again from these levels – our longer-term view in the space would be decidedly more negative due to valuation concerns. Let’s leave it at this – the next 12 months are likely going to tell us a lot…
One final note on stocks before we move on. One of the debates Dave and I were having heading into this year was whether or not we might be entering another (long overdue) “value over growth” cycle. As an example, people tend to forget that many value managers actually had positive performance numbers during the dot-com fiasco – escaping some or all of the market carnage. Even though we had (and have) a value tilt with our holdings, I couldn’t get myself to a place where I believed that such a scenario existed this time around – mainly because valuations around “value” were historically elevated coming into this year (versus dirt cheap in 2000). However, I am now considering this possibility much more seriously…
For one, there is interest rates. For reasons too long and technical to go into great detail, value stocks tend to do better during periods of rising/higher interest rates. We can certainly now check that box, where we couldn’t heading into this year. More importantly, the “value” space is littered with companies whose businesses revolve around energy and commodities – the asset class we will get to next. So, while I have not yet wrapped my head around this enough to want to go even heavier toward value over growth, that sentiment is growing – and is the reason for the disparity you see in the table between the two.
Gold and Gold Miners
The first thing you will note is that I have dropped the expletives which had preceded the word “gold” in my last few updates – and for good reason. Here is where I find out who has truly been reading these things in detail. From my last update:
It is for this reason – even though this space has become markedly less attractive to us (short-term) since our last update – that (bleeping) gold remains an important piece of our overall positioning puzzle.
I’m going to get more technical for a minute here. As you know by now, we have been laser-focused on protecting downside during this period. As the year has progressed, we have made changes (as deemed appropriate) to even further reduce our risk exposure – either by directly reducing positions, or by adding hedges to others. Either way, the net result is less exposure to “risk assets” in general. In making these changes, the dilemma then becomes ensuring we have some capture on the upside when “risk assets” get oversold, and subsequently make a violent move higher (the bear market rally). This is where the gold positions came into play…
As the year has worn on, most all of the trend-followers and their algorithms have largely used the same trade – long (own) the US dollar, short (bet against) bonds and gold (and stocks to a lesser extent). Our thinking was that – at whatever point this trade “broke” – it would likely be violently so, at least in the short-term. So, our hope was that keeping exposure to gold (and more so the miners) – even though it had become technically much less attractive by that time – would allow for potentially outsized (and needed) upside when the trend (which had largely worked in our favor) reverted.
While I can’t get any more specific with numbers and still hope to get this thing through compliance expeditiously, I will just say that it worked – and better than I had hoped. Still, as you can see in our asset class analysis, we are not overly optimistic that it can (will) continue much longer. I still believe that gold will have its day in the sun, but that it is much more likely at the time where the Fed actually pivots and starts bringing rates down (and assumptively the dollar with it). This is the reason that we have a more negative view in the short-term, and a more positive view over time – I just do not believe that time is yet here. For now, we will continue to “rent” the little yellow bugger as needed.
But I would like to take this opportunity, Mr. Gold, to apologize for my previous insults directed your way. I do hope you understand that they were warranted at the time of issuance…
Energy / Energy Producers
Our exposure to this space is on a very short list describing how we’ve gotten to where we are on your behalf this year. Less important than our underweight allocations to both stocks and duration, but then more important than anything else. Yet, as always, it is most important to look forward rather than back on what has already occurred. And I believe that getting this space “right” moving forward may very well trump all other considerations. Let me explain.
If we are correct with our macro (boogie, woogie, woogie), then the path forward for energy should be a sharp rise higher as inflation takes hold (already occurred), followed by an eventual “collapse” - along with the economy - when said inflation (and the Fed’s reaction to it) takes its final toll. In other words, and in our view, there is (still) significant upside in the space – which we think will ultimately lead to significant downside. This part is not rocket science, but rather historically the case. But there is a kicker…
I’m not going into this in detail as I have already done so in previous updates and yet again today. The short version is that we don’t have the (global) ability to increase the supply needed to bring prices down. This is due to a decade or more of underinvestment – almost entirely brought about by the global oligarchs and their mission to take down energy producers before their “green ambitions” were anywhere near ready to execute. As a result, the potential upside for these producers remains significant in our view – while the downside is limited before they successfully achieve demand destruction. In other words, before they destroy the economy.
Still, as I hope I have already made clear, I do believe that they are in the process of doing just that. So this space is truly the definition of walking a tightrope – though doing so with strong earnings and juicy dividends beneath us. Throw in the geopolitical turmoil and the fact that we may or may not have already entered into WWIII – it is one of those asset classes where the potential upside is greater than the perceived downside. At least in our view.
Here's the deal Jack – just watch the price of oil. Want to know what the Fed is going to do? Watch oil. Want to know what stocks are going to do? Watch oil. Want to know what the dollar is going to do? Watch oil. And what to know what our current and sure to be short-lived “bestie” gold is going to do? You get the picture…
If the economy (and markets) have truly bottomed – which we don’t believe it has – then I cannot imagine a scenario where the price of oil does not continue higher from here. Doesn’t mean I’m right, I just can’t wrap my head around how we get there. If we are right, however, then that is continued inflation. If that is inflation, then the Fed isn’t done. Again, rinse and repeat. This also explains our views above as we move from positive on the space, to somewhat so, and ultimately to neutral as time goes on. At some point, the demand will be killed – and we don’t want to be too heavily involved when that time comes, as the potential downside is very, very substantial. In the interim, we continue to view the potential upside as equally (or even more) significant.
Final note on energy – valuations. Many (most actually) of these large energy companies – even after the appreciation they’ve enjoyed this year – trade under (significantly so in many cases) 10x their projected earnings. Now, compare that to your favorite tech stock. Oh yeah, and which of the two do you think more likely to be growing their earnings in the coming year(s) given the economic backdrop? I will let each of you ponder that one for yourselves.
Final, final note – we haven’t even talked about our (US) current relationship with Russia, China or Saudi Arabia. Nor have we talked about geopolitical turmoil already in progress. Not to be ignored for sure…
Broad-Based Commodities / Producers
See the discussion above – largely without the inherently inelastic qualities of energy (or food). The more any commodity is needed for sustenance, the greater the demand you have to kill – in the absence of major technological advancement - before getting its price under control. To reiterate from above, the lack of investment in the space has led to little hope for said “technological advancement”. It will come (I think), but will likely take years. You can’t magically snap your fingers and immediately begin producing more of this “stuff”. Enough said. Politics will most certainly play a roll here.
Trend-Following / Market Neutral / Long-Short
Keeping this section very basic and very brief. Our ultra-short term, negative stance on these types of strategies is basically due to the major trends of this year (dollar up, bonds down, etc.) turning viciously last week with that inflation report. This is where many strategies like these can struggle – when markets move against the longer-term trends. They are now left trying to figure out whether or not the trend has structurally changed, or it is simply short-term mean reversion. Not fun.
Still, based on our macro (you sing it) views, we surmise that some tradable trends will again make themselves clearer as we head into next year. And whether or not we are correct in that assumption, we also expect volatility to remain rather elevated. As such, any strategy that allows for both long and short exposure to various asset classes is a valuable one in periods such as this.
One final and important thought on this space. Coming into this year, the interest that we were giving up by using strategies such as these vs. short-term bonds was minimal at best. Now, we can earn 3 or 4% interest on such vehicles, and with minimal volatility. That is a big deal – and we will discuss what that means in the next section on positioning…
Tuesday morning, 11/15. Woke up this morning and realized that I had completely missed that another inflation report was due out in an hour. I miss Eastern Standard Time. Honestly – while I have no idea how I forgot about this – I’m actually glad I did. No reason for another night waking up at 4am and not being able to get back to sleep (although that frustrating occurrence is good for additional writing time). Number came in significantly better than expected – whew. Conditions even better for a continued rally in risk assets for the rest of the year. The “whew” reaction will make more sense when I talk about positioning. Much more importantly, and no “whew” here, spot oil didn’t hold $86 yesterday, and is down again this morning. That is surprising to me, and not at all what I was hoping to see, as I think it could lead to significant downside from here if it breaks much further from it. Shit. And &*%&ing gold (that didn’t take long) isn’t participating this morning – even with the dollar down significantly (yet again) along with bond yields. Apparently, I’m not the only one feeling like it’s getting toppy. I “know” deep down that I should trim it some, but I also can’t forget why it’s there and how it served its purpose when it needed to last week. Noise. Think. Breathe. No emotion, ignore short-term noise. I got this. On with the day. Doubt there will be any more writing today.
Checking back in, as the Fed just announced that US Household debt just reached a new, all-time high at 16.5 trillion. “While delinquencies remain low, we are seeing signs of deterioration.” In line with our macro-outlook, and – as I have repeated several times in these updates – “I doubt consumers can handle the higher prices that are already here, never mind any ongoing inflation.” Time will tell. Short-term noise vs. long-term reality. Let’s see how far the big boys can take this thing – and hope the long/short guys can ride with them until I decide to take matters into my own hands. Let ‘er run boys…
Wednesday morning, 11/16. Well, the bulls couldn’t hold on yesterday – certainly not helped by the now mysterious missile that landed in Poland. Spent yesterday and last night trying to figure out why I keep having this gnawing feeling that I should be “doing something” with portfolios. For the vast majority of this year, I have not felt this way. What we have been doing has worked. Even when we have the natural periods where things “reverse” – mainly interest rates dropping or energy/commodities working against us – it has always gone right back to “working” in a matter of a few days or weeks at most. As the old saying goes, “if it ain’t broke, don’t try and fix it”. But the last week has been torture on my brain. I know what it is – I am feeling a strong desire to hunker down even more as stocks drift higher and in light of our macro view for the coming year. But there is no telling how long they will be able to push this higher in the interim – there are plenty of incentives there as previously discussed - and that is assuming we are right in our outlook in the first place. Oil rallied back above my key level of $86 yesterday afternoon – but then gave it back and more this morning. That is not helping me achieve mental clarity. Oh well, perfect time to head into our LAST section of this newsletter – around positioning – and see if the writing process helps as it often does…
Positioning
(What We are Doing with Your Monies and Why)
I was initially going to insert another topic into the discussion before getting to the positioning, designed to tackle key reasons that we could be wrong in our macro thinking. As discussed many times before, I am constantly looking for data and analysis that would contradict my theses. There are several data points or narratives out there that are grounded in facts, and are useful toward this end. We don’t ignore them. Still, rather than adding another 3 pages to this already lengthy outlook, let’s just leave it at this:
We can be wrong. It wouldn’t be the first time, nor would it be the last.
Of huuuuuuge (in homage to the other news last night – and I ain’t going there) importance - which I will describe below – we are acutely aware of this fact and are prepared to react appropriately. As I mentioned in the last update, managing monies from a “macro standpoint” is a lonely and stress-filled existence – which is largely why so many choose to just “60/40 and forget it”. That said, I also believe that it is the responsible way to manage money – especially as a fiduciary for others’ life savings. Ignoring the environment (economic, valuations, etc.) and simply “blaming the market” if something blows up doesn’t cut it. At least it doesn’t for me.
Second hugely important point before I get into positioning, and I am asking compliance to read this closely before marking this outlook up. We do not run “models” for clients. As such, you will note that I do not discuss specific performance numbers – as there are not (I don’t believe) any two clients reading this that have the exact same performance for the year. While this creates infinitely more work (and stress) for us, there is a very important reason we choose not to run models.
Because there are also no two clients whose situation is exactly the same.
While I have the podium on this topic, I want to be clear on something. FINRA (our main regulatory body) requires every advisory client of any financial services firm such as ours to be “labeled” in terms of their objectives for their money. Unfortunately, these “labels” are vague and not at all helpful in our view. Take a client who has listed “income” as their objective – and go back to two years prior when interest rates were near-zero. Should I assume that this more conservative investor should have all of their money in high dividend yielding stocks, or risky junk bonds, because they can’t get any “income” from the traditionally more conservative fixed income vehicles? I think not. Conversely, should an “aggressive growth” investor completely ignore the environment overall, and just “ride the market down” regardless of the environment? Again, the answer is no – EXCEPT when either specifically states that they are wanting as much (at which point it is in fact appropriate).
My job is to understand what each and every client is trying to accomplish – for the long-term – and to do everything in my power to help them achieve those goals. It is also my job to know and understand when long-term objectives have changed. And I better have a good understanding of each client’s tolerance for risk, and their psychology around it. And then, incorporating my experience, understanding and analysis of both the macro (now dance!) as well as the universe of investment solutions at our disposal, work my ass off toward that end. That’s it. That’s what I do, and what I will continue to do. Rant over…
Along with not discussing specific performance, I will also not be discussing any particular funds or investment vehicles by name. Again, this is because not every one of you owns the exact same (or even any) of any particular position vs. any other client. Instead, I will be discussing asset classes in general, of which I have discussed in greater detail in the previous section.
Finally, circling back, and then we get into it. Because I am discussing things generally, and no two clients are the same as discussed, try to take what I am writing below in relative terms. Let’s use a hypothetical example. Say you are a younger, more aggressive client – and came into this year with a long-term target to “risk assets” of 70%, which had already been ratcheted down to 50% due to valuation/economic concerns. If I say that I am “hunkering down” in terms of risk because of our views, that might mean that your “risk allocation” drops to (hypothetically) 30 or 40%. At the same time, a more conservative investor who is now relying on their investments, came into the year with 30% risk. “Hunkering down” might mean their new “risk exposure” is 10%. Again, these are purely hypothetical – just understand that what I am about to go into means something different to each of you reading this. Ok, here we go…
Let’s start with our current positioning. We are “hunkered down” in terms of risk vs. where we came into the year. I will drop the quotes around “hunkered down” going forward, as I explain now that means “reduced allocation to risk assets” than where we started the year. Important to note – “risk” and “growth” are interchangeable here. Less risk means less downside potential, but also means less upside potential. I am not going into the specifics – that is a conversation we can have together for those that are interested.
Importantly, we are not yet at what I would deem “max-hunkered down” (had to include the quotes because of the “max”) – which is what I would describe as the “maximum risk-off positioning that I am willing to assume for any individual client, based on their personal objectives”. Per my diary entry this morning, this is the area that is causing the sleepless nights – and why I am hoping that short-term, the big boys will in fact let ‘er run…
What I want to get into is what will cause us to either move to max-hunker down, or conversely, what would cause us to reverse the hunker down all-together. For that, I want to re-introduce the two charts that we looked at previously, as I think they will make all of what is about to come easier to follow…
So, the first thing to reiterate is that the “technical levels” I am about to describe – along with their significance to our short-term positioning – does not in any way mean that our investment strategies going forward will be reliant on my interpretation of charts. God help us all if that were the case. Instead, as mentioned, technical levels are most useful in trying to determine shorter-term resistance or support levels – which is extremely important during periods like we are in now, and especially assuming our macro (dance damnit!) proves correct. Also important – we pay very close attention to technical levels from others much more experienced and focused on the subject matter. The charts above show the levels that most closely match up with a combination of basic trend lines, moving averages, inflection levels, and what other “experts” (who have proven themselves to be very good at such analysis in our view) have to say.
Let’s use those charts and discuss levels that would incline us to move to max-hunker down mode. To be honest, again, my brain is half there right now – I’ll explain why in a moment. There are two main levels we are watching most closely as possible ending points for the current drift higher. The first is the 200-day moving average (around 4070). Everyone and their dog will be looking at this level – especially because the last rally ended to almost the penny at this level (look at the 12-month chart above). That said, if we do in fact get there, I have a gut feeling that we will go even higher. Reason? It’s not that easy. It never is. And since it worked perfectly the last time around, I find the odds of that happening twice insanely unlikely. But I could be wrong, which will certainly cause more insomnia as we get close.
Second level is 4100-4150. First, this is where we would be bumping up against the longer-term, downward trend line. Always important. Next, like the 200-day, everyone and their dog will also be looking at this number. Ironically, going through my Twitter feed last night, I couldn’t get over the number of references to getting short the S&P at some number that fell between those ranges. By the way, this included a prominent and vocal “perma-bull” (thinks stocks never go down) from a large investment bank who all of a sudden said it was time to flip bearish at this level. Huh? Finally, getting to these levels would cause pain to those who decided to short the S&P at the 200-day. When they say that “bear market rallies will always cause maximum pain to the maximum number of participants” – well, let’s just say that there is a reason for it.
But if everyone and all of their dogs are now convinced that the money is to be made shorting the S&P at one of these two levels, we then have to think – what would truly cause the most pain? Again, it is never that easy. Well, the answer could be that we never get to either one of them before we take the next (and maybe final?) leg lower. This is the one that scares me. The second could be that we blow right through both! In that case, the market would have wiped out all of those that got short at either of the two previous levels. Additionally, the calls that the “new bull market has begun” will be everywhere. Investors will buy stocks in a panic. It would be the perfect set up to truly cause maximum pain to the maximum number, and then the real drop began.
Either way, I hope this gives you some idea of what we are watching most closely. I am not prepared to say what I will be doing and at what level just yet – I’m still sorting it out. But at some point in those ranges, max-hunker down is likely coming (for those who have not requested otherwise in our conversations, of course).
Important point(s) to remember, so you are getting the emphasis in bold. Yes, the more hunkered down you are means the less downside exposure you have – and everyone likes to hear that. But it also means less upside potential, as you have less exposure to growth, for as long as we remain hunkered down. I (nor anyone else) can do both at the same time – at least not entirely.
If you are following along so far, you should already have two questions for me lined up in your head. I am now going to answer them. The first one should be “Ok, so we get to max- hunker down, but what happens if the markets keep going up and your macro analysis (or dance) sucks?” Great question. Max-hunker down positioning will immediately entail levels where I require myself to “listen to the market”. While it is highly unlikely that my views will have changed with the market now even more expensive than it was coming into the year (on an interest rate adjusted basis), I will still listen. As of right now, the level I would be using is 4400(ish). If you look at the pink moving average on the longer-term chart, you will see why (it is also a level often talked about, but this is long enough). It will require that I reverse the hunkering down (at least to some extent), and with one very important caveat – that the markets continue to hold above key technical levels. Same process, just in reverse. If they don’t, we hunker down again, as the last thing I want is for us to be one of the victims of a bear market rally and its maximum pain agenda…
The second question you should be thinking is, “If you get this right, at what levels (lower) do we begin adding more risk again?” Another great question. Keeping this shorter, it will somewhat depend on how much hunkering down we achieved during the carnage. If all the stars aligned, and we were max-hunkered down at the exact right time (it won’t), it would make us more comfortable “taking shots” with risk at 3400(ish). But honestly, it is 3100 and below where I am interested in doing so for the right reasons – those reasons being that risk assets have started to reach valuations that actually look attractive (at least mildly so). Let’s leave it at that for the time being – too much is going to happen between now and then.
Thursday morning, 11/17. Got to bed at 2:30am, up at 5 – sweet. Went to bed having convinced myself to do some minor tweaking – stage one of the max-hunker down if you will. Always gotta sleep on it. If you’re truly convicted, you will wake up feeling the same way. I didn’t. Came in and ran daily/YTD performance reports. Even more doubts seeping in. Why hunker down even further – with this much short-term uncertainty – when everything has already held up so well for the year? I know both 3900 and then 3850 are going to be major support levels. Let it go. Shut it off. Let the market dictate it. Oil nowhere near holding $86. F&%@!!!!! Miners down again. F&%@, F&%@!!!! Yields and dollar up. The markets are seriously full-blown bipolar right now. Let it go. Back to writing. You’re driving yourself (and anyone reading this) nuts…
Before I move on, just a thought on the “Fed Pivot” everyone is waiting for. If the Fed came out tomorrow and said they were done raising interest rates, it would not change a thing with our thinking. It would likely cause a vicious short-term rally, until everyone realized that rates are already above 4% - with mortgages near 7%. That “pivot” would not at all change our thought process for what is to come with the economy. If, however, they came out and said that they were not only done raising rates – but they were also about to begin cutting them (and putting an end to their balance sheet reductions) – that is a different story. Doesn’t make valuations any better, but we can’t stay hunkered down (too long) if the Fed party is off and running again. Highly, highly unlikely happens anytime soon – but you never say never with J-Pow and his band of merry morons…
On to a much easier (and happier) discussion. As mentioned previously, we can now earn 4% interest on risk-free, 3-month treasury bills. That was near-zero 12 months ago. This is a big deal. BIG deal. Right now, your portfolios are constructed with many different asset classes and positions – all playing significant roles in how we are trying to manage both downside risk as well as upside potential. My goal is to significantly reduce the number and sizing of positions – as tax-efficiently as I can – so that we can take all of the excess “noise” and instead park those funds at said interest rates. This is not (yet) as easy as it may seem. But rest assured, that is a big piece of the positioning puzzle and what we are going to be trying to accomplish in the coming weeks and months.
So, what I am working on now – and the reason I have asked for your flexibility during this period – is twofold. First, I have to determine what level of hunkered down I want – and the timing of such as discussed. That is the most important part of this whole process by a large margin. At the same time, I am working on how I can get there – while simultaneously having as much of the portfolio as possible free to take advantage of the now higher rates. This may be done all at once, or it may be done in stages (more likely the latter). Either way, I just wanted to point out that this is a significant and very beneficial development over the course of the year, and if (when) you see a large swap of positions being sold you will now know what is occurring.
A final note in this section. First, pat yourself on the back if you’ve made it this far – you are almost done! I don’t think there has ever been a period since any of you have known me where I have talked this much about “trading” (getting into and out of positions). I do not want you to think that this is the new-normal. It isn’t. It is a necessary evil – one that I am no fan of I must say – in dealing with an environment as complex as the one we find ourselves in now. For all of the reasons I have discussed in this update, I unfortunately expect this to remain the same in the coming year(s?). But rest assured, this too shall pass…
I again want to reiterate that I in no way view this outlook for the coming year as a negative one. Yes, I find it likely that the markets and economy might finally experience a long-overdue “cleansing”. That is how capitalism is supposed to work, especially following a decade or more of malinvestment spurred on by an activist Fed.
But that cleansing, should it come to pass, is a GOOD thing.
We now have interest rates at our disposal – at least for a time – allowing investors a decent alternative to insanely expensive stocks. And if we are right, stocks themselves may finally again come to represent attractive, long-term opportunity. The combination of those two should bring a smile to the face of any responsible, long-term investor. It certainly does mine – even if it doesn’t sound like it.
Reiterating what I have said many times before – I have exactly zero interest in “gambling” with your money. When interest rates are zero, and valuations (and speculation) around stocks are at all times high – in essence, that is what an investor is forced to do. And while it will certainly open again – it always does – for all of the reasons I have hopefully explained, it seems the casino may finally be closing its doors. At least for a while. And I don’t know that I can properly express just what a positive development that is for anyone reading this.
Our job over the coming months is to make sure we all get out safely, before they lock the doors behind us. And I promise every ounce of energy I have in me toward that end…
So, this is now off to compliance – and you likely will not be reading this for a week, maybe two, after it was written. Many of the questions I’ve asked (myself) in these “diary” entries will have likely been answered. You’ll certainly know my mental state, based on what I’ve written here and what you see on your screens (oil $86, and whether or not the “big boys let ‘er run”). I may or may not have already made some of the positioning moves discussed. A note that I don’t know that I’ve ever really shared with any of you in great detail. I am a competitive bastard. Like anyone, I like winning - but I REALLY hate losing. I’ve always said that sports taught me infinitely more about life than anything in school ever did. Mainly, it taught me how to win (don’t get cocky, it WILL bite) – and more importantly how to lose (pick yourself up, LEARN, and on to the next one). I can’t imagine being in this line of work without that experience – especially in this day and age. While my playing days have long passed, my clients’ financial well-being is now my playing field. To be sure, it affects me deeply. That is a good thing – for you and I both. I’m blessed to love what I do. So, if you find yourself reading any of these “diary entries” and worrying about my mental state – please don’t. I’m simply trying to “win” on your behalf….
As always, we can never thank you enough for the trust and confidence you have placed in us.
Sincerely,
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