My investing advice on a day like today is simple. Don’t get emotional. Stay calm. Go out for a walk. Get some fresh air if you need to. But whatever you do, don’t get all crazy running around chasing charts. That will just get you into trouble.
Today is a day when you need a process. It’s a day where you manage volatility. And it’s also a day that starts the process of many days — and maybe many months — where you’re going to get more volatility.
More confusion. More contempt. And more success.
Are you ready for it? We are.
The list of post-election losers is long. Toward the top of this list is the establishment media. The arrogant MSM. There’s good reason print ad revenue at the New York Times and the Wall Street Journal was down between -10% and -20% in the third quarter.
Establishment Media has “0” credibility.
This election is just one the latest in a long list of examples. It’s nauseating to watch pundits attempting to explain why Donald Trump is going to be president after completely dismissing him this last year and a half. They are curling up in the fetal position.
Meanwhile, the Bond Bears are puffing out their chests today, as the 10-year Treasury yield backs up over 2.0%. To be clear, Wall Street consensus has been short bonds for years now. Anyone who invested on this advice has been hurt. But that’s how the game works. Wall Street shorted bonds with other people’s money, so they’ll live on to fight another day. And that’s sad.
We’ve been the bulls on bonds since August 2014, when the 10-year Treasury was up near 2.5%. We don’t have to apologize for that.
Ask yourself this question. “Did the election of Donald Trump change anything about our call on long-term bonds?”
No, it didn’t. Here’s why.
Think of the U.S. economic cycle. In 2013, the economy was accelerating. We said short bonds, gold and buy growth stocks. In early 2015, U.S. economic growth peaked at 3.3%. Today we’re at 1.5%. In other words, we’re on the fast-track to 0%. On that, we have continually said buy long bonds, gold and utilities. That’s been the right call this year.
Here’s another question. Does your process strip out politics and tell you whether the economy is accelerating or slowing?
Because Trump’s win should give you a good hint about what’s actually happening in the U.S. economy. Unbeknownst to many Wall Street pundits, a large portion of America is hurting right now. The U.S. economy is not firing on all cylinders. Did you know that Fed policy (which created the highest cost of living in US history) would upset so many voters?
In other words, don’t believe the pie-in-the-sky dreams of overly optimistic economists conjuring up 3% U.S. growth inside their ivory towers.
It’s not how you feel about the economy. It’s what the economy is actually doing. For those of you who don’t believe economic recessions can happen anymore (that includes most Fed policymakers and current White House economic advisory team) they happen. Remind yourself of that.
As bond bears celebrate, I’m taking a step back. Trump doesn’t change our algorithm on U.S. #GrowthSlowing. We measure and map thirty data points each month, ninety in a quarter. Those data points tell us where we are headed. We’re modeling fourth quarter U.S. growth on a year-over-year basis of 0.5%, then -0.7% for the first quarter. While I could be wrong on that, history suggests it’s a bad idea to bet against the rate of change of growth.
There is a great opportunity here for leadership. In crisis — or at least when there’s confusion—there are leaders who rise to the top of the pile. We intend to be part of that team.
