Recession, the banks, and debt ceiling, oh my!
May 11, 2023
Some mornings I wake up and I feel like Dorothy. The day starts with a tornado, get chased by flying monkeys, and end up passing out in a poppy field, before finally getting to my destination. Only, this isn’t OZ. It’s this crazy place called the markets.
Today, it seems to be recession, the banks, and the debt ceiling, oh my. Throw in a little inflation, and Dorothy’s journey doesn’t seem so bad. At least we know she wakes up back in Kansas. Where we’ll wake up is anyone’s guess, except I know we’ll get to Kansas, it’s just a matter of when.
I truly understand everyone’s concern. In my 35 years plus of doing this, I’ve never seen an economic situation so uncertain and unstable. Am I concerned? Of course, but it doesn’t change how we do things. Just to play devils advocate, it seems that the point of maximum pessimism tends to be the bottom of the market.
Are we near a bottom? I really don’t know. Today, we are actually on a relatively weak buy signal, so we are invested to a degree, but with certain caveats. First, we own no banks. The banks are a dumpster fire. In fact, it seems that the banks are creating more day to day issues than the debt ceiling. Second, a good part of what we hold are companies that tend to be a bit more recession resistant. Think companies that make things that we buy regardless of GDP growth. What I like to call kitchen and bathroom stocks. And third, we own some of those technology companies that were absolutely destroyed last year. The holdings aren’t large, but as I see it, if we liked Amazon at 150, it’s really hard to not like it at 105.
The debt ceiling fiasco does create some uncertainty. We do have our holdings on a tight leash so we will move quickly if they can’t figure something out, but if we listen to what the market is telling us, it’s confident something will get done. I believe that we’ll see movement well before the “deadline” if we truly reach that fiscal cliff, and we’ll have a chance to get out before a huge move downward. That’s not a guarantee, just experience telling me that parts of the market will know before we do, and we’ll be able to see that in their trading actions.
To sum it up, making a huge move one way or the other in reaction to something that may or may not happen seems like heading to Vegas and hitting the roulette wheel. It’s not exactly how we do things, so we’ll keep doing our math, listening to what the market tells us.
We appreciate your confidence as always, and are constantly working to give you the best outcome we can!