You don’t always have to trade

Stocks stumbled across the board yesterday as investors struggled to find a good reason to buy stocks. Ken Griffen adds a $40 million pile of dinosaur bones to his portfolio, proof that long-long-long-term investing pays.

Let loose the mainsheet. I am not sure every one of you will get that tagline. I know my sailor-readers certainly will. Ok, so I will broaden it a bit in a moment. First, let me say that I have submitted more than 1300 daily notes to you over these past several years. I leave them up for you to look back on so you can check my accuracy and timeliness of themes. Hindsight is 20/20, especially on Wall Street, where many folks like to bury their missteps and highlight their often too few correct calls. Me? Nope, you see it all, and thankfully the missteps were few 😅. That said, if you do go back and look at my past musings, you will find some common, and tried-but-true themes. But wait, if you are a regular reader, you probably know most of them already. If you do, then my goal is being achieved. Now, let’s get back to business… and one of my recurring themes.

I come from a seafaring family. That is a cool way of saying “we had a boat.” It was not a small boat, and it took skill to pilot it. That is why only a few of us were ever awarded the right to ply its helm. I count myself in the lucky assemblage, but it took me years and lots of practice to earn that right. With a boat that size, small mistakes could lead to costly disasters, if not embarrassing ones. The first, and one of the most difficult things to learn is that boats don’t have brakes. That leaves you at the mercy of the wind, the tide, currents, and momentum. That is usually not a problem when motoring in a straight line in open water. You just go on your merry way… full sail! However, if you are in a marina attempting to back your yacht into a tight spot… in between boats that are bigger and far more expensive than yours… well, let’s just say the stress level goes up significantly. Similarly, when trying to maneuver around boats of all sizes in a crowded channel while watching the water’s depth fall, bringing the bottom dangerously close to your hull and propellors, the sweat beads multiply… quite rapidly.

If you are not a boater, imagine parallel parking a car in a tight spot… with your mother-in-law in the back seat… in front of a large crowd standing on the sidewalk… and your significant other in the passenger seat ATTEMPTING to “help” you with driving pointers… and you are late for your dinner reservation. Come on, I know you have been there 😉. Now, imagine that you are attempting that same maneuver without brakes… ON A SHEET OF ICE. Yep, that’s what it’s like. Can I get a hooyah from my Navy friends ⚓🔱? Now, my dad, who was my instructor, but not a very steady helmsman himself, made up for his shaky disposition with wisdom, which he passed along to me. One of those important bits of wisdom was a small piece of paper that he taped in the center of the array of high-tech instruments that surrounded the helm. And that paper read simply “Neutral is your friend!”

That’s it. A simple, but very powerful reminder… that, in fact saved me from many costly, and possibly dangerous accidents. You see, there were many times when the boat was seemingly not going in the right direction. In fact, it was sometimes even not obvious which direction the boat was going in as the wind pushed the bow in one direction while the current swept the whole boat in yet another. The wheel would be useless while moving slowly. Remember, there are no brakes. Just forward and backward on your engines. Well, there was one more option. You could just give up and jump off the side of the boat. While I am sure that option has been taken by some in the past, I would not have ever considered it. HOLD ON, HOLD ON, there was something else… NEUTRAL.

I remember one of those early scary moments when I was in a state of panic, but through it all I noticed that small note from my dad. Everything else I was doing with the engines and helm seemed to be making things worse, and I realized that I had not yet tried… neutral. I tried it, thrusting both engine gears into neutral. Very quickly, I was able to figure everything out. The boat was actually going in the right-ish direction without any engines or steering. The boat’s momentum, the wind, and the current (and maybe a bit of luck) were doing the bulk of the work. All I needed to do was make some minor adjustments to avoid disaster and get the boat where I wanted it.

If you come to my office for a visit, and I welcome you (we have great views), you would see a small note taped to one of the many screens that line my desk. Wanna guess what it says? Markets have been far more volatile over these past few years, but recently, things may not seem to be going in the right direction. We have conflicting statements from Fed members, politicians, economic numbers, and corporate CEOs. They are not all bad, nor are they all good, but they are sometimes confusing and inconsistent. You wonder if recent moves are buying opportunities or selling opportunities. Your finger goes from the buy button to the sell button, as you wonder which one to press. Guess what? Sometimes the best option may be to PRESS NEITHER! Step back and wait from some real signals to trade on. Also, you may realize that your portfolio is actually going in the right direction requiring no big moves. Just remember that, sometimes, “neutral is your friend!”

YESTERDAY’S MARKETS

NEXT UP

• No numbers today, but next week will be jampacked with earnings alongwithmore housing numbers, regional Fed reports, flash PMIs, GDP, PCE Deflator, Durable Goods Orders, and University of Michigan Sentiment. Check back in on Monday for calendars and details.
• A worldwide Microsoft / Crowdstrike – related outage has inserted a bit of unrest in the premarket (both stocks are lower).
• This morning Comerica, Huntington Bancshares, and Schlumberger beat on EPS and Revenues, while Fifth Third Bancorp, Halliburton, and American Express came up short.