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Sugar highs and others

Sugar Highs and Other Items

Sugar Highs and Other Items

Sugar and disappointment are two things found in plenty at the marketplace. As the market feeds itself more sugar, disappointment awaits. Euphoria (the end stage of the Bull) signaled by folks chasing Unicorns and Rainbows is approaching.

To be clear we are not there as yet (it could be multiple months or a couple of years away) however it bears watching closely. The Bear has surely been disturbed from its hibernation by the collective cacophony created by today's market participants.

The passions unleashed by the Robinhood tribe descending upon the trading portals of the internet are likely to have the typical ending of them buying high and selling lower... as they follow the latest hot stories/ stocks being pushed on Twitter, Redditt etc. by celebrity CEOs.

Investing oft is a lonely path where following the herd is rarely profitable. In that vein allow me to share a few thoughts which are divergent from the current crop of news stories being bandied about in the media.

Stimulus... The Biden administration proposals are being touted by some as being the extra fuel that will push the economy into overdrive. If passed by Congress in its present form (and that's a big if), our view is that it's being mis-labeled and hence wrongly attributed as fuel, its perhaps transfer payments from the Federal Govt to recipients as substitute for their earnings lost on account of the lockdown so the rocket like growth expected may in reality be a Pinto starting.

Inflation Bogeyman... Expectations of inflation taking off because of the large money supply (M2) (Fig. 1) being created are everywhere. Indeed, M2 has taken off at an exponential rate as the government fired up the printing press. YET... Inflation is dependent on 2 things. Money Supply (M2) and Money Velocity (Fig. 2) together. We see money being printed however the speed of transactions (money exchanging hands from one participant to another) is dropping hence keeping inflation moderate in reality. So, for e.g. those long of Commodities trade for an expected super cycle may be in a for a rude awakening.

SPACs splat...Another old new wine to peddle to the Pixie dust believers. Imagine if someone asked you to give them a blank check and wait around for 2 years while they looked for investment ideas, oh and then they would take 20-30% of the money as fees, you likely will have shown them the door, yet others have poured Billions in these vehicles. Amazing.

Consumer Spending... The popular narrative is that as the government sends checks directly to the Consumer, we will see spending increase in turn demand for goods / service will spike up creating inflationary pressure. That could be or not. The Personal Savings Rate (Fig. 3) is at historic highs which shows that so far, the consumer has saved the transfer payments / stimulus money or used it to pay down debt like credit card balances or personal loans.

This logically aligns as they are likely hunkering down and saving cash (similar to what Banks did in 2009 post the banking crisis... when they got $$s from the Fed instead of lending it like in the past they used it to shore up balance sheets)

BTW, this chart (Fig. 3) also ties in to an earlier point on why the Money velocity (Fig. 2) is so low (as money hoarding is happening)

Coins... The next big thing... to currencies. Likely not. Currencies are store of value, whose prices are largely stable, can be used to buy / sell goods with others. Crypto coins are a platform for speculation as acceptance of these coins at shops / merchants' is negligible, the price moves massively intraday and they are a cyber-attack nightmare waiting to happen. YET another sign of emerging euphoria as many ignore basic diligence on an investment.

OUTLOOK:

It has been a long, sad, and tumultuous 2020. In that time, we were steadfast in our view of keeping our members invested in the market, that has been of utility.

The real stimulus (which is not getting talked about enough) for this economy are the Vaccines. Every arm getting one gets us closer to the end of this socioeconomic nightmare and continues this economic expansion further.

Economic reality is catching up to market expectations, those same expectations are ratcheting higher on the backs of wishful thinking. At some point those wishes will derail the current market expansion.

Our present course of staying invested and adding funds in the market is reasonable, the months/ years remaining of the current expansion are likely to be valuable from a return's viewpoint. As an example, see (Fig. 4) returns prior to a bear market start.

We continue to seek opportunities to expand your financial freedom... Together

Warm Regards...
Team OneNorthStar



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NorthStar Portfolio Investments, LLC
80 Fourth ST, Stamford, CT 06905
investments@onenorthstar.com
+1 203-343-0880


NOTE: Past performance is no guarantee of future results. A risk of loss is involved with investments in capital markets. Please consider investment actions in light of your goals, objectives, cash flow needs, time horizon and other lasting factors.