05-13-2020: Common Sense vs Uncle Sugar

Tepper versus Powell/Congress... or a better comparison is "Common Sense vs Uncle Sugar".

Billionaire hedge fund investor, David Tepper, according to CNBC, said today "this is the most overvalued stock market since 1999". Actually, I do not completely agree with Mr. Tepper, but I do agree that only Uncle Sugar is keeping the market up, and that my friend, is the real conundrum.

I prefer to look at the market from the standpoint of common sense. Without revenue, companies fail... big companies, small companies, mom/pop companies... all companies. It is just that simple. Unlimited money from Uncle Sugar is NOT revenue; it is a band-aid until revenue returns. And guess what... the sugar from Uncle Sugar is highly addictive. Once you start consuming this free sugar, it becomes harder and harder to break the addiction. You begin to look for ways to get more sugar and quit looking for ways to generate revenue the old fashion way... offering services that people want and are willing to pay to get for a price that is higher than what it costs you to provide.

That is capitalism and free money to keep the doors open is NOT capitalism. Well run companies (or States or municipalities) should rely on the free flow of capitalism to get our country back to work; not the free-flow of addictive, government-supplied money in place of hard work and efficient management with a vibrant market... and, there's the rub... where is the vibrant market? Well, if you listen to 'some', it is just a matter of lifting the lock-down rules; and if you listen to 'some others', the vibrant market is gone until there is a vaccine (which could be never).

But, the market has been assuming (maybe not based on today's 500-point sell-off in the Dow) that there will be enough money pushed into the pockets of anyone who has a pocket, to let companies grow and prosper and, by extension, see the stock market move higher and higher. Why do I believe, like Mr. Tepper, that line of thinking is folly? Silly me... I guess.

So, what did I do today? Well, I bought into this falling market in a couple of strategies (Tactical Growth and Diversified Income)... not a lot, but a decent amount. Our RNG and TMO trades made some nice gains today. And while the market was down -1.75% today, Tactical Growth was only down about 0.13%. We now have some solid positions in TG that have long track-records of withstanding interim market sell-offs. And, with Uncle Sugar having 18-wheelers lined up as far as the eye can see (Nancy is driving the biggest one) overflowing with addictive sugar, it will not surprise me to see a rebound tomorrow... not because of common sense, but more because you simply can't fight the Fed and unlimited trillions of dollars of free money for all.

Just wait... I'll bet it won't be long before someone from one side of the aisle (you know which side) will come out and say, "Since we can print more money than the entire GDP, there is no need for anyone (except the very wealthy, of course), to pay any income taxes this year. We (the government) will just write a check to ourselves for the total amount of taxes we normally get each year, and give the entire country a one-year tax holiday!" After all, why should 'our people' pay taxes when the government can just write itself a check for the money that they need to meet its obligations. Makes perfect sense in this world we live in right now.

For tomorrow, I am still looking to put more money to work on the bullish side in Tactical Growth, but I am being very, very selective in these trades. I full-well know that this market could snap out of it and get some much needed common sense... so these trades, while not bear-market 'proof', are as close to that condition as I can find. Total Market, ULTRA and ULTRA-MAX are index ETF-centric strategies and need a clearly defined market trend to capitalize on; and that trend has not yet evolved. And, while Tepper is probably right that the market is far too overvalued at this point, the market is likely to continue lapping up the sugar and could easily move higher. This condition is not based on common-sense or fundamentals, it is based purely on emotion and I suspect there will be a hard day of reckoning coming at some point, but probably not tomorrow. If I am wrong and the wheels fall off this market tomorrow, we have stops in place to get us back to cash.

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