06-16-2020: Nothing or No One is Stopping the Gravy Train

I've lost count... How many massive infusions of money have come out of Washington in the past 90 days? Seems like almost one a day... sometimes more than one a day. Well, here it is, another day... and here comes the next trillion dollar capital infusion. Today's iteration is "The Infrastructure Bill".


And why not? Heaven knows how bad our highways are getting; not to mention the need for better overpasses which pull double-duty as homeless shelters. I'm sure lots of cities (like Austin) can use a few billion for more light rail for those few commuters who actually ride light rail instead of simply driving. Austin is NOT New York. Gotta stop there... I'm getting dangerously close to proffering a political opinion.


Maybe I'm just a wee bit too cynical. We have a president who is an accomplished builder of huge projects. Like him or hate him, my guess is he knows a thing or two about the best use of capital for infrastructure projects... or knows people who do.


With the economy continuing to teeter on the brink of either careening higher or careening clear off the road and into a bottomless chasm, dumping yet another trillion dollars into the economy to beef up our nation's infrastructure actually sounds reasonable; especially if all of the red ink can be written off to COVID-19.


Fiscal responsibility conveniently goes out the window when faced with a do-or-die situation like we are in now. Plus, it's never a good idea to waste an opportunity to spend money on projects that can help everyone; especially voters. My guess is both sides of the aisle will sign on for this one. Every Congressman has a bridge to nowhere in need of getting built, I am sure. Let's hope there are fewer of those than not if the infrastructure bill gets to the president's desk.


For those of you have a Masters Degree in Monday-Morning Quarterbacking (and you know who you are), I am sure you saw last Thursday's huge sell-off as the bottom and have been making a ton of money the last couple of days. Congrats! For those of us who do not have as clear a crystal ball as you do, we have been taking a wait-and-see approach to this market by keeping most of our powder dry. I started out the week with my client accounts about 30% or so invested. I added a little more yesterday to some of the models; and, today, I put us at 80% to 100% in the market (in all but my Diversified Income Strategy) when we got a bit of a pull-back in the typical mid-day profit-taking action.


The result? All client accounts made money today and when that occurs they are 'mostly' happier... yes, I do have a few clients that are harder to please than others. In my world, a happy client is job one!


The question that I get asked the most is, "How long will this bullish trend last." Of course you, dear reader, know the answer to this and as such, I hate to repeat the obvious, but for those readers who are just now joining our little family, here is the answer: "The current bull market trend will last exactly, to the minute, until it doesn't." We spend a lot of effort and quantitative analysis detecting when that "doesn't" occurs.


At this writing, the market has been in a bullish trend for almost 4.5 weeks. The sell-off last week did not change that trend.


What we want to happen now, is to see this trend last at least long enough for stops to get pulled up above their respective basis prices in our client accounts. Yesterday and today helped that process a lot.


I'm giving the holdings plenty of room to run. Stops are at the widest level that I use. While I do not expect this market to continue to move higher every day, I do not expect (this is a guess for those of you who may think otherwise) any major sell-offs as long as Uncle Sugar and his entire family continue juicing the market (yes, and the economy) with more and more and more free money.


No one and nothing (so far) is stopping the unending gravy train of free money in one form or the other. As long as that continues, the market will (likely) continue its bullish slope. Tomorrow's market looks (at this point) to be selling off a bit... totally expected.

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