About Our Horrible Start to 2021...

Mike Williams | 3rd February 2021
Categories
Letter from America

"To lose patience is to lose the battle."
- Mahatma Gandhi

The angst is building.

The media senses it and is feeding you with it.  

A month ago, COVID dominated the airwaves.  

Today, it’s GameStop auditioning to be the next dominator in the near-term. 

It’s as incredible as it is sad.

The US has recently witnessed all-time highs in wealth, per capita income, and household net worth. Our costs of debt have never been lower.  And the technology and services available to us to improve our lives has never been higher. 

The real danger ahead is to lose sight of this.

The next 20 years will be vastly more beneficial to you and the United States economy than the last 20 years. The opportunities are so significant that it’s difficult to put them into words or even describe the new world awaiting us round the corner. 

Earnings Count

We’ve touched on pre-earnings issues several times now.  

The main culprit in the short run was that we had seen markets rally strongly into the beginning of the earnings season.

This time around however, the concern was that we set the stage for the "uh - yea, of course things are good - we expected that dummy..." responses instead.  

Then throw in a little "Oh My God, the world is going to end because GameStop is out of control, the market is broken, the little guy will get destroyed and the trickle-down effect will break us all" and you get the current wave of fear that’s splashing on our shores. 

Folks, embrace a few things:

  • COVID did not destroy the world. 
  • Terrorism did not destroy the world. 
  • Recent political vitriol did not destroy the world. 
  • Natural disasters around the clock did not destroy the world.

And neither did unending wars, Middle East unrest, Brexit, Greek Debt, China Tariff Wars, or the Great Financial Crisis of 2008-2009… 

SO now we’re supposed to believe a Reddit "chat room" catching hedge funds shorting the wrong stuff and supposedly "leveraging the system" will be the "thing" that rings the Armageddon bell? 

Keep listening to garbage like this and it will cost you a small fortune.  

Now, About That “Horrible Start” to 2021:

In the chart above, the red arrow is the record highs from a few days ago.  

The orange arrow is where we closed last Friday after "a week which saw TWO of the worst trading days for the markets since October..." (That’s a direct quote from CNBC).   

I’ve also placed two boxes on the chart to highlight the trade range suspects in play - and the support for the markets therein.

The red box was the pre-election trade range. It started at the lows in mid-summer and was tested again with the September and October lows - before starting the next run into the recent highs. 

And now GameStop has served as the "excuse" for a needed setback. And fear has quickly risen just as suspected.  

The red ink is unlikely to be over just yet. 

While our crystal ball remains in the shop for repair, you should expect that somewhere between here and that breakout in mid-November (the red box 3-5%) lower, is a staging area for the new (but likely choppy) support range. 

The issue? 

Controlling your emotions.

And stop believing the media when they tell you about how horrible a start we’ve gotten off to in 2021.