The Issachar Fund (LIONX), is about 99% invested in a diverse group of leading growth stocks, about 50% in Muni Bond ETFs and about 30% Short Technology. I purchased more stocks and muni bonds and put on a hedge (30% short) seeking to limit some downside risk should the market turn south on escalating coronavirus fears. If the “fears” diminish, I plan to remove the hedge and stay long. I am of the opinion that Chinese and US central banks will flood the market with liquidity as needed to squash virus fears seeking to instill hope and prosperity into the markets. The Fed currently has the ability to increase its balance sheet by creating money out of thin air without anyone auditing its records. Sooner or later, there will likely be a price to pay for this excess money creation, but I do not believe the time is near. I plan to ride this liquidity wave as long as it lasts. However, I will not stick my “head in the sand” and pretend that this will continue forever. Risk management has not been “valued” since the financial collapse in 2008 but I believe it will be “respected” during the next correction/bear market. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
The Fed’s balance sheet increased by $16 billion last week and $422 BILLION since 8/30/19! As long as the Fed keeps expanding its balance sheet, I believe it will be hard for the market to correct. When the Fed creates liquidity out of nothing, I believe it usually finds its way in the stock and bond markets where it is being welcomed with open arms. If the coronavirus causes earnings to contract more than anticipated, I believe stock prices could still continue higher due to an expanding Fed balance sheet causing P/E ratios to expand.
This bull market could end with a parabolic move higher! While many pundits believe P/E ratios are high and stretched and ripe for a sharp correction, I believe the market could go higher if the Fed remains on our side. I believe the Fed has our back and will use all tools in its market bag to support an upward slopping stock market into the November election. If I am right, this bull market could extend its gains higher and end with a parabolic move into November. If that were to happen, I believe Trump would be reelected and both Houses would be ruled by Republicans for more than four years. However, I will continue to manage risk on a daily basis seeking to avoid life-changing losses.
Party like its 1999! The Fed expanded its balance sheet similar to what it was doing right before the year 2000. There was great fear percolating through the markets at the end of 1999 as investors feared computers would not function properly when the clock strikes midnight on December 31, 1999. The worst fears were not realized in January, but the market topped on March 24, 2000. From 3/24/2000 to 9/21/2000, the market dropped over 35%! History has a way of repeating and rhyming so let’s keep our eyes on the road and never fall asleep at the wheel stuck on “buy and hold” cruise control.
China is learning how to play the QE game! China dropped about $29 billion into their repo market on Monday, February 17, 2020. They also lowered their interest rates by 10 bps. I believe the Chinese could be learning how to play the QE game better than their rivals at the Federal Reserve. Think about it, if no one knows the limits of QE (printing money out of thin air) then why not push the limits to see how much the market will stand. I believe that is where we are. When a country gets in a bind, they just print more of their currency hoping the “market” will “take it”. Central banks understand if they reach an inflection point by printing too much currency they are doomed. I believe it is the “secret” no one wants to talk about because there is no “Plan B”. If central banks get to a point where the world does not accept their currencies, then the whole system could implode. We are not there yet, but I believe we are headed in that direction. Managing risk daily and letting the market determine the return has helped me to avoid life-changing losses.
Junk bonds are still confirming the uptrend in the stock market! The junk bond market is like a “canary in the coal mine” that has historically revealed to us the “risk” in the market. The junk bond market is trending higher and just reached an all-time high. This tells me that investors may still have an appetite for risk and their hunger could be growing. The market is also trading near an all-time high and I see no alarming signs of the trend ending any time soon. I believe there are times to be in the market when the risk is low and there are times to sit in cash when the risk is high. I view the risk as low because the economy appears to be firing on all cylinders and I believe the Fed will do whatever necessary to keep this train rolling into the November election. It is hard to stop a train once it is rolling!
Bottom line: The market appears to be firing on all cylinders with plenty of gas still left in the tank! I remain optimistic and believe the trend (the Fed and QE) is my friend. However, there is always the possibility of a Black Swan event so stay alert and focused on the prize. I wish you all a healthy and prosperous week! Grace & Peace to Everyone!
LIONX is a BRI, Trend Following, Liquid-Alternative, Tactical Allocation Mutual Fund that is Actively Managing Risk like a Hedge Fund seeking low-correlation/beta/risk to the stock indexes. When my Strategy identifies a low-risk environment, I seek to invest in growth stocks/junk bonds with sound fundamentals and strong technical chart patterns. During high-risk environments, I seek to avoid Life-Changing losses. The Issachar Fund seeks moderate capital appreciation consistent with capital preservation. The Fund’s Adviser (HCM) is Celebrating 30 Years of Actively Managing Risk! 99% of my liquid net worth is invested in LIONX, so I have the incentive to avoid life-changing losses when the next recession/bear market occurs.
Before June 2019, I was not honoring God by investing in companies that support abortion, pornography, human trafficking, etc. then God touched my heart. He revealed to me how to screen out “bad actors” and make His Fund a BRI Fund. Since partnering with Inspire, LIONX has only invested in companies with positive Inspire Impact Scores and I am very pleased with the results. Biblical Responsible Investing (BRI) describes the activities of Christian investors who purposely align their investment choices to support their Christian values. LIONX is also ESG (Environmental Social Governance) conscious, pro-life and pro-family.
I Believe: The God of heaven and earth is my Father and I am a Son. Jesus is my Savior and the Holy Spirit is my Helper. We are all under the New Covenant of Grace and there is nothing we can do or not do to make God love us any more or less. I try really hard to Rest daily in His Grace & Peace and Love my neighbor the way Jesus Loves Me! I pray that you would accept the Love of my Father because I Believe You are a Son/Daughter that is totally forgiven and unconditionally Loved Forever! Amen!
Investors should carefully consider the investment objectives, risks, charges and expenses of the Issachar Fund. This and other important information about the Fund are contained in the prospectus, which can be obtained by calling 1-866-787-8355 or visiting https://www.LIONX.net. The prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC., member FINRA/SIPC. Horizon Capital Management Inc., (HCM) is not affiliated with Northern Lights Distributors, LLC.
Important Risk Information:
Mutual Funds involve risks including the possible loss of principal. An investment in the Fund may not be appropriate for all investors. The Fund may hold cash positions when the Adviser feels that the market is not producing returns greater than the short-term cash investments in which the Fund may invest. There is a risk that the sections of the market in which the Fund invests will begin to rise or fall rapidly and the Fund will not be able to sell stocks quickly enough to avoid losses or reinvest its cash positions into areas of the advancing market quickly enough to capture the initial returns of changing market conditions. If the Fund uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. The Adviser’s judgment about the attractiveness, value and potential appreciation of particular asset classes and securities in which the Fund invests may prove to be incorrect and may not produce the desired results. If the Fund uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. Past performance is no guarantee of future results. The Inspire Impact Score is a faith-based ESG (environment, social, governance) security selection methodology that seeks to identify the most inspiring, biblically aligned companies in the world. The Inspire Impact Score utilizes both positive inclusionary and negative exclusionary screens in the scoring process. The result is a rules-based system of finding companies that are operating as blessings to their customers, communities, workforce and the world and excluding companies that are operating at odds with biblical values. NLD Review Code:3270-NLD-2/18/2020 Dexter P. Lyons, Portfolio Manager (LIONX) Monday, February 17, 2020.