CASH is a Position! The Issachar Fund (LIONX) is 100% in CASH as of Friday, October 26, 2018. I sold the two Floating Rate Funds because I saw above average selling volume in a few Floating Rate ETFs and I did not want to risk losing money in our Floating Rate Fund positions. I am patiently building my Watch List of stocks that have performed relatively well during the recent sell off. The S&P 500 is down over 9% since 10/3/18 while LIONX is down less than 0.3% in the same period. LIONX is up 3.11% while the S&P 500 is only up 0.98% YTD. It is not about how much you make, it is more about how much you keep that counts. I believe managing risk is the key to long-term success!
The S&P 500 is sitting on support and I am expecting a bounce. If the bounce fails and breaks this level of support, we could see the market test the May 3rd bottom which is about 2% lower. Fundamentally the market appears strong but technically it looks weak and corporate guidance has been tepid at best. I believe the market is trying to digest tariffs, elections, higher rates and a liquidity and credit contraction due to the Fed decreasing its balance sheet by selling bonds. In an effort to revive the economy after a near financial collapse in 2008, the Fed began aggressively buying bonds driving interest rates to near zero. In this process, the Fed injected over $4 Trillion Dollars into the US economy and I believe most of this “liquidity” went into the stock market which resulted in higher stock prices.
I believe that we are seeing the beginning of a “Great Unwinding” of the Fed’s balance sheet and it could get uglier as more liquidity is drained from the system. Less money chasing the same goods typically produces lower prices. What is your Exit Strategy? Will you Buy & Hold and ride the market lower in the next Bear Market decline? I believe that there are times to be invested and times to sit on the sidelines and now is a time to carefully manage your assets. No one knows if this is the beginning of the end or just the end of the huge QE Bubble Market that started in 2008. Draw a “line in the sand” and stick to your plan otherwise you may end up with Life-Changing losses in the end. I actively access risk daily and manage LIONX in an attempt benefit shareholders as I see opportunity across all asset classes long/short. I try to focus on risk and let the profits take care of itself. LIONX can go short (benefit if the stock market goes down) but I am not there yet.
Algos move the market! I believe that “algorithmic” (algos) computer trading programs represent about 75% of the movements in the market today. Back in the day, stock movements were mainly controlled by “fear and greed” but today everything we touch is more digital. Computers are not emotional or rational, so I would not be surprised to see a 20% daily decline if sell programs kick in and feed on itself. Someone needs to be looking out for your money if things get ugly. All of my investable assets are in LIONX, so I am looking out for my money and yours if you are invested with me in LIONX. Computers and robots are not going away any time soon and I believe they will play more of a role in everything we experience going forward. However, computers and robots can’t replace God given Wisdom and Common Sense!
Most mutual funds are required to stay fully-invested at all times and some of them are trying to hide in Utilities and Consumer Staples but they are also declining, just not as fast. LIONX can go to cash at the managers discretion. I am patiently waiting for stocks to “base” and “set up” properly for some high probability trades before I re-enter the market. I am certainly not seeing many “set ups” at this time. It does me no good to have the knowledge of what to do if I do not have the discipline to implement it when the time is right. I believe patience, discipline and common sense is key at this juncture.
Bottom Line: I believe risk is high and now is not a time to be fully invested! A favorable Republican House and Senate victory could be the catalyst that takes the market higher, but a Democratic victory could allow the Bear to dominate the Bulls. Please vote your conscience and let’s Keep America Great!
PS: If you don’t bet, you can’t win and if you lose all your chips, you can’t bet so find a way to keep your chips!
(Portfolio holdings are subject to change at any time and should not be considered investment advice. There is no guarantee that any investment will achieve its objectives, generate positive returns or avoid losses.)
I have been using Investor’s FastTrack since 1990 and Market Smith since 2016. If you are serious about managing your money or other people’s money, I recommend that you take a look at what these two programs might do for you. They have certainly helped me manage risk for LIONX shareholders! (I am not paid to endorse these products.)
The chart below shows the YTD return of LIONX (3.11% in red) and the S&P 500 Index (0.98% in green). Notice how less volatile (risky) LIONX is compared to the S&P 500.