WW III

We felt in recent months that there were too many people on the one side of the boat. That “side of the boat” was investors heavily shorting US Treasuries are they prepared for the Federal Reserve to raise rates three times this year. When everyone thinks something will happen you can almost guarantee that something else will. The 10 year closed Thursday at 2.23%. While a lot of because of geopolitical concerns and the long weekend we still think investors are too short Treasuries. This could be the last move lower in Treasuries as the short sellers’ force yields lower to cover their shorts and stop their pain. For now, we are still long duration but looking to sell into strength.

The last 30 minutes of trading have been abysmal. Four out of the last 5 trading sessions markets have moved lower in the last 30 minutes. We postulated in recent posts that the last 30 minutes are the “tell” in the market right now. Thursday was exacerbated by geopolitics and the long weekend so next week will help make that clue a bit more solid. Keep an eye on the last 30 minutes as that may be our best clue as to the near term direction of the market.

Strange week. Congress went out on Easter recess and so investors and the media began to focus (perhaps obsess) on geopolitics. The beneficiaries were the usual suspects of bonds and precious metals. Let’s see how things play out early next week if WW III doesn’t manage to break out this weekend.

Another week and another famous hedge fund manager is giving money back to clients. We take this as a sign that we could be at or near an inflection point. Jeff Ubben is a highly respected hedge fund manager and is giving 10% of his fund back to clients. He is finding it difficult to find value in this market. Valuations are stretched.

Active vs. Passive management has not been much of a fight over the last decade but we think that there are signs that perhaps we should be tilting more in the direction of adding some more active management. One of the headlines in Barron’s this weekend is “Can Humans Still Beat the Market”. This week Pennsylvania’s elected treasurer announced he is moving $1B from active to passive management to save $5M in fees. Treasurer Moving to Passive Investments

We know the argument all too well. Active is less predictable. It is more costly. It also pathetically tax inefficient. We think that investors have become too blind buying the whole market and there is room for active. The pendulum will swing back. We are diving back into researching for the active players who will outperform.

I  think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd  Blankfein

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.

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