Good afternoon. I had been writing a longer newsletter, but thought I’d get out a quick note on recent volatility. Right now, we’re viewing the type of normal pullback we get nearly every year—we usually get one around 10% even in bull markets. Given volatility has been so low, the market was rather complacent. You might have read, but a big part of it is the unwinding of a Yen carry trade after BOJ (Bank of Japan) hiked its interest rates, which has impacted many hedge funds. No, we didn’t have a carry trade in portfolios and have actively worked to avoid leverage within our positions. Of course, the world is on edge awaiting on any Iranian response to Israel. This will likely have an impact on energy markets, but Iranian oil has been under sanction and Israel is not a producer… it would more likely have an impact on the transportation of oil. As it has been in past and continues to be now, all eyes remain on the Fed. Now it is a virtual certainty that they will cut rates in September, if not before. Many on bubble vision are calling for an emergency rate cut. I mean, we’re hardly even in a correction and they’re already calling for it. I don’t think that will happen unless there are liquidity issues that surface, which doesn’t seem to be the case at this point. Attached is a good piece from Raymond James putting the latest volatility in perspective.
Expect part two of my newsletter in next few days that will include: link to our behavioral finance webinar, some observations from my latest investment conference, comment on our new scheduling system discussed last newsletter (should have letters soon!), comments on the rapid series of geopolitical events from last month, and finally a ‘save the date’ for this year’s wine and chocolate event!
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