Cash is King! The Issachar Fund is 100% in Cash, as risk seems to be rising! After Fed talk of higher rates for longer, the Silicon Valley Bank (16th biggest bank in the US), and Signature Bank failures, stocks have been declining across all sectors. The risk of potentially more bank runs and closures has set an ugly tone in the market, and many investors are on defense. Our positions hit sell stops, so I followed my discipline to avoid life-changing losses. Sometimes it is easy to make money, and other times it is flat-out hard. I believe we are in a “hard penny” environment, but this, too, shall pass. I make decisions based on price and volume, so we will entertain the opportunity when they confirm it may be safe to return. For now, the markets overall are in retreat, so the best we can do is sit tight and be glad we are “out wishing we were in” instead of “in wishing we were out.” I am content in Cash, letting the dust settle and waiting for new trends to develop. After this self-induced inflation mess has been sorted out, there should be another opportunity to make money, so let’s remain patient. I am looking at short ideas, but the market is due for an oversold bounce, so Cash is king for now. There will be another bull market, and those with mental and physical capital will be the winners. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
Inverted yield curves (when short-term rates are higher than long-term rates) are historically bad for banks and economic growth! The inverted yield curve is now the steepest since 1981. Around that time, the Fed Funds rate was a massive 20%. That would suggest the Fed is far behind where it should be if it wants to kill inflation. Banks borrow money from depositors, paying them a lower interest rate, and lend those deposits out at higher rates making a profit on the spread. However, banks are losing deposits to higher money market yields, and they are losing money on their Treasury bonds as Jay Powell fights inflation with higher rates. Hiking rates exacerbate inflation. Tightening credit without hiking rates can reduce inflation. Demand can be reduced by making loans harder to get simply by raising loan qualification standards. Without such tight money, smart people continue to borrow to buy assets because loans with interest below the inflation rate are like “free money.” That is why luxury real estate has had big price increases in the past year while other real estate types are not doing well. Raising interest rates has never been a recipe for growth.
The M2 measure of the money supply growth was unusually fast through January 2022! In the past year, it has been reported as falling for the first time since the 1940s and at the fastest pace since the Great Depression. If M2 affects “real” (inflation-adjusted) economic output with a lag of a year (give or take), then that support for activity likely peaked very early this year and could dwindle sharply by year-end. We need current leadership to do what is good for the country and not what is good for their party or ideology.
Bottom Line: We are content in Cash while leading stocks decline on above-average volume. Historically, a traditional “run on a bank” happened as depositors stood outside the bank to get their money. However, most current “bank runs” occur with a few clicks on a computer or cell phone, and money is transferred to another bank. Banks are then usually forced to pay higher rates, or customers will transfer balances to higher-yielding money market accounts with a few clicks. Banks will likely raise deposit rates at the expense of profit margins to hold onto or attract deposits. Modern Bank runs have then called or attempted to reduce their outstanding lines of credit and slow lending to borrowers. The loss of this credit lubrication to the economy has shown to be an economic depressant that can lead to a recession sooner than most expected. However, I believe God is still on the Throne and working all things for our good!
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We know that all things work together for good for those who love God, who are called according to his purpose. Romans 8:28
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, obtained by calling 1-866-787-8355 or visiting IssacharFund.com. 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. The Adviser’s judgment about the attractiveness, value, and potential appreciation of particular asset classes and securities in which the Fund invests may prove incorrect and may not produce the desired results. Past performance is no guarantee of future results. Ratings are only one form of Fund performance and should not be used as the sole consideration in an investment decision. Opinions expressed are subject to change, not guaranteed, and should not be considered investment advice. There is no assurance these opinions or forecasts will come to pass, and past performance is no assurance of future results. For more information regarding the fund, including current performance, please visit IssacharFund.com. Review Code: 5265-NLD-03/13/2023.