Manage Risk or Else! The Issachar Fund is still 100% in Cash, as risk still seems to rise! I believe there are times to be fully invested and times to sit on the sidelines. Investing without a risk-management discipline can be like going to the casino and expecting to beat the house at their own game. One may get lucky and win a few big hands, but the “house” (market) eventually wins. After 33 years of actively managing risk, I have learned the hard way to cut losses small, or I may end up trying to dig myself out of a deeper hole. The markets don’t care if I have a gain or loss. The market is comparable to a giant casino (the house), luring me with “shiny objects” to take more of my chips. When the market is not rewarding me for taking risk, I take some chips off the table until I can sleep with what is in my hand. Sometimes it may be best to throw in the towel if my line in the sand is crossed to protect my nest egg, then wait for the sun to shine again. This may be a time to “fold ’em” and not “hold ’em.” Managing risk may allow us to stay in the game to catch those big hands that will inevitability come if we play our cards right. I do not plan to stay wrong when I am wrong because that is how to go broke. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
Wow! The Fed increased its balance sheet by almost $300 billion last week! The Fed stepped on the Quantitative Easing (QE) gas pedal by printing money out of thin air and lending it to hedge funds that buy the big indexes. From 4/13/22 to 3/14/23, the Fed has steadily decreased its balance sheet by over $600 billion in fighting inflation. However, Jay Powel wiped out 50% of the last 11 months of QE in one week! This tells me the Fed may be more concerned about preventing a banking crisis/recession than slowing the inflation it helped create. Banks make money by giving depositors a lower rate than their long-term borrowers. Banks tend to lose money when short-term rates exceed long-term rates (inverted yield curve). When investors realize that it is hard for banks to make money while the yield curve is inverted, investors tend to sell bank stocks, and selling begets more panic selling. I do not believe the selling is over, and the Fed may be trying to prevent another “run on the banks” by flooding the system with more liquidity which could lead to higher inflation. The Fed seems to be driving with one foot on the gas (creating $300 billion in one week) and one on the brake (raising rates), headed for a financial/economic cliff. I believe we desperately need new leaders in Washington with a vision to unite America before it is too late!
Gold, Bitcoin, and Technology stocks have been moving higher! As the Fed created $300 billion last week out of “thin air,” this money has to go somewhere. This newly created liquidity may have been used to bid up Gold, Bitcoin, and tech stocks. Since 3/10/23, Bitcoin has been up over 37%, and the NASDAQ 100 Tech Stock Index (QQQ) is up over 5%. However, Gold has risen over 9% since 3/8/23. Gold put in a bottom before QQQ and Bitcoin, so maybe the gold market is trying to tell us something. Gold may be taking back its historical flight to safety and inflation hedge status. I can’t see the American government adopting Bitcoin as its digital currency since it can’t be controlled/devalued as they do with the Dollar. I have no interest in owning Bitcoin or any other digital currencies. I am concerned the government may use this crisis to introduce its own digital currency and force everyone to rely on the electric grid they can control. Imagine the government rationing electricity for your electric car, turning on your home lights, or using their digital coin to buy a gun. The recent rise in tech stocks is over-bought and may be short-lived unless the Fed keeps printing “free” money or lowers rates. I want to short QQQ and go long Gold, but I need more conviction.
SVB Financial Group (SIVB) look good two-weeks ago! The rating agencies considered their debt and other obligations “safe,” and no government bureaucrats argued otherwise. But insiders had already been busy dumping $150 million of their SIVB stock for months. Three days before Silicon Valley Bank blew up, Jay Powel said there was “no evidence that they raised rates too much.” Rising rates caused huge bond portfolio losses (duration risk) on the books at SIVB, leading to a “run on the bank” as depositors transferred their money to bigger/better banks. Now we are assured by Janet Yellen that everything is “safe and sound.” Yellen and Powel told us that “inflation was transitory.” Making sound investment decisions based on lies from our government is difficult. Seek the Truth, and it will set you free!
Bottom Line: We are content in Cash while banks experience more “runs” as depositors cash out in droves! Treasury Secretary, Janet Yellen, said they would protect all deposits, not just accounts under $250k covered by FDIC insurance. Bitcoin is rallying like it did during the massive balance sheet expansion experiment during COVID. Most cyclical stocks are in downtrends, indicating a possible economic decline. The S&P 500 index trades below its 50-DMA and 200-DMA on above-average volume. Gold seems to be regaining its “inflation hedge” status. Commodities and oil are falling fast as investors anticipate reduced demand in a pending recession. The Fed lent $160 billion to banks and $153 billion to the FDIC last week. We could be headed for “stagflation,” where the economy falls, and inflation rises. Respect/manage risk or long-term financial goals suffer. The Fed meets Wednesday to decide on a 25-bps rate increase or cut. Either way, market volatility will likely increase. God help us!
Links: Performance, Fact Sheet & Strategy, Blogs, My Story, Docs, BRI
Issachar: A Buy & Hold Alternative Actively Managed Like A Hedge Fund!
Our help is in the name of the Lord, who made heaven and earth. Psalms 124:8
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: 5275-NLD-03/20/2023.