Simple Markets

If you grew up in the ‘80s, you often heard reference to a synthetic chemical made up of carbon and fluorine called Polytetrafluoroethylene.

It’s better known by its commercial name, Teflon, a unique compound to which almost nothing sticks.

John Gotti, the famous mob boss, was regularly referred to as the “Teflon Don.”

And Ronald Reagan was repeatedly called the “Teflon President.”

In Gotti’s case, this nickname came about after escaping unscathed from several trials where he was charged with everything from tax evasion, to racketeering, to murder.

Reagan earned his sobriquet after various scandals and controversies - in which he was tangentially connected - were uncovered but failed to diminish his public appeal.

This week we saw the continuation of what I’m calling the “Teflon Rally.”

Continued social unrest, spikes in COVID cases, horrible economic numbers, and even Apple re-closing some of its stores couldn’t knock the market down.

And this rally bears some of the same hallmarks as the phenomenon that surrounded both our country’s most famous non-Coppola/Scorsese mobster as well as its 40th president.

You see, everybody knew John Gotti was guilty, including the jury, but they just decided to acquit him anyway.

Some jurors did so because they saw him as a sort of modern-day Robinhood, while others did so to curry favor from the Godfather. And still, others did so after they received an unmarked envelope in their mailbox bursting with untraceable bills.

In Reagan’s case, voters were just willing to excuse the president’s shortcomings that they wouldn’t accept in others, no matter how much dirty laundry his opponents uncovered.

In both cases, the obvious was being actively looked past, just as investors are looking past the economy, valuations, and common sense.

Which, for now, is okay, because the Fed is printing money and buying up everything that’s not nailed down, and a rising tide lifts all boats.

It’s pretty simple.

In a little bit, we’ll take a look at 30+ charts and I’ll serve you up the best curated links from the past week, but first, stick with me for a moment while I tell you a story.

I promise it will be worth it.


Here in my car, I feel safest of all. I can lock all my doors, it’s the only way to live. In cars.

                               -Gary Numan, Cars


Down in the park where the mach-men meet, the machines they play ‘kill-by-numbers.” Down in the park with a friend called “five.”

                       -Gary Numan, Down in the Park


In early 2018, the day after my mother died, I dropped my 67’ Mustang at a repair shop for some long-overdue work.

There was some symbolism in the timing.

The car had been in my family since 1967, when my great Aunt, who was 67, bought it brand new from San Leandro Ford in Northern California.

I loved this car, but it wasn’t safe for transporting kids and had ceased to be my daily driver a long time ago, and for the most part had just sat in my driveway, slowly decaying.

My mom had spent the last two years slowly decaying as well, though not from the elements, but cancer.

I couldn’t save her, but I could save the ‘stang.

Question was, at what cost?

The mechanics spent a week pouring over it from bumper to bumper to give me an idea of what had to be done to get it back on the road.

When a car reaches 50 years of age you start having issues with things other than run of the mill items, and when I returned to the shop I was presented with three single-spaced pages full of suggested repairs.

As the owner went over each issue in exacting detail, a mental calculator kept a running tally in my head.

I wanted to get the car driving again, but I had a line in the sand about how much I was willing to pay and figured that by the middle of page two I was way over that number.

Yet, when he finally hit me with the total, it was less than half of what I was expecting.

Hashtag winning.

I was shocked at first, but then realized I had forgotten something since the last time I’d had major work done on my baby - 20 years previous - a 67’ Ford Mustang is a simple car.

You control where it goes by turning a steering wheel connected to a metal shaft, not a computer interface.

It has no electric locks, windows, defrost, or air conditioner.

There are no sensors, GPS, or autopilot.

Repairs are simple, and thus, inexpensive.

Hell, I’d once had the whole engine completely torn down and rebuilt for less than a grand.

Right now, post-corona crash, we are in a simple market. One that doesn’t lend itself to overly complex strategies.

If you are on an institutional desk, you short volatility.

Simple.

If you are a long-term investor you put your money in an index fund.

Simple.

If you are an active investor, you buy every fucking dip.

Simple.

If you are a trader, you buy every breakout or pullback to support.

Simple.

If you want exposure to an exotic portfolio, asset class, or strategy, you buy the appropriate ETF.

Simple.

If you’re a Millennial who wants to retire before 25 - and doesn’t like paying commissions - you use Robinhood.

Simple.

This market is simple and inexpensive to take part in.

The only people who don’t think this market is simple are hedge funds and perma-bears who try to make it complex.

Yet even as they are continually wrong, they are right.

Markets are not simple by nature.

A simple market is an aberration, just like the ones that came out of Black Monday, the Dotcom boom, 9/11, the Financial Crisis, the Flash Crash, Brexit, and the one we’re in right now.

Historically, simple markets don’t last because they are risk-free environments, but a “normal” market has risk.

And you get paid to take risks.

Smart risks. Measured risks. Manageable risks.

A no-risk market has a limited shelf life as it puts everybody on one side of the trade, and though it may pay in the short-term – as long as the Fed takes the other side of the trade - ultimately, it’s a loser’s game.

Nobody knows when complexity will come back into the market. But sure enough, when it does, it will take down those who aren’t prepared.

It’s just that simple.

Okay, let’s get to the charts…

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Thanks for reading this week’s edition of The Lund Loop.

I want to hear your opinion on these or any other topics you see fit to pontificate on.

So drop me a line.

Talk to you soon.

-B

P.S. It should go without saying - but I’ll say it anyway - all opinions expressed in The Lund Loop are my own personal opinions and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.

Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.