The SBF Thanksgiving Bottom


WELL, for those claiming to be -- or wanting to be – the classic value investor looking to buy “when there’s blood in the streets,” all I can say is, now is your time to express your Thanksgiving.

And yet, this time – like every other “this time” – you don’t feel like buying, do you…?

Because “this time” feels different…


But you also know that whenever a “this time is different” moment arrives, you’re supposed to feel that way, you’re supposed to doubt yourself, and then you’re supposed to overcome your doubts…

And yet, you don’t feel like you can…


Because “this time” has now produced another shady Bernie Madoff-like creature, replete with a 21st century 3-letter meme name– SBF.

A guy who was supposed to be the “white knight” of crypto, buddying up with
Washington politicians, former Presidents and Prime Ministers, actors and
athletes, even so-called regulators…

How can you invest when the whole system seems once again to be a collapsing
house of cards…?

Well, ask yourself this.

Is “this time” really that different from 2008-09 when the entire global
financial system was “on the verge of total collapse…?”

Or Y2K when the entire internet phenomenon was “revealed” to be nothing but
“eyeballs” staring into “smoke and mirrors…?”

Or 2020 when a worldwide epidemic was not just going to shut down all economies
on the planet, but also kill you…?

YOU SEE, the point of the way you feel in these moments is that you really believe that maybe it is different this time, that “this time” the hole in your gut, the reasons why you shouldn’t invest, just might be... right…

That’s the point.

Bottoms aren’t reached until you really feel that in your gut.

You’re supposed to feel that.

And then you’re supposed to act anyway.

Easier said than done though…

This is why there aren’t a huge number of Warren Buffet’s in the real world of
investing. It’s not easy to overcome that feeling in your gut. And yet, those
who ultimately succeed in investing are the ones who do overcome it. It isn’t that they don’t feel it, too. It’s that they get past it.

AS always, I’ve learned to rely on indicators that I’ve come to trust over
decades of investing to help me overcome “that feeling.”

It’s not that any indicators are perfect. But some do tend to put me on the
right side of the bigger moves. And one of my main indicators that I’ve grown
to trust is my pH-Liquidity Indicator.

“Liquidity” is seemingly on the tongue of many these days. But back when I developed this indicator in the 1990’s -- in the days of Alan Greenspan and a Federal Reserve that led markets instead of following them -- it was out on its own. And for followers of my 21 Forward research letter, which included investors from institutions to individuals flying solo, it gave us an edge. And I believe it still does.

Here is its latest update, on both asset classes it is capable of measuring -- the stock market and Bitcoin. 



broken image

pH-Liquidity in the stock market 



broken image

pH-Liquidity in Bitcoin


In both cases, the indicator has snuck past the red downtrend lines that have defined the Bear markets of 2022.

Not enough to guarantee that all selling is complete. For that, we usually need
to see a higher low in the indicator coming with a lower low in price – the aptly
named positive divergence.

But this development, the breaking of the downtrend line, is what comes first,
and it is enough to suggest that we’re at or near the final bottom in the Fed induced slam on the brakes that has crippled both stocks and Bitcoin in 2022.


Is “this time different?”

I’ll stick with this indicator, which has called major turns not only in what
the Fed is doing, but in how markets are pricing what the Fed is doing.

That is the key difference in the pH-Liquidity Indicator, the quality that separates it from all the rest talking about “liquidity.”

pH-Liquidity is not just telling us what the Fed and bank reserves are doing in the economy. It is showing us how markets are pricing what those reserves are doing.

And when it comes to investing, it is the pricing part of the equation that we are interested in.


I am a buyer here.

Of stocks.

And yes, of Bitcoin.

The best signals from this indicator come, as I have mentioned, when we get a
positive divergence -- with assets making a lower low in price while the indicator makes a higher low. 

That will be the final buy signal to complete a long allocation.

But for now, a dipping of the toe into long positions is warranted.


I will be back with updates if and when we get that positive divergence in pH-L as well.


PS. An FYI for those who haven’t followed every tick of the markets for decades:
some of the best stock market bottoms of all time have come in around the Thanksgiving
holiday period…


--RL / 11.18.2022



Richard Lees and clients of Richard Lees Capital Management may be long stocks or cryptocurrencies mentioned in this article. Clients invested in any of RLCM's managed digital portfolios have undergone thorough risk evaluation to deem these investments appropriate for them, as should anyone considering speculative investments, particularly in crypto.