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- Defensive But Extremely Optimistic...Micro Brands... and Everything You Need to Know About the 200-Day Moving Average
Defensive But Extremely Optimistic...Micro Brands... and Everything You Need to Know About the 200-Day Moving Average
Howard Lindzon
April 03, 2018
I have been cautious enough as of late on this blog. It’s time for an optimistic riff and rant.
As I chase the good energy, the sun and smart people around the world I see too many good things to stay negative (re deploying capital) for long.
While I am on the defensive about stocks at the moment, I am thrilled about the quality of founders and startups teams that I am seeing.
Just a year ago it looked like only an ‘unhinged’ engineer would leave the safe bosom of Facebook or Google, but now it seems silly for smart people not to leave.
People are taking career risk. That is great. The last generation did not have that luxury and it is a sweet luxury to have.
I doubt the markets are pricing this ‘mobility’ in, because the media gets paid for ‘the world is ending’ clicks, the investments banks have fired all the analysts, people put robots in charge of their money (I continue to invest in companies that do the opposite of robots when it comes to money), and…and…but…drivel, drivel, yawn.
Our Social Leverage portfolios are also seeing companies with unbelievable growth.
We are actively investing out of Social Leverage Fund 3, and the two areas we focus on are in an incredible boom ( financial services and enterprise).
Between Robinhood, Etoro and Coinbase there are now at least 30 million new accounts. People are saving, trading, investing and of course imploding (I call it learning).
They said millennials would never buy homes but Zillow is near all-time highs and while retail was supposed to die, Lulu Lemon is at all-time highs.
While the orange putz in the White House is trying to build a wall around the post office (I assume to stuff it with coal) and blame the problem squarely on Amazon, a next generation of Amazon haters have started a bazillion ‘micro brands’ to pester Amazon in all the right ways (read it).
End of riff/rant.
Now about that 200 day moving average…
My friend Michael Batnick has the definitive post about it so have a read. The gist:
For me, the 200-day moving average is not a line in the sand, but rather an indicator of what type of market we’re in. Historically, the S&P 500 has traded below its 200-day moving average 31% of the time, and unfortunately, stocks tend to be way more volatile below the 200-day than above it.
In 2015 I wrote, “The average 30-day return going back to 1960 is 0.88%. The average 30-day return when stocks are below the 200-day is -2.60%.” Declining prices attract sellers and bad things tend to happen when sellers are in control. “Of the 100 worst single days over the last 55 years, 83 of them happened while stocks were below the 200-day.” (As of 2015)
Have a great day!
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