Fear is the Mind Killer: Protect Your Mind/Protect Your Happiness

"Earnings don't move the overall market; it's the Federal Reserve Board... focus on the central banks, and focus on the movement of liquidity..." Stanley Druckenmiller

Nov 08, 2024

I’m not here to sell fear…

I’m here to offer a new approach to living, profiting, and finding happiness. Money alone won’t make you happy. If trading feels like a stressful chase, you’re unlikely to find fulfillment or profit.

We’re all ultimately in pursuit of happiness, which is why the words from the Declaration of Independence resonate so deeply: "We hold these truths to be self-evident, that all men are created equal, endowed with certain unalienable rights, among them life, liberty, and the pursuit of happiness."

Happiness is personal. I’ve always followed what makes me happy, even when it hurts. And I believe work can bring happiness, but only if you genuinely love what you do.

I love trading, I love talking about the markets with you, and I wake up every day excited about my life. Even on my busiest days, I’m having fun. Understanding the macro puzzle is my passion.

In that sense, I connect with Stanley Druckenmiller. Our trading styles are similar—much of what I do is inspired by his approach. I recommend watching this interview, his insights are truly enlightening.

As Stanley Druckenmiller says, "The best economist I know is the inside of the stock market."

What does he mean by that?

He’s talking about the relative performance of equity sectors and style factors (growth or value) and this is exactly why I focus on relative strength.

Another key point he raised in this interview is his deep interest in the 1970s and inflation. That’s something we share.

The market is about to be caught off guard by the reflation trade. With the Fed fixated on achieving a "soft landing," they’re about to make a historic mistake, much like they did in the 1970s.

The red line represents 2013-2024, and the blue line shows 1966-1982.

This chart illustrates the rate of inflation, highlighting three waves it went through in the 1970s. While I’m usually cautious about drawing direct parallels with charts like this, the similarities to today’s situation are too striking to ignore.

Yesterday, Jerome Powell came out and essentially declared victory over inflation, claiming he’d achieved a soft landing. He might as well have...

Back in 2020, "Mr. Inflation is Transitory" told us inflation was just a passing phase—right before we entered the worst inflationary cycle in 50 years. And now?

As you saw in yesterday's report, reflationary sectors are beginning to gain momentum.

Now, let's take a closer look at the inflation picture.

Commodities vs. bonds is gearing up for a new leg up. My commodity trades are about to broaden, and who knows—you might even see me bring back European power market trades.

Exciting stuff, at least to me!

We’re approaching a critical point in the relationship between the Dow Jones Industrials and crude oil.

I highly doubt we’ll ever see oil drop to negative $50 again, and I’d be surprised if it even hits $50 on the positive side.

For now, higher commodity prices should broadly benefit stocks, especially with breadth looking this strong.

As long as we’re above the blue line on the bottom indicator (stocks above the 50-day DMA) and the top indicator (stocks above the 200-day DMA), I’m broadly bullish on stocks.

You can’t be bearish on stocks when the market is hitting this many new highs. For the market to move lower, stocks need to start trending down.

I’m bullish on stocks as long as key indicators remain strong and new highs continue across the market. With Breadth and reflationary sectors showing momentum, there’s no sign of a major downturn yet.

While inflation concerns and commodity moves are worth watching, the current market breadth supports a positive outlook for the stock market.

Have a great weekend my friends!

Against All Odds Research

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