Financial Constipation

It’s good to be back.  A week-long extravaganza in the city that never sleeps makes you appreciate sleep when you come home to “The Big Hick.”  Looking back, it was hard to believe I was able to do it for as long as I did.  Then again, I’ve learned the hard way that some people just aren’t programmed to sleep three or four hours per night like Dennis Gartman.  We hosted Dennis at the Grandover Resort in Greensboro last night and I had the pleasure of introducing him to the members of CFA North Carolina.  The man wakes up at 1AM every morning to pen the Gartman Letter, which he has done every single day since 1986.  Incredible streak!  When I asked him what time he hits the sack to get up that early, he responded, “around 10PM.”  I imagine that an extra five hours per day can provide quite an edge over the competition, but Dennis humbly suggests he needs this time just to get back to even!  Somehow, we doubt that.  Brought back memories to my first years at JPM, when I naively convinced myself that if I could train my body to work on four hours sleep, I too would have an edge over my peer group.  It worked great for a few months . . . until I ended up hitting a concrete wall on the highway after falling asleep at the wheel on the way home from the office.  Lesson learned.

So we’re back at the Blue Ridge after a good night’s rest catching up on all of the incremental data points of late.  We’ll have more to say in coming weeks, but in the interim, suffice it to say that equity markets are back to overbought extremes, sentiment has rocketed back up to levels of excessive optimism (see first chart below), while consensus estimates remain stubbornly in the stratosphere as economic data continues to rapidly deteriorate.  Earnings revisions have a long way to fall on the downside as Wall Street, true to form, holds on to last year’s stimulus driven rebound (see second chart below).  The risk is to the downside.  And there’s a lot of it.  On a positive note, the treasury market appears to have completed its correction, and the most hated bull market is likely headed to new highs ahead.  More on this in next quarter’s Broyhill Letter.  Until then, we thought that these thoughts from Tony Boeckh were worth sharing in a recent Boeckh Investment Letter.