As I've noted, one of the five things I learned at five years old was Gin Rummy. The 10-card game has extended into the next generation as my daughter slowly picks up the patterns. She knows to dump the high cards because you don't want to get stuck with them... and she's quick enough not to throw me anything under a 4.
Last night, I arrived at Baltimore-Washington International Airport. A man and wife sat at a restaurant table, and I pulled up a chair. They were playing 10-card rummy, and she called Gin, leaving him with a stunning 47 points in his hand.
Not even the 5-year-old loses hands that badly.
We got to talking. And... as always... it's Baltimore.
Everyone knows you... or knows your parents. The man asked where I went to school... and he meant high school. Like me, he was a lacrosse goalie.
He went to Hopkins (I went there for graduate school).
And his wife was in the mother's club with my mom when my brother attended my high school.
Small world.
They live in South Carolina now, but it's just a reminder of how "Smaltimore" works. It was always something that I felt like I was trying to escape at an earlier age. But now... it's interesting how inviting it felt as I grew older.
A flight to safety...
But now, we're back in the Florida Republic.
It's quieter. It's breezier. And the season is starting to kick into full swing.
The weather is perfect, and there's nothing like your own bed. There's a lot to do over the next two months until the "Official" launch of the Florida Republic.
Making Sense of This Market
As I noted yesterday, this is a very tricky market to navigate. Despite the escalation in Israel, concerns about bond term premia, refinancing woes, and economic questions...
Our signals turned Green before a big 1 p.m. candle took us lower. We saw a sizeable drop in the 10-year bond yield as investors flew to safety. The CBOE Volatility Index (VIX) fell sharply as well. That's pretty interesting, given the state of global affairs.
We're effectively yellow now on the S&P 500 and the Nasdaq 100 - but weakening into the final hours. The next 24 to 48 hours will dictate whether this is just a squeeze off oversold territory from last Wednesday... or if this becomes something bigger that rivals the rally of last October or late March 2023.
The one major factor to watch is in China, where rumors suggest the nation will pump another $137 billion (1 Trillion Yuan) into infrastructure projects.
I've been speculating around the iShares China Large-Cap ETF (FXI), which had two very sizeable pops during the January and June infusions of monetary stimulus.
I know the headlines are negative around China due to the real estate sector and the possibility of a debt deflation crisis. But markets don't go straight down, and the occasional smart trade can take advantage of the dual combination of oversold technical conditions and the impact of stimulus on equity markets.
Finally, keep in mind that we also have individual signals for sectors. We've seen energy hold right now in positive territory after a dismal week to start October.
Any escalation with Iran would dramatically impact oil prices, especially in the Strait of Hormuz, which I profiled yesterday. I can't predict where prices would go, but I know it would be MUCH higher... while we'd likely see a flight to bonds.
In addition, there's been a positive move in Industrials driven by defense contractors. RTX Corp. (RTX), formerly Raytheon, has surged out of oversold conditions after a roughly 30% decline since July.
Pink Sands Value Investor noted last month that shares have been under pressure due to a large recall of engine parts for Pratt & Whitney.
I'll be back tomorrow to talk about another approach to RTX - and the importance of conservative investing in this environment.
Stay positive,
Garrett Baldwin
Secretary of Finance