Selling Time? Oil, Inflation, Debt Concerns And A T-Bill Portfolio

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Matthew Tuttle and Rob Isbitts discuss watching the charts and whether it’s time to sell (1:25). Oil and why inflation may be rekindled (6:40). Concerns about upcoming debt issues (8:20) and why Matthew’s portfolio is entirely in T-bills right now (15:20).

Recorded August 10, 2023

Transcript

Rob Isbitts: This is Seeking Alpha’s Investing Experts Podcast. I’m Rob Isbitts, a Seeking Alpha contributor under the profile Sungarden Investment Publishing.

And I am joined again by my friend, Matthew Tuttle of Tuttle Capital Management. He is a fellow Seeking Alpha contributor, a highly experienced trader, and an ETF innovator. His firm actually made a little bit of news this week. I know he doesn’t like to brag on himself, but I can brag on him all I want. And so look up, Tuttle Capital Management. They made a little news this week.

So, welcome back Matthew. Let me start with this. I wrote a piece for Seeking Alpha several months ago. And I said, Buy Summer, Sell Autumn? And so far it’s played out pretty well. It has been a pretty strong summer. We’ve had a little bit of rumbling recently. It does seem like we’re kind of back in that mode where even when the market rallies, like today on CPI day, Thursday, it kind of gives a chunk of it back right away. Almost like there’s no sort of oomph to the upside, or sustainable oomph.

So let me ask you, I said a few months ago, Buy Summer, Sell Autumn. Is autumn arriving early?

Matthew Tuttle: So, obviously don’t have a crystal ball, but certainly not liking what I’m seeing. Through this whole rally we’ve seen since at least the beginning of June, every sell-off which haven’t been many and haven’t been steep, have held either the 10-day moving average of the 20. And this latest move lower has broken below the 20, and any kind of attempt to reclaim like today, for example, has been sold into.

This is just another kind of ugly day like we saw on Friday where the market wanted to rally out of the gate. You could tell even before CPI came out, that they wanted to run this thing up and at least as we’re recording this, most of that early rally has been retraced.

So, yeah, I mean, not liking what I’m seeing and you also got to figure, these stocks, the Magnificent Seven, for example, that are up ridiculous amounts year-to-date. I mean, we’ve got to give some of that back. So, so far I would agree with you.

You saw after the CPI got released, the market jumped and it was already up going into CPI and the market jumped. And for the first early part of the trading day, the market kept going up and then basically what you have happen is institutional investors who were probably looking for a spot to get out of some positions, just hit the sell button.

And I watch five minute charts and you just see, this straight line up on the S&P, on the NASDAQ and then kaboom. A equally straight line down after the first hour or so of trading. So that’s what I mean. Where you’ve got institutional investors because typically what happens when you have a big up move like this, the unsophisticated retailer like, oh wow, you know, the decline is over, time for me to buy, and the so called smart money is sitting there and saying, all right time for me to sell. Thank you.

RI: Matthew and I, if you’ve listened to the first few of these we’ve done together. He is kind of like a day trade, swing trade for the most part. I am kind of swing trade. Meaning, I mean, look, I could buy an option, sell it the next day if it’s up 100% which is kind of my target with a lot of them. And I’m happy to say that it’s been happening with a little more frequency recently. But I will go out much further and I happen to own something for years, if it still meets the criteria.

But we’re both technicians and I got written down here, we’re going to – the next couple of these I think we’re going to do, we have to do one that focuses on technical analysis because as an example, okay, you mentioned five minute price chart.

So in front of me at all times, because even when you decide you’re going to make, let’s call it a decision where you hope you’re going to own something for weeks or months or maybe even years, you want to get it at the best price possible. So, I’ve got sitting in front of me, one minute, five minute, 15 minute, 30 minute chart, one hour, two hour, four hour chart, daily chart, three day chart. Why? Because nobody looks at three days. So maybe there’s some value there, same with the four hour, I think in a lot of cases, all the way up to weekly, monthly and quarterly.

So I think we’ll explore a lot of this when we talk technical analysis. The other thing we want to do is, I think a mail bag episode because we’re getting some really good questions from you. One of them I’m going to hit today in just a minute. And I think we’ve got more than enough I think over the last several weeks to be able to do a whole episode on that.

But when it comes to CPI and some of the other economic news that has looked a little bit better lately, little more encouraging if you spin it a little, is this the one cockroach theory where this is just a temporary respite?

And a month or two from now, we’re going to be talking about a, let’s call it reinvigoration of inflation and diving economic growth, especially with a lot of the debt related stuff coming up later this year.

MT: So we could. I’m not focused as much on the debt. I’m more focused on the price of oil because I think one of the big reasons you’ve seen inflation come down is you’ve seen the price of oil come down and lately the price of oil has been coming back up.

And so, if we get, right now, I’m looking, it’s like 83. But if we get a situation where crude goes over $100 a barrel, I would not be surprised to see inflation rekindled. You’re also seeing some commodity prices that had come down, starting to percolate a little bit.

So I think if anyone is out there taking a victory lap saying that they have conquered inflation, I just would be very careful that you don’t – don’t take too much of a victory lap and end up as a caricature somewhere when it turns out inflation has come back.

RI: I’m more concerned about the debt than you are probably and apparently more concerned than the market is in general. Like as I see, it’s kind of all fun and games until all the debt that the consumers and businesses have been allowed to delay paying, can’t be put off anymore.

I’m talking to you student loans, I’m talking to you some mortgage payments, who knows with auto loans. So, you know, we kind of had this YOLO period after the pandemic. And I just — I’m very, very, very curious about that and not really a topic for today, but I’m sure we’ll hit it as we move on through the year.

You’ve got a lot of companies that issued very suspicious quality debt and now it’s coming due, a lot of it in early 2024. And that’s a potential debt bomb. But does the market care about it today? Not at all.

Do you think that that’s a 2024 issue? Or do you think kind of like the way people are saying Oh, no, no, no, we’re not going to have a recession. We’re going to miss the recession this time that we’re just going to kind of get away, let’s say scot-free. And the biggest issue for the market might be not that it crashes, but that it just doesn’t go up for a while.

MT: So I think everything is on the table. My sense is that the Fed, who didn’t see inflation coming caused inflation to actually come, aren’t going to get off scot-free and we get a soft landing and everything’s great. I do not think you raise interest rates from 0% to 5% in a very short period of time without breaking stuff. And we’ve seen it in the regional banks.

What we don’t know because the regional banks, unless you were tuned into exactly what’s going on in the regional banks, came out of left field. We don’t know what else is out there and will also come out of left field. So, I don’t think it’s going to be as simple as all right, soft landing, Fed goes back to lowering rates. Everything’s great again. Certainly, you’ve always got to assume every single scenario. But I’m not feeling the soft landing right now.

RI: Yeah. Well, and are you not feeling it because I’m not either – are you not feeling it for the same reason I am, which is, I just don’t think there’s such a thing as a soft landing because of what you just outlined.

MT: I mean I think there is such a thing as a soft landing and I think if we get it, the Fed lucks into it because I don’t think they’ve known what they’ve been doing all along and they’ve been throwing stuff against a wall to see what sticks.

But yeah, my sense is, again, you can’t raise interest rates this far, this fast and not expect bad stuff to happen and I think we just don’t know yet what that bad stuff is.

RI: Yeah. Completely, completely agree. But just so that people don’t think I, or we, are like permabears here because we’re really just kind of looking at things as they come up as opposed to – we’re worried – not worried – we’re always looking for what the market’s going to worry about later on because staying ahead of the game is a lot better than chasing, as you’ve mentioned, like what happened this morning off the CPI report.

It just seems to me that there will be some sort of comeuppance, it’s just a matter of where and maybe the saving grace, as I see it is the fact that you do have a noticeable portion of the market that as long as the earnings don’t just completely go south over the next 12 months, and I’m talking about small caps and I’m talking about well, energy and there’s a few other sectors that are not outrageously expensive, that maybe this ends up being a little more like the first part of the dot-com bubble where it took about a year and a half for anything that wasn’t tech and telecom to really roll over and die.

It was a tech telecom crash. Everything else did, you know, utilities and staples and I think REITs at the time actually made money. They made money in 2000, they made money in the first half of 2001. So maybe it’s, if you will, a rolling correction which hit everything but tech and then will hit tech and the high-flyers and the low quality stuff. Any thoughts on that?

MT: Yeah. I think whatever we get, if we do get an actual sell off, to an extent you’ve got a rising tide lifting all boats and a sinking tide, sinking all boats. But you’ve got to look at what’s the stuff that’s run up. And what’s the stuff that’s really maybe run up without a reason to run up.

So, not your NVIDIAs (NVDA) and your Microsofts (MSFT) as much as maybe some of those ancillary companies that have nothing to do with AI, but ran up because AI-related stocks were running up. So, I’d worry about that. I’d worry about economically sensitive if in fact we’re not getting a soft landing. So, that type of stuff as well.

RI: Yeah. Yeah. I like where you’re going with that. So, couple other quick things before we hit kind of what we’re doing in our portfolios and all. They had a market pundit on, I think he was probably a private money manager, RAA, and I speak and write to those folks quite a bit as formerly being in that business and not anymore. So, anyway, this is what I heard.

Like, hey, you like such and such a stock? Why do you like the stock? Well, first of all, I really like the performance this year. Okay. So that was the first rationale for why they like the stock. Now it’s done well this year. Okay. Can I just stop right there. What do you think when you hear something like that?

MT: I mean, I think that it’s the normal useless stuff you get from Wall Street and you specifically get from the media. That’s using past performance to predict future results. And my buddy, Jim Cramer, does it all the time on Mad Money. Hey, you know x, y, z, it’s up 100% this year. This is great. Okay. You know, the time to buy it was before it went up 100%, not when it’s already up 100%. So yeah, that’s what I think. I think that’s when you have the TV on mute. So you don’t have to be subjected to that stuff.

RI: In your own portfolio, your trading, et cetera. So folks can kind of learn from us in almost real time here?

MT: So right now, what I’m doing is sitting entirely in T-Bills. Yeah, I mean – and my portfolio will be that way from time to time. I’m watching this daily action to see kind of where this market wants to go. Do we take it from green to red? Which I think would be extremely bearish. Was this little pullback an opportunity to buy some stuff?

Now that CPI is out of the way and now that most of the important earnings are out of the way, except for NVIDIA obviously, which is going to be a biggie. But besides that, a lot of this stuff is out of the way. So I’m just watching and waiting at this point.

RI: Yeah, you really shocked me there with the all T-Bills, but obviously when you have a short time frame you could do that if you were going on a vacation for a week, right? And instead what you’re saying is, there’s just nothing that jumps out at you. So why throw good money after bad? And I am wholly behind that.

I mentioned, I think on the last one, that something like 80% of my portfolio is T-Bill’ish. But that I was starting to stretch out a little bit in terms of maturity. And I will say this and I know we’ll come back to this again. I think the bond market is a lot more interesting than the stock market right now. I think maybe the next time we’ll hit a couple of questions we’ve gotten on that. But I’ll come back to that. So I have to wait for next time.

I ran through all my charts yesterday in anticipation of this on the road. And look, like I say, all the time, the market always tells us a story. It’s always trying to tell us a story, the stock market, the bond market, commodity market, the currency market. And we just have to listen and the goal of this podcast is to try to make us and everybody else listening better listeners.

So the summary of what I get. Okay. I mean, personally, I could sum up the major moves in my portfolio over the last two weeks in one word: energy. I owned (XOP) stock and options. Took profits on the options, I think twice already, because it just keeps going up and I keep kind of chasing it. One day perhaps I’ll describe sort of the methodology I use to try to keep getting out of harm’s way on winning trades.

But when I look at things right now, I am seeing that this is a market that’s like, well, will it rally? My response there would be, when I look at the S&P and the NASDAQ, it better, it better rally soon.

Because it appears to me from looking at hundreds of charts and what I’ve done for 43 years since my dad taught me when I was 16 years old. So I’ve done a bit of this. I see that the weight of the evidence, or let’s say the most likely direction is down. That does not mean it’s down. It means it’s most likely down and we’re going to need a recovery.

But I’m thinking ahead to Jackson Hole in a couple of weeks where — end of August, I think it’s 25th, 26th of August something like that and into September. And so that’s why I say, it’s kind of a slippery slope. You mentioned 20 day moving average has gone negative, that’s a big signal for me as well.

And frankly, I look across the whole equity market and other than energy, the aforementioned, I just don’t see anything. I see things that have a chance. I don’t really see anything that says the reward-to-risk trade-off is excellent here and that’s what I need to buy.

MT: Yeah. And I would agree. I mean, I’m not seeing anything jumping out of the page. I was in energy. (NOV) was my favorite play. It looks a little extended. So we got out of it, but if it comes back down in support, I’ll probably be back into that.

I was liking Brazil for a little while, but that’s not looking like anything special at the moment. So, yeah, I mean, just nothing to give me any reason to say buy, buy, buy or sell, sell, sell.

RI: Yeah, I’ll just mention briefly on the non-U.S. part. India had looked like a really good market. I think went to an all-time high. It doesn’t mean that much after the last few years, maybe just getting back to where it was a few years ago.

But India and Japan had both looked pretty interesting for me. I even had a small, I think (EWJ) position in the model portfolio I run for the advisor who bought my practice few years ago. So I was making — hoping to put a stake in the ground with Japan and it’s all just rolling over. So what looks particularly optimistic? Single inverse ETFs.

So with that, we will see where things land when we do this again in about a week.

Thanks for listening to the Investing Experts Podcast. Nothing on this podcast should be taken as investment advice of any sort. At times, myself Rob Isbitts, or my co-host Matthew Tuttle, or any guests we have, may own positions in the securities mentioned. You can follow me on Seeking Alpha at Sungarden Investment Publishing and you can follow Matthew at, let me get it right.

MT: Yeah. Tuttlecap.com or @TuttleCapital on Twitter.

RI: Great, great. Yeah. And we’re at ModernIncomeInvestor.com as well. You can also go to Seeking Alpha and see full transcripts of all these episodes. Take full advantage of Seeking Alpha, become a Premium subscriber, learn more at seekingalpha.com/subscriptions. See you next time.