Skate To Where The Puck Is Going

We always laugh tongue in cheek when we hear this Wayne Gretzky quote.  I have heard this quote inserted in so many business plan presentations.  Most of these ideas, at least the ones I’ve had the privilege of sitting through, invariably failed.  That could be one reason for my sarcasm.  You know the one.  The one with ‘skate to where the puck is going’. 

For a moment, I considered not writing this as I am about to use the same quote.  But what the heck.  So here it is …..

I skate to where the puck is going to be, not where it has been – Wayne Gretzy

After you are done laughing, see the chart below from Goldman Sach’s on weekly fund flows. 

Here is a summary:

Equity - $23 billion Outflow

Bonds   - $38 Billion Inflow

Money Market - $1.24 Trillion Inflow

The prospects of long-term damage from Covid-19 on global economies have created a massive asset inflow into the safety of money market funds.  Now there is no denying that economic conditions can stay sluggish - for longer - than we would like to admit.  To consider that as a higher probability outcome, one must accept the notion that a motivated global scientific community, with massive economic and reputational incentives, would be unsuccessful in a COVID treatment.  One must also reject the regenerative qualities of the U.S. economic system and the resilience of the entrepreneur.

Then, there is the Fed.

I come from a position of optimism.  In my opinion, we are at the beginning of a new economic cycle.  Economic data is bad as it usually is at the end of recessions, but we are at the trough, and the Fed is in a generous mood.  Investor positioning, based on the flow summary, is defensive.  The probability is reasonably high that we manage the ‘2nd wave during the summer months’ and finally get back to business.  In this scenario, the flows would then exit the safety of money markets and find their way into higher-risk assets over the next 18 months.

While the implementation is much more nuanced, the Equity market would be my choice. 

Here is a quote that is much better received.  As is every Buffet quote.

If you wait for the robins, spring will be over – Warren Buffet

How are you positioned?