Recently, someone named Jamie Dimon said this:
“I said there were storm clouds. But I’m going to change it. It’s a hurricane. Right now it’s kind of sunny, things are doing fine, and everyone thinks the Fed can handle it. That hurricane is right out there down the road coming our way. We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”
Jamie isn’t just any someone - he is the someone that is the CEO of J. P. Morgan Chase. So…his comments got a lot of attention; although, at the exact moment, not so much from me. It had to percolate in me a bit before it ripened into full blown awareness. To be fair - it still seems a bit
meh even now. But maybe not
I mean it’s not like playing stud poker with Chicky Chicky where a good bluff could go a long way. We called him Chicky Chicky because he could do these amazing imitations of barn yard animals - especially chickens. To see him cluck cluck about scratching for insects and flapping his wings was pure fascination for all of us that left us all laughing until tears ran down our faces. Guys real name was Robert but no one ever called him that: to us he was always Chicky Chicky. And we were all 12-14 years old when simple things such as that drew not only mirth but immense admiration. (The best I could ever do was an inexact sort of sloppy replication of Miss Sally’s one eyed, fish and frog dog Jimbo.
Jimbo was a very old and friendly beagle with large floppy ears and a horrible case of hind quarter mange causing him stop every few paces, regardless of where he was going or what he was doing, and scratch like crazy. I had the ears and the scratch down pat! Those were the days!
Anyway…when we played stud poker back then - we played more or less for marbles - and we played one-eyed Jacks and Deuces wild. Bluffing was rife and a sort of right of passage for our poker games but we only had one deck of cards in the club and the deuces and one-eyed jacks had been marked and remarked so many times that you could tell right off who had them - Unless. Unless you surreptitiously faded the edges of the other cards you held as well. Now that I think of it - we probably weren’t playing with a complete deck. And thats the point I want to make about Mr Dimon’s comments.
Now closer to home…it has been stated by some of the greater investors among us - with some degree of authority - that THIS TIME is different. Different because our companies, by and large, are SaaS companies with built-in repetitive revenue which we call ARR - but which, as far as I can tell is essentially the same thing. So I think a lot of folks perhaps have hung their hat, if not their coat, on that particular hook. But so far…again as far as this amateur investor can ascertain - it doesn’t seem to be all that different: In that gobs of money have been siphoned out of accounts just like in the old reset/sell-off/correction days. I mean…if it is actually different then it might ought to somehow look or feel different…right? But just now it feels like the same old regular stock market butt whooping. Doesn’t it? Which leads me back to Mr Dimon, smarty pants CEO of Morgan Chase. What does he really know or is it just bold talk from a one-eyed fat man?
Now here’s the thing. If you have been a LTBH aficionado up to this point clinging to whatever portfolio of growth companies that caught your fancy - you probably already feel like you’ve been badly battered by at least a Cat 4. How much worse can it get? Well…put simply, I don’t think Jamie is just a modern day, older version of Chicky Chicky trying to bluff his way out of a tight spot. Nothing in it for him to bluff about as far as my simple mind can determine. Which means that it could get worse - much, much worse from here - which, to be honest, is a little disappointing if not outright frightening…If. Big IF here - you consider/concede and further allow that the smarty pants CEO of big bad Morgan Chase has any sort of venue or platform from which his vision and assessment is of a higher calibre/value than those to be found on local discussion boards.
So what to do? First of all, its ok to be a little rattled just now. After all, the portfolios are in tatters and this guy Jamie seems to be legit - and maybe in position to actually know something. But - as bad as it might sound there is good news in his message. How so?
First let’s get to the What to do thingy. Unless you are a stubborn old mule it might be time to consider the Retreat to High Ground Strategy. Why? Because its way, way to late to run. The RTHG strategy is nothing more than closing out lower confidence positions and pushing the funds into the higher confidence companies. Why on earth would I invest more in this hellish market? Well…the answer is actually pretty simple and represents the good news in Jamie Dixon’s warning.
You would invest more in this market primarily because it makes really great sense to purchase the companies with the highest potential possible at the lowest prices attainable. Seems reasonable. See how that works? Ok so moving forward - after implementing the RTHG strategy what do you do? That to is simple:
Hunker Down and take whatever beating the market sends our way. Now why would you want to just Hunker Down and take the beating. Well…because I am not all that convinced that the greater investors among us are all that wrong that the whole THIS TIME is different thingy. Sure the Jamie Dixons of the world should be able to read the tea leaves and see storm clouds gathering and interpret such with a better worldwide viewpoint; however, all that ARR mentioned earlier might actually be the exact thing that does, in fact, make this time different. How? Well thats simple: Because those ingrained, essential to business, software systems are not business wants - but business needs. And once ingrained they are perhaps a crutch that buoys businesses and are difficult to just rip out. All of which means that those big fat Recurring Revenue streams are gonna just keep on rolling. And that is the way that THIS TIME is in fact different. At least thats my story and I’m sticking to it.
Simple as that.
All the Best,