Have We Hit Bottom?

On April 1st 2020 the Dow completed its worst first quarter in 124 years. You needn’t have been a fool to lose significant money (the Gabriel fund profited 11% the first quarter 2020). The market remains overvalued, and I anticipate the S&P 500 will revisit March’s low around 2200. The model is Bearish for April 2020.

Calling a market bottom is very difficult, and the S&P 500 is up about 13% since March 22nd 2020.

Source: Yahoo Finance

This resurgence is in response to the federal reserve lowering interest rates to 0%, and a historically large economic stimulus plan. While both of these are bullish, consider market valuations. The last time market valuations were as high as recent (Buffets Ratio reached 155% in February 2020) was prior to the Dot.com Crash (Buffets Ratio reached 150% in January 2000). Buffets Ratio dropped to 71% before the market hit bottom in 2002. Currently Buffets Ratio is 113%.

Source: GuruFocus

I expect Buffets Ratio and the S&P 500 to continue to head lower in this Bear Market.

Also consider that experts predict the Coronavirus outbreak to peak mid-April, and economic data will begin reflecting the enormous recessionary impact of the virus. Both of these are very bearish, and it will be difficult being bullish before new cases of the virus peak.

But there is light on the horizon. Factory activity is already expanding in China (the Gabriel fund recently increased its investment in MCHI), and barring additional economic shocks we anticipate the U.S. economy following a similar recovery within the next several months.

This report reflects the current opinion of the author. The report is based upon sources believed to be accurate and reliable. Opinions and statements about the future expressed in the report are subject to change without notice. The report is not a solicitation or an offer to buy or sell any security.

Market Valuations in Danger Zone as Federal Reserve Pledges Afterburner

Updated 9/1/2020 Gabriel Private Alpha Fund (after fees) SP-500 (SP-500 ETF SPY) Eurekahedge 50 (50 largest hedge funds) Index AI (Artificial Intelligence) Hedge Fund Index Barclay Hedge Fund Index Hedge Fund Index Return since January 2020 (the inception of GPA Fund) 33.0% 9.5% -5.2% 2.7% 2.3% -0.6% The United States stock market valuations are in a Danger Zone. A formula of stock market valuations around the world indicates that United States markets are the second most overvalued in the world (after India). Frankly our model forecasts negative one and two year S&P 500 returns if considering only market valuations. However the Federal Reserve’s actions in March 2020 temper this bearish outlook. In March the Federal Reserve (Fed) lowered the Federal Funds rate - the rate at which money is loaned to banks - to its present rate near 0% in order to fuel a stalling economy. Lowering the Federal Fund rate fuels the economy because it lowers borrowing costs. For examp

Is the Covid Crisis a Recession or a Depression? (Historical context)

“History does not repeat itself...but if often rhymes” - attributed to Mark Twain In the decade leading up to the crisis the Federal Reserve cut interest rates, and unemployment descended to near-record lows. At the same time corporate debt surged, and the U.S. pursued protectionist tariffs. Then the Great Depression occurred. The 1920s uncannily parallel our past decade, therefore it is instructive to compare today’s COVID Crisis to the Great Depression (beginning in 1929). We will also compare it to the recent Great Recession (beginning in 2007). The table below reveals that the COVID Crisis is more damaging to the Global and United States economy than the Great Recession, and of a similar magnitude to the Great Depression: 1 No reliable annual worldwide data exists for the Great Depression. Source for World Product during the other periods: International Monetary Fund 2 Sources: International Monetary Fund , World Bank 3 Source

We Claim to be neither Fake nor Smart...

...But the Gabriel Private Alpha (GPA) Fund continues to beat the Artificial Intelligence (AI) hedge fund index and numerous hedge fund indices: 8/1/2020 15:51:53 Gabriel Private Alpha GPA Fund (after fees) SP-500 (SP-500 ETF SPY) Barclay Hedge Fund Index Hedge Fund Index AI (Artificial Intelligence) Hedge Fund Index Eurekahedge 50 (50 largest hedge funds) Index Overall Return since January 2020 17.9% 2.7% 0.9% -2.6% -0.6% -5.2% We accomplish this with a Beta of 0.14 (one-seventh [1/7th] the volatility of the S&P 500). Here is a screenshot of our year-to-date return (32.59% before fees): Back-testing of our model supports the Fund generating Alpha with Low Beta over the long-term. Nevertheless we are humbled by our return, and grateful for those who read the Gabriel Report. All the Best, Brian Gabriel

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