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Indicator Waves

Updated: Jul 20, 2023

My 13 year old daughter, Maia, is really into surfing. She’s been doing it for a few years now, and it’s one of our favorite things to do together. I recently got her a new surfboard, and I’m pretty sure she thinks it’s the greatest gift ever.

We went to Costa Rica a few months ago. We spent several days there before getting to the surfing part of our trip, so Maia was chomping at the bit to get in the water. We took a boat up to Witch’s Rock on a day when it was really good. Maybe too good.

As we paddled from the boat towards the surf and the shore, I could tell it was big. There was one other boat sitting out the back, and as we paddled by, the one guy on the boat told us in Spanish that the five surfers he had brought out there had just gotten cleaned up by a six-wave set and that we should be careful.

I translated for Maia. She looked me square in the eye and said, “Dad, we’re going.”

We paddled around the corner a little bit and started working our way up the sand bar, looking for a spot to take off. Maia positioned herself for the first wave of a big set, totally going for it. And she ate it.

I watched for her to pop up, but it was the first wave of the set, and I was just trying to claw over the waves behind it. I finally got a glimpse of her but then lost her again for some 15 minutes. I caught a wave in and spotted her all the way in on the beach, standing in knee-high water.

She was frustrated and sad, or perhaps just disappointed. She had reeled her board in after her wipeout and tried to paddle out the back, but she just kept getting hammered by the rest of the waves in the set.

Now, Witch’s Rock is an interesting break. There’s an “indicator” offshore, out by the rock, where you can see the waves coming before they actually arrive in the surf zone. As I stood there with Maia, watching the indicator, the sets just kept pouring in, and she began to cry.

I told her, “Maia, look at me.” We locked eyes once again. “I know this sucks right now-- we’re having to wait this one out. But I’m glad we’re waiting it out in here instead of out there,” as I gestured to the impact zone. “This set will end, and then we’re gonna smoothly paddle together-- straight out the back, ok? You watch, this is going to be fine.”

As if on cue, the indicator went soft, and I yelled encouragement to Maia as the rip took her, like an escalator, straight out to the boat. She didn’t have to duck a single wave.


Bear markets are like surfing Witch’s. The reality is that, sometimes, you just have to hang on the beach and wait it out. Also like Witch’s, this particular bear market has an indicator point, and we’ve been seeing large set waves pound it for months.

We’ve been harping on those indicator waves for a year here in Insights. The problem is that this has been quite a long set.


We continue to be somewhat dismayed at the level of stupidity that has been on display at the federal level for such a long time now. To be sure, Insights is a melting pot of information from a multitude of other sources; most of the data we cite is the result of well-known third party research. …I often wonder why those in power aren’t reading the same stuff I am, or worse yet, I wonder why they ignore it.

Because, in June 2021, we discussed all the reasons why inflation in wages and energy prices were not transitory. Then, in October of 2021, we discussed how higher taxes were going to hurt the economy. In December 2021, we discussed how our children’s mental health crisis would affect the job market. In January, we discussed why the Fed running off its balance sheet and simultaneously raising rates was a recipe for disaster. A month before home prices peaked in April here in my local San Diego County and many other areas of the country, we discussed why it was a bad time to buy a house. We discussed the significance of the inversion of the 2- and 10- year Treasury yields in April just before the twenty year Treasury tumbled 30 %. In May, we discussed the likely results of American consumers’ record levels of credit card debt. And more recently, we’ve been discussing why our lack of energy independence will leave us vulnerable to ongoing inflation and near-certain tragedy in the event of war.

You’ll notice that the links in the previous paragraph are either to RG’s Insights or to extremely well known sources like Deloitte, The American Academy of Pediatrics, Reuters, etc… Nothing obscure (well, maybe the stuff on our website), yet nobody in the Biden administration was reading any of this. We moved forward with tax hikes in a slowing economy, our mental health crisis has continued to deepen while the job market has continued to tighten, the Fed’s performance has been horrific and has served to destroy the housing market, Treasury bonds—once regarded as the safest safe haven of anywhere in the world— have been crushed, revolving consumer credit now stands at $4.7 trillion and rising, and even the New York Times recognized last week that Biden is using the Strategic Petroleum Reserve as a piggy bank for votes.


I think it’s imperative to listen to what company leaders say, as their economic views are generally a reflection of what they are seeing in real time. When WalMart (WMT) warned in May and guided earnings estimates lower, that was telling, for they sell just about everything. When Micron (MU) missed their earnings estimates and guided lower in June, that was telling, for their products are in just about everything. When FedEx (FDX) warned and guided lower last month, that was telling, for they ship just about everything.

Last week, Gene Seroka, the executive director at the Port of Los Angeles, told Bloomberg that cargo volumes declined for a second month in September and said the outlook for the remainder of the year will be "soft." Is that telling? Don’t let Janet Yellen decide.

"It's a hurricane." Jamie Dimon

The point is that we all knew this was coming; we saw the indicator set waves. Even if you tried to paddle back out in July during that three-week bear market rally only to have a new set of selling crash on your head, or perhaps even this last week of options-expirations- and earnings-fueled madness, it’s not too late to take a breath, look around and assess you situation.

And buy energy stocks. Take a breath, look around, assess your situation-- and then, well, most of us should buy energy stocks. Sure, as the world burns, Exxon Mobile is hitting a new all time high, but look at your indicator. The waves are crashing in: Biden is about to deplete the “Strategic Midterm Reserve,” OPEC is laughing at us while lowering production, and China’s economy won’t tolerate zero-Covid for much longer and will rapidly increase their consumption.

In addition to energy stocks, we continue to recommend elevated allocations to dollar denominated cash and the utilization of income solutions, alternatives and tax management.

Lastly, we would instruct that most good days of surfing include a few good thrashings. Nobody’s going to get an eight-foot barrel without first taking a few lumps. So, even when you get caught inside, remember why you’re out there in the first place-- because stocks historically make twice as much as any other asset class.

Click here to invest with Chad. For disclosure information please visit:

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