Monday, November 12, 2018

Quick Note on Present Conditions

Personal circumstances do not allow me to flood your inbox as I typically do during volatile periods, however I was able to perform our weekly macro analysis over the weekend.

Quote of the Day: 'Maybe' A Silver Lining

Stock index futures were in good shape this morning (Dow future up triple digits) until this showed up in the Wall Street Journal (Dow future down triple digits):

Saturday, November 10, 2018

This Week's Message: A strong finish is in the historical cards, but there's this issue...

History favors the odds of a strong 6 weeks to come, particularly in that this is an election year. 2018, however, has an issue coming to a head that can -- good or bad -- make its year-end one to remember...

Save for communications, and despite Friday's ugly session, every major sector made up some technical ground last week, which makes sense given the unsurprising mid-term election results and the -- until yesterday -- somewhat friendlier rhetoric around foreign trade.

If you followed, and, worse yet, believed the financial headlines over the course of Friday's trading session you might've gone from feeling concern over a heating economy (the producer price index [reported 5:30 a.m. pt] was way hotter than economists expected) and, therefore, Fed rate hikes galore, to, by the afternoon, all out angst over a weakening global economy, as that then became the reason du jour.

Frankly, in my view, both narratives essentially focus on the cart, while ignoring the elephant-sized horse pulling it along. 

While I'm certainly not the only observer who sees the present core issue as being the U.S./China trade dispute, for whatever reason it pretty much remains, again, the elephant in the room that folks who should know better seem content to tiptoe around. And as my metaphors suggest, if indeed inflation and global growth are legitimate worries (they indeed are), well, you might imagine how a protracted trade war can only make matters worse. Much worse!

As for Friday morning’s rhetoric, White House trade adviser Peter Navarro made the rounds, fielding questions on the latest U.S./China trade developments. Two headlines summed up his message:
"White House Trade Adviser Navarro Says China Deal Will Be On Trump's Terms, Not Wall Street's"
"Peter Navarro Blasts China and Wall Street Globalists"
Of course his statements exacerbated an already weak trading session.

I think Peter's a bit peeved at a market that he clearly does not understand. Here's me quoting him, and exposing his naiveté, in my March 20th blog post:
“I don’t think there’s anybody on Wall Street that will oppose cracking down on China’s theft of our intellectual property.”
Wanna bet, Peter?
Honestly, I agree with the sentiment of his March statement; let's crack down on intellectual property theft, but let's not do it by implementing an asinine (tariff) scheme that history has proven over and over again hurts the U.S. economy at every conceivable rung!

As for Friday's outbursts, well, okay, the China deal will be on the President's, not Wall Street's, terms, but make no mistake my dear friends, Wall Street will judge it based on what it portends for the economy. And as we've learned over the years, nothing can lay waste to a political career like a weak economy and a bear market in stocks.

So I'll taunt once again (can't help it); wanna bet, Peter?

And as for the political football term "globalist", which by some miracle gains negative traction in this great melting pot of the world, well, when you consider that so many iconic U.S. companies generate better than half of their revenue from outside our borders -- i.e., from where the remaining 96% of our human family lives -- it's probably not a term/concept we should be at all railing against.

Here's a video we shot back in July of 2016 that we'd like all of our clients to watch (again) -- part one (3 minutes) in particular. Virtually all of the return, valuation, etc., comparisons that I illustrated in part 2 are as, if not more, pertinent today than they were 2+ years ago. 

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, November 6, 2018

Checking One Headwind Off Our List

Assuming sufficient races are decided, by this time tomorrow we will have crossed one market headwind off of our list. Judging by yesterday's and today's action, market players in the aggregate are comfortable with a Democrat-led House and a Republican Senate. As you know, polls strongly favor that outcome.

Sunday, November 4, 2018

This Week's Message: Last Week's Medley and the Short-term Character of the Stock Market

I knew I was active herein last week, but (just counted), geeze!, 15 posts... yeah, that's a bit much. But, you know, it was a crazy week and it's tough to stay quiet when I know that the media is killing itself to grab the attention of our clients with all manner of noise and, often, hyperbole.

Friday, November 2, 2018

Unfortunate -- for really short-term bulls -- Headline of the Day

This one (just released), plus the one we featured earlier this morning, was good for a 530-point plunge in the Dow (from last night's futures trading to this moment):

Bonus Quote of the Day: The Expansion Has Legs

As clients and regular readers know, our assessment of conditions instructs that -- barring a protracted trade war -- the present economic expansion has legs.

The Economist agrees:    emphasis mine...

Good job: America’s labour market

Jobs are plentiful, as today’s figures on non-farm payrolls from the Bureau of Labour Statistics should confirm. ADP, a company that publishes its own estimates a couple of days before the BLS posts official numbers, tends to track the official numbers reasonably well. On October 31st it estimated an increase of 227,000 jobs, though some of that strength may be because last year’s employment was depressed by hurricanes. The trillion-dollar question is how long these good times can last. The ratio of prime-age employment to population was 79.3% in September, still a full percentage point below the level seen in 2009. That suggests there is still scope for a hotter economy to draw more people into the workforce. And although it looks likely that average hourly earnings growth will top 3% for the first time since 2009, that is not strong enough to think that this recovery is anywhere near its last gasps.