Friday, November 13, 2015

Your Weekly Update

Tell me you're not at least a little nerve-wracked over the stock market these days. I'm not hearing anything because you can't tell me that. As much as we know that equity investing is a long-term affair---and that volatility is inevitable---let's face it, when it's "bad" it stinks!

When the stock market's "bad" we wish we weren't in it. When it's "bad" we're sad.

When our clients take a look at their monthly statements---or, worse yet, when they daily pull up their accounts online, they, save for a few, don't see the individual companies they hold. They see the names of funds that  assemble the stocks of the individual companies they hold; names that aren't what you'd call "household"---names that don't engender any pride of ownership.

So, while we may be sad when the market's "bad", would we indeed be as sad if we knew we owned a company that has a couple hundred billion in cash and utterly dominates the world of wireless devices---even when it's share price is in decline? Well, we might, but we shouldn't. How about if we owned the retailer that is largely responsible for the pain dealt to the market this week by the likes of Macys and Nordstrom? We might, but we shouldn't. How about if we owned the world's largest and most profitable banks? The chip maker that dominates cloud technology? The leader in home improvement goods? The place where you connect with hundreds of friends you didn't know you had? The company run by the world's most successful investor? Again, we might, but surely we shouldn't.

If you're our client, here---in order of their weighting (taken from a representative client account)---are the top 25 companies (out of hundreds) you hold.

Apple Inc
Microsoft Corp Inc
General Electric Co
Wells Fargo & Co
Chevron Corp
JPMorgan Chase & Co
Exxon Mobil Corporation
Alphabet Inc Class A (Google)
Comcast Corp Class A
Home Depot Inc
Citigroup Inc
Facebook Inc Class A
Monsanto Co
Cisco Systems Inc
Oracle Corporation
Berkshire Hathaway Inc Class B
Alphabet Inc Class C Capital Stock
Bank of America Corporation
Medtronic PLC
Visa Inc Class A
Procter & Gamble Co
Intel Corp
Boeing Co

Being in a position to own 25 companies that the world assigns over $2 trillion of its annual spending to is, you must agree, a pretty enviable position to be in---even during those inevitable stretches when their share prices are trading lower. I.e., those visions of destitution your brain conjures up during market selloffs simply do not jibe with the undeniable fact that the institutions you own ain't going nowhere!


As you noticed, I can type again. But I can't just yet go the distance in a weekly update. So from here on I'm going to dazzle you with my charts.

Here's your third update of my 2015 versus 2011 chart (click to enlarge). You may recall that, prior to this year, the last time the market suffered a 10+% correction was in 2011. As you'll see below, this year continues to follow a similar path. If by happenstance the present pullback were to precisely match the November 2011 pullback---aside from being really freaky---the S&P would touch roughly 1960 before resuming its recent uptrend. In Dow terms we're talking another 370 or so points to the downside.

2011 VS 2015

Even though we now have a firm grasp on what we own and are, therefore, never again going to worry about corrections or bear markets, I'll go ahead and share with you the output from my weekly macro indicator exercise (click the "macro indicators" link below to download).

Each Wednesday I update a group of charts that represent what I believe to be some of the most telling data with regard to the present state of the economy and the financial markets. The color highlights represent my impression of the signal each indicator is sending. Where I highlight a title with more than one color I'm suggesting that the signal could be interpreted as either a positive or a negative.

While there are some yellow and red flags here and there, in the aggregate things look pretty okay at the moment. Which doesn't in any way mean that there won't be lots of volatility as the market digests a somewhat tighter U.S. monetary policy, volatile currencies, the implications of a whale of a commodity bear market, and, sorrowfully, the tragic events that took place in France today. Our hearts, thoughts and prayers are with the people of Paris this evening.


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