Quote of the Day

Remember what I said yesterday about the counter-productiveness of the financial networks? Well, here's Bespoke Investment Group on 2016's winners and losers:

.... the worst performing decile in the entire matrix is the 50 stocks that Wall Street analysts collectively were most bullish on coming into the year. 

The financial media/networks is the platform from which Wall Street's wiz's promote their prognostications.

This Week's Message: Oh No, It's January!!!

Wandered into one of our staff's office this week and heard a gentleman on CNBC ask another gentleman (I presume a market wiz) what to expect this January, given that it's been a rough month the past three years running. I quickly exited the room so as to not hear the wiz's answer (seriously!). Other than Janet Yellen's December press conference, and maybe to catch a monthly employment release or two, my office TV has been turned off for months. Honestly, I have come to the conclusion, the enlightenment, if you will, that the financial media has virtually nothing to offer the investor, let alone the investment adviser. In fact, I'd go so far as to say that it is utterly counterproductive to the business of long-term investing altogether. Heck, I wouldn't even suggest that a trader try to glean anything useful from the attention-grabbing, ad-selling noise that is packaged up for the public on CNBC (the old default on my TV), Fox Business and Bloomberg Television.

Our 2016 Year-End Letter Part 3: Present Market Conditions -- and -- The Most Useful and Pertinent Information I Have to Offer

Part 1
Part 2

In parts 1 and 2 we touched on 2016's winners and losers, equity valuations, the present risk in bonds and an economic backdrop that strongly suggests that a recession is not something we should be presently losing sleep over. So, in terms of prevailing market conditions, we've already seen a picture that inspires optimism over the prospects for economic growth and, thus, corporate earnings growth going forward. Okay, so what else?

Our 2016 Year-End Letter Part 2: The Economy

Link to Part 1

While the economy and the stock market do not necessarily move in lockstep -- we've had up years during recessions and down years during expansions -- we can all agree that, over the long-run, a healthy economy is essential to a healthy stock market.

Here's a look at the U.S. (although many, if not all, have global implications) economic indicators I track and record each week (there are more, but these are the ones I take the trouble to formally document for myself). The color coded titles denote my view of the signal each is presently sending. The red-shaded areas in the charts highlight past recessions:       click each chart to enlarge...

Our 2016 Year-End Letter Part 1: Some Look Backs, Valuations, and Bonds

Year-end letters can really be long, so, like last year, we'll break this year's into parts.

Part 1:

Today's Friday 12/23/2016, so the following can't be full-year stats, but I suspect they'll be close:

2016 New York Stk Exch Composite Index: +9.57%
2016 Dow Jones Industrial Average: +14.31%
2016 S&P 500: +10.62%
2016 S&P Global 1200: +6.58%
2016 MSCI Europe, Australia, Far East: -3.09%
2016 MSCI Emerging Markets: +7.54%

Quote of the Day: Just a blip...

I couldn't agree more with James Altucher:

This Week's Message: The Magic of Thousand-Point Milestones...

I look at markets from a number of angles. There's the fundamental view, which is the assessment of the general condition in terms of valuations, economic conditions, interest rate trends, currencies, etc. Then there's the technical approach, which is where we consider price trends, relative strength, breadth and a host of other indicators. But I must tell you, with regard to the overall market condition, as well as, and in particular, our work with individuals, I find the study of behavioral investing to be utterly fascinating.

Quote of the Day: How We Look At Things Makes or Loses Us Money...

Parents teach their children that success in life is about process. To pay attention, to learn from experience, to do their best to not repeat prior mistakes. They urge them to simply do the "right" things consistently and to watch as good results ultimately follow. Alas, if the average investor, in the act of investing, would only live his/her own parental wisdom.

Quote of the Day: The cheese keeps moving...

Every now and again a client will inquire as to why we sold a position that had been performing well, or kept, or added, one that stinks (or, say, has been stinking).

Quote of the day: Immigrants' true effect on labor demand and, thus, wages...

If your concerns (assuming you have any) regarding immigration surround the notion that importing labor reduces wages, allow Don Boudreaux, in this letter to the Wall Street Journal, to help disabuse you of that misconception:

This Week's Message: The Setup's Good, But There's Always Something...

If I had a nickel for every time somebody asked me what I think the market'll do over the next year, well, I'd be having serious nickels right about now. Sadly, the fact that I'm not typing this on my floating keyboard whilst in my mega Jacuzzi on my mega yacht in the Mediterranean means that, dang!, I just don't know :(! Yeah, you'd think that after 32 years of living this stuff I'd totally know what a few billion people are going to be thinking and doing over the next year and how it'll impact the markets. Oh well, maybe someday....

So, till then, what am I to do? And how am I to answer that question?

Quote of the Day

This, from Gregory Morris's very fine book Investing with the Trend, speaks to what is probably the chief reason why some folks just don't do well -- even in the long run -- in the markets:

Market Commentary: The Fed's Market Impact "Today" (video)

Market Commentary: Does the Setup Suggest a Reagan-Style Post Inauguration Selloff? (video)

The one thing I failed to mention in today's commentary was tomorrow's Fed rate decision. That would be because there's virtually no ambiguity in the market in terms of what's to occur -- which is a quarter-point rate increase. Of course, in the short-term, we tend to wonder what could come out of left field and catch markets unaware. In terms of the Fed that would be either no change in rates or a half-point increase. Neither of which is likely in my view. Aside from that, the prepared statement and Janet Yellen's press conference will be in focus. Anything too dovish (soft) on interest rates, or too hawkish, will indeed reflect in post-meeting trading. In which case I'll offer my thoughts tomorrow afternoon...

Quote of the Day: It's All About the Condition...

Brexit was supposed to topple the markets, and it did, for two whole days. Trump's election was supposed to send the Dow down quadruple digits, and it nearly did, for a few hours in pre-market trading. In both instances sentiment was sour going in and the general technical setup was positive. In terms of sentiment, when everybody's on the fear side of the boat the sellers have pretty much already sold, turning them into panicky buyers when they open their eyes and find the boat still floating or, I should say, the market not sinking.

The Goldman Sachs Industrial Average

As you may know, the Dow Jones Industrial Average -- the index everyone watches because it's the index everyone has always watched -- is comprised of only 30 stocks. Plus, it's price-weighted; meaning the companies whose shares sport the highest prices impact the Dow's move the most.

Quote of the day: A hundred-point move ain't what it used to be...

Yes, the market's enjoying quite a run. But I get a sense from talking with folks that they view it as some breathtaking meteoric ascent, particularly when we're talking the Dow. The thing is, at nearly 20,000, per Bespoke Investment Group below, a 100 point gain just ain't what it used to be:

Your Weekly Message: The Battle of 2016 -- AND -- Is It Trumphoria?

Some client comments over the past week:

"Marty, these levels make me nervous." "This market can't go higher". "Here's $X more to invest for me." "The market's going crazy." "Things are looking really good!"

Let's tackle them one at a time:

Market Commentary (video)

This Week's TV Segment (video)

Market Commentary (video)

What, in today's world, brings prosperity, peace, civility and even makes us smarter?

Let's you and I never underestimate how much America's greatness owes itself to trade. 

Don Boudreaux articulates this as well as anyone I know. I highly recommend his book Globalization.

Your Companies Gotta Be Free If They're Going To Lead!!

Nicolas D. Kondratieff, a Russian economist, studied historical commodity prices in the 1920s. He found that there existed long economic cycles in capitalist nations that evolved and self-corrected, which was in sharp contrast to the Marxist notion that capitalism would be its own doom. He died in a Siberian concentration camp in 1938.

This Week's Message: Obsess With Process -- AND -- Beware That After-Dinner Cigarette!

Last week we touched on the continuing (as of this week) selloff in the bond market. I warned of the dangers of owning bonds in a rising inflation/interest rate environment. I also mentioned that we haven't ventured there in quite some time. What I failed to mention is that had we ventured, or, I should say, stayed, there, at least until very recently (and a few stints along the way), our clients' portfolios would've realized better results on the fixed income side of the ledger. Yes, generally speaking, owning a few select bonds over the past few years yielded better results than the cash and short-term CDs we clung to.

Quote of the Day: Yes, Ken, That's Scary!

Republican billionaire businessman Ken Langone and I (per yesterday's video) are on the same page on this one:

"Trump has to understand, and he will, no doubt about it, ... we don't have a managed economy. We don't say to companies you can't go and you won't go. That's scary,"

Market Commentary: What's Happening to Tech Stocks? -- OR -- Good Trump, Bad Trump (video)