Sunday, March 18, 2018

Headline of the Day: Bitcoin a serious threat, not! -- And -- Blockchain itself, however, is another proposition altogether.

From day-one, when anyone asked me how I felt about bitcoin I'd reply, "I absolutely love the concept, but fuggetaboutit if you think it's going to take over the world. I mean, imagine the threat to the global monetary system. The powers that be will have nothing of it, I promise."

Saturday, March 17, 2018

We Still Think the Market's a Bit Behind the Inflation Curve

On balance, last week's economic data releases were decent; better than decent when we look at consumer confidence, jobs-related data and industrial production. We're seeing virtually no signs presently of any heightened risk of a near-term recession; which is of course what we're forever on the watch for as we consider our equity exposures.

Friday, March 16, 2018

Don's Mom

The mother of the best economist I know passed away on this day in 2008. The tribute he penned to her a decade a go is timeless, and most inspiring. 

We Had A Huge Trade Surplus In January!!

Wow! We had a huge trade surplus in January!

Well, not by popular definition, but certainly by your investment consultant's 😇.

Wednesday, March 14, 2018

Why Media Headlines are Virtually Worthless

Now, it is true that the Dow is down over 100 points as I type. And it is true that retail sales unexpectedly dropped last month (something we'll dig into and apply to our model). However, does the message implied by the following headline paint an accurate picture of this morning's move in the Dow?

Data of the Day: Small Business Owners Continue to Like What They See

Small business is the employer of U.S. citizens, and, thus, the internals of the National Federation of Independent Business monthly survey account for 3 (of the 49) inputs to the economic component of our macro index. 

Tuesday, March 13, 2018

This Week's Message: Why We Like Financials Right Here -- And March Trends

This week we raised our financial sector target weighting to 18% (from 16%) of equities, making it our single heaviest position (previously tied with materials and industrials [still at 16% each]). Here's why:

Market News of the Day: Protectionism putting the bull market to the test...

For the umpteenth time, we emphasize that, while our analysis of current conditions favors equities going forward, we see a U.S. push toward protectionism as the development that will put the data, and, thus, our thesis, to the test. 

We Remain Constructive on Tech, However........

The following headline crosses my screen after what was a strong start for the market this morning:
The S&P 500 and the Nasdaq turn negative as tech rolls over.
We do remain constructive on tech going forward, however, per the following, not as much as we were this time last year:

Sunday, March 11, 2018

Milton Friedman on Steel Tariffs (VIDEO)

If you suffer any ambiguity over the steel and aluminum tariff debate, allow Milton Friedman six minutes to clear it up for you:

Saturday, March 10, 2018

Data of the Day: Capex easy to do going forward...

While getting a jump this morning on our internal weekly macro update, one of the inputs to our index -- the "corporate financing gap" -- jumped out at me. By comparing non-residential fixed investment (i.e., business capital investment) to corporate cash flows this indicator gauges corporate America's wherewithal to expand. 

Quote of the Day: More than Goldilocks

In yesterday's blog post we suggested that the stock market (participants in the aggregate) -- based on its strong positive response (Dow +441) to the February jobs report -- is betting that interest rates will remain tepid despite the economy picking up some real steam. 

Our suggestion lies partly in the fact that when January's healthy jobs report featured a surprise pickup in wages (exceeded estimates, while February's missed) -- presumed inflationary -- the market tanked (Dow -667):

Thursday, March 8, 2018

Let's Talk Economics, Not Politics!

Here's the headline:
(Bloomberg) -- China’s exports surged and its trade surplus unexpectedly widened in February, illustrating the lopsided nature of global commerce that Donald Trump is preparing to introduce protectionist measures against. Overall exports rose 44.5 percent in February from a year earlier and those to the U.S. surged 46.1 percent, customs data showed...
Here's one possible spin:

Wednesday, March 7, 2018

Video Commentary: More On Current Conditions

This morning's video commentary piggy backs onto last night's with a little deeper dive into our ongoing research and assessment of current conditions.

Highly recommended for clients!

A Little Clarity on the Mucky Protectionism Debate

Here's a slice of my end of a friendly dialogue regarding current events. I'm offering this up to inject some clarity into the very mucky protectionism debate:

Tuesday, March 6, 2018

Video Commentary: Putting Tomorrow's (literally tomorrow's) Volatility Into Perspective, and More on the Current Setup

The President's chief economic adviser -- one the capable advisers (who adamantly opposed the recently unveiled tariff scheme) we referred to in an earlier post -- announced his resignation this evening. As I type, Dow futures are pointing to a 400 point decline at the open. 

Here's some perspective:

This Week's Message: Hey, Chicken and Paper Clips Say There Ain't No Inflation -- And -- This Week's Vision Test

In a recent weekly message we suggested that a strong two-day rally in stocks at the time was based on false pretenses: the notion that the economy isn't in fact exhibiting the kind of strength that would see interest rates notably higher over the foreseeable future, and that that's a good thing for stocks. 

Again, we think the data, and market history, fly directly in the face of such thinking.

Monday, March 5, 2018

Quote of the Day: What Could Bring the Bears Back...

Economist Ed Yardeni echoes our chief concern for the market coming into this year (as expressed in our 2017 year-end letter), and the idiosyncrasy that we've stated will likely mute the specifics of what might otherwise test our bullish thesis going forward:

February Surveys Confirm Our View of Present Conditions

This morning's releases of the services sector surveys by Markit Inc. (PMI Services Index) and the Institute for Supply Management (ISM Non-Manufacturing Index) essentially confirm what our macro analysis tells us about the current state of the U.S. economy.

Sunday, March 4, 2018

Pins and Needles Over Protectionism

Much like other head-scratching phenomena (read tweets and other public commentary of an impulsive nature) of the past year+, the latest calls for anything but knee-jerk reaction. It does, however, demand that we assess our various areas of exposure to what in my humble view is the most ill-advised impulse thus far. 

Saturday, March 3, 2018

Quote of the day: These things take time...

Bespoke Investment Group's guidance on present circumstances mirrors ours:

One More on Tariffs

Okay, we'll do just one more very quick post on the potential economic/market/political effects of tariffs. 

Going forward we'll wait for the details and monitor the immediate impact on market technicals and begin assessing the potential longer-term fundamental implications for both our U.S. and non-US exposures, if any:

So much for this being about U.S. Jobs:

Friday, March 2, 2018

The Simple Sad Truth About Tariffs (Q&A)

In this morning's video commentary I suggested that I'd offer up more on protectionism and markets over the weekend. Thinking about it, the brief mention in this morning's written post pretty much sums up the why of the market's negative reaction:

Video Commentary: The Correction and Our Assessment of Present Conditions

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:

Present volatility -- per all of our commentary -- makes sense, however....

We've been strongly suggesting that the correction has yet to run its course, which means days like the last three (we'll see about today) were in the offing with or without the ill-timed (always ill-timed!!) announcement that the U.S. is about to do a number on its own consumers, its exporters, its manufacturers who import all manner of components, and of course its key international relationships.

Thursday, March 1, 2018

Oops! Scratch the Earlier "Market-Centric Trump!" Post

Forgive all of the intrusions this morning, this should be the last time I bug you today! But I want you to understand that recent volatility has at this point nothing to do with the fundamental market setup.

Headline from a minute ago:

Quote of the Day: The Fed and the Financial Sector

Bloomberg sees financials as the sector to benefit the most under the new Fed regime. As evidenced by it being our current top sector weighting, we happen to agree (although a financials-friendly Fed is not the only thing that has us bullish on the space):

Market-Centric Trump!

Per this morning's blog post, I'm thinking the pending tariff announcement could (depending on severity) be a negative event for the stock market. I suggested that the President is very market focused and would ultimately look to escape any measure that clearly hits stocks in a bad way.

Another Potential Catalyst for Volatility -- And the Market's Definitely In the Mood For (or in need of) Volatility!

We've been pounding aplenty herein on the normalness and, frankly, the necessity (this bull market is overdue for a pause/shakeout) of present volatility! So the bottom line is that stocks remain ripe for some pain, regardless of the catalyst. I.e., the market has to be in the mood to correct for, say, a more hawkish Fed stance -- and/or something else -- to set things in motion.

Wednesday, February 28, 2018

Nothing Surprising Here!

Day's like yesterday (Dow down 399) and today (Dow down 382) almost demand that we say something here on the blog (not that it takes much to get us saying stuff here on the blog).

Our Quick Take on Housing

One might surmise that rising interest rates would be a no-brainer reason to short (sell) housing-related stocks. And this morning's report on pending home sales -- down 4.7% month-over-month -- certainly supports that notion. 

Tuesday, February 27, 2018

Why stocks are struggling a bit this morning...

From this week's message: (be sure to read the whole thing)

This Week's Message: Rallying on the Wrong Theme!

Regular readers know that we remain constructive on global equity markets going forward. In fact, "constructive", frankly -- based on the weight of both the technical and fundamental evidence -- puts it mildly. I.e., We're -- heightened volatility notwithstanding -- downright bullish for the foreseeable future. That said, I find the otherwise impressive two-day (last Friday and yesterday) rally uninspiring. 

Monday, February 26, 2018

Stats of the Day, Plus a Heads Up

To put it bluntly, U.S. companies are doing exceptionally well at the moment. 

The following charts and commentary from Bespoke Investment Group tell the story:

Wednesday, February 21, 2018

Uncertainty Is A Certainty

Just a couple quick thoughts to help you put today's action -- the Dow first rallying 300, then declining 460 presumably in response to the release of the Fed's January meeting minutes -- into perspective.

Monday, February 19, 2018

This Week's Message: General Conditions Update -- And -- Timeless Insight

Our job, as we see it, as portfolio managers is to make sure that each client's portfolio is properly aligned with present general conditions. Our job, as we see it, as portfolio counselors is to make sure that each client's portfolio is aligned with his or her personality. 

Frankly, the latter is every bit as critical as the former, and in many ways it's the more challenging of the two!

As for us as portfolio managers: We just completed this week's technical analysis and updated our macro index. Here are the highlights:

Saturday, February 17, 2018

A Complete Sissy of a Correction So Far!

If you really think the current, or previous (if it's indeed over, which I dunno) correction is/was scary, horrific, terrifying or just plain bad, well, historically-speaking -- and to prepare yourself for the future -- you need to think again.

Friday, February 16, 2018

Today's Data Make Sense

This morning's economic releases happen to jibe with what we've been reporting herein; that is, an improving economy with an attendant pick up in inflation. 

Thursday, February 15, 2018

Chart of the Day: Home Builders Aren't Sweating Higher Mortgage Rates

The National Association of Home Builder monthly sentiment index (January's results just released) -- one of the 79 inputs to our macro model -- suggests that while housing contractors are struggling with shortages of land and labor, they aren't sweating the prospects for higher mortgage rates in the least:

How to Make "The Big Money"

Circa 1923, the otherwise media-aloof Jesse Livermore confided in journalist Edwin Lefevre and gave the world what became in my view history's greatest written work on the stock market. Livermore's observations are as pertinent, and prescient, today as they were nearly a century ago.

Wednesday, February 14, 2018

This Week's Message: Feeling At Home In The Markets

Having spent nearly my entire adult life in the investment arena, I must tell you that I feel completely at home in the stock market. That is, on behalf of myself as an investor, and on behalf of my family's financial well being, there's virtually no amount of volatility that rattles me. And it's instructive for you to know why.

Inflation Up! Duh!!

As I type Dow futures have dropped from +150 to -230. A 380 decline that began the minute the January Consumer Price Index came in at +.5% versus the +.3% consensus expectation. Yesterday virtually all of the experts were -- and clearly the "smart" money was -- betting it would come in below, at, say, .2%; thus quelling, for the moment, the market fears over higher interest rates. I sure saw it in rallying gold and bond prices yesterday, (bonds tanking [rates rising] as I type) and in equity futures this morning.

Stat of the Day: U.S. Companies Doing Pretty Okay On The Global Stage!!

If you happen to be of the mind that somehow U.S. companies are getting a raw deal on the global stage, well, we're looking at the best bottom and top-line growth we've seen in many years and, ironically, the companies whose earnings and revenues come mostly via foreign customers are the cheif difference makers. I.e., they're seeing markedly better results than those whose earnings come primarily from within (although the latter's ain't nothin to sneeze at either!). Of course the weak U.S. dollar certainly hasn't hurt:

Tuesday, February 13, 2018

Stats of the Day: Small Business Attitudes And Present Recession Risk

Small businesses employ 2/3rds of the U.S. workforce. Hence, the monthly NFIB Small Business Optimism Index is one of the 79 inputs to our macro model.

Here's this morning's release:   click to enlarge...

Monday, February 12, 2018

Uninspired to React

Those of you who'd prefer to see the present correction end sooner than later will like how the market at least opens this morning. Those of you who understand that corrections amid a strong overall setup are the healthiest of things might prefer that it last a bit longer and purge a few more excesses. Best I suppose to be oblivious to the short-term and simply take what we get.

Sunday, February 11, 2018

Volatility Is Good News For Financials!

In our year-end letter we mentioned that our expectation for market volatility in 2018 was, ironically, one of the positives for financial firms' earnings going forward:

Saturday, February 10, 2018

Charts of the Day: Earnings Results Thus Far

While you wouldn't know it by recent price action, the current earnings season -- with over a thousand U.S. companies having issued their Q4 results -- thus far ranks among the best since the early 2000s.

Thursday, February 8, 2018

Your Daily Dose of Perspective: Awfully Windy Up There!

While I suspect we've said about all there is to be said about the present state of the market and the economy (btw, economic data has only gotten better this week [hence the interest rate fear]), we're feeling we should pop in on you, nonetheless, given this morning's 600+ point decline in the Dow. 

Wednesday, February 7, 2018

Bonus Chart of the Day: One You'll Like, But Still....

We're guessing you'll like this chart and commentary from Bloomberg; operative words being "during non-recession years."

This Week's Message: The Basics of This Particular Selloff, And Sour Grapes for Flat Footed Gurus

The last few days have seen a remarkable – relative to very recent history – selloff. Based on media accounts you’d think we’re seeing a shakeup that rivals history’s “worst”. When, in fact, this is the fifth time during the current bull market where a 7-day stretch has seen at least a 7% drawdown.

The question of course is, do present conditions suggest that this could be the beginning of something far more pernicious? While it’s of course within the realm of possibilities, the answer from the data is a resounding no.

Chart of the Day: Don't Hold Your Breath

In a blog post yesterday we featured a chart of the five periods during the present bull market that saw a 7%+ decline over 7 trading days. 

Tuesday, February 6, 2018

Times Like These (video)

You gotta be thinking that all we do here is blog. Actually, you'd be surprised how quickly we can churn these things out. I guess I've been writing on markets for so long that it just flows easily.

The reason you get so much, particularly during times like these, is because unequivocally times like these bring out the worst in individual investors. Times likes these are when their emotions can get in the way of prudent long-term investment management. I.e., times like these are when investors make the biggest mistakes!

Not An Economic Phenomenon, Not At All Unprecedented Even During The Current Bull Market, And, Again, Likely Not Over Just Yet

Along with our investment in the Bloomberg Terminal (considered the most robust data source for the investment industry), we've found our relationship with premium research provider Bespoke Investment Group to be most valuable over the years.

Video Commentary: The Selloff In Perspective

Today's video commentary is brief and to the point. Please take a minute and take it in:

Monday, February 5, 2018

The Mechanics of The Seloff -- And -- Expect More Of The Same For Awhile Longer

Yes, we've been preaching herein that volatility is coming, and that, in light of the extreme lack thereof for a record period of time, it was likely going to be uncomfortable at best. And while we're very much within the % range of your garden variety correction, the speed in which we got to this point, I must confess, I find remarkable.

More on History and Volatility

Not that we're not generally active here on the blog, but it's times like these when we get to step it up several notches. 

It's tempting to pull from the archives of past market corrections and offer up the quotes, videos, stats and so on from times when the market saw every bit (more at times) of the rapid % declines we're presently experiencing; times when the Dow was multiple thousands of points lower than where it is right now. We of course may indeed resort to that, but, for this particular post, I can draw from something as recent as 2 weeks ago.

Bonus Stat of the Day: Services Sector Remarkably Strong

This morning's release of the Institute for Supply Management's Non-Manufacturing Index for January speaks to the strong reading we're getting from our macro index (illustrated for you in this morning's video commentary). Read Bloomberg's notes for the detail:

Video Commentary: The Facts (the data) As To Why We're Not Remotely Concerned 'At This Juncture'

Toward the end of the video I suggest that follow through from Friday's selloff over next few days or weeks should be something to expect. I also emphasize that it would be the norm, and that the lack of volatility we've experienced over the past year is anything but.

Stats of the Day: Global Economy

Well, the recent dip in stocks has nothing to do with the strength of the global economy. Here are the freshly released service sector Purchasing Manager Indices for 13 major economies. 50 and above denotes economic expansion:

Friday, February 2, 2018

Quote of the Day: 3% Pullbacks Since the 1920s

If you're thinking this week was at all unusual, you'll think differently after you read the following.

This Week's Second Message: My Thoughts From Last November

Don't know if you're at all rattled by today's "plunge" in stock prices, but, seriously, we haven't been kidding here on the blog when we've said that such action is long overdue, and, in fact, necessary for the ongoing health of what remains for now a bull market.

I keep a journal that I've found to be most helpful for my own keeping-things-in-perspective. Below is the 11/10/2017 entry (unedited, other than bolding). 

The Heck Is.........

So, the U.S. economy created a net 200,000 new jobs in January, employee wages rose at the fastest pace in 9 years, and 95.9% of Americans show up somewhere to work most days of the week. On top of that, half of the S&P 500's constituents have reported 4th quarter results with 77% beating analysts' earnings estimates and 67% exceeding revenue expectations.

And, as I type, the Dow's down 400 points. What the heck?

Wednesday, January 31, 2018

Chart of the Day: Wages Rising!

The Fed finished up Janet Yellen's last meeting today, and while, as expected, there was no move on interest rates, the post meeting statement reflected a positive view of growth and (rising) inflation, and the will to move the policy rate higher multiple times going forward. 

This Week's Message: Yesterday, Volatility in General, and the Energy Sector

For this week's message I'll share this morning's two entries to our market journal, cleaned up for your reading pleasure. The first speaks to recent market volatility, the second to my thoughts on the energy sector:

Tuesday, January 30, 2018

Quotes (our own) for a 363 Point Down Day

If today's 363 point decline in the Dow has you remotely rattled, here are some excerpts from stuff we wrote over just the past month  to help you keep the market in perspective:

Chart of the Day: Yeah, Infrastructure...

Yeah, I think there's some infrastructure spending on the horizon:

Monday, January 29, 2018

Chart of the Day: Really Really Good Earnings Guidance So Far

To round off our last two (here and here) charts of the day; in addition to exceptionally high earnings and revenue beats, the spread between positive and negative forward outlooks (generally THE mover of stock prices post earnings) has been extremely bullish so far this earnings season:

Sunday, January 28, 2018

Beware the Headlines!!

If you've been following us here on the blog you know that our analysis continues to paint quite the bullish picture going forward. And you know that we don't do hunches, we don't make predictions, we simply weigh the data and consider the go-forward probabilities. And, most importantly, we remain open to all possibilities. 

Saturday, January 27, 2018

Bonus Chart of the Day: Better Yet, Top Line Results Are Really Really Good So Far!

While the investment world tends to be laser-focused on earnings, we should never forget that publicly-traded companies employ the most creative accountants money can buy. I.e., certain items can be stuffed over there, tucked under here, and so on, to shed the most favorable light on an earnings statement. 

Chart of the Day: Really Really Good Earnings Reports So Far!

The fact that analysts were rushing to up their earning's estimates coming into January makes the chart below all the more impressive:

What's Up With Gold? And Should We Care?

Our presently bearish view of gold, from a macroeconomic standpoint, continues to make sense to us. Contrary to what some would have you believe, consumer demand (India's wedding season, for example), while it may appear to offer the metal a periodic seasonal boost, is no determinant of whether an investor (as opposed to a short-term trader) should take a position. The supply of gold in the world far outstrips all the functional demand the world marketplace could virtually ever serve up.

Friday, January 26, 2018

Headlines We Like!

Regular readers know how -- in multiple respects -- we feel about protectionism. Herein, however, we'll stick to investing. 

This past two days have brought some encouraging, investor friendly, headlines:

Wednesday, January 24, 2018

Headline of the Day: Wilbur Ross Talks Trade and Stocks Fade

Yes, the setup remains notably bullish, and we suspect, therefore, that this market can withstand a lot. But, as we all know, there are always risks. In our year-end letter we cited U.S.-led protectionism as being chief among them.

This Week's Message: Why We Keep Reminding You About Volatility

We've been fielding an unusual number of market-related  inquiries from clients of late. Interestingly, they're coming from two distinctly different angles; and I'd say the split is roughly 70/30. That is, it seems like better than 2/3rds are soliciting our thoughts on the market's amazing run from a skeptical point of view, others conversely are asking if perhaps we should untether some of their fixed income holdings (read cash and short-term CDs, currently) to get more capital working in the equity market.

Saturday, January 20, 2018

The Eagle

As we ponder this weekend the market implications of all things political, I thought I'd offer up the analogy we've been using during client review meetings. 

With few exceptions, and at times with virtual incredulousness, clients are asking about (commenting on) the record heights the stock market continues to mount. Here, metaphorically, is how we explain it:

Thursday, January 18, 2018

This Week's Message: Still Not a U.S.-Only Phenomenon, Options Traders Are Betting On Volatility, Macro Trends Remain Bullish, and Some Important Stuff Going Forward

As good as it feels to credit one's favored factor(s), development(s), person(s) or political party, the truth is that the market dynamic you and I are presently experiencing is a global affair. 

Tuesday, January 16, 2018

Quote of the Day

Jack Schwager, in his instructive and comprehensive A Complete Guide to the Futures Market  makes the point that we've been stressing of late in client review meetings: That while our fundamental analysis says the overall setup remains bullish for equity markets, it's  only useful in terms of assessing the prospects for the intermediate and longer-term horizons. We should always expect frequent counter-trend moves and corrections even under the best of conditions. 

Friday, January 12, 2018

Inflation Update

In last night's post we featured December import and export prices and the Producer Price Index -- each missing expectations -- and reiterated our stance that it's simply a matter of time.

Thursday, January 11, 2018

Despite the headline numbers, the market feels inflation coming...

We've been hinting herein that our view on inflation is that we're on the cusp. Not, mind you, remotely in the style of the late-70's/early-80s, but at a rate that jibes with an accelerating economy and an uber-tight labor market. 

This Week's Message: The Troubling Rumbling!

As we suggested yesterday, and in our year-end letter, the most troubling rumbling amid the presently bullish macro setup is the threat of U.S.-led protectionism. 

Wednesday, January 10, 2018

China's Dollars

Dow's down triple-digits as I type. Here's the headline:
"Dow falls 100 points amid concern China may stop buying U.S. debt"
Let me help you put that headline into perspective.

Tuesday, January 9, 2018

The good news may be bad news, which, if it is, makes it good news!

Well, the good news is that analysts are absolutely giddy about the current earnings season! The bad news is that analysts are absolutely giddy about the current earnings season!

Monday, January 8, 2018

Things 'presently' look good, the world over...

The monthly Purchasing Managers Surveys are priceless when it comes to assessing global economic conditions. 

Here's why:

Saturday, January 6, 2018

PWA 2017 Year-End Client Letter

Part 1: What Makes Us Tick

2017 has been quite the year for the stock market! Predictions annihilated, records smashed, and headwinds bucked like they were never there. My, where to begin?

Friday, January 5, 2018

This Week's Message: We're in the minority on the dollar, again...

After just bombarding you with our lengthy year-end treatise, this week's message will be very short and sweet.

Here's part of an interoffice memo I sent this morning:

Wednesday, January 3, 2018

Stat of the Day: We're hearing footsteps...

The results of December's Institute for Supply Management's 
manufacturing purchasing managers survey were released this morning. 

Given the macro backdrop we've been discussing herein, the above-consensus headline number -- and 14-year high for new orders -- should be no big surprise.

While this is of course very good news, one thing we're looking for in such releases is any whiff of inflation: Note the last line in paragraph 2:

Monday, January 1, 2018

Quote of the Day (Maybe the Year!)

So a young man says to me over the weekend "they say Apple is going down. What do you think?" I explain why I never listen to "they". I then offer up an alternative scenario and escape the conversation without making a recommendation. A minute later I overhear him complaining to my son Nick (we're between basketball games), "your Dad always answers my questions like an attorney!"