Monday, April 16, 2018

One Example of Why Tariffs Really Bug Me!

A friend, and BTL reader, told me recently that in reading the blog he senses that talk of tariffs for me is akin to someone scraping their fingernails on a chalk board.

I must confess, he was spot on!

This morning's Empire State Manufacturing Survey release gives you one reason (among multiple) why:  emphasis mine...


note: Paragraph 3 supports our bullish view of current conditions; paragraph 1 explains why we stressed at the beginning of the year that protectionism poses the greatest threat to our thesis...

Sunday, April 15, 2018

This Week's Message: Long-term trend intact, short-term setup in question...

Bringing you this week's message early, as I'll be away from the office Tuesday through Friday (what'll you do with all that extra reading time?). 

While recent volatility has delivered some short-term technical damage to equities, the longer-term bullish trend remains intact; per the three long-term trend indicators (the slope of the S&P 500's 200-day moving average, the positioning and slope of our weekly moving average indicator, and the signal indicated in our monthly Bollinger Band chart) featured below: 

Saturday, April 14, 2018

From Our April Current Trends File

The entries thus far to our April current trends file pretty much jibe with the latest reading from our macro index. 

In a nutshell: Under the weight of rising geopolitical uncertainty, global trends are not what they were a few months ago. The U.S. economy nonetheless remains in good shape with probabilities pointing to no recession on the near-term horizon. In the meantime, inflation is picking up at a healthy enough pace to justify at least 3 Fed rate hikes this year. 

Friday, April 13, 2018

Stat of the Day: Workers! Workers! Workers!

You and I can have a legitimate debate about the good and bad of employment trends in manufacturing. And we can legitimately debate the quality of jobs available across all sectors. But, frankly, there's no debating the fact that the U.S. economy is in no way shape or form wanting for job opportunities. 

Don't Celebrate This Stronger Week Just Yet -- And -- Is China On The Ropes Or Playing Rope-A-Dope?

While we're ultimately concerned with general conditions, and allocate accordingly, we nonetheless pay very close attention to the day-to-day developments that impact short-term market moves. 

Two reasons: One, the media, in an effort to capture our attention, often doesn't capture the true catalyst(s) for a given market move; we thus feel compelled to offer our readers what we view to be the straight unbiased scoop. And, two, we want to help our clients keep the noise in perspective, as, often -- as it pertains to our/their time horizon -- that's all it is.

A 'Fundamental' Silver Lining To A Volatile Market

If you're our client financials is presently your portfolio's top sector weighting. We outlined our bullish thesis in our 2017 year-end letter. Per point #5 in the excerpt at the bottom, we saw market volatility in 2018 as a distinct positive for the sector's earnings prospects.

Citigroup's earnings announcement this morning confirmed our suspicions:

Thursday, April 12, 2018

Quote of the Day: Market-Friendly Stuff

While commentary from Washington has been the definition of volatile/uncertain of late, some of the latest is market-friendly stuff:

Wednesday, April 11, 2018

Quote of the Day: Anything can happen in three months time...

Jack Schwager -- in an interview for his highly insightful book Hedge Fund Market Wizards -- asked GMT Capital (multi-billion dollar money management firm) founder Tom Claugus about his early years as a hedge fund manager. 

We entirely sympathize with his response; which describes plain and simply why we decline all requests to manage short-horizon portfolios:

Tuesday, April 10, 2018

This Week's Message: It's All About Trade, For Now...

About mid-morning yesterday at the office we discussed the then big rally in stocks (the Dow peaked 450+ points higher on the day). We concluded that the advance had little chance of lasting the day as it was clear from the open that it was predicated upon softer trade talk out of Washington. I.e., given that Chinese President Xi's address at the BOAO Forum was scheduled for the evening, it simply didn't make sense that traders would want to be long at the close.

Monday, April 9, 2018

Our Present View of the Tech Sector

Thought I'd share with you our updated internal narrative on the technology sector. In addition to summarizing our assessment of the tech space, it offers some insight into the dynamics presently pushing stock prices in both directions:

Sunday, April 8, 2018

Lee and Li Do a Deal

Let's say that Lee, an American, gets together with Li, a Chinese artist, via the internet and buys one of his paintings for $2,000. Li is happy to have 2,000 U.S. dollars, and Lee and his wife are thrilled with the beautiful piece of art now displayed above their mantel: A win/win by definition.

In my story, Lee happens to be a spender, while Li happens to be a saver; Lee likes nice artwork, Li likes to save and invest.

Saturday, April 7, 2018

"The Sensible, Rational Thing For Us To Do"

I'm with Milton Friedman on this one (have been for decades as I've watched both sides of the aisle exploit the American consumer's confusion and abuse him/her in the process):

Friday, April 6, 2018

Where the Jobs Are, and Comparative Advantage

There's a thing called comparative advantage; I actually did a Youtube video on it a few years ago (first video below) -- you'll find it instructive.

In a nutshell, different countries do different things more efficiently, and when we allow for/exploit those comparative advantages we ALL get richer.

Stat of the Day: One more on why we like financials (our highest present conviction) right here...

Bloomberg's Chart of the Hour:

Median and Meek

While the headlines and price swings may feel freaky, it's always good during times like these to step back -- as we did in last night's video -- and put things in historical perspective:

"Selloffs can be waved off. However..."

Market researcher Bespoke Investment Group did an excellent job this morning outlining present risks:   emphasis mine...
It is impossible to view the announcement of expanded tariffs by the US last night as anything but a major escalation. Thus far, every tariff announcement by the US has been responded to in similar size with Chinese proposals, so China’s response is likely only a matter of time.

So, Was the Market Right About Trump to Begin With? -- Or -- How This Likely Plays Out...

Thought I'd share with you my entry this morning to our internal market log:

4/6/18 Friday

Upon leaving the office the afternoon of the 2016 Presidential election, I recall telling Jeannette that “Trump’s not going to win, but if he does the Dow will be down a thousand points tomorrow.” Well, of course I was wrong on both counts; he won, and the Dow opened only a couple hundred points lower (although Dow futures were down nearly 900 points overnight after the results were announced), and closed I believe 300+ points higher.

So why all the pessimism going in, and the ~900-pt drop the night of?

Thursday, April 5, 2018

Video Commentary: Very Much the Norm 'So Far'...

Well, like I said yesterday, we do video commentaries during unusually rough days for the market. While the night's still young, it looks as though the market may be in for a rough ride come tomorrow morning.

In this evening's video I apply a popular technical concept throughout the current bull market to make the point that present volatility is -- to this point -- very much within the norm:

Service Sector Purchasing Managers are Upbeat, Save for one big concern....

The ISM Non-Mfg (Services) Survey -- a highly regarded indicator of economic prospects -- came in on balance strong for March. Which is consistent with how our macro index is scoring.

Wednesday, April 4, 2018

Kudlow Breaks His Silence!

Had a technical difficulty with this morning's promised video commentary. In that we tend to produce those during major down moves, we've decided to hold off till the next one of those days. 

Where This is Coming From, The Facts, and Simon and Garfunkel on the real problem...

As you readers should absolutely expect (and, at this point, be unrattled by) -- based on the headlines of the past 18 hours or so -- Dow futures are pointing to a 500 point decline at this morning's open. We'll put a video commentary together a little later this morning.

In the meantime, here's something to help you understand where this all is coming from:

Tuesday, April 3, 2018

This Week's Message: The Long and the Short of Current Conditions

As managers of what we'll label long-term (retirement, generational wealth, institutional, etc.) portfolios, it's general conditions and the long-term setup that we're ultimately concerned with. That said, in that in our view good communication ultimately leads to emotional comfort among our clients (our ultimate aim), we believe it's important to continually offer insight into the day-to-day goings on that influence short-term market movement and, alas, the financial media's messaging. 

Monday, April 2, 2018

Some Good News Amid the Noise

We view the Institute for Supply Management's monthly manufacturing and service sector surveys as very important inputs to our macro model. 
As we suggested in a post this morning, February's manufacturing survey suggests that the economy remains in decent (in fact, very decent) shape.

Same Story, Same Macro Setup... For Now...

The Dow's down 670 points as I type. Ironically, exactly one week ago the Dow closed up 670 points. While you might think it's all about Amazon, don't! Not that the signal the President -- in his attack of Amazon -- is sending to the market isn't concerning on a number of fronts, the energy underneath today's selloff generates from the same issue du jour that inspired last Monday's rally; trade.

Economy Looks Decent, So What's the Problem With the Market?

This morning's selloff in stocks isn't about the economy, per the following results from two key manufacturing surveys just released. Ironically, however, the Manufacturing Purchasing Managers report offers a clue (my highlight):

Sunday, April 1, 2018

Headline of the Day -- And -- Near-Term Prospects

In last Sunday's "Headline of the Day" we suggested that the market would warmly greet Secretary Mnuchin's comments that he was hopeful that the U.S. could come to a workable, non-tariff, solution with China. As it tuned out, the Dow screamed higher on Monday to the tune of 667 points.

Unless the headlines out of Washington improve on this Easter Sunday 2018 (by the way, Happy Easter!!), we won't be looking for another monster Monday rally tomorrow. 

The President has been active on Twitter this morning: