Wednesday, November 28, 2018

Underneath Today's Rally

Today's monster rally was the biggest in 8 months. Here's my take:

Virtually without exception you'll find the media's explanation to be that today's move was entirely about Fed Chair Jerome Powell stating that rates are sitting "just below" what the Fed presently deems neutral. That would be the rate consistent with present economic conditions; i.e., a fed funds rate that would stick for awhile (no further hikes in the near-term offing).

Monday, November 26, 2018

Quote of the Day: "Tariffs Are Bad"

Notes from the Dallas Fed Manufacturing Survey released this morning speak volumes about why we said at the beginning of the year (and have stressed repeatedly since) that protectionism is the looming threat that could put our bullish thesis to the test:

Saturday, November 24, 2018

This Week's Message: Gloom is Good

In last Monday's post I wrote:
"Sometimes immediate conditions are such that the would-be buyers decide to sit on the sidelines for days, weeks, even months, waiting for things to shake out a bit -- and waiting for the average investor to panic."
Yes, a classic characteristic of a stock market bottom is that ultimate capitulation when the last holdout seller -- typically the individual investor -- succumbs to the pain, and the recency bias, and turns his/her shares over to bargain hunters who suffer not the affliction of believing that what's occurring today will occur forever.

Friday, November 23, 2018

Chart, and Message, Of the Day

As we anticipated, and have expressed herein, the Dow is highly likely to, at a minimum, test its recent intraday support level. Today it came within a hair:

Wednesday, November 21, 2018

Well, We Told You So!

We're generally not ones to say "we told you so", but today's worse than expected durable goods orders report is consistent with our somewhat party-pooping post back on July 27th, when that whopping 4.1% second quarter GDP number was announced.

Tuesday, November 20, 2018

Video Commentary: The Correction For What It Is -- For Now

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:

Bonus Quote of the Day

While White House Econ Adviser Larry Kudlow tried his best this morning to talk up the market by talking up the U.S. economy, he clearly didn't give traders what they wanted.

Quote of the Day

Today's quote below (from Bespoke's morning message) nicely follows yesterday's quick thought:

Quick Market Update, and Chart of the Day

If you've been with us consistently here on the blog, this morning's selloff should come as no big surprise. In last week's video I suggested that the near-term technical setup suggested that a test, and possible breach, of the recent low was very much in the cards.

Monday, November 19, 2018

Charts of the Day: Consumers Are Keeping Current

As we stress herein ad nauseam, in our view the key to long-term investment success is to allocate in accordance with general conditions. Therefore, the majority of our research time is spent assessing the present state of macro affairs.

Being that consumer spending accounts for 2/3rds of the U.S. economy, we are keenly interested in the fiscal health of the American spender.

Quick Thought

I recall earlier this year, during a period when virtually every dip in stocks was getting quickly bought, pushing the major indexes past prior highs, a friend commented to me how he comforts his wife when she's nervous about a big down day: He'd say "Honey, I'll betchya it'll snap right back up tomorrow", and he told me he was virtually always right.

Quick Note On This Morning's Action

Here's the last paragraph to this week's message; posted Saturday:

Saturday, November 17, 2018

This Week's Message: Seeing Some Stress, Seeing Some Strength, Seeing More Near-Term Uncertainty

We absolutely have our concerns over the present trajectory of the global economy. However, as our direct experience, as well as our study of economic/market history, instructs, long-term trends are forever interrupted by counter-trend fluctuations. 

Thursday, November 15, 2018

Market Commentary (video included)

So when will the market calm down? Is this a correction or the beginning of a bear market? If the economy's so good, why is the market so bad lately?

Three very good questions that we can address by answering a single, simpler, yet deeper, question:

Wednesday, November 14, 2018

Quick note on today's action...

Headline reads: 
"Dow turns negative, giving up 200-point gain, as Apple rolls over"

Tuesday, November 13, 2018

Bonus Quote of the Day: Consequential (on trade) Conflict in Washington

Last post for today:

Per the below, there's serious (and consequential) conflict on trade going on in Washington.

Quote of the Day

Yes, that elephant in the room we talked about in our weekly message  is absolutely the issue:  emphasis mine...

Be Careful What You Ask For!

If you're at all inspired by the politically-popular (in some circles) notion that China's economic pain (say, when -- due to U.S. tariffs -- producers en masse move their manufacturing facilities elsewhere), somehow equates to U.S. industry's gain, consider the following:

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.

Quote of the Day: Apple's Other Announcement

Per my earlier post, Apple's feeling some pain this morning due to its decision to no longer report iPhone unit sales in its quarterly numbers. Thing is, per the snip below, there were two changes to the company's plans for reporting the internals going forward: Along with the notably negative iPhone decision, the company will also be disclosing the costs borne within its ever-growing services division. 

Not So Hugely Positive News, But, Actually...

Just crossing the wire:

Thursday, November 1, 2018

Should We Worry About Apple?

I purposely jumped onto the Apple earnings call a half hour late this afternoon so as to miss Tim Cook and company tell the world how phenomenal last quarter's numbers were. Not that they weren't wonderful, in fact they were, it's just that that's not where I find value in listening in on earnings conference calls. What I am interested in is the Q&A. That's where, through their demands for explanation and clarity, the blokes who get paid the big bucks to know what's what with a company express their concerns.

More Hugely Positive News

Futures were looking ugly this evening after Apple posted stellar numbers, but a conservative outlook, and a heads up that they won't be reporting iPhone unit sales numbers going forward (I have thoughts on that that I may follow up with in another post). But then the following hit the wires: 

Hugely Positive Headline

While the cynic would say that the below is simply an attempt to engineer a pre-midterm election market bounce (Dow was up 20 before the headline, up 203 as I type), it absolutely does speak to how the equity market is influencing the discussion. 

Manufacturers Still See Expansion, But (and that's a hugely concerning "but"!)

The Institute for Supply Management (ISM) monthly surveys are hugely telling about the state of the economy; they are important constituents in our PWA Macro Index. Readings over 50 denote economic expansion.