Narrative Flip, Sentiment Rush Typical of Extremes, Exit Liquidity Needed, Small Cap Head Fake, Etc. (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

The Yen's Not the Ultimate Risk Right Here, Some Survey Results, Equity Market Conditions, Buffett Cash, yada yada

Dear Clients, the following, from our internal log, is important stuff!

But first, a quote:

“Acting in excessive reliance on the fact that something ‘should happen’ can kill you when it doesn’t. That’s why I always remind people about the 6-foot-tall man who drowned crossing the stream that was 5 feet deep on average. You have to be able to get through the low points. And the success of your investment actions shouldn’t depend on normal outcomes prevailing; instead, you must allow for outliers.” —Howard Marks

What (And Why) We're Thinking About This Selloff (video)

Just a few thoughts on the latest action in equity markets.

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Are Markets Now Reflecting Fundamental Reality? (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Credit Card Pain, "Excess Savings" (And Inflation) Wane, The Fed's Set to Setup Rate Cuts

Credit Card Pain

While those who don’t see recession looming (looking out 6-12 months) will cite the fact that the upper half of income earners are still spending quite healthily, and that their spending represents the lion’s share of US consumption, we should nevertheless take the latest credit data seriously.

I.e., while the below may indeed reflect the pain among those not in the upper 50% of income earners, it nevertheless speaks to the evolving state of the economy, and, in our view, should be viewed as a serious warning sign:

'Technical' Rally Right on Cue! GDP Pops (some history), Ex-Fedhead Panicking, Global Economy Surprising (in a not-good way), yada yada

Well, alas, technical difficulties did not allow me to post this week's video commentary, so I'll just give you the highlights.

But first, a quote:

“Whoever wishes to foresee the future must consult the past.”

Niccolò Machiavell

Starting with the technicals, here's the 1-year daily chart for the S&P 500... Like I said last week, we'll see some nice rallies off of technical support.

Context! Dangerously Giddy While Economic Sentiment Wanes... No Top Yet, Although... and Conflicting Narratives All Priced In!

Update: The following content was posted yesterday for today's distribution... In the meantime, here's an entry to our internal log this morning:

Google (Alphabet) stock is getting slammed this morning on earnings comments that very much jibe with our concerns over the AI hype… They implied that patience will be needed when it comes to justifying the massive spending they and others are devoting to AI.

Like I said yesterday:

“With regard to AI, so far it’s all about companies competing to see who can spend the most on it, while seeing virtually zero offsetting profitability gains yet emerging… They’ll likely come, but there’s little evidence that said profitability will emerge to offset the bottom line hits – which tend to roil perfectly-priced markets – that’ll show up amid the heavy AI spenders in coming quarterly earnings reports.”

Context

I can't emphasize enough how all the hoopla over all-time highs in US stocks needs some serious context.

Essentially, the extent to which a mere handful of stocks have done all the lifting is historic (and, by the way, historically-unhealthy).

Here's from the 2021 peak, nearly 3 years ago... Note that while the S&P 500 and Nasdaq 100 cap-weighted indices (white and purple) have done okay since then (well, actually, since last December), the same stocks equal-weighted have produced just barely positive results for the S&P (green) and slightly negative results for the Nasdaq (yellow):

Adjust those for inflation and of course it's much worse.

Now, could, as some expect, the many ultimately catch up to the few, and thus extend the cap-weighted indices up trend far into the future?

Absolutely!

Should we, in the present late-cycle setup, bet the farm on it?

Absolutely not!