Some Weekend Thoughts

Good Morning,

 

Three down – 11 to go.  This hazy process in the markets is set to continue – even as “news” gets louder and more productive.

 

Sure, some sectors have been heavily tossed about this week – but overall – the churn is under the surface with little else happening above.

 

Given it has a fairly uneventful week for markets, as one might expect, bullish sentiment was little changed as well – and it’s still real low!

 

The latest weekly survey from AAII, bullish sentiment increased less than a percent from 32.27% up to 32.65%.  This now sets another record:  weeks with readings below 50% now stands at 129.  Get this:  over the last sixteen weeks of pretty steady markets, there have been only four weeks where more than a third of investors were bullish.

If you think the bears are right….

 

Well, this chart will give you a spook – wrongly so when misunderstood – but it will give you a scare.  That’s an ugly little shot down to the lows….bad right?

 

Let’s see:

This is important to understand why and how this chart works.  Otherwise, it is easy to see it differently – and oddly enough, bears count on your doing so.

 

First – just check the other times (there haven’t been many) this chart has shown “weak” data.  They were ALL good times to be a long-term investor – not a scared trader looking for the next shoe to drop.  History helps if we are willing to be patient with it.

 

Now to the data itself and why?  The Citi Economic Surprise Index above is a measure of the pace at which indicators are beating estimates.  In other words, when analysts get on the wrong side of projections (expectations) – as they often do – […]

Watching Paint Dry

Good Morning,

 

Sometimes it’s tough to provide helpful data when there is little in the haze of summer which is overriding or new.  Bring on the chop and concerns as the churn is helping to keep the masses back on their heels, solidly in cash and rolling waves of capital into bonds.  Meanwhile, new highs keep getting slowly, silently etched in stone for one reason or another.

 

The “mayday” call on Friday was the purchase of Whole Foods by Amazon.  A shocker indeed.  I chuckled listening to many “experts” and talking heads tell us how much it meant, what the future would bring to any stock listed and how every element of the retail landscape would be affected – all within moments of the announcement.

 

I always find it amazing how the future is known by so many – so clearly.  Oddly, not a single one of the talking heads had actually foretold of the buyout itself.  I mean, if you know all the tea leaves from an event unfolding, wouldn’t you have also seen the event itself coming?

 

LOL

 

I will tell you what did not help – a low volume Friday in the heat of summer with more people traveling to the beach than were there to fight back against the internal churn.

 

A few companies got shellacked and many others felt some stress – without reason.

The result of the knee-jerk, algo-driven, HFT minefield we must endure for the remainder of summer.

 

Indeed, watching paint dry is a good reference.  Worse, it’s ugly paint.

 

Speaking of Investing

 

I bring this chart below to your attention.  It shows the result of a survey covering current feelings about investing.  Posted in the WSJ and done in conjunction with Blackrock.

 

No wonder the mood remains punk as it […]

Investors on Tilt

Good Morning,

 

Happy Father’s Day to All Dads!

 

Enjoy a great weekend with family and loved ones!

As we head into our second official Friday of summer, expect things to be slow.  Oddly, today we are going to talk about the lack of excitement….at record highs.

 

Just yesterday, the data on fund flows showed the highest level of fund flows into bond funds since October of 2009!  This on just two to three days of a tech setback?  And we now listen to talking heads all week calling it the “tech wreck?”

 

Jeez.  Bring it on man.  Pray for the chop – and adapt to the change.

 

While it may be terrible for short-term traders, in general the setting is likely far better than expected for patient, long-term investors.  Heck, JP Morgan told the world earlier in the week that only 10% of trades are now done by “active managers” – the rest apparently by high speed traders, HFT shops or algo funds.

Could This Be The Reason for the Sedate Mood?

 

The masses have simply seemed to check out in the normal sentiment rise which typically tags along with record highs in markets.  You may recall the sentiment stats I shows you at the end of last week to compare the record bullish readings back in 2000 – along with the tech bubble top vs. the current readings.

 

Here is the deal – Wall Street is struggling – feeling the pain of all of this – and it may be why we cannot seem to see the crowd getting excited about anything.  Hey, if the main cheerleaders are in a funk – the crowd will be too.

 

Check it out….

 

Greenwich, the winter home of the hedge fund elite has some interesting turmoil in its high-end […]

Recognize Any of These?

Good Morning,

 

I am confident you have seen the from Friday, the weekend reviews and the Monday “shellacking” in tech.  I chuckled yesterday when I saw this headline late in the day:

 

“Now Bitcoin is Crashing with Tech Stocks”

 

Crashing?  Really?  Have we come to the point where any red ink is either a) a crash or b) the start of a crash?

 

If so, then as a long-term investor, one should be aware history would suggest it is time to rejoice.  At least in my 35 years of being around this crazy arena, it has always been a good thing that the crowd was terrified of stocks.

 

Recent emails have provided you vast updates of the real emotion and sentiment behind the markets.  A vast majority of the crowd is hugely underexposed to equities and further – remains significantly, outright, afraid.

 

In case you needed another dose of comedy – check it out below…

 

In recent years, we have literally been inundated by headlines designed to keep your attention on what has proven to be useless noise – and off the important elements of your financial goals.  Some of those headlines were from some pretty prominent names….a solid lesson indeed:

Friends, there is always something to be concerned about.

 

As stated often, we must help clients understand there is a vast difference between what your emotions will tell you and what the market tends to be pricing in about the future.

 

It’s an untidy beast at times…completely mystifying at others.

 

Often, little from the headlines mixes well with price action.

 

Even now as I type, I am listening to media talking heads on CNBC speak of the risks and tech weaknesses even as the scrolling headline on the bottom of the screen flashes “Dow hits all-time high….” […]

It was a Small Truck

Good Morning,

 

Ah yes, the smell of the summer haze – and even – already, the impending doom of a summer swoon projection is causing that itch.  You know, that little thing in your gut that just makes you sure something is about to happen.  It’s what has kept $9.3 Trillion in the bank for consumers as the last 14,000+ points have ticked higher.

 

JP Morgan was the first to suggest “a summer top with a correction into fall…”  in a report out Friday morning.  Well, a brief review of history makes that a pretty normal bet – about 50/50 when you look at the regular seasonal pattern which tends to occur – if there is a summer swoon.

 

Of course, the results of trying to “time” the market are clear – and heavily outweighed to the losing side…but heck, who keeps track of that stuff when a good scary headline will work well on a Friday afternoon as the lazy days of summer are just getting underway.

 

Don’t say we didn’t warn you.

 

This is typical of a summer haze session.

 

The Citron article about Nvidia then hit the tape a couple hours later – and, well, with the weekend at hand, you can guess what unfolded next.

 

This is precisely the type of shenanigan’s we suggested repeatedly one should expect for weeks leading into summer.  Lower volumes, less attention, fewer players, wider spreads and its like putting a match to pine straw in the dry mountains of California in summer.

 

It does not take long to light a fire.

 

Those taking the hit were the big winners of the year so far – the FANGs and the tech index got bloodied a bit.  Logically, we can chalk this up to yet another […]

Value in Breadcrumbs

Good Morning,

 

Often, things tend to sneak up on us.  It is human nature, and unfortunately a sign of our history, that we assume the thing sneaking up on us is a bad thing.  It keeps one on edge – even if you don’t know it.  Kind of like white noise.  You don’t know it is there—until it isn’t.

 

My point….the breadcrumbs of fear form a lengthy pathway.  It has been the underlying theme for so many years now, it has become an all encompassing gray cloud.  How do we know?  Let us count the ways:

 

$9.3 trillion in cash – sitting in consumer bank/savings accounts

 

Less than 10 days ago, the 10-year bond auction had the highest number of personal consumer bids in the history of bond auctions at 2.12% (that’s what I call fear)

 

And then, there is the sentiment….a dead horse indeed – but worth yet another compelling look:

This is going to take a few minutes to sink in….

 

Take a close look at the two charts above.

 

The top chart is the Nasdaq 100 going back to 1990.  The bottom is the same sentiment chart I included for you late last week.  It goes back to 1986.

 

Focus your attention on the matching red and green circles.

 

Logically speaking – you would expect these to match.

 

In other words – the red dots mark the top of what became known as “the tech bubble.” The markets were at record highs – and sentiment (also marked in red) – had also reached then record highs.

 

In essence, the masses were certain stocks grew to the sky…which can be seen in their record bullishness at the time.

 

Now here is the eerie part.

 

As the top chart shows us – prices today are almost 25% higher than they […]

Brain on Investing

Good Morning,

 

You know that feeling…the sweaty palms, top of the roller-coaster (right before you drop off a cliff), light-headed feeling?

 

Yes – that one.   The one that floods your mind right after the “Oh My Gosh, the market did what?…followed quickly by “I wonder if these office windows open up?” fight or flight thoughts flush everything from your logical thinking system.

 

They happen quickly, sometimes seconds…with no real time to reflect before your heart-beat has increased by something north of 100%.

 

That, my friends, is your brain on investing.

 

Accepting that as reality will help you fend it off more effectively the next time it hits – and be assured – it will hit.

 

History has proven to us that successful investors, over time, have figured out how to change the message those events send to their brains.  Indeed, the most successful have found a way to send nearly the exact opposite message.

 

In the vast sea of investors of all shapes and sizes, when trouble hits (as it always will), some twitch, some gasp, some reach for their inhaler, some instantly hit their sell buttons, some pick up the red phone and flush it all with their brokers, some call their advisors and scream something about being prudent and risk management and then “get me the f*** out of the markets right now”….and then some…well, don’t.

 

There is an easier way to define this.  It’s a simple question:

 

Are you an investor or a trader?

 

They are very different monsters indeed, the psychological makeup of which would take lots of pages to explain.

 

Why make The Point?

 

Well, because summer is the home of more than a few defining moments usually.

 

Traders who call themselves investors will sit still just until the news gets too hyper and the market movements become somewhat […]

Think People, Not Politics

Good Afternoon!

 

Hey, Happy Friday.  Fantastic.

 

The point of today’s title?  Too many make the grave error of allowing political views to interfere with their financial facts.

 

Like it or not, our demographic make-up is set for the next 50 years.  This will encompass many different administrations.  The demography issues will have substantially more productive impact on your thinking versus any amount of time spent in turmoil over the latest political event(s).

 

We can ignore that simplicity if we choose – but there is little we can do to stop it from unfolding.

 

Facts about numbers of people are real.  Human nature is real.  Striving for the best they can accomplish is the goal of most humans.  Throw a hurdle in their way?  Well, that is what has marked almost every major surge of accomplishment in our history.

 

As investors, we must learn to welcome discomfort, welcome problems, welcome things we must fix.

 

Why?

 

Think about it.

 

You can be assured if we run out of things we need to fix, create, build or replace…the picture gets pretty dim after that : )

 

The Biggest Element…

 

Outside of the demographic issues which are driving a significant shift for the next 20-25 years +, the sentiment picture is something I want to leave with you today.

 

Yes, I know I am a broken record.  But emotion drives money.

 

Let’s make sure we have a strong grasp of the back-drop first:  We are just moving into the summer haze.  This period is normally marked by very slow movement.  Kind of like maybe walking in quicksand.  We can expect some movement up – and some movement down.  We can assuredly expect slower volumes – and even slower on Monday’s and Friday’s.

 

The pace will slacken further in July and come almost to a complete stop (at least […]

Welcome to the Haze

Welcome…to the Haze

Good Morning,

 

I say “welcome” because it is June 1 – summer is here and will be until the week after Labor Day.  Expect the type of stuff we have seen over the last two days:  low volumes, choppy markets, meandering direction and hiccups each time a scary headline crosses…..

 

Like….

 

Yesterday morning, the Chicago PMI came out.  The headlines hit early in the morning – it showed a 2% reduction in the index and was “reported” as bad news for the region.

 

In the next 30 minutes, without much fanfare – and no special headline – the reading was fixed.  It was reported incorrectly in the headline!  And by a wide margin.  Instead of a 2% “miss” down – it was a 2% miss up!

 

The proper reading was over 59% and was the highest in the region in over three years!!  If it was not so sad – it would be funny.  Why?  Too many still believe the “garbage” reported in so many areas.

 

You can check the link here from the back pages just in case you are laughing too hard to believe me.

 

Here is an excerpt:

 

“A measure of how well the economy is performing in the Chicago area rose in May to the highest level in 2½ years, showing the economy remains quite healthy in key regions of the U.S.

 

The Chicago business barometer, or Chicago PMI, rose to 59.4 in May from 58.3, MNI Indicators said Wednesday after initially reporting an incorrect number. Any reading over 50 indicates improving conditions.

 

Originally, the firm mistakenly reported that its Chicago-area gauge fell to 55.2, adding to downward pressure early Wednesday on U.S. stocks. MNI has not explained how the error occurred.

 

The index has risen sharply since President Donald Trump took […]

The New Dawn Ahead

Good Morning,

 

Here we are – that spot in each calendar when everything starts to slow down.  Volume slowly ebbs into the lows around mid to late August (the worst of the summer doldrums) and attention spans lag.  Price spreads increase – and with lower volumes, we can expect the high-speed traders will be able to temporarily push stocks around more when the algo’s gang up on a sector for example.  We have seen it before – we will see it again.

 

Lesson?  Try hard to ignore it.

 

Why?  Bigger events are unfolding.  The backdrop is shifting ever so slightly each month that passes by.  New things pop up to scare you into not recognizing the shift.  This is the age-old model of Wall Street.  Keep tensions high and money moving.  If we all invested like Warren, there would be a need for only one or two large banks or Wall Street houses.

More movement – more fees.  More things to worry about – more movement.  More things to worry about – creation of more “solutions” to help you – which steadily gets us right back to more movement.

 

Stand still…every step in your life investment and wealth management pathway is not designed (nor should it be) to “beat the market.”  The goal and effort should be focused on meeting your goals, calmly, logically and – with patience – over time.

 

The Bigger Picture?

 

While too many will fret over any fear painted across the headlines of the day, the summer will do as it almost always does – slow down.

 

As it does so, the lines will blur as normal and the call of the beach trip will be on everyone’s mind.  A break is what we all need.

 

Meanwhile….

 

…the shift is unfolding. […]