Building Retirement Confidence

Read’em and Weep

Good Morning,


Needless to say, my wishes for a summer swoon appear pretty bogus so far.  Zilch, nadda, goose eggs, nuthin’….talk about a real bummer.


Just about everywhere you look – records.  Except of course – sentiment.  We have covered it for many moons now.


Maybe this last week will finally change that?


Uh – no.


The 8-week moving average of the bullish sentiment in the latest AAII Survey release is 30.96%.


The one-week reading, as of last night, did pop.  It rose all the way to 35%.


Hence, at all-time record highs in every major index, a mere two thirds of the crowd are still either bearish or neutral on the market in the future.


Were you and I told only about current and recent months of sentiment, the mad rush into bonds (still) on any two-day setback and the more than $10.7 Trillion sitting in cash in the bank – we would rightfully tell you that we must be in a very extended bear market.


This is good news…and has historically suggested continued positive surprises ahead.


Read ’em and Weep


We can be thankful for positive – globally-leading demography.


The gears are grinding – the improvement is steady – the economy is expanding.


Most are focused on the wrong thing.  Sad.


Eye Opener:


Here is something is that will cause you to pause:


The very first 8-week moving average of AAII Sentiment was way back on September 11, 1987.  Spooky date but alas the first 8-week moving average in bullish sentiment was 46.62%.  Back then, the DOW stood at 2,576.  Here is a link to the front page of the Business section of the Chicago Tribune for that date.


Comically, you will find that bad news is not new.


So here we are, with a DOW 9 times higher – with a bullish sentiment reading […]

Money For Nothing

Good Morning,


For those that like to study market structure, I have prepped another short video review for you here as we edge closer to the mid-point of the summer haze.  Make sure you click and check the data – it only takes a few minutes and it should provide some calm as the rest of the haze unfolds.


Janet is on the Hill today and Trump is stuck in the quicksand-like swamp of DC.  Add that to the official kick-off of the larger flows of Q2 earnings season on Friday and you have the makings of more chop and churn – don’t fret – most of the good news is being overlooked any way as you will see below.


Upbeat Forward Guidance Continues


Earnings seasons are filled to the brim with constant adjustments by industry analysts who often earn their keep by revising their earnings estimates, usually based on the latest quarterly results reported by their companies. They are also influenced by managements’ conference calls discussing those results as well as their forward guidance on their business prospects. As noted above, we will see how the Q2-2017 season plays out over the next few weeks – but the breadcrumbs so far look pretty solid.


Dr. Ed reminds us that the analyst crowd is currently projecting growth rates of 10.3%, 7.0%, and 6.2% on a pro forma basis for the three S&P indexes.  Even more impressive is the steadiness, since last September, of their S&P 500/600 estimates for 2018, while the estimate for the S&P 400 has been on a modest uptrend. The analysts are estimating 2018 growth rates of 12.0%, 14.2%, and 19.3%.


Recall we often note how every season we get a notch downward in expectations and then a high beat rate. […]

The Haze – Stage 2



The economic calendar remains light – hence, expect louder noise levels.
The results are often stories about nothing – saying “all is well” sells little
Ms. Yellen will fend off attacks with her Congressional testimony.
Summer swoons are good.  With sound process and a long-term focus, one can find attractive steps to take while most others fret over the above.


Good Morning,


So oddly enough, even as the second stage of the summer haze kicks in (lasting to about August 1), the upcoming earnings season should still be surprisingly solid.


This is supported in the latest data on forward earnings from Thomson along with a very light pre-announcement warnings calendar.  The Thomson Reuters’ data as of 7/7/17:


Fwd Looking 4-qtr S&P 500 earnings estimate: $139.21
P/E ratio: 17.5(x)
PEG ratio: 1.82(x)
S&P 500 earnings yield: 5.74%, nice increase over last week’s 5.56%
Year-over-year growth rate of fwd. est.: +9.58%, down from last week’s +9.75%.


Keep in mind, the “forward 4-quarter” look now includes Q3 ’17 through Q2 ’18 periods.


The S&P 500 earnings yield rose primarily because the S&P 500 was unchanged on the week (with lots of internal churn so some sectors were down), while that forward estimate continues to increase at a pretty solid 9% annual rate.


One data point tracked from Thomson Reuters is the overall “estimated revised higher” vs. “estimates revised lower” over the course of a quarter.  Once again, in the 2nd calendar quarter 2017, the upward revisions outnumbered the downward revisions.


Good News?


ISM Manufacturing and Services data both were solid to round off the week.  Both beat as previously noted.


Take note:  The ISM Manufacturing came in at 57.8, both an increase and a beat of expectations. The special part however is this: ISM notes that if we annualize at this level, we would have a corresponding real […]

Use Logic – Not Emotion

Good Morning,


The summer is getting just as choppy as we wanted it should be.  By the way, just about every summer I have been in this business has looked this way.  In recent years, the choppiness has picked up a bit – and the aglo and HFT guys have not helped.  Most tend to overlook that a vast amount of the now dwindling volume is done by ETF’s and HFT guys during the summer.


Wall Street has successfully trained the crowd to think that ETF’s are their next savior. That same crowd cannot seem to understand why the more we see ETF’s being used, the more we see wild internal swings in sectors or specific stocks – especially in, around and during the earnings seasons….which, oddly, seem to come about every 72 hours now.


Call me a nut, but they used to be quarterly.


The Point at Hand


I am prepping a little chart view video for you and will send it out this weekend.  I like doing on every few months when we see choppy windows like this as it tends to help one understand the larger picture and the rhythm unfolding in the marketplace.


Remember folks – emotion stings…logic reigns.  The latter is very tough to focus upon when chop and churn is the name of the game.  But, alas, we can be assured Warren and his staff are not rushing out to sell stuff.  Indeed, he looks to be ready to pull the trigger on another acquisition as we speak.  While sentiment shows bulls are already dwindling rapidly – Warren is ready to spend billions while too may fear “the summer swoon.”


Short Test


How many DOW points have passed us by since the end of the dreaded […]

More Bears than Bulls

Good Morning,


The latest data as of last evening from AAII shows that bears once again outnumber bulls. Yes indeed, a record 131 weeks now – while thousands of points have been ticked off on the markets climb – where bulls have failed to take a majority position.


As suspected, that high “neutral” reading is bleeding off into the bear camp.  If the summer chop and churn we expect to continue (normal) does indeed continue, we should see that bear count rise even more.   A good thing for us long-term as any red ink uncorks a flood of media coverage like, “So, Jim is this finally the beginning of the summer swoon so many expect….”



The altitude sickness so many succumb to as they fear higher prices continues to seep into the psyche of the average investor.  It is so much like the early 80’s, the hair on my neck stands up daily as I watch a replay of the confusion back then.


Folks – focus on people.  That clarifies ones thinking.




While many more fret over our politics, things continue to improve on several fronts.


Jobs are solid (see ADP)


Manufacturing ISM is closing in on a 6-year high (see chart)


Retail sales saw weekly gains of 2.7% on Wednesday’s data release (even better than last week) – and summer vacations are in full swing.

Even More?


This is important to note as well:  The headline ISM index data was strong.  However, the commentary most never see or review paints a picture of even more robust activity.


I have included a snapshot of some of the selected commentary from this month’s report. You can see that with the exception of one comment concerning environmental regulations, every other one suggests steady, solid, and or strong business activity. […]

Christmas in July

1. Put Pen to Paper
Holiday Budget Worksheet
2. Stockpile Savings
3. Score in the Off-Season

Calling All Black Swans

Good Morning,


First of all – and most important:


Happy 4th of July Weekend Holiday to You and Yours!



I think if I hear another reference to a coming Black Swan event, I am going to be ill. The thing too many forget is that once you call it a Black Swan, it is not a Black Swan anymore.


No matter, sentiment still falls.  Good news again in the latest AAII sentiment data – it is bearish – meaning bullish in a contrary sense.  Let’s see the data first and then read on below the charts.

As I stated last week, “If we keep seeing chop, I will not be surprised at all to see the 20’s again soon on bullish readings.”  And here we are at 29.7%.  If the chop and internal churn we saw yesterday goes into the half day on Monday, I think we can easily expect even lower bullish sentiment readings in the next survey midweek.  By the way – this is excellent news for long-term investors.


Net net – the first chart above shows the obvious:  In terms of bullish sentiment, optimism declined this week falling from 32.65% down to 29.71. In case you are keeping track, that is now a record 130 straight week where more than half of the investor audience surveyed was not bullish.


Now what is really kind of striking is the “neutral camp” oddly enough.  Notice the second chart above.  See where the current reading is now over 43?  That is the highest since last August.


In my experience, often these “neutrals” end up being bears on any little step down so it will be interesting to watch after yesterday’s action.


This is the classic – “Oh I […]

Getting Better

Good Morning,


Plenty to worry about right?  I mean Trump’s deals are all but in the garbage bin.  The promises of the campaign seem like dust in the wind and well, that swamp – it’s still full of gators.


By the way – I bring your attention back to our notes each week leading up to the inauguration.  It was pretty clear – we suggested on not expect it to be some simple shift. Our view was it would look as ugly and divided as the first year of President Reagan’s term:  chocked full of missteps, errors and misguided naivety.


It’s not a surprise at all that the power struggle is unfolding.  In the end, it will become clear what is correct for the country.  Further, I am not exactly certain the media or the Dems get the idea that this type of stuff is unlikely new to Trump.  The types of people you deal with in NYC when building skyscrapers make the DC swamp look like a sunset on Maui.


Then Why?


So why all the hustle in the markets?  Why haven’t we tanked?  How come the setbacks are so mild?  Why is it the press branded two small days of tech selling as the “tech wreck of ’17” and it was over in two days?  Why does any red ink mean the start of “something big” to the downside?


Simple:  deep-seeded fear – and a awfully bad misunderstanding of what is unfolding in the much larger picture.


Heck, Warren is even making dea;s – two in the last 48 hours.


A couple thoughts…..


In the last 10 days, the 20-Year Government Bond ETF set a record for receiving more capital inflows than all domestic equity mutual funds combined.  The last two government bond […]

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?




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 […]