Investing

Whaaaat?

Good Morning,

 

“Risk comes from not knowing what you are doing.”

 

Don’t yell at me – that comment is from Mr. Buffett.  This one is too:

 

“If you aren’t thinking about owning a stock for 10 years, don’t even think about

owning it for 10 minutes.”

 

This year has been a good example of how badly “news” can screw you up.  After all, we have had a ton of garbage spewed into the airwaves – from everything terrible about Trump, to the gigantic wave of harassment scandals, to the North Korea lunacy, to tax-bill madness, to Fed-head chatter, two Cat-5 hurricanes, multiple massive wildfires and, of course, the thousands of “expert” quotes which serve to confuse anyone listening long enough.

 

Meanwhile, the markets went up.

 

And up.  And up.  Experts, talking heads, the media, bankers, strategists and investors were all perplexed at various stages and in varying degrees.  The end result?  Since it is outside of the scope of “normal” and “so close to the ’08-’09 financial crisis”, the go-to topic has been to call the top, the end – the “this is when it will all be over” chatter.

 

What did they miss?

 

Demographics.

 

Let’s review the records:

Lots of record high closes, right?

 

Well, keep in mind, it’s a bit of a misleading chart.  When the markets start on a high, 1 point higher is another record.  Hence a trending market to the upside could set a hundred records in a year with little problem at all.  My hunch?  One of those type years is likely ahead.

 

Let’s see how this “tired bull” stacks up so far:

While the magnitude of the gain this year has been far from record-breaking for a calendar year, the consistency has been without precedent by several measures.

 

The tables above provide an overview […]

Ready To Be Seated

Good Morning,

 

“The business schools reward difficult complex behavior more than simple behavior,

but simple behavior is more effective.”

 

“There seems to be some perverse human characteristic that likes to make

easy things difficult.”

 

Those two brilliant thoughts come from Warren Buffett quotes.  While we never set out to do so, much of what Demogronomics teaches about investing patterns and positioning for the long-term can be seen in the habits Warren has espoused for decades.

 

“Simple” and “Easy” are not two words normally used in the investing arena these days.  After all, Wall Street would prefer the masses think it opposite.  Constant movement, chatter on the airwaves and unmerciful angst over every syllable a CEO or CFO utters on a conference call seems to be the preferred route.  This leaves out the painful process of waiting for any FedHead to speak at any moment and the painful slicing and dicing of every word, expression or tone used.

 

Put it to bed.  If all of that really worked, don’t you think everyone would be rich by now?

 

The Title Reference Today

 

We have heard months of “late in the game”, “last of the cycle” and/or my favorite, the proverbial “9th inning” as it relates to market action.

 

Heck even the bulls are starting to say things like “well, 2018 may bring a top….”  True, of course.   Yes 2018 could also bring the year where Earth is struck by a meteor, caves in on itself, vanishes into a black hole and well, we can forget the 9th inning.

 

The point?  Neither one of those events is knowable –  but rest assured all those calling for tops will indeed take credit for it when it finally arrives.  And it will finally arrive.  It will be painful.  It will cause […]

Pinch Me

Good Morning,

 

“Ladies and Gentlemen of the class of ’99
Wear Sunscreen
If I could offer you only one tip for the future,
Sunscreen would be it
The long term benefits of sunscreen have been proved by scientists
whereas the rest of my advice has no basis more reliable than my own meandering experience…
I will dispense this advice now…”

 

Of course, I borrowed those wise words from a song.  Here are a few more from one of my favs and it is amazing how true they remain – no matter how much time passes by:

 

“Well alas we’ve seen it all before
Knights in armour, days for yore
The same old fears and the same old crimes
We haven’t changed since ancient times”

 

So – that’s a long-winded way of suggesting there are a few things to dispense of now:

 

First, in the “You Must Be Kidding Me” Box Today…is this:

Guess what?  It’s because half are not Republican.  It has nothing to do with what’s in the tax bill.  Further?  It would be identical if it was a Democratic Party Tax Bill.  So get over it…no news here…but it is hilarious to watch.

 

This is news:

 

The second read on GDP went up to 3.3% and inflation went down – while many other important categories set records.  And yet?

 

Nothing.

 

Crickets.

 

Lauer made more headlines…pathetic.

The two snapshots above show increasing records set in major corporate investments – both on residential investment and then industrial equipment and more and more manufacturing comes back here from overseas.

 

That tends to be very positive for long-term trends and is topped off with records set in R&D in all channels.

 

We are setting records folks, no matter how you slice it – and it is still falling on deaf ears….or should we say, um, scared ears?

 

Check out the latest from the […]

By |November 30th, 2017|Investing|0 Comments

What Can You Say?

Good Morning,

 

Hoping you and yours are still enjoying the beginning of the 2017 Holiday Season.

 

A quick review of the retail chatter suggests shoppers were out in force.  The better news?  Retailers are sending strong signals that shopping results have come with far fewer sales and price reductions seen in previous years.

 

My hunch?  Once again, the “obvious” assumption of the death of retail will end up being mostly a farce.

 

While I could only find my way through enough traffic to get to a couple spots, here are a few photos taken on my trusty iPhone:

Yes, the one above is the Apple store.  Now what is interesting here is the sections you do not see.  To the left of this shot is a line that looks much like the lines at Disney World, where you are roped off going back and forth to wait to get into the store to buy an iPhone.  It is 7 layers deep.  If you wanted to by an iWatch – you stood to the right in the same manner – just out of camera range.  We were in this mall for about 4 hours – the picture did not change, the lines only got longer.

 

The photo below was the sleeper shot of the day.  I did a bad job of getting the stores entire name in the picture.  It was a line to get into GameStop.  They were selling the new Nintendo Switch platform.  It was not on sale.  Max was number 352 in line when he started.  We left him there for roughly 1 hour and 25 minutes.  He was number 15 when we returned.

 

All in all, I would say from the highly scientific research I was able to endure on Friday, it […]

By |November 28th, 2017|Investing|0 Comments

Sorry – I was wrong

Good Morning,

 

For months – maybe longer, I have suggested (to the point of understandable boredom) that we should take this claim that the crowd is too bullish and complacent with, well, the largest mountain of salt your mind can fit in the frame.

 

These notes went on to suggest many a time, “That if you find yourself concerned the crowd has become too bullish and it is all about to end, give me two weeks of red ink and a 1,000 points down on the Dow and I will show you a crowd whose bullish reading is back in the 20’s.”

 

Long-time readers will recall we repeatedly suggest you pray for a correction as such.

 

As they say though…my errors have fallen upon me and I must confess.

 

I was wrong.  Very wrong.

 

You see, it only took 6 days – and less than 350 Dow points – to witness bullish sentiment from AAII fall from the 40’s to the 20’s.

 

Read ’em and….well, weep – for joy : )

Folks….

 

It’s 350 or so points from the recent high of DOW 23,546.

 

Pray for more – 5 or 6 times more.

 

Yes, I understand the internal churn has been significant and we have already noted that more than a few times.  The market-weighted indices are skewing perspectives due to tech.

 

It may surprise you to note this:

 

Twenty-nine percent of the S&P 500 stocks are actually down on the year.

 

Further, if one-quarter of your portfolio is NOT the 5 big tech stocks, then this is one of those years (rare as they may be) when the broad market’s solid gains are pretty far away from the most followed averages in the press.

 

I enter into evidence the NYSE Composite as of last evening:      + 10.52%

 

That’s some 400 basis points below the market-weighted bloat […]

By |November 16th, 2017|Investing|0 Comments

Speaking of Garbage

Good Morning,

 

Sorry…long-time readers and partner advisors around the country know me.

 

They know that sometimes, after all the patience is spent, after all the allowances for the lunacy sold on media as expertise, you just have to call a spade a spade.  Most of it is just plain garbage.

 

Let me enter a few pieces – from just the first few hours of this morning as evidence:

Folks….

 

It’s 100 points on 23,400.

It’s 100 points off the 8,000 point rally over the last 20 months…8,000 points!

It’s 100 points.  Pray for more.

 

Of course, the headline tells the novice investor that the 100 point drop in futures is somehow a sure sign that the mood for risk sours.  Let me provide a clue.  If you feel risk is pervasive and somehow goes up or down based on mood swings, then please – get out of the market now.

 

Alas, if you did not leap to hit the sell button based on the headline alone, there are a few more senseless daggers waiting for you in the bullet points below the chart.  I am fond of the first one “careening ever closer to the sun…”  Creative huh?  What a crock.

 

Or how about the always present downdraft just around the corner.  I was certain we might get a few weeks rest from this repeating headline given Halloween is done for 2017.  I was wrong.

 

When I read never-ending garbage like this, it pains my heart because I know the average investor, massively confused by what is unfolding in our Barbell Economy – will be swayed – often in the wrong direction, by the repeating insanity sold to too many as expertise.

 

I am providing a chart below if you need reasons to sell (hey, before you go […]

By |November 15th, 2017|Investing|0 Comments

Surprisingly Good

Good Morning,

 

In case you may have been wondering about results in recent weeks, the averages on the surface have been doing far batter than the stocks reporting results – even as the results beat estimates.

 

Recall before the earnings season started we stated here, “Given markets have rallied fairly nicely into earnings, I suggest we not be surprised if we see some ‘buy the rumor, sell the news activity’ as reports come in….”  That’s market speak for – “hey, we might be a tiny bit ahead of ourselves for traders with itchy, short-term trigger fingers.”

 

Sadly, we watched stock after stock beat – and sometimes even beat and raise – only to see their stocks get pushed back.  Indeed, even the Barbell Economy portfolio felt the same stresses.

 

While I hate watching pullbacks internally – likely far more than most – as surprising as it may seem, this action is very often a long-term good sign.  It tells you the masses are still very, very nervous about how high the market is and provides insight to the weak underbelly of the theme of fear:  it can’t be this good – so it must be ready to fall.

 

The better news?  Earnings set more records – and with zero sign of a recession near-term, the next 4-8 quarters all have record setting levels projected as well.  Already, total Q3 earnings for the S&P 500 index are on track to reach a new all-time quarterly record, surpassing the previous record reached in last earnings season.  Let’s take a quick look:

On top of that – the trend for forward earnings to adapt for Q4 has remained supportive.  Recall, of often mentioned, the normal trend is for expectations to be ratcheted downward by analyst […]

By |November 13th, 2017|Investing|0 Comments

Perspective

Good Morning,

 

Before I get to a thought of the day – thought I’d share something funny.

 

There was a lady driving her brand new Mercedes Benz convertible down the road in Florida one afternoon.  She was speeding – but heck, everyone was speeding.  Alas, she noticed blue lights coming up from behind her as a highway patrolman was clearly headed her way.

 

Instead of doing what one might expect, she sped up faster and led the office on a chase for a short time.

 

Finally, she pulled over – surely expecting this to be a very uncomfortable discussion as she rolled her window down.  The conversation went something like this:

 

Officer:  “Ma’am, why in the world would you speed up faster when you saw my lights?”  Disgusted and before she could even answer, he added, “Tell you what – it’s 4:15 on a Friday and I have to be back at the station by 5:00.  Given I’d much rather not be doing any paperwork this late in the day, if you can give me a really good reason for all of this – something I have not heard before – then I will let you go with only a warning.”

 

The lady, sitting nervously, thought for a moment and finally spoke up.

 

Driver:  “Well Sir, a few years ago my ex-husband ran off with a female highway patrolman – and I was afraid you were bringing him back.”

 

Officer:  (tipping his hat) “Ma’am, you have a good weekend.”

 

A Perspective to Consider

 

You can imagine I hear lots of stuff each day.  Calls, emails, comments, questions.  It’s all good – but there is usually a theme.  I call it the “yeah, but” theme.

 

You know – when you think of something that is factually good and then find […]

Voodoo One

Good Morning,

 

I was always fond of a saying I heard in my first few years in this business, “Sometimes you eat the bear and at others, the bear eats you.”

 

I always get that thought flashing through my head during earnings seasons given the continuous and rising occurrence of really ridiculous responses to various quarterly reports – good and bad.

 

First, let me apologize.

 

Anyone who knows me also know I am never sick.  Indeed I hate it when I am not at 100%.  I make it a personal challenge to never miss a day of work!  Last week, I had one of the worst migraine headaches I can recall ever having – so I am sorry that I lost a day or two of writing the morning note.  I was here – it just hurt too much to stare at the lit screen and try to type.  Those with migraines know what I mean.

 

Any how – all seems well and for the long-term investor – to see continued volatile churn during earnings seasons is a good sign.  Not until every response is – for one reason or another – a good response – do we need to fret a ton.

 

How Are Earnings?

 

In a word – solid.  In fact, looking at the latest forward data, acceleration comes to mind – and in a consistent pattern rarely seen.  Of course, the moment you mention something about upside and accelerating earnings you become overwhelmed at the howling about “yea, but those are really signs of the end…it can’t get any better…..”

 

To which I respond, “that has been the message for at least the last 10,000 points…”, so get used to it.

 

The Stats:

 

For the nerds who like data, note this:

 

Recall that the […]

Need More Bulbs

Good Morning,

 

The data last week seemed never-ending – oddly enough, mostly positive.  We saw the week end with the Thursday and Friday earnings releases from 4 of the Big Tech names – all of which completely knocked the lights out.  Hence, today’s title.

 

The GDP report was solid and even the internals were as well – with records in cash flows, investments, software and even R&D – an often overlooked ingredient, but one that is a positive pre-cursor for things to come in the long run.

 

Keep in mind, when tech knocked the lights out, the market reaction in the momo stocks – along with their already over-weighted impact, took the tech sector into new high territory in more ways than one.

 

The move higher has now caused its weighting in the S&P 500 to balloon up to 24.2%.

 

Let’s just be aware this is almost ten percentage points larger than the 2nd largest sector in the S&P 500 – Financials. It’s also more than 12x as large as the smallest sector in the index – Telecom. As a final comp, Tech is now as large as the smallest SIX sectors in the S&P.

What does that tell us?  It merely means that results will look skewed a bit until year-end – all things being equal.  To give you a sense of the difference the tech monsters are making, the NYSE Composite is now over 400 basis points below the S&P 500 YTD results.

 

This week, we should expect this margin to increase as FB is up to bat and iPhone X sales for pre-orders are likely off the charts as pent-up demand should be significant.

 

For more on the Barbell effect, don’t forget to take a few minutes to watch this short video here.

 

The […]

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