Investing

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. […]

Never Forget

Good Morning,

 

All of us here wish you and yours the very best of the Memorial Day weekend break. While it is seen as the official start to the summer season, it is also a time to remember what created the foundation of our Freedom.  The words “freedom is not free” often tend to slip off the tongue with ease.

 

That is until you gaze upon an image like the one above or a video like the one below.

 

We get so busy with life sometimes that we may overlook how so many gave up theirs to protect ours.  Let’s agree we won’t forget.

We wish you the best of the summer kickoff…and for all those who have served, we thank you.

 

We close out the week and the summer season begins with a rather steady process underway in the economy.

Data is generally positive and jobs are solid.  Indeed, jobless claims are severely depressed – and the flip side of that coin is even better.  Job openings are at record highs.

Hence, all those kids you keep hearing about leaving college with a lot of debt should have plenty of offers to go to work – and begin shedding that debt quickly.

 

It’s called planting seeds for the future….or Armageddon XXVIII if you prefer the scary lane:

On a non-seasonally adjusted basis, jobless claims actually rose slightly from 207K up to 209.8K. We can overlook that tiny increase because this week’s level was still more than 100K below the average for the current week of the year dating all the way back to 1973!

 

Note corporate profits are up nicely in the latest data updates above.  Durable goods look negative at first glance – but they are not.  Check the revision to last […]

Pray for a Correction

Good Morning,

 

Yes, I know – it’s nutty.  But we must begin to recognize that there is a change afoot. While many may not recall them, I do – the 80’s and 90’s were a replication of what is set to unfold in our economy for the next 20 years.  A massive tectonic shift – bringing along with it waves of change, the likes of which many are not prepared for.

 

Call it pie in the sky if you will–but as those who defined it as such in the 80’s and 90’s found out…change is not always a bad thing.   Sure, it is scary at times.  Change always is – and it may even be painful at times.  But for the sake of what is unfolding in our economy, these tend to be positives over time.

 

The problem?  There is that word again – time.

 

The most painful element investors must learn to withstand over a life of building wealth – time.

 

Time to let things unfold.

 

Time to permit the compounding effect to benefit you.

 

Time to let all the elements that seem terrible at first – and drive so many poor reactions – to pass into the dust of history.

 

It’s why the markets are fooling the masses again.  How do we know they are being fooled?  Checks the sentiment stats.  I know I reported them late last week – and they are set to change again in 48 hours – but sometimes an image is the most vital way of driving a point home.

 

As they say – a picture is worth…..well, you get the point:

I bring your attention to the two charts above – the first for bullish sentiment readings, the second for Neutral sentiment readings.  History shows the […]

Ugly Days…Just Perfect

Good Morning,

 

Finally….they cracked.

 

Yes, one had to know the cookie would crumble eventually right?  After a media attack and wave after wave of implied, yet rarely factual headline events, Trump and politics are the subject of the blame game for the latest market events.

 

Nowhere in recent history have we seen the types of political mayhem – right out of the box – we have witnessed in the first 110 days of this administration.

 

So, as one would expect – and on the fringe of watching our latest earnings season ebb into history – we must find new events to have investors sadly careen off course over.

 

The good news?   It’s working.

 

Note the AAII data from late last evening (and this was before the effect of yesterday’s “worst selling since the election” could be voted upon):

Now, call me a bit nutty but I have strong hunch that were we to have had the AAII survey open through today this week – the retreat into the bearish camp would have been even more severe.

 

As it is, only with the hindsight of nearly 35 years in this industry, I find it completely stunning that we have a bullish reading of just 23%.  This in a marketplace which just last week hit a minor, new, all-time high.

 

Remember, at the lows of March 2009 – some 14,000 Dow points ago – this reading reached its low – just 19.7% bullish.  Or, just one in five participants.

 

We are a mere few points away from that now.

 

It is sad and at the same time, oddly, spectacularly positive for the long-term, patient investor today.

 

The Larger Picture?

 

Notice how quickly one cannot even find a hint of North Korea in the headlines at all today?

 

Trump is the latest hot button.

 

Last week, […]

Almost Done

Good Morning,

 

Ok, so earnings season is about done with just a few more days of any importance.  The bulk is complete and again – it was pretty solid – even when allowing for how ugly Q1 2016 looked with energy write-downs clouding the picture.

 

In the future, when you see a particular sector being trashed – just remember the Armageddon cries during the crude oil crunch.  Then, take advantage of it.

 

To that point….can anyone say retail?

 

As experts would have it….retail is dead, useless – ready for the trash heap.

 

I was at Mall of America this weekend – it looked pretty darn busy to me.

 

I digress.

 

Let’s Review…

 

In his most recent Woodstock in Omaha, Warren stated that he missed Jeff Bezos and Amazon completely.  He had a one-word answer as to why “stupidity.”

 

Why…well let’s look into AMZN and how we might see its latest impact in the most recent GDP data.

 

But first – Amazon has been described as a “piranha-like corporation that eats up retailers, particularly the anchor stores, and doesn’t even leave the bones.”  I recall about 20 years ago, Wal-Mart was called the same – sort of.

 

Here is a quote from Dr. Ed in an IBD article last week:

 

“‘Amazon is killing lots of businesses. In the process, it may also be killing inflation,’ Ed Yardeni, noted economist and president of Yardeni Research, said in a recent report.

 

I would add that inflation is being killed by the entire Gen Y process of growth.  They are all about multi-tasking, cutting layers of fluff and going straight to the end point.  I remain confident we will be shocked at margin growth over the coming years as Gen Y moves deeper into the corporate management structure.  Granted, they are […]