The Key: Can Fed Policy Change Renew Recovery ?

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,985
S&P 500:2,792
Nasdaq Comp.:7,554
Russell 2000:1,581
Thursday, February 28
, 2019    8:09 a.m.
……………………..
gbifr79@gmail.com
“Wait and see,” said Fed Chief Jerome Powell on
…………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

      The Fed did an about-face in policy in early January with comments by Fed Chief Powell that there was no need for further rate hikes and in February that the unwinding of its balance sheet would end in 2019.
A normal technical rally was extended by his comments to levels that in Q4 last year turned stocks down sharply.
If the Fed’s policy change cannot head off a recession, stocks are seriously overpriced, and he did investors a great disservice with his
rosy” economy characterization.

ECONOMY:
It’s struggling.     A survey by the National Association  of  Business Economics reveals that 50% of those surveyed see a recession  by the end of 2020, 75% by the end of 2021. 10% see it starting this year.
      I think it has already started.
      December was a disaster for reports on housing manufacturing and retail, January not much better with troubling reports on Existing Home Sales,
Leading Economic Indicators, PMI Composite, Philly Fed Business Outlook, Survey Durable Goods, Chicago Fed National Activity Index, Dallas Fed Mfg. Survey’s production index, Housing Starts, and the State Street Investor Confidence Index.  However, Consumer Confidence,the Richmond Fed Mfg. Indexes, and yesterday’s Pending Home  Sales Index (+4.6% in Jan.) offered hope for a recovery. The Q4 stock market plunge and December/January government shutdown adversely impacted confidence.  Time is needed to see if the Fed’s change in policy will help avoid a recession.  ……………………………………………………………..
“KEY” ECONOMIC REPORTS THIS WEEK:

Today – GDP (8:30); Chicago PMI (11:00)
Friday – PMI Mfg. Ix. (9:45); ISM Mfg. Ix. (10:00); Consumer Sentiment (10:00)
……………………………………………
The Stock Market:
POTENTIAL: While the stock market has some room to run, odds are good it will roll over into a sideways correction. Traders should lock-in some gains, investors who bought in ahead of the Jan./Feb. rebound can lock in profits. If they rode out the 20% Q4 crunch, they should raise cash.
The Street is hopeful for a favorable outcome from the U.S./China trade negotiations, but the summit between Trump and North Korea’s  president  Kim Jong Un failed to arrive at an agreement. Kim wanted all sanctions lifted, but only willing to offer partial denuclearization.
“RISKS”
It doesn’t make sense that the market is soaring, because Fed did a total about-face on policy because they were scared the country, the world, was on the edge of a recession. What if the Fed is right ? 
Stocks are entering “pricey” levels where the market cannot handle any bad news,
and there is the potential for a lot of it.
-The Street continues to revise earnings for 2019 sharply down
-Recent reports on the economy raise odds a recession  (See below)is looming
Debt (individual, corporate and government) has risen sharply due to years of low interest rates. It not only must be repaid, but additional debt to fund needs is out of the question.
-There is still risk in the successful negotiation of a trade deal with China, as well as progress dealing with North Korea.
-The Trump administration’s ability to govern may be damaged by the findings of the Mueller investigation, the renewed U.S. House investigation and Southern District of New York.
…………………………………………………
TECHNICAL:
The DJIA and Nasdaq Comp. have retraced all that was lost in the December crunch. The S&P 500 is within striking distance. The market is racing along in high gear, everyone is once again bullish, and therein lies the risk of paying up for stocks.
Bulls need to push the DJIA above 25,050, the S&P 500 above 2,796 and the Nasdaq Comp. above 7,565 to make something happen.  Support is 25,900, 2,782 and 7,523 respectively.
……………………………………………..
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.  So far, the Street has ignored the issue. Bad news for Trump may not adversely impact stock prices, good news would jettison them, since it raises the odds that Trump would be re-elected in 2020.
      There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 2.7% down from minus 0.7%; Q2 at plus 0.7% down from plus 1.6%; Q3 at plus 2.2%  down from plus 2.7% and Q4 at plus 8.8% down from plus 9.9%. For the year they see an earnings gain of plus 4.9% down from plus 5.6%.     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

What Will Fed Chief Powell Say This Time ?

What Will Fed’s Powell Say This Time ?

INVESTORS first read.com – Daily edge before the open deal 
DJIA:26,091
S&P 500:2,796
Nasdaq Comp.:7,554
Russell 2000:1,588
Tuesday, February 26
, 2019    8:58 a.m.
……………………..
gbifr79@gmail.com
“Wait and see,” said Fed Chief Jerome Powell on

…………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The Fed:
Fed Chief Jerome Powell will testify before the Senate Banking Committees and House Financial Services Committee at starting at 9:45 today, as the Street braces for what he may say this time, and they have reason to worry.
      In October, Powell said the Fed was “a long way” from establishing a neutral fed funds rate, which we now know was misleading.  In December, he said the Fed’s unwinding of its bloated balance sheet was on “autopilot.”
Then the Fed did an about-face in policy in January with comments that there was no need for further rate hikes and in February that the unwinding of its balance sheet would end in 2019.
Worse yet, on January 30, Powell  characterized the economy as “rosy,” which simply is not true per all the reports that indicate it is struggling.

ECONOMY:
It’s struggling.     A survey by the National Association  of  Business Economics reveals that 50% of those surveyed see a recession  by the end of 2020, 75% by the end of 2021. 10% see it starting this year.
      I think it has already started.
      December was a disaster for reports on housing manufacturing and retail, January not much better with troubling reports on Existing Home Sales,
Leading Economic Indicators, the PMI Composite, Philly Fed Business Outlook, and the Survey Durable Goods.
Monday the Chicago Fed National Activity Index came in at minus 0.43 from a plus0.27.  The Dallas Fed Mfg. Survey’s production index slipped  to 10.1 from 14.5.

……………………………………………………………..
“KEY” ECONOMIC REPORTS THIS WEEK:
Today – Housing Starts (8:30) – Just reported for December at minus 13.4%, permits up 2.8%; Consumer Confidence (10:00)
Fed Chief Jerome Powell speaks (10:00)
Wednesday – Factory Orders (8:30); Pending Home Sales (10:00)
Thursday – GDP (8:30); Chicago PMI (11:00)
Friday – PMI Mfg. Ix. (9:45); ISM Mfg. Ix. (10:00); Consumer Sentiment (10:00)
These reports were adversely impacted to some extent by the government shutdown, and the economy may gain impetus from the Fed’s policy change.
……………………………………………
The Stock Market:
POTENTIAL: The stock market ran into resistance yesterday, which has spilled over to today. The Street is hopeful for a favorable outcome from the U.S./China trade negotiations and Trump’s summit with North Korean’s Kin Jong Un.
“RISKS”
It doesn’t make sense that the market is soaring because Fed did a total about-face on policy because they were scared the country, the world, was on the edge of a recession. What if the Fed is right ? 
Stocks are entering “pricey” levels where the market cannot handle any bad news,
and there is the potential for a lot of it.
-The Street continues to revise earnings for 2019 sharply down
-Recent reports on the economy raise odds a recession  (See below)is looming
Debt (individual, corporate and government) has risen sharply due to years of low interest rates. It not only must be repaid, but additional debt to fund needs is out of the question.
-There is still risk in the successful negotiation of a trade deal with China, as well as progress dealing with North Korea.
-The Trump administration’s ability to govern may be damaged by the findings of the Mueller investigation, the renewed U.S. House investigation and Southern District of New York.
…………………………………………………
TECHNICAL: The Street is beginning to panic, chasing stocks that are moving up sharply in expectation of a favorable outcome in the U.S./China trade deal and Trump’s summit with North Korea’s Kin Jong Un.
The DJIA and Nasdaq Comp. have retraced all that was lost in the December crunch. The S&P 500 is within striking distance. The market is racing along in high gear, everyone is once again bullish, and therein lies the risk of paying up for stocks.
This is not a time when anyone wants to hear any negatives about buying. They saw their portfolio take a big hit in Q4 and want to recoup those losses and make money again.
Who can blame them. The problem is, they are not open to the risks that are present.
SUMMARY/CONCLUSION:
     The biggest problem the Street has is it is spoiled rotten by a Fed-managed bull market, assurance that the Fed will step in if the market drops more than 15%.
The Fed can only do so much, as evidenced by 50% plunges in 1973-1974; 2000 – 2002; 2007 – 2009.
The Fed is in PANIC mode – respect that.
……………………………………………..
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.  So far, the Street has ignored the issue. Bad news for Trump may not adversely impact stock prices, good news would jettison them, since it raises the odds that Trump would be re-elected in 2020.
      There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 2.7% down from minus 0.7%; Q2 at plus 0.7% down from plus 1.6%; Q3 at plus 2.2%  down from plus 2.7% and Q4 at plus 8.8% down from plus 9.9%. For the year they see an earnings gain of plus 4.9% down from plus 5.6%.     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fed Chief Powell Speaks Tuesday 10:00 a.m. ????

INVESTORS first read.com – Daily edge before the open deal 
DJIA:26,031
S&P 500:2,792
Nasdaq Comp.:7,527
Russell 2000:1,540
Monday, February 25
, 2019    8:58 a.m.
……………………..
gbifr79@gmail.com
“Wait and see,” said Fed Chief Jerome Powell on

…………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

ECONOMY
:  It’s struggling, but we must get a month or two past the impact of the shutdown, as well as, to see if the change in Fed policy rekindles the country’s economic growth.
December was a disaster for reports on housing manufacturing and retail, January not much better.
     Existing Home Sales dropped 1.2% in January (y/y: -8.5%).
Leading Economic Indicators for January slipped 0.1%, though tainted by the     shutdown.
PMI Composite (flash)slowed by 1.2 points to 53.7. While services rose, it is manufacturing that is of major concern.
Philly Fed Business Outlook Survey at minus 4.1 is in contraction for the first time since May 2016. And new orders the same since August 2016 at minus 2.4.
Durable Goods rose 1.2% in December, but core capital goods sank 0.7%.
……………………………………………………………..
“KEY” ECONOMIC REPORTS THIS WEEK:
Tuesday – Housing Starts (8:30); Consumer Confidence (10:00)
Fed Chief Jerome Powell speaks (10:00)
Wednesday – Factory Orders (8:30); Pending Home Sales (10:00)
Thursday – GDP (8:30); Chicago PMI (11:00)
Friday – PMI Mfg. Ix. (9:45); ISM Mfg. Ix. (10:00); Consumer Sentiment (10:00)
……………………………………………
The Stock Market:
POTENTIAL: The stock market can go higher, driven by enthusiasm about the Fed’s policy change on interest rates, and the improved prospects for  a U.S./China trade deal.
“RISKS” Stocks are entering “pricey” levels where the market cannot handle any bad news,
and there is the potential for a lot of it.
-The Street continues to revise earnings for 2019 sharply down
-Recent reports on the economy raise odds a recession  (See below)is looming
Debt (individual, corporate and government) has risen sharply due to years of low interest rates. It not only must be repaid, but additional debt to fund needs is out of the question.
-There is still risk in the successful negotiation of a trade deal with China, as well as progress dealing with North Korea.
-The Trump administration’s ability to govern may be damaged by the findings of the Mueller investigation, the renewed U.S. House investigation and Southern District of New York.
…………………………………………………
TECHNICAL: The Street is beginning to panic, chasing stocks that are moving up sharply in expectation of a favorable outcome in the U.S./China trade deal.
The DJIA and Nasdaq Comp. have retraced all that was lost in the December crunch. The S&P 500 is within striking distance. The market is racing along in high gear, everyone is once again bullish, and therein lies the risk of paying up for stocks.
This is not a time when anyone wants to hear any negatives about buying. They saw their portfolio take a big hit in Q4 and want to recoup those losses and make money again.
Who can blame them. The problem is, they are not open to the risks that are present.
OPINION: Does it make sense that the market is soaring because Fed did a total about-face on policy because they were scared the country, the world, was on the edge of a recession ?
What if the Fed is right ?
SUMMARY/CONCLUSION:
     The biggest problem the Street has is it is spoiled rotten by a Fed-managed bull market, assurance that the Fed will step in if the market drops more than 15%.
The Fed can only do so much, as evidenced by 50% plunges in 1973-1974; 2000 – 2002; 2007 – 2009.
The Fed is in PANIC mode – respect that.
……………………………………………..
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.  So far, the Street has ignored the issue. Bad news for Trump may not adversely impact stock prices, good news would jettison them, since it raises the odds that Trump would be re-elected in 2020.
      There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 2.7% down from minus 0.7%; Q2 at plus 0.7% down from plus 1.6%; Q3 at plus 2.2%  down from plus 2.7% and Q4 at plus 8.8% down from plus 9.9%. For the year they see an earnings gain of plus 4.9% down from plus 5.6%.     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fed To Cut Rate If Economy Deteriorates Further

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,850
S&P 500: 2,774
Nasdaq Comp.:7,459
Russell 2000:1,575
Friday, February 22
, 2019    9:07 a.m.
……………………..
gbifr79@gmail.com
…………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

ECONOMY:
Yesterday’s economic reports  confirmed my suspicions that the Fed hit the panic button in January with its abrupt policy change from steadily raising its fed funds rate  to a “wait and see policy,” i.e., no more increases unless the economy overheats, which it won’t.
      Former Fed Chief Janet Yellen and economic advisor to Alianz, Mohamed El-Erian speculate the next move by the Fed could be a reduction in its benchmark fed funds rate.
Yesterday’s economic readings suggest the economy is slipping across the board.
Existing Home Sales dropped 1.2% in January (y/y: -8.5%).
Leading Economic Indicators for January slipped 0.1%, though tainted by the     shutdown.
PMI Composite (flash)slowed by 1.2 points to 53.7. While services rose, it is manufacturing that is of major concern.
Philly Fed Business Outlook Survey at minus 4.1 is in contraction for the first time since May 2016. And new orders the same since August 2016 at minus 2.4.
Durable Goods rose 1.2% in December, but core capital goods sank 0.7%.
Can the Fed bail out an economy
they weakened with QT rate increases ?  Economic reports in coming months will give us answers.
The Street will need to put the shutdown behind it and give the Fed’s change of heart a chance to nurture the economy back to health.
IMHO, a recession will still hit, but maybe not until early 2010.
      St. Louis President James Bullard was interviewed yesterday on CNBC’s “Squawk Box,” and appeared to hint the Fed’s benchmark fed funds rate  at 2.25% may be a bit too high, suggesting a rate decline may be in order if the economy deteriorates further.
Tasked with keeping inflation low and employment high, the Fed’s policy may have gone too far in December with its last rate increase.  That hike on top of  preceding hikes since December 2015  crushed the housing industry and sent tremors throughout the banking industry as refinancing of individual and corporate debt loom.
As for a recession, Bullard replied, “Slowing, but not terribly.”  Really, what’s he going to say ?
……………………………………………………………..
SUMMARY/CONCLUSION:
Should investors be selling now ?
That depends on an investor’s tolerance for risk.  At these levels, a sizable cash reserve would be wise.  Traders can work the market, but  sit close to the exit.
The Street has anxiously awaited good news on the U.S./China trade talks, so that is mostly priced into the market. Disappointing news is not !
The stock market has recouped three-quarters of its Oct./Dec. 20% loss, and the Mueller report is due in a matter of days, which may adversely impact the administration’s ability to govern.
     The biggest problem the Street has is it is spoiled rotten by a Fed-managed bull market, assurance that the Fed will step in if the market drops more than 15%.
The Fed can only do so much, as evidenced by 50% plunges in 1973-1974; 2000 – 2002; 2007 – 2009.
The Fed is in PANIC mode – respect that.
……………………………………………..
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.  So far, the Street has ignored the issue. Bad news for Trump may not adversely impact stock prices, good news would jettison them, since it raises the odds that Trump would be re-elected in 2020.
      There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S./China Trade Talks Begin

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,954
S&P 500: 2,784
Nasdaq Comp.:7,984
Russell 2000:1,581
Thursday, February 21
, 2019    9:07 a.m.
……………………..
gbifr79@gmail.com
…………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

ECONOMY:  Can the Fed bail out an economy they weakened with QT rate increases ?  Economic reports in coming months will give us answers.
As leading indicators go, the stock market is the most visible. Between September and January, it was signaling recession, Since the Fed’s policy change in January, the market is saying – “Not so fast.”

The economy takes center stage today. Last month the Fed panicked, reversing a policy of raising interest rates to one of “wait and see.”
Former Fed Chief Janet Yellen and economic advisor to Alianz, Mohamed El-Erian speculate the next move by the Fed could be a reduction in its benchmark fed funds rate.
The reason for the Fed’s abrupt about face is becoming clear – the U.S. and global economies are flirting with recession.
We may get a hint of how things are shaping up this morning, though data may still be tainted by the government 35-day shutdown December 22 to January 25.
………………………..
Durable Goods (8:30) growth for December slipped to +1.2% from +1.5%
Jobless Claims  (8:30): down 23,000 to  213,000
Philly Fed Business Outlook (8:30): index minus 4.1 vs +14.0 (not good, in     downtrend since May)
PMI  Composite –flash (8:30) unchanged at 54.4 from January
Existing Home Sales (10:00)
Leading Economic Indicators (10:00)
Last year, the housing market was clobbered by rising interest rates. But the NAHB Homebuilder/Wells Fargo Housing Market  Index for February jumped nicely, indicating the industry was turning around with lower mortgage rates a big help.
Sales of Existing Homes slumped in December, so the report today may confirm if the NAHB’s optimism is justified.
The Leading Economic Indicators (LEI) will be the  most important report of the day. It has been a  consistent early warning of pending recessions with a lead time ranging between 8 and 21 months (ugh).  It has been flat over the last five months, but again, it may be skewed by the shutdown.
Obviously, the Fed was spooked by something.
Five senior Fed officials will be on the speaker circuit tomorrow.  James Bullard, President of the St. Louis Fed, will speak at 1:30. Next to Fed Chief, Jerome Powell, Bullard has the greatest clout. He has demonstrated he can move markets in the past.
JUST IN: Bullard was interviewed at 8:30 on CNBC – highlights were:
-2019 GDP growth 2.25% (“Slowing, but not terribly”)
-Unemployment remain the same
-implied interest rates won’t increase.
SUMMARY/CONCLUSION:
Should investors be selling now ?  The stock market has recouped three-quarters of its Oct./Dec. 20% loss, and the Mueller report is due in a matter of days, which may adversely impact the administration’s ability to govern.
      With so many decisions on Wall Street made by computer algorithms, human emotions stand to play a smaller part in the buy/sell decisions, unless the programmer knows how to plug that in.
The biggest problem the Street has is it is spoiled rotten by a Fed-managed bull market, assurance that the Fed will step in if the market drops more than 15%.
The Fed can only do so much, as evidenced by 50% plunges in 1973-1974; 2000 – 2002; 2007 – 2009.
The Fed is in PANIC mode – respect that.
……………………………………………..
ON A BRIGHTER SIDE:
January’s 7.9% jump was the biggest in 30 years, The Stock Trader’s Almanac’s January Barometer, published since 1972, has successfully forecast the S&P 500’s year as a whole 86.7% of the time over the last 50 years. Odds are, a strong January will lead to a gain for the year. However, there is no guarantee that between January and year-end there won’t be one or more major corrections. In pre-presidential years alone there were major corrections in 1971,1979, 1987, 2011, and 2015. Pre-presidential election years are the best of the four years in the presidential cycle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.  So far, the Street has ignored the issue. Bad news for Trump may not adversely impact stock prices, good news would jettison them, since it raises the odds that Trump would be re-elected in 2020.
      There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GREED Sinking Its Talons In Deeply

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,891
S&P 500: 2,729
Nasdaq Comp.:7,456
Russell 2000:1,574
Wednesday, February 20
, 2019    9:07 a.m.
……………………..
gbifr79@gmail.com
…………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

SUMMARY/CONCLUSION:
So much of the stock market’s behavior is just humans being humans, and especially at extreme bull market tops and bottoms.  Fear and greed take hold to force investors and professionals to sell when they should be buying (bear bottoms), and buying (bull tops) when they should be selling.
Should they be selling now ?
      Tough call, but after recovering more than three-quarters of the 20% plunge between October 8 and December 26, they should raise some cash if they haven’t already.
We are in the late stages of a bull market. Last call was a while ago, but everyone is still drinking !
With so many decisions on Wall Street made by computer algorithms, human emotions stand to play a smaller part in the buy/sell decisions, unless the programmer knows how to plug that in.
This raises the risk that any sell decisions will all be made at the same time, as money managers/analysts intervene to override the algos with a sell, causing a freefall in the market.
Yeah OK, that’s me warning again about a flash crash.
But you won’t hear this warning from the Street, they are too busy buying breakouts. GREED is now sinking its talons in deeply.
The biggest problem the Street has is it is spoiled rotten by a Fed-managed bull market, assurance that the Fed will step in if the market drops more than 15%.
The Fed can only do so much, as evidenced by 50% plunges in 1973-1974; 2000 – 2002; 2007 – 2009.
The Fed is in PANIC mode – respect that.
……………………………………………..
ON A BRIGHTER SIDE:
January’s 7.9% jump was the biggest in 30 years, The Stock Trader’s Almanac’s January Barometer, published since 1972, has successfully forecast the S&P 500’s year as a whole 86.7% of the time over the last 50 years. Odds are, a strong January will lead to a gain for the year. However, there is no guarantee that between January and year-end there won’t be one or more major corrections. In pre-presidential years alone there were major corrections in 1971,1979, 1987, 2011, and 2015. Pre-presidential election years are the best of the four years in the presidential cycle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.
The daily disclosure of wrongdoing by this administration will weigh heavily on the market at a time the economy is going in the tank and the stock market  is on the verge of a bear market.
      An even bigger issue is about to hit the Street right between its eyes and that is, what will happen to stock prices when President Trump is removed from office, or he resigns ?
There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
      Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PANIC ! Easy Does It !

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,883
S&P 500: 2,775
Nasdaq Comp.:7,472
Russell 2000:1,569
Tuesday, February 19
, 2019    9:13 a.m.
……………………..
gbifr79@gmail.com
…………………….
Sept. 21, 2018 : Raise cash to 50% (DJIA: 26,656)
Nov. 8, 2018: Raise cash to 75% (DJIA: 26,180)
Dec. 26, 2018 Doom Thick Enough for a Rally (DJIA:  21,792)

…………………………………………………………………….
Note: I will be changing my format in coming weeks with brief summaries of key topics up front for a quick read, then details below.  I plan to address politics in a weekly blog, or more often depending on unravelling events, under the title of “Folly Sci 20/20.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

SUMMARY:
We are looking at a panic by institutions as they scoop up stocks of interest before they run away from them.  There haven’t been many pullbacks  since a 20%, three month correction bottomed out on December 26.
Buyers are paying up for stocks they thought they would have plenty of time to accumulate, even buy at much lower prices.
A policy change by the Fed from one of increasing its fed funds rate (Quantitative Tightening) to a “wait and see” policy in 2019 was the trigger for the panic.
For bears, the message is “outta my way,” as the Fed’s undeniable clout flexes its muscles.
The 20% drop in the S&P 500 between October and December in face of a global economic slowdown steered the Fed to its abrupt about face in policy with the prospect of NO rate increases this year, even a decrease if global economies continue to slip.
Here’s the rub.  If the Fed’s policy change is premature and the economic expansion gets enough of an infusion by the Fed to overheat, the Fed will have to raise rates again. 

That will crush the market from the lofty levels it is attaining by way of the panic.
If the economy begins to tank, slipping into a recession later in the year or next year the market will get crushed.
CONCLUSION:  Odds favor the bulls, they have the Fed on their side
. They can expect the Fed to step in if a correction sets in (a Powell put), either with a policy move, or verbally through its many minions out there on the speaking circuit.
Under present conditions, risks will rise with the market.  Breakouts from stock price patterns are popping up right and left, drawing traders in for the kill.
This is fine for the savvy investor/trader.
It’s frustrating for the average investor who sees others making money.
This is classic late-stage bull market behavior.  I have found that many investors hate missing a buying opportunity more than they hate taking a loss on a stock (humans being humans).
The danger here will be, the less informed, the less nimble, will jump in with both feet at the ultimate top, when the plug is pulled by the Street, and there goes the portfolio down the tube until the bottom when untethered fear causes them to sell out just before the bear market bottom.  (humans being humans)
CAUTIONARY NOTES:
Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
I think  we are in the early stages of a recession, that the Fed sees it and panicked last  month by abruptly abandoning its QT policy of raising rates in favor of wait and see.  Whether it can salvage this 9 year/8 month economic expansion is the question of the day.
The Street believes the Fed has its back, that any decline will be stopped by some action by the Fed.  We have had three bear markets in the S&P 500 exceeding 50% since 1974, so lot’s of luck on that one.
What if 10 years of bull market has drawn the Street into a false sense of security, a cult-like confidence that significant facts can be overlooked/ignored, that there is nothing to worry about, that any dip in prices, even a 20% correction is a buying opportunity ?
Economist, A. Gary Shilling’s INSIGHT refers to a Duke University survey that finds nearly half the CFOs polled expect a recession by year-end.  One-quarter of the economists polled by the Wall Street Journal in January see a recession this year, up from 13% a year ago.
While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
BOTTOM LINE:

 The Fed is running scared for a reason.  Respect that !
Savvy, nimble investors can  hit ‘n run as the Street fires out its latest “buy” recommendations, new accounts open, existing accounts are harvested, and commissions roll in.  The Street thinks it’s back in a cruise control, algorithm buy-and-fret-not-market.   Fever festers.  Careful !
………………………………………………..
ON A BRIGHTER SIDE:
January’s 7.9% jump was the biggest in 30 years, The Stock Trader’s Almanac’s January Barometer, published since 1972, has successfully forecast the S&P 500’s year as a whole 86.7% of the time over the last 50 years. Odds are, a strong January will lead to a gain for the year. However, there is no guarantee that between January and year-end there won’t be one or more major corrections. In pre-presidential years alone there were major corrections in 1971,1979, 1987, 2011, and 2015. Pre-presidential election years are the best of the four years in the presidential cycle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.
The daily disclosure of wrongdoing by this administration will weigh heavily on the market at a time the economy is going in the tank and the stock market  is on the verge of a bear market.
      An even bigger issue is about to hit the Street right between its eyes and that is, what will happen to stock prices when President Trump is removed from office, or he resigns ?
There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
      Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
…………………………………
DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

December Retail Sales So Bad It Must Be An ERROR

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,439
S&P 500: 2,745
Nasdaq Comp.:7,426
Russell 2000:1,545
Friday, February 15
, 2019    7:31 a.m.
……………………..
gbifr79@gmail.com
…………………….
Sept. 21, 2018 : Raise cash to 50% (DJIA: 26,656)
Nov. 8, 2018: Raise cash to 75% (DJIA: 26,180)
Dec. 26, 2018 Doom Thick Enough for a Rally (DJIA:  21,792)

…………………………………………………………………….
TODAY:
Meanwhile economic indicators continue to soften, which is why the Fed panicked in January, reversing its QT policy of raising rates. December retail sales plunged 1.2%, the worst  since 2009 shortly after the recession ended.
Analysts think the number is so big, there must be a reason not rerlated to the economy.
I feel very uncomfortable with the Fed micromanaging the economy and stock market. Essentially, since  they are sending the  a message to the Street that it is safe to load up on stocks knowing, but not publicly acknowledging, the economy at risk.
If a recession develops late this year or early next, the market will plunge from the lofty levels the Fed created with its abrupt 180-degree reversal in January.
The potential is here for the unexpected. The potential is also present for a blow up of the entire Trump administration.
An astute group I met with yesterday (mostly former Republicans) raised an interesting point.  What would happen if we are confronted with a huge global crisis ? Is our government staffed to meet the challenge ?
Worth noting, recessions followed decisions by the Fed to stop raising rates, and especially force them down.
      Also worth noting. Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is.reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
I think  we are in the early stages of a recession, that the Fed sees it and panicked last  month by abruptly abandoning its QT policy of raising rates in favor of wait and see.  Whether it can salvage this 9 year/8 month economic expansion is the question of the day.
The Street believes the Fed has its back, that any decline will be stopped by some action by the Fed.  We have had three bear markets in the S&P 500 exceeding 50% since 1974, so lot’s of luck on that one.
What if 10 years of bull market has drawn the Street into a false sense of security, a cult-like confidence that significant facts can be overlooked/ignored, that there is nothing to worry about, that any dip in prices, even a 20% correction is a buying opportunity ?
Economist, A. Gary Shilling’s INSIGHT refers to a Duke University survey that finds nearly half the CFOs polled expect a recession by year-end.  One-quarter of the economists polled by the Wall Street Journal in January see a recession this year, up from 13% a year ago.
While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
BOTTOM LINE:

 The Fed is running scared for a reason.  Respect that !
Savvy, nimble investors can  hit ‘n run as the Street fires out its latest “buy” recommendations, new accounts open, existing accounts are harvested, and commissions roll in.  The Street thinks it’s back in a cruise control, algorithm buy-and-fret-not-market.   Fever festers.  Careful !
………………………………………………..
TIMING
 is EVERYTHING !
MAJOR RESISTANCE FOR THE MARKET AVERAGES STARTS AT:
DJIA: 25,507
S&P 500: 2,756
Nasdaq Comp.: 7,387
These where I expect resistance to begin to impede further advances. This has become a news sensitive market, with hopes and expectations about a government shutdown and progress on tariffs can have an impact.
…………………………………
As  noted below under “Bearish Case”, odds are good we are in the early stages of a recession. Also note below, what A. Gary Shilling, publisher of INSIGHT, has to say about a recession.
     ON A BRIGHTER SIDE:
January’s 7.9% jump was the biggest in 30 years, The Stock Trader’s Almanac’s January Barometer, published since 1972, has successfully forecast the S&P 500’s year as a whole 86.7% of the time over the last 50 years. Odds are, a strong January will lead to a gain for the year. However, there is no guarantee that between January and year-end there won’t be one or more major corrections. In pre-presidential years alone there were major corrections in 1971,1979, 1987, 2011, and 2015. Pre-presidential election years are the best of the four years in the presidential cycle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.
The daily disclosure of wrongdoing by this administration will weigh heavily on the market at a time the economy is going in the tank and the stock market  is on the verge of a bear market.
      An even bigger issue is about to hit the Street right between its eyes and that is, what will happen to stock prices when President Trump is removed from office, or he resigns ?
There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
      Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
……………………………………
TRUMP  – Agent, Asset, or Facilitator ?
      IMHO, Trump is toast, he will accept a deal to resign. The 16 attorneys just hired are not to defend his occupation of the office of President, they are to limit his massive legal problems, possibly keep him out of jail.
It will take years for the scope of wrong doings to be aired, which I believe will shock Americans beyond belief.
President Trump is the single most destructive thing this country has ever faced, he is a human wrecking ball, gutting our country of its global security, self respect, respect, honor, goodwill, good deeds, sacrifices,  and achievements. As long as he is in the office of the Presidency, we and everything we hold dear are at risk. When the business is rotten at the top there is nowhere else to go but down.
He has made consummate lying, abusiveness, irrationality, and disrespect the new normal for Americans, and tragically our children.
Stock markets thrive on CONFIDENCE (or lack thereof), and the continuing blundering and lying coming out of the White House  is devastating to confidence in the running of our country in the next two years.
What’s more, odds favor the Mueller investigation will lead to a prolonged constitutional crisis that will also be a drag on the economy.
It doesn’t take heavy selling to drive stock prices lower, just a decision by money managers that they can get stocks at lower prices so they defer purchases allow normal selling to have an impact.
RESIGNATION
Investors must be ready for a resignation by President Trump
who would cut a deal to trade his presidency for a get out of jail “sort of free” card, in face of incredible string of illegal activities.
The deal would include family members.
Who would succeed Trump as President ?
      It is possible, Vice President Pence would also be at risk and forced to resign, since he was Chair of the President-Elect Trump campaign, which is now under intense scrutiny.
According to the Succession Act of 1947, the Speaker of the House, Nancy Pelosi,  would be next in line to become President if both Trump and Pence are forced out of office, and that would cause a monstrous firestorm.
What if Pence resigns first and Trump appoints another Vice President who would then become President ?
It gets complicated and divisive, and that wouldn’t be good for stock prices.
All this is possible, in my opinion – probable, and would  most likely crush stock prices until resolved.
…………………………………………….
DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
>Technical Note: Frequently, there is what I refer to as a mid-afternoon counter move (2:30 – 3:00 where the market rallies or declines against the prevailing trend for the day.   This can be a fake out for investors thinking the market has turned (up or down).
 >Nine out of the last 10 recessions have occurred with a Republican in the White House
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
BULLISH CASE
      The case for the bulls has been weakening. The stellar earnings increases in 2018 in excess of 20%  will be followed by increases less than one-third  as great .
FactSet has been lowering its projections for 2019 in recent weeks.
The Fed has backpedaled from a policy of tightening credit through increases in its fed funds rate.  Following its January 30 FOMC meeting, Fed Chief Powell  implied no further rate increases are planned unless “data” requires it.
That’s a plus, unless the weakening in the economy is worse than reported.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>…
BEARISH CASE
RISING INTEREST RATES:
>The Fed is retreating from its policy of increasing its benchmark interest rate (federal funds), though more information is needed. It has raised rates eight times since December 2015. That policy has led to an ugly slump in the housing industry.  It raised its benchmark federal funds rate in December to 2.25% – 2.50% percent, but no further increases are planned.  That’s a positive unless this change in policy indicates the economy is in trouble.
>Year/year existing home sales down 12 straight months. New home sales  fell 8.9% in October.  Single family starts fell  for third straight month to an 18-month low.
OVERVALUED MARKET:
> The onset of bear markets have led the beginning of recessions by 8.5 months going back to 1956, so don’t look for a recession to signal a bear market. The longest lead time was 13 months (1968 – 1969) The “mode” (most frequent) is 12 months.
> If companies were buying back their own stock at a record clip, pushing stocks higher, why then are insiders selling $8 of stock for every $1 of stock they buy ?
.> Companies took advantage of low interest rates to load up on debt in recent years for acquisitions and to buy back their own stock. Excluding banks, the tally is $6.3trillion. The downside of this comes when these companies will need to refinance this debt at higher interest rates when it comes due.
………………………………………….
Earnings growth myth:  The Street is counting on earnings growth to reduce the overvaluation of equities.   Look again.
A 20% increase in S&P 500 earnings this year will  be tough to beat next year.  The quarter versus year ago in 2019 will make poor reading going up against the 2018 earnings .  So far, the Street is not factoring in the likelihood of a recession, which could mean negative growth.
> The S&P 500 price to sales ratio at 1.92 is 19% higher than in 2007 before the devastating bear market, and is even higher than in March 2000 before the dot-com bubble burst leading to a bear market. Both bear markets dropped 50%.
> The Shiller P/E is 29.8  times earnings versus a mean of 16.6.  Shiller’s P/E is based on  inflation adjusted earnings over 10 years.
> The Total Market Capitalization to GDP  stands at 147.3%, anything above 115% is  considered “overvalued.”
> Thompson Reuters reports the S&P 500 sells at 17.1 times earnings and 16.8 times a year from now. All this versus a 10-year average of 14.3.
AGING BULL MARKET:
> The bull market is now  nine years and six months old (117 months).  That’s 3.5 times the average of the last 15 bull markets.
AGING ECONOMIC EXPANSION:
> Republicans – the recession party. Nine of last 10 recession have been with a Republican in the White House.  Odds favor Trump will make 10 for 11.
> The current economic expansion has lasted 116 months. That’s 53 months (1.9 x) longer than the average expansion going back to 1945.  Nine out of the last 10 recessions have occurred with a Republican in the White House.
> GDP expected to slow in 2019 to 2.7%, CAPEX to 5% from 7%.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
> Housing stocks have recovered after the Fed opted out of further increases in interest rates.

>Year/year existing home sales down 8 straight months. New home sales  fell 8.9% in October.  Single family starts fell  for third straight month to an 18-month low.   The 30-year fixed rate mortgage rate is projected to hit 5.3% in 2019.
The iShares  home construction ETF is still down 17% from its January 2018 high of 41.48. Not only is the industry a major employer, its health affects other industries, especially furniture and appliances.
> Household debt increased for the 16th straight quarter to 13.3 trillion, that’s 19%  above the post-financial-crisis low.
> Personal loans have soared   18% to  a record 120 billion, Personal savings as percent of disposable income at 3%, down from 9% in 2012.
> Low interest rates have encouraged US companies to go on a debt binge, amassing  $6.3 trillion. With rates on the increase, refinancing will get more costly, according to S&P analyst, Andrew Chang, who points out that this amounts to $8 for every $1 in cash.
>  in 2018, 1,100 economists Warned that  Trump is repeating biggest mistakes of Great Depression – tariffs, trade protectionism, according to conservative National Taxpayers’ Union.
> Last year former Fed Chair, Ben Bernanke, economy to fall off a cliff in 2020, thanks to the $1.5 trillion corporate and individual tax cut and $300 billion increase in spending. He has not indicated he has changed his mind.
TRUMP’S TRADE WAR TANTRUM
> Trump’s tariff tiff costing  US companies a bundle:  The damage extends to manufacturers, input suppliers, fishermen, and numerous businesses who are finding it more difficult to sell abroad.
> Today’s businesses are complex, especially supply chains that can involve a thousand parts that make up a whole product, many of which are sourced from different countries, sometimes crossing back and forth across the same border a number of times.
>  Trump is considering leaving World Trade Organization (WTO).
TRUMP ADMINISTRATION IMPLODING:
So far, the stock market has not wavered in face of the increasing likelihood, Trump and many present and former associates are in legal trouble.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

Fed Policy Change Drives Speculative Frenzy

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,543
S&P 500: 2,753
Nasdaq Comp.:7,426
Russell 2000:1,542
Thursday, February 14
, 2019    7:31 a.m.
……………………..
gbifr79@gmail.com
…………………….
Sept. 21, 2018 : Raise cash to 50% (DJIA: 26,656)
Nov. 8, 2018: Raise cash to 75% (DJIA: 26,180)
Dec. 26, 2018 Doom Thick Enough for a Rally (DJIA:  21,792)

…………………………………………………………………….
TODAY:
Stocks continued their upward march yesterday responding to the prospects that the government won’t be shut down, that progress is being made on trade, and the Street is now confident the Fed will step in if the market heads south again.
Meanwhile economic indicators continue to soften, which is why the Fed panicked in January, reversing its QT policy of raising rates.
I feel very uncomfortable with the Fed micromanaging the economy and stock market. Essentially, they are sending the Street a message it is safe to load up on stocks knowing, but not publicly acknowledging, the economy at risk.
If a recession develops late this year or early next the market will plunge from the lofty levels the Fed created with its abrupt 180-degree reversal in January.
Markets should be left to find their own comfort level. That way unexpected developments don’t have a chilling effect (flash crash).
Worth noting, recessions followed decisions by the Fed to stop raising rates, and especially force them down.
Economist, A. Gary Shilling’s INSIGHT refers to a Duke University survey that finds nearly half the CFOs polled expect a recession by year-end.  One-quarter of the economists polled by the Wall Street Journal in January see a recession this year, up from 13% a year ago.
While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
BOTTOM LINE:

 The Fed is running scared for a reason.  Respect that !
Savvy, nimble investors can  hit ‘n run as the Street fires out its latest “buy” recommendations, new accounts open, existing accounts are harvested, and commissions roll in.  The Street thinks it’s back in a cruise control, algorithm buy-and-fret-not-market.   Fever festers.  Careful !
………………………………………………..
TIMING
 is EVERYTHING !
MAJOR RESISTANCE FOR THE MARKET AVERAGES STARTS AT:
DJIA: 25,507
S&P 500: 2,756
Nasdaq Comp.: 7,387
These where I expect resistance to begin to impede further advances. This has become a news sensitive market, with hopes and expectations about a government shutdown and progress on tariffs can have an impact.
…………………………………
As  noted below under “Bearish Case”, odds are good we are in the early stages of a recession. Also note below, what A. Gary Shilling, publisher of INSIGHT, has to say about a recession.
     ON A BRIGHTER SIDE:
January’s 7.9% jump was the biggest in 30 years, The Stock Trader’s Almanac’s January Barometer, published since 1972, has successfully forecast the S&P 500’s year as a whole 86.7% of the time over the last 50 years. Odds are, a strong January will lead to a gain for the year. However, there is no guarantee that between January and year-end there won’t be one or more major corrections. In pre-presidential years alone there were major corrections in 1971,1979, 1987, 2011, and 2015. Pre-presidential election years are the best of the four years in the presidential cycle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.
The daily disclosure of wrongdoing by this administration will weigh heavily on the market at a time the economy is going in the tank and the stock market  is on the verge of a bear market.
      An even bigger issue is about to hit the Street right between its eyes and that is, what will happen to stock prices when President Trump is removed from office, or he resigns ?
There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
      Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
……………………………………
TRUMP  – Agent, Asset, or Facilitator ?
      IMHO, Trump is toast, he will accept a deal to resign. The 16 attorneys just hired are not to defend his occupation of the office of President, they are to limit his massive legal problems, possibly keep him out of jail.
It will take years for the scope of wrong doings to be aired, which I believe will shock Americans beyond belief.
President Trump is the single most destructive thing this country has ever faced, he is a human wrecking ball, gutting our country of its global security, self respect, respect, honor, goodwill, good deeds, sacrifices,  and achievements. As long as he is in the office of the Presidency, we and everything we hold dear are at risk. When the business is rotten at the top there is nowhere else to go but down.
He has made consummate lying, abusiveness, irrationality, and disrespect the new normal for Americans, and tragically our children.
Stock markets thrive on CONFIDENCE (or lack thereof), and the continuing blundering and lying coming out of the White House  is devastating to confidence in the running of our country in the next two years.
What’s more, odds favor the Mueller investigation will lead to a prolonged constitutional crisis that will also be a drag on the economy.
It doesn’t take heavy selling to drive stock prices lower, just a decision by money managers that they can get stocks at lower prices so they defer purchases allow normal selling to have an impact.
RESIGNATION
Investors must be ready for a resignation by President Trump
who would cut a deal to trade his presidency for a get out of jail “sort of free” card, in face of incredible string of illegal activities.
The deal would include family members.
Who would succeed Trump as President ?
      It is possible, Vice President Pence would also be at risk and forced to resign, since he was Chair of the President-Elect Trump campaign, which is now under intense scrutiny.
According to the Succession Act of 1947, the Speaker of the House, Nancy Pelosi,  would be next in line to become President if both Trump and Pence are forced out of office, and that would cause a monstrous firestorm.
What if Pence resigns first and Trump appoints another Vice President who would then become President ?
It gets complicated and divisive, and that wouldn’t be good for stock prices.
All this is possible, in my opinion – probable, and would  most likely crush stock prices until resolved.
…………………………………………….
DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
>Technical Note: Frequently, there is what I refer to as a mid-afternoon counter move (2:30 – 3:00 where the market rallies or declines against the prevailing trend for the day.   This can be a fake out for investors thinking the market has turned (up or down).
 >Nine out of the last 10 recessions have occurred with a Republican in the White House
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
BULLISH CASE
      The case for the bulls has been weakening. The stellar earnings increases in 2018 in excess of 20%  will be followed by increases less than one-third  as great .
FactSet has been lowering its projections for 2019 in recent weeks.
The Fed has backpedaled from a policy of tightening credit through increases in its fed funds rate.  Following its January 30 FOMC meeting, Fed Chief Powell  implied no further rate increases are planned unless “data” requires it.
That’s a plus, unless the weakening in the economy is worse than reported.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>…
BEARISH CASE
RISING INTEREST RATES:
>The Fed is retreating from its policy of increasing its benchmark interest rate (federal funds), though more information is needed. It has raised rates eight times since December 2015. That policy has led to an ugly slump in the housing industry.  It raised its benchmark federal funds rate in December to 2.25% – 2.50% percent, but no further increases are planned.  That’s a positive unless this change in policy indicates the economy is in trouble.
>Year/year existing home sales down 12 straight months. New home sales  fell 8.9% in October.  Single family starts fell  for third straight month to an 18-month low.
OVERVALUED MARKET:
> The onset of bear markets have led the beginning of recessions by 8.5 months going back to 1956, so don’t look for a recession to signal a bear market. The longest lead time was 13 months (1968 – 1969) The “mode” (most frequent) is 12 months.
> If companies were buying back their own stock at a record clip, pushing stocks higher, why then are insiders selling $8 of stock for every $1 of stock they buy ?
.> Companies took advantage of low interest rates to load up on debt in recent years for acquisitions and to buy back their own stock. Excluding banks, the tally is $6.3trillion. The downside of this comes when these companies will need to refinance this debt at higher interest rates when it comes due.
………………………………………….
Earnings growth myth:  The Street is counting on earnings growth to reduce the overvaluation of equities.   Look again.
A 20% increase in S&P 500 earnings this year will  be tough to beat next year.  The quarter versus year ago in 2019 will make poor reading going up against the 2018 earnings .  So far, the Street is not factoring in the likelihood of a recession, which could mean negative growth.
> The S&P 500 price to sales ratio at 1.92 is 19% higher than in 2007 before the devastating bear market, and is even higher than in March 2000 before the dot-com bubble burst leading to a bear market. Both bear markets dropped 50%.
> The Shiller P/E is 29.8  times earnings versus a mean of 16.6.  Shiller’s P/E is based on  inflation adjusted earnings over 10 years.
> The Total Market Capitalization to GDP  stands at 147.3%, anything above 115% is  considered “overvalued.”
> Thompson Reuters reports the S&P 500 sells at 17.1 times earnings and 16.8 times a year from now. All this versus a 10-year average of 14.3.
AGING BULL MARKET:
> The bull market is now  nine years and six months old (117 months).  That’s 3.5 times the average of the last 15 bull markets.
AGING ECONOMIC EXPANSION:
> Republicans – the recession party. Nine of last 10 recession have been with a Republican in the White House.  Odds favor Trump will make 10 for 11.
> The current economic expansion has lasted 116 months. That’s 53 months (1.9 x) longer than the average expansion going back to 1945.  Nine out of the last 10 recessions have occurred with a Republican in the White House.
> GDP expected to slow in 2019 to 2.7%, CAPEX to 5% from 7%.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
> Housing stocks have recovered after the Fed opted out of further increases in interest rates.

>Year/year existing home sales down 8 straight months. New home sales  fell 8.9% in October.  Single family starts fell  for third straight month to an 18-month low.   The 30-year fixed rate mortgage rate is projected to hit 5.3% in 2019.
The iShares  home construction ETF is still down 17% from its January 2018 high of 41.48. Not only is the industry a major employer, its health affects other industries, especially furniture and appliances.
> Household debt increased for the 16th straight quarter to 13.3 trillion, that’s 19%  above the post-financial-crisis low.
> Personal loans have soared   18% to  a record 120 billion, Personal savings as percent of disposable income at 3%, down from 9% in 2012.
> Low interest rates have encouraged US companies to go on a debt binge, amassing  $6.3 trillion. With rates on the increase, refinancing will get more costly, according to S&P analyst, Andrew Chang, who points out that this amounts to $8 for every $1 in cash.
>  in 2018, 1,100 economists Warned that  Trump is repeating biggest mistakes of Great Depression – tariffs, trade protectionism, according to conservative National Taxpayers’ Union.
> Last year former Fed Chair, Ben Bernanke, economy to fall off a cliff in 2020, thanks to the $1.5 trillion corporate and individual tax cut and $300 billion increase in spending. He has not indicated he has changed his mind.
TRUMP’S TRADE WAR TANTRUM
> Trump’s tariff tiff costing  US companies a bundle:  The damage extends to manufacturers, input suppliers, fishermen, and numerous businesses who are finding it more difficult to sell abroad.
> Today’s businesses are complex, especially supply chains that can involve a thousand parts that make up a whole product, many of which are sourced from different countries, sometimes crossing back and forth across the same border a number of times.
>  Trump is considering leaving World Trade Organization (WTO).
TRUMP ADMINISTRATION IMPLODING:
So far, the stock market has not wavered in face of the increasing likelihood, Trump and many present and former associates are in legal trouble.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

S&P 500 Has Recouped Two-Thirds of Oct./Dec. Loss

INVESTORS first read.com – Daily edge before the open deal 
DJIA:25,425
S&P 500: 2,744
Nasdaq Comp.:7,414
Russell 2000:1,538
Tuesday, February 13
, 2019    9:07 a.m.
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gbifr79@gmail.com
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Sept. 21, 2018 : Raise cash to 50% (DJIA: 26,656)
Nov. 8, 2018: Raise cash to 75% (DJIA: 26,180)
Dec. 26, 2018 Doom Thick Enough for a Rally (DJIA:  21,792)

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TODAY: A tentative agreement was reached by Congressional negotiators yesterday to avert another government shutdown.  While the amount allocated for a “wall” falls short of Trump’s demands, coming in at $1.4 billion vs. $5.7 billion, Trump will either press for changes, accept a deal, or opt for a continuing resolution (CR), keep the government open, and keep negotiating..
The news sent stock’s soaring, but for two other reasons. Fed policy is positive for stocks and the Street expects progress on trade negotiations.
     Speculative fever is beginning to fester again.  That’s great if you are a nimble trader quick to exit if you see trouble.
IMHO, the Fed blew it, or put another way, screwed investors.
If the economy heats up, the Fed will start raising interest rates again and down will go stocks (from a lofty level).
If the increasing signs of economic weakness begin to bite and the Street sees a recession, the market will plunge.
The Fed should have acknowledged the weakness in housing, manufacturing, consumer confidence/sentiment and small business’ bearishness instead of saying the economic outlook was “rosy.”
The stock market would not have risen as much, maybe declined, but it would have found a level that more realistically reflects actual and potential economic conditions.
     Economist, A. Gary Shilling’s INSIGHT refers to a Duke University survey that finds nearly half the CFOs polled expect a recession by year-end.  One-quarter of the economists polled by the Wall Street Journal in January see a recession this year, up from 13% a year ago.
While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. On December 10, 2018, Thomson Reuters was projecting Q1 2019 S&P 500 earnings growth of  +7.3%. As of February 1, it has slashed growth for Q1 2019 to +0.7% with significant cuts for the rest of 2019.
The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
BOTTOM LINE:

 The Fed is running scared for a reason.  Respect that !
Savvy, nimble investors can  hit ‘n run as the Street fires out its latest “buy” recommendations, new accounts open, existing accounts are harvested, and commissions roll in.  Fever festers.  Careful !
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TIMING
 is EVERYTHING !
MAJOR RESISTANCE FOR THE MARKET AVERAGES STARTS AT:
DJIA: 25,507
S&P 500: 2,756
Nasdaq Comp.: 7,387
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Progress on U.S./China trade talks and an agreement on keeping the government open would
 push stock prices back up from overvalued levels to extremely overvalued levels.
Progress is being made. Both the U.S. and China are hurting from this nonsense.
As  noted below under “Bearish Case”, odds are good we are in the early stages of a recession. Also note below, what A. Gary Shilling, publisher of INSIGHT, has to say about a recession.
     As I have emphasized so many times, the Street’s algos pretty much track the same stuff, but are  still programmed with  a bullish bias.
At some point, the Street will all bail at the same time. We saw this flash crash mentality in April/May 2010 (-13%); Aug.2011 (-16%); Jul./Aug. 2015 (-11.5%); Dec./Jan. 2016 (-13%); Jan./Feb. 2018 (-11.8%), and Jan. 2019 (-16.4%). Next time will be worse.
The big loser here is the person who needs a return on a fixed income investment.
ON A BRIGHTER SIDE:

January’s 7.9% jump was the biggest in 30 years, The Stock Trader’s Almanac’s January Barometer, published since 1972, has successfully forecast the S&P 500’s year as a whole 86.7% of the time over the last 50 years. Odds are, a strong January will lead to a gain for the year. However, there is no guarantee that between January and year-end there won’t be one or more major corrections. In pre-presidential years alone there were major corrections in 1971,1979, 1987, 2011, and 2015. Pre-presidential election years are the best of the four years in the presidential cycle.
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RECESSION ?
The National Bureau of Economic Research (NBER) is the arbiter of recessions drawing on a host of economic and monetary data to  track the beginning and end of recessions, rejecting the simple definition that a recession is two straight declines in GDP.     
I think we are is the very early stages of a recession, and that a bear market started last October.  The dominos are beginning to tumble. One at a time.
However, The Fed’s abrupt change in policy could buy time for the economy and delay the beginning of a recession.
A. Gary Shilling  believes we are headed for a recession and noted his reasons December issue, headlining his issue of “INSIGHT“ with “Looming Recession ?”   I have tracked Shilling for decades. He nailed the 2007 – 2009 Great Recession/Bear Market before anyone else. For him to suddenly turn negative is  a shocker.  He details his reasons in a 50-page analysis that  is overwhelming in detail and backed up with stats and graphs. No one in my experience has more economic/investing integrity than Shilling.
Shillings reasons for forecasting a recession are:
1. Output exceeds capacity
2. Stocks fall
3. Central banks tighten
4. Yield curve inversion near
5. Junk bond-Treasury yield spread opens
6. Housing activity declines
7. Corporate profits growth falls
8. Consumers are optimistic
9. Global leading indicators drop
10. Commodity prices decline
11. Downward data revisions
12. Emerging-market troubles mount
13. U.S.-China trade war escalation.
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 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller is closing in on Trump, et al, and  this is going to get ugly.
The daily disclosure of wrongdoing by this administration will weigh heavily on the market at a time the economy is going in the tank and the stock market  is on the verge of a bear market.
      An even bigger issue is about to hit the Street right between its eyes and that is, what will happen to stock prices when President Trump is removed from office, or he resigns ?
There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
      Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
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TRUMP  – Agent, Asset, or Facilitator ?
      IMHO, Trump is toast, he will accept a deal to resign. The 16 attorneys just hired are not to defend his occupation of the office of President, they are to limit his massive legal problems, possibly keep him out of jail.
It will take years for the scope of wrong doings to be aired, which I believe will shock Americans beyond belief.
President Trump is the single most destructive thing this country has ever faced, he is a human wrecking ball, gutting our country of its global security, self respect, respect, honor, goodwill, good deeds, sacrifices,  and achievements. As long as he is in the office of the Presidency, we and everything we hold dear are at risk. When the business is rotten at the top there is nowhere else to go but down.
He has made consummate lying, abusiveness, irrationality, and disrespect the new normal for Americans, and tragically our children.
Stock markets thrive on CONFIDENCE (or lack thereof), and the continuing blundering and lying coming out of the White House  is devastating to confidence in the running of our country in the next two years.
What’s more, odds favor the Mueller investigation will lead to a prolonged constitutional crisis that will also be a drag on the economy.
It doesn’t take heavy selling to drive stock prices lower, just a decision by money managers that they can get stocks at lower prices so they defer purchases allow normal selling to have an impact.
RESIGNATION
Investors must be ready for a resignation by President Trump
who would cut a deal to trade his presidency for a get out of jail “sort of free” card, in face of incredible string of illegal activities.
The deal would include family members.
Who would succeed Trump as President ?
      It is possible, Vice President Pence would also be at risk and forced to resign, since he was Chair of the President-Elect Trump campaign, which is now under intense scrutiny.
According to the Succession Act of 1947, the Speaker of the House, Nancy Pelosi,  would be next in line to become President if both Trump and Pence are forced out of office, and that would cause a monstrous firestorm.
What if Pence resigns first and Trump appoints another Vice President who would then become President ?
It gets complicated and divisive, and that wouldn’t be good for stock prices.
All this is possible, in my opinion – probable, and would  most likely crush stock prices until resolved.
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DID YOU KNOW ?
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 116 months, the second longest on record and  twice as long as the average length of 11 cycles since 1945.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four times the average of the last 15 bulls going back to 1957
>Technical Note: Frequently, there is what I refer to as a mid-afternoon counter move (2:30 – 3:00 where the market rallies or declines against the prevailing trend for the day.   This can be a fake out for investors thinking the market has turned (up or down).
 >Nine out of the last 10 recessions have occurred with a Republican in the White House
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 1945.
>
Of the 10 recessions since 1950,the average time between the low point in the unemployment rate and the start of a recession was 3.8 Months.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
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BULLISH CASE
      The case for the bulls has been weakening. The stellar earnings increases in 2018 in excess of 20%  will be followed by increases less than one-third  as great .
FactSet has been lowering its projections for 2019 in recent weeks.
The Fed has backpedaled from a policy of tightening credit through increases in its fed funds rate.  Following its January 30 FOMC meeting, Fed Chief Powell  implied no further rate increases are planned unless “data” requires it.
That’s a plus, unless the weakening in the economy is worse than reported.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>…
BEARISH CASE
RISING INTEREST RATES:
>The Fed is retreating from its policy of increasing its benchmark interest rate (federal funds), though more information is needed. It has raised rates eight times since December 2015. That policy has led to an ugly slump in the housing industry.  It raised its benchmark federal funds rate in December to 2.25% – 2.50% percent, but no further increases are planned.  That’s a positive unless this change in policy indicates the economy is in trouble.
>Year/year existing home sales down 12 straight months. New home sales  fell 8.9% in October.  Single family starts fell  for third straight month to an 18-month low.
>The yield curve is flattening as short-term treasuries rise faster than long-tern governments just another warning sign of impending recession.
OVERVALUED MARKET:
> The onset of bear markets have led the beginning of recessions by 8.5 months going back to 1956, so don’t look for a recession to signal a bear market. The longest lead time was 13 months (1968 – 1969) The “mode” (most frequent) is 12 months.
> If companies were buying back their own stock at a record clip, pushing stocks higher, why then are insiders selling $8 of stock for every $1 of stock they buy ?
.> Companies took advantage of low interest rates to load up on debt in recent years for acquisitions and to buy back their own stock. Excluding banks, the tally is $6.3trillion. The downside of this comes when these companies will need to refinance this debt at higher interest rates when it comes due.
………………………………………….
Earnings growth myth:  The Street is counting on earnings growth to reduce the overvaluation of equities.   Look again.
A 20% increase in S&P 500 earnings this year will  be tough to beat next year.  The quarter versus year ago in 2019 will make poor reading going up against the 2018 earnings .  So far, the Street is not factoring in the likelihood of a recession, which could mean negative growth.
> The S&P 500 price to sales ratio at 1.92 is 19% higher than in 2007 before the devastating bear market, and is even higher than in March 2000 before the dot-com bubble burst leading to a bear market. Both bear markets dropped 50%.
> The Shiller P/E is 29.8  times earnings versus a mean of 16.6.  Shiller’s P/E is based on  inflation adjusted earnings over 10 years.
> The Total Market Capitalization to GDP  stands at 147.3%, anything above 115% is  considered “overvalued.”
> Thompson Reuters reports the S&P 500 sells at 17.1 times earnings and 16.8 times a year from now. All this versus a 10-year average of 14.3.
AGING BULL MARKET:
> The bull market is now  nine years and six months old (117 months).  That’s 3.5 times the average of the last 15 bull markets.
AGING ECONOMIC EXPANSION:
> Republicans – the recession party. Nine of last 10 recession have been with a Republican in the White House.  Odds favor Trump will make 10 for 11.
> The current economic expansion has lasted 116 months. That’s 53 months (1.9 x) longer than the average expansion going back to 1945.  Nine out of the last 10 recessions have occurred with a Republican in the White House.
> GDP expected to slow in 2019 to 2.7%, CAPEX to 5% from 7%.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.
> Housing stocks have been in a prolonged slump since January.

>Year/year existing home sales down 8 straight months. New home sales  fell 8.9% in October.  Single family starts fell  for third straight month to an 18-month low.   The 30-year fixed rate mortgage rate is projected to hit 5.3% in 2019.
The iShares  home construction ETF has dropped 30.5%, as interest rates rise. Not only is it  major employer, its health affects other industries, especially furniture and appliances.
> Household debt increased for the 16th straight quarter to 13.3 trillion, that’s 19%  above the post-financial-crisis low.
> Jamie Dimon, CEO J.P. Morgan Chase,  thinks the benchmark  10-yearTreasury note , now 2.95%, should be 5%. The rate impacts lending for autos, mortgages and businesses.
> Personal loans have soared   18% to  a record 120 billion, Personal savings as percent of disposable income at 3%, down from 9% in 2012.
> Low interest rates have encouraged US companies to go on a debt binge, amassing  $6.3 trillion. With rates on the increase, refinancing will get more costly, according to S&P analyst, Andrew Chang, who points out that this amounts to $8 for every $1 in cash.
> Recently, 1,100 economists Warned that  Trump is repeating biggest mistakes of Great Depression – tariffs, trade protectionism, according to conservative National Taxpayers’ Union.
> Former Fed Chair, Ben Bernanke, says economy to fall off a cliff in 2020, thanks to the $1.5 trillion corporate and individual tax cut and $300 billion increase in spending.
TRUMP’S TRADE WAR TANTRUM
> Trump’s tariff tiff costing  US companies a bundle:  The damage extends to manufacturers, input suppliers, fishermen, and numerous businesses who are finding it more difficult to sell abroad.
> Today’s businesses are complex, especially supply chains that can involve a thousand parts that make up a whole product, many of which are sourced from different countries, sometimes crossing back and forth across the same border a number of times.
>  Trump is considering leaving World Trade Organization (WTO).
TRUMP ADMINISTRATION IMPLODING:
So far, the stock market has not wavered in face of the increasing likelihood, Trump and many present and former associates are in legal trouble.
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POLITICAL/STOCK MARKET
I have decided to publish my political comments in a separate publication under a different LOGO and structure it differently, publishing a commentary a couple times a week, sometimes more, then publish the commentary history one day a week.
This will make easier for the reader and enable me to concentrate more on items.  What’s more, I will be able to refer readers to web sites where they can get additional information.
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.