BIG Monet Selling Why Everyone Else is Buying

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,526
S&P 500: 2,924
Nasdaq Comp.:7,967
Russell 2000:1,546
Friday June 28, 2019
   9:29 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
      Signs of a recession are cropping up everywhere for those who objectively will see them.  Yet, the Street keeps buying running stocks up to historically extremely overvalued levels, obviously expecting the Fed to cut interest rates if the economy falls off the cliff.
This is classic late stage bull market stuff, happens at every market top. The unwillingness to buy at extremely undervalued levels is characteristic at bear market bottoms.  Humans doing what they do best – being human.
If one must play, they should play with a limited amount of one’s funds while maintaining a healthy cash reserve to reduce the carnage when the market goes straight down.
Monday I asked, “Is the BIG money selling while all else are  buying ?”
      Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
Jesse Felder, The Felder Report agrees saying, “Leveraged investors could be signaling a bear market is now underway,” and backed it up with graphs. He noted, “Margin debt is now falling at an annual rate of 15%, a level of de-risking that has always been accompanied by a minimum 20% decline in the S&P 500 over the past half century.”

……………………………………………………………
TECHNICAL

      The big question here is, why did the Fed reverse its policy earlier in the year from restraint to ease ?    What are they afraid of ?

Minor Support: DJIA:2626,473;S&P 500:2,918;Nasdaq Comp.:7,946
Minor Resistance: DJIA:26,605; S&P 500:2,932; Nasdaq Comp.:7,988

………………………………………….
Thursday   (June 27)
On balance, this is not a good week for economic indicators: Jobless Claims  and  Retail and Wholesale Inventories up, Durable Goods , New Home Sales, Consumer Confidence, Retail Sales, Net Exports, and  the Dallas Fed Business Index are down.  The third estimate for Q1 GDP at a 3.1%  an annual rate of growth is unchanged.
As I have been saying, we are in the early stages of a recession. It will gain momentum in spite of a Fed rate cut on July 31 or September 18 at the latest.
Once underway, the Fed will not be able to stop a recession, slow down its intensity – yes, stop no.
So why is the Stock market hovering at new highs ?
The Street thinks it can ignore a recession and look out to 2020 – 2012.
       After all, the average recession going back to 1945 lasts less than a year.
But, as I have repeatedly noted, stocks are overvalued heading into a recession and  extremely overvalued at the mid-point of a recession.  The Shiller P/E at 29.7 is 80%  higher than its historic norm of 16.6.
        Humans being human, will get scared when the market tumbles 15%, 20%, 30% and sell driving prices lower.
………………………………………………………
Wall Street’s problem is they do not want the party to end. Some big hitters will break ranks and sell, others will follow.
In the interim, there will be buyers in response3 to promises of success in trade talks and a Fed rate cut, but most of that is priced into the market.

 

Wednesday  (June 26)
The G-20 will meet Friday and Saturday in Osaka, Japan where Presidents Trump and Xi Jinping  are expected to discuss trade, but without any major breakthrough, except a promise to meet for further discussions in the near future.
We should get a better idea of how global economies a faring, as well as input on the impact of Trump’s tariffs.
Fed Chief Powell has insisted the Fed won’t cut its fed funds rate to please Trump, which leads me to believe he will anyhow, not to  avoid the President’s criticism, but  to head off a recession.
I have warned of a recession for many months, and believe it is already underway.
The Street doesn’t share my concern, it is still in a buy mode, or shall I say its computer algorithms are still bullish.
That will end in a 12% – 18% plunge as everyone on the Street gets a SELL signal at the same time.
When ?  Don’t know !
Bad news doesn’t do it, a dysfunctional government doesn’t do it, an overvalued stock market doesn’t deter  paying up for stocks.
On a given day no one will show up to buy, and prices will plunge followed by sellers and more downside as it becomes obvious, this should have happened six months ago, before the Fed stepped in with its hype that the “economy is in a good place”  to prevent the market from finding a genuine comfort level that discounts a recession.
………………………………………………………
Tuesday   (June 25)
There are just too many balls up in the air for the Street to decide what to do next.  This week is loaded with economic reports that could pressure  the Fed to cut rates on July 31, which I previously thought was unlikely because there is no press conference scheduled for that day, and for a rate cut they would want one. Should they schedule a press conference, it would be a tip-off they are cutting rates.
Key economic reports today are: New Home Sales (9:00), Consumer Confidence (10:00), Richmond Fed. Bus. (10:00).
The G20 meeting in Japan will be held Friday and Saturday.  President Trump and China’s President Xi Jinping have agreed to talk trade at the summit, but expectations of tangible progress are low.
The U.S./Iran issue will remain uncertain at least until next week.
Then too, we have a stock market at all-time highs, which by many standards is over-priced and due for a technical correction  after a sharp 8.7%, Fed-induced surge.
The Street is undeterred by all exterior events, at least until it becomes aware how vulnerable the market is. This indifference and self-fulfilling  tunnel vision is typical of late stage bull markets.
The market will hang tough until someone breaks ranks to stop buying, worse yet start selling, then it will be straight down.
……………………………………………….       
Monday  (June 24)
The financial press and market pundits are  now focused on the market averages new all-time highs.  This suggests the Street is even more enthusiastic about the  market’s valuation and future than at any time before.
Presently the S&P 500 hit an all-time high last week.  The DJIA must post a gain of 232 points (0.0087%) and Nasdaq jump 145 points (1.8%) to follow suit.
But what about the Dow Jones Transports (DJTA), a barometer for the  rail, road and air industries   ?  It must gain 1,271 points to reach all-time highs (12.3%) to be hitting all-time highs.
Why wouldn’t the Dow transports confirm the  other market averages (indexes) ?
If they came close, I wouldn’t waste time mentioning it, but  the gap here is huge.
The fact the Fed reversed its policy from restraint to ease in January triggered a surge in equity markets, which got a further boost by Fed Chief Powell’s hint last week a cut in its fed funds rate was imminent.
On the surface, that’s enough to whet the bulls’ appetite, but it begs the question “WHY” is the Fed doing this ?
The long and short answer is – RECESSION !
Is the BIG money selling while all else are  buying ?
Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
……………………………………………………..
Friday  (June 21)
One thing certain about the Fed, it continually manages to push stock prices to overvalued levels with rhetoric and occasionally action.
     If it is concerned with early evidence of a recession, it should say so flat out. The stock market would then be able to find a level that discounts  risk.
Shuffling back and forth like a bunch of drunk line dancers, it manages have it both ways all the while delaying the inevitable – a recession and a bear market.
The market must find a level that weighs both risk and opportunity, without this charade by the Fed.
The stock market is hitting all-time highs at a time:
-the White House is in a turmoil
Mid-East tensions are about to boil.
-individual, corporate and government debt has swelled to uncomfortable levels.
-international trade is in a flux adversely impacting the corporate decision process.
-global economies are on the edge of recession.
-signs of recession here in the United States have prompted bearish forecasts by
Morgan Stanley, whose Business Conditions Index had its biggest plunge  ever, A. Gary Shilling who has an outstanding track record for calling recessions, ands a survey by the Duke University/CFO Global Business Outlook which finds 48% of the CFOs surveyed see a recession this time next year.
ALL THIS WITH THE SHILLER PRICE/EARNINGS RATIO HIGHER THAN IT HAS EVER BEEN EXCEPT FOR 1999-2000, THE DOT-COM BUBBLE BURST BEAR MARKET THAN PLUNGED 50.50%.
……………………………………………..
Thursday  (June 20)
What’s better than a Fed rate cut  yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decision is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

…………………………………………
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.
>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.com
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.

 

 

 

 

 

 

 

 

 

SLO-MO Recession/Bear Market Unfolding

INVESTOR’S first read.com – Daily edge before the open
DJIA :25,536
S&P 500: 2,913
Nasdaq Comp.:7,909
Russell 2000:1,517
Thursday June 27, 2019
   9:18 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
On balance, this is not a good week for economic indicators: Jobless Claims  and  Retail and Wholesale Inventories up, Durable Goods , New Home Sales, Consumer Confidence, Retail Sales, Net Exports, and  the Dallas Fed Business Index are down.  The third estimate for Q1 GDP at a 3.1%  an annual rate of growth is unchanged.
As I have been saying, we are in the early stages of a recession. It will gain momentum in spite of a Fed rate cut on July 31 or September 18 at the latest.
Once underway, the Fed will not be able to stop a recession, slow down its intensity – yes, stop no.
So why is the Stock market hovering at new highs ?
The Street thinks it can ignore a recession and look out to 2020 – 2012.
       After all, the average recession going back to 1945 lasts less than a year.
But, as I have repeatedly noted, stocks are overvalued heading into a recession and  extremely overvalued at the mid-point of a recession.  The Shiller P/E at 29.7 is 80%  higher than its historic norm of 16.6.
        Humans being human, will get scared when the market tumbles 15%, 20%, 30% and sell driving prices lower.
Wall Street’s problem is they do not want the party to end. Some big hitters will break ranks and sell, others will follow.
In the interim, there will be buyers in response3 to promises of success in trade talks and a Fed rate cut, but most of that is priced into the market.
……………………………………………………………
TECHNICAL

      The big question here is, why did the Fed reverse its policy earlier in the year from restraint to ease ?    What are they afraid of ?

Minor Support: DJIA:26,518;S&P 500:2,927;Nasdaq Comp.:7,891
Minor Resistance: DJIA:26,797; S&P 500:2,959; Nasdaq Comp.:8,261

………………………………………….
Wednesday  (June 26)
The G-20 will meet Friday and Saturday in Osaka, Japan where Presidents Trump and Xi Jinping  are expected to discuss trade, but without any major breakthrough, except a promise to meet for further discussions in the near future.
We should get a better idea of how global economies a faring, as well as input on the impact of Trump’s tariffs.
Fed Chief Powell has insisted the Fed won’t cut its fed funds rate to please Trump, which leads me to believe he will anyhow, not to  avoid the President’s criticism, but  to head off a recession.
I have warned of a recession for many months, and believe it is already underway.
The Street doesn’t share my concern, it is still in a buy mode, or shall I say its computer algorithms are still bullish.
That will end in a 12% – 18% plunge as everyone on the Street gets a SELL signal at the same time.
When ?  Don’t know !
Bad news doesn’t do it, a dysfunctional government doesn’t do it, an overvalued stock market doesn’t deter  paying up for stocks.
On a given day no one will show up to buy, and prices will plunge followed by sellers and more downside as it becomes obvious, this should have happened six months ago, before the Fed stepped in with its hype that the “economy is in a good place”  to prevent the market from finding a genuine comfort level that discounts a recession.
………………………………………………………
Tuesday   (June 25)
There are just too many balls up in the air for the Street to decide what to do next.  This week is loaded with economic reports that could pressure  the Fed to cut rates on July 31, which I previously thought was unlikely because there is no press conference scheduled for that day, and for a rate cut they would want one. Should they schedule a press conference, it would be a tip-off they are cutting rates.
Key economic reports today are: New Home Sales (9:00), Consumer Confidence (10:00), Richmond Fed. Bus. (10:00).
The G20 meeting in Japan will be held Friday and Saturday.  President Trump and China’s President Xi Jinping have agreed to talk trade at the summit, but expectations of tangible progress are low.
The U.S./Iran issue will remain uncertain at least until next week.
Then too, we have a stock market at all-time highs, which by many standards is over-priced and due for a technical correction  after a sharp 8.7%, Fed-induced surge.
The Street is undeterred by all exterior events, at least until it becomes aware how vulnerable the market is. This indifference and self-fulfilling  tunnel vision is typical of late stage bull markets.
The market will hang tough until someone breaks ranks to stop buying, worse yet start selling, then it will be straight down.
……………………………………………….       
Monday  (June 24)
The financial press and market pundits are  now focused on the market averages new all-time highs.  This suggests the Street is even more enthusiastic about the  market’s valuation and future than at any time before.
Presently the S&P 500 hit an all-time high last week.  The DJIA must post a gain of 232 points (0.0087%) and Nasdaq jump 145 points (1.8%) to follow suit.
But what about the Dow Jones Transports (DJTA), a barometer for the  rail, road and air industries   ?  It must gain 1,271 points to reach all-time highs (12.3%) to be hitting all-time highs.
Why wouldn’t the Dow transports confirm the  other market averages (indexes) ?
If they came close, I wouldn’t waste time mentioning it, but  the gap here is huge.
The fact the Fed reversed its policy from restraint to ease in January triggered a surge in equity markets, which got a further boost by Fed Chief Powell’s hint last week a cut in its fed funds rate was imminent.
On the surface, that’s enough to whet the bulls’ appetite, but it begs the question “WHY” is the Fed doing this ?
The long and short answer is – RECESSION !
Is the BIG money selling while all else are  buying ?
Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
……………………………………………………..
Friday  (June 21)
One thing certain about the Fed, it continually manages to push stock prices to overvalued levels with rhetoric and occasionally action.
     If it is concerned with early evidence of a recession, it should say so flat out. The stock market would then be able to find a level that discounts  risk.
Shuffling back and forth like a bunch of drunk line dancers, it manages have it both ways all the while delaying the inevitable – a recession and a bear market.
The market must find a level that weighs both risk and opportunity, without this charade by the Fed.
The stock market is hitting all-time highs at a time:
-the White House is in a turmoil
Mid-East tensions are about to boil.
-individual, corporate and government debt has swelled to uncomfortable levels.
-international trade is in a flux adversely impacting the corporate decision process.
-global economies are on the edge of recession.
-signs of recession here in the United States have prompted bearish forecasts by
Morgan Stanley, whose Business Conditions Index had its biggest plunge  ever, A. Gary Shilling who has an outstanding track record for calling recessions, ands a survey by the Duke University/CFO Global Business Outlook which finds 48% of the CFOs surveyed see a recession this time next year.
ALL THIS WITH THE SHILLER PRICE/EARNINGS RATIO HIGHER THAN IT HAS EVER BEEN EXCEPT FOR 1999-2000, THE DOT-COM BUBBLE BURST BEAR MARKET THAN PLUNGED 50.50%.
……………………………………………..
Thursday  (June 20)
What’s better than a Fed rate cut  yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decision is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

…………………………………………
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.
>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.com
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.

 

 

 

 

 

 

 

 

Shiller P/E is 29.7 vs Mean of 16.6

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,548
S&P 500: 2,917
Nasdaq Comp.:7,884
Russell 2000:1,521
Wednesday June 26, 2019
   9:11 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The G-20 will meet Friday and Saturday in Osaka, Japan where Presidents Trump and Xi Jinping  are expected to discuss trade, but without any major breakthrough, except a promise to meet for further discussions in the near future.
We should get a better idea of how global economies a faring, as well as input on the impact of Trump’s tariffs.
Fed Chief Powell has insisted the Fed won’t cut its fed funds rate to please Trump, which leads me to believe he will anyhow, not to  avoid the President’s criticism, but  to head off a recession.
I have warned of a recession for many months, and believe it is already underway.
The Street doesn’t share my concern, it is still in a buy mode, or shall I say its computer algorithms are still bullish.
That will end in a 12% – 18% plunge as everyone on the Street gets a SELL signal at the same time.
When ?  Don’t know !
Bad news doesn’t do it, a dysfunctional government doesn’t do it, an overvalued stock market doesn’t deter  paying up for stocks.
On a given day no one will show up to buy, and prices will plunge followed by sellers and more downside as it becomes obvious, this should have happened six months ago, before the Fed stepped in with its hype that the “economy is in a good place”  to prevent the market from finding a genuine comfort level that discounts a recession.
……………………………………………………………
TECHNICAL

      The big question here is, why did the Fed reverse its policy earlier in the year from restraint to ease ?    What are they afraid of ?

Minor Support: DJIA:26,017;S&P 500:2,897;Nasdaq Comp.:7,917
Minor Resistance: DJIA:26,201; S&P 500:2,907Nasdaq Comp.:7,878

………………………………………….
Tuesday   (June 25)
There are just too many balls up in the air for the Street to decide what to do next.  This week is loaded with economic reports that could pressure  the Fed to cut rates on July 31, which I previously thought was unlikely because there is no press conference scheduled for that day, and for a rate cut they would want one. Should they schedule a press conference, it would be a tip-off they are cutting rates.
Key economic reports today are: New Home Sales (9:00), Consumer Confidence (10:00), Richmond Fed. Bus. (10:00).
The G20 meeting in Japan will be held Friday and Saturday.  President Trump and China’s President Xi Jinping have agreed to talk trade at the summit, but expectations of tangible progress are low.
The U.S./Iran issue will remain uncertain at least until next week.
Then too, we have a stock market at all-time highs, which by many standards is over-priced and due for a technical correction  after a sharp 8.7%, Fed-induced surge.
The Street is undeterred by all exterior events, at least until it becomes aware how vulnerable the market is. This indifference and self-fulfilling  tunnel vision is typical of late stage bull markets.
The market will hang tough until someone breaks ranks to stop buying, worse yet start selling, then it will be straight down.
……………………………………………….       
Monday  (June 24)
The financial press and market pundits are  now focused on the market averages new all-time highs.  This suggests the Street is even more enthusiastic about the  market’s valuation and future than at any time before.
Presently the S&P 500 hit an all-time high last week.  The DJIA must post a gain of 232 points (0.0087%) and Nasdaq jump 145 points (1.8%) to follow suit.
But what about the Dow Jones Transports (DJTA), a barometer for the  rail, road and air industries   ?  It must gain 1,271 points to reach all-time highs (12.3%) to be hitting all-time highs.
Why wouldn’t the Dow transports confirm the  other market averages (indexes) ?
If they came close, I wouldn’t waste time mentioning it, but  the gap here is huge.
The fact the Fed reversed its policy from restraint to ease in January triggered a surge in equity markets, which got a further boost by Fed Chief Powell’s hint last week a cut in its fed funds rate was imminent.
On the surface, that’s enough to whet the bulls’ appetite, but it begs the question “WHY” is the Fed doing this ?
The long and short answer is – RECESSION !
Is the BIG money selling while all else are  buying ?
Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
……………………………………………………..
Friday  (June 21)
One thing certain about the Fed, it continually manages to push stock prices to overvalued levels with rhetoric and occasionally action.
     If it is concerned with early evidence of a recession, it should say so flat out. The stock market would then be able to find a level that discounts  risk.
Shuffling back and forth like a bunch of drunk line dancers, it manages have it both ways all the while delaying the inevitable – a recession and a bear market.
The market must find a level that weighs both risk and opportunity, without this charade by the Fed.
The stock market is hitting all-time highs at a time:
-the White House is in a turmoil
Mid-East tensions are about to boil.
-individual, corporate and government debt has swelled to uncomfortable levels.
-international trade is in a flux adversely impacting the corporate decision process.
-global economies are on the edge of recession.
-signs of recession here in the United States have prompted bearish forecasts by
Morgan Stanley, whose Business Conditions Index had its biggest plunge  ever, A. Gary Shilling who has an outstanding track record for calling recessions, ands a survey by the Duke University/CFO Global Business Outlook which finds 48% of the CFOs surveyed see a recession this time next year.
ALL THIS WITH THE SHILLER PRICE/EARNINGS RATIO HIGHER THAN IT HAS EVER BEEN EXCEPT FOR 1999-2000, THE DOT-COM BUBBLE BURST BEAR MARKET THAN PLUNGED 50.50%.
……………………………………………..
Thursday  (June 20)
What’s better than a Fed rate cut  yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decision is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

…………………………………………
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.
>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.com
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.

 

 

 

 

 

 

 

Nothing Worries the Street – Until Someone Breaks Ranks

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,727
S&P 500: 2,945
Nasdaq Comp.:8,005
Russell 2000:1,530
Tuesday June 25, 2019
   9:06 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
There are just too many balls up in the air for the Street to decide what to do next.  This week is loaded with economic reports that could pressure  the Fed to cut rates on July 31, which I previously thought was unlikely because there is no press conference scheduled for that day, and for a rate cut they would want one. Should they schedule a press conference, it would be a tip-off they are cutting rates.
Key economic reports today are: New Home Sales (9:00), Consumer Confidence (10:00), Richmond Fed. Bus. (10:00).
The G20 meeting in Japan will be held Friday and Saturday.  President Trump and China’s President Xi Jinping have agreed to talk trade at the summit, but expectations of tangible progress are low.
The U.S./Iran issue will remain uncertain at least until next week.
Then too, we have a stock market at all-time highs, which by many standards is over-priced and due for a technical correction  after a sharp 8.7%, Fed-induced surge.
The Street is undeterred by all exterior events, at least until it becomes aware how vulnerable the market is. This indifference and self-fulfilling  tunnel vision is typical of late stage bull markets.
The market will hang tough until someone breaks ranks to stop buying, worse yet start selling, then it will be straight down.

……………………………………………………………
TECHNICAL

      The big question here is, why did the Fed reverse its policy earlier in the year from restraint to ease ?    What are they afraid of ?

Minor Support: DJIA:26,687;S&P 500:2,941;Nasdaq Comp.:8,013
Minor Resistance: DJIA:26,801; S&P 500:2,957;Nasdaq Comp.:8,053

………………………………………….
Monday  (June 24)
The financial press and market pundits are  now focused on the market averages new all-time highs.  This suggests the Street is even more enthusiastic about the  market’s valuation and future than at any time before.
Presently the S&P 500 hit an all-time high last week.  The DJIA must post a gain of 232 points (0.0087%) and Nasdaq jump 145 points (1.8%) to follow suit.
But what about the Dow Jones Transports (DJTA), a barometer for the  rail, road and air industries   ?  It must gain 1,271 points to reach all-time highs (12.3%) to be hitting all-time highs.
Why wouldn’t the Dow transports confirm the  other market averages (indexes) ?
If they came close, I wouldn’t waste time mentioning it, but  the gap here is huge.
The fact the Fed reversed its policy from restraint to ease in January triggered a surge in equity markets, which got a further boost by Fed Chief Powell’s hint last week a cut in its fed funds rate was imminent.
On the surface, that’s enough to whet the bulls’ appetite, but it begs the question “WHY” is the Fed doing this ?
The long and short answer is – RECESSION !
Is the BIG money selling while all else are  buying ?
Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
……………………………………………………..
Friday  (June 21)
One thing certain about the Fed, it continually manages to push stock prices to overvalued levels with rhetoric and occasionally action.
     If it is concerned with early evidence of a recession, it should say so flat out. The stock market would then be able to find a level that discounts  risk.
Shuffling back and forth like a bunch of drunk line dancers, it manages have it both ways all the while delaying the inevitable – a recession and a bear market.
The market must find a level that weighs both risk and opportunity, without this charade by the Fed.
The stock market is hitting all-time highs at a time:
-the White House is in a turmoil
Mid-East tensions are about to boil.
-individual, corporate and government debt has swelled to uncomfortable levels.
-international trade is in a flux adversely impacting the corporate decision process.
-global economies are on the edge of recession.
-signs of recession here in the United States have prompted bearish forecasts by
Morgan Stanley, whose Business Conditions Index had its biggest plunge  ever, A. Gary Shilling who has an outstanding track record for calling recessions, ands a survey by the Duke University/CFO Global Business Outlook which finds 48% of the CFOs surveyed see a recession this time next year.
ALL THIS WITH THE SHILLER PRICE/EARNINGS RATIO HIGHER THAN IT HAS EVER BEEN EXCEPT FOR 1999-2000, THE DOT-COM BUBBLE BURST BEAR MARKET THAN PLUNGED 50.50%.
……………………………………………..
Thursday  (June 20)
What’s better than a Fed rate cut  yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decision is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

Wednesday  (June 19)
Yesterday’s surge in prices was attributed to news that Trump and China’s president Xi Jinping will meet at the G20 meeting in Japan next week to discuss  trade tariffs, currencies, etc.
Fine ! If they can resolve this drag on global economies, it would lessen the severity of the looming recession.
I also think the Street is front-running a potential decision by the Fed today to cut its fed funds rate, currently 2.5%.
Is that cause for celebration ?
Yes
, if you are buying a home, but No if you are relying on fixed income to supplement your living expenses.
Just bear in mind,  the Fed wouldn’t cut its rate unless  it is worried about a recession in 2020, a presidential election year.
Two questions here.
1) With individual, corporate and government debt at bloated levels, how much additional borrowing can be expected from lower rates ? Aren’t rates already low ?
2) With stocks selling at nearly twice historic price/earnings levels, the stock market is not pricing in a recession, even less so after a rate cut rally.
      I have been predicting  a rate cut since May 31, today we will see if I am premature.  While there is no press conference scheduled after the July 31 FOMC meeting, that does not preclude a rate cut then, however an announcement of a last minute presser would be a tip-off.
I have personally experienced 14 bear markets, all had at least one thing in common – no one believed a bear market could  happen.
       What is different today is the flash crash phenom where prices suddenly plunge10% – 15%.  This is due to heavy concentration by institutions which tend to key on the same indicators, all getting signals at the same time.
The only defense I know is to have a high cash reserve when the market is pricey, like now. If  trade issues are resolved, investors would get another opportunity to raise reserves even higher, likewise  with a cut in the fed funds rate.
…………………………………………………..
Tuesday   (June 18)
The biggest contributor to losses in the stock market is investors are humans. At extreme market highs, they get greedy. At lows, they get scared. It’s normal !
When stock markets are pricey relative to standard benchmarks, it is necessary for analysts like myself to warn of risk, because corrections in today’s stock market are so sharp and severe, all but the very nimble trader can  protect their portfolio before it takes a nasty hit by a plunge straight down.
So far, in this 10 year bull market, corrections have been followed by a an immediate rebound.
        The next one, or maybe the one after than WON’T ! It will come out of nowhere without warning as major investors stop buying and begin selling.
There will be no immediate rebound because the economy will be in a prolonged recession and the Fed unable to mount an effective stimulus.
         A drop in interest rates from an already low level will do little, and especially where individuals, corporations and the government are already over burdened with too much debt. We may see one severe recession or two smaller back-to-back recessions.  It will be a spender recession caused by inadequate cash and insufficient borrowing power across the board.
NOT SELLING ANYTHING,  I’M IN IT FOR THE LONG HAUL ?
      OK, that’s fine if you don’t mind waiting years to get even. But the “human” factor can thwart that dubious strategy.  Investors get scared after a 30% drop, thinking it will drop even more.   They Sell and never get back in until the market is once again hitting new highs !
The most disciplined investor will sell most of their portfolio when the market gets frothy and wait for big correction or bear market has run its course to move back in. Others will raise 30% cash, or so,  to reduce the damage when a correction occurs. .  The problem here is, sitting on cash in a late-stage  bull market when others are making money is not easy, they end up going “all-in.” That’s the primary reason investors get caught.
CONCLUSION
We have a presidential election and general election coming up next year and the Trump administration, Federal Reserve and Wall Street will stop at nothing to prevent a recession/bear market. The Fed will cut its fed funds rate and the others will unleash relentless and unsubstantiated “hype.”
It will be so very, very difficult for investors to NOT GET CAUGHT at the top of this bull market before a 35% -50% bear market.
No matter what, that’s why I urge a cash reserve relative to one’s tolerance for risk – -now.
…………………………………………
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.
>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.com
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.

 

 

 

 

 

 

Dow Jones Transports Fail To Confirm Other Averages

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,729
S&P 500: 2,950
Nasdaq Comp.:8,031
Russell 2000:1,549
Monday June 24, 2019
   9:06 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The financial press and market pundits are  now focused on the market averages new all-time highs.  This suggests the Street is even more enthusiastic about the  market’s valuation and future than at any time before.
Presently the S&P 500 hit an all-time high last week.  The DJIA must post a gain of 232 points (0.0087%) and Nasdaq jump 145 points (1.8%) to follow suit.
But what about the Dow Jones Transports (DJTA), a barometer for the  rail, road and air industries   ?  It must gain 1,271 points to reach all-time highs (12.3%) to be hitting all-time highs.
Why wouldn’t the Dow transports confirm the  other market averages (indexes) ?
If they came close, I wouldn’t waste time mentioning it, but  the gap here is huge.
The fact the Fed reversed its policy from restraint to ease in January triggered a surge in equity markets, which got a further boost by Fed Chief Powell’s hint last week a cut in its fed funds rate was imminent.
On the surface, that’s enough to whet the bulls’ appetite, but it begs the question “WHY” is the Fed doing this ?
The long and short answer is – RECESSION !
Is the BIG money selling while all else are  buying ?
Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
……………………………………………………………
TECHNICAL

      The big question here is, why did the Fed reverse its policy earlier in the year from restraint to ease ?    What are they afraid of ?

Minor Support: DJIA:26,676;S&P 500:2,942;Nasdaq Comp.:8.011
Minor Resistance: DJIA:26,793; S&P 500:2,961;Nasdaq Comp.:8.041

………………………………………….
Monday  (June 21)
One thing certain about the Fed, it continually manages to push stock prices to overvalued levels with rhetoric and occasionally action.
     If it is concerned with early evidence of a recession, it should say so flat out. The stock market would then be able to find a level that discounts  risk.
Shuffling back and forth like a bunch of drunk line dancers, it manages have it both ways all the while delaying the inevitable – a recession and a bear market.
The market must find a level that weighs both risk and opportunity, without this charade by the Fed.
The stock market is hitting all-time highs at a time:
-the White House is in a turmoil
Mid-East tensions are about to boil.
-individual, corporate and government debt has swelled to uncomfortable levels.
-international trade is in a flux adversely impacting the corporate decision process.
-global economies are on the edge of recession.
-signs of recession here in the United States have prompted bearish forecasts by
Morgan Stanley, whose Business Conditions Index had its biggest plunge  ever, A. Gary Shilling who has an outstanding track record for calling recessions, ands a survey by the Duke University/CFO Global Business Outlook which finds 48% of the CFOs surveyed see a recession this time next year.
ALL THIS WITH THE SHILLER PRICE/EARNINGS RATIO HIGHER THAN IT HAS EVER BEEN EXCEPT FOR 1999-2000, THE DOT-COM BUBBLE BURST BEAR MARKET THAN PLUNGED 50.50%.
……………………………………………..
Thursday  (June 20)
What’s better than a Fed rate cut  yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decision is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

Wednesday  (June 19)
Yesterday’s surge in prices was attributed to news that Trump and China’s president Xi Jinping will meet at the G20 meeting in Japan next week to discuss  trade tariffs, currencies, etc.
Fine ! If they can resolve this drag on global economies, it would lessen the severity of the looming recession.
I also think the Street is front-running a potential decision by the Fed today to cut its fed funds rate, currently 2.5%.
Is that cause for celebration ?
Yes
, if you are buying a home, but No if you are relying on fixed income to supplement your living expenses.
Just bear in mind,  the Fed wouldn’t cut its rate unless  it is worried about a recession in 2020, a presidential election year.
Two questions here.
1) With individual, corporate and government debt at bloated levels, how much additional borrowing can be expected from lower rates ? Aren’t rates already low ?
2) With stocks selling at nearly twice historic price/earnings levels, the stock market is not pricing in a recession, even less so after a rate cut rally.
      I have been predicting  a rate cut since May 31, today we will see if I am premature.  While there is no press conference scheduled after the July 31 FOMC meeting, that does not preclude a rate cut then, however an announcement of a last minute presser would be a tip-off.
I have personally experienced 14 bear markets, all had at least one thing in common – no one believed a bear market could  happen.
       What is different today is the flash crash phenom where prices suddenly plunge10% – 15%.  This is due to heavy concentration by institutions which tend to key on the same indicators, all getting signals at the same time.
The only defense I know is to have a high cash reserve when the market is pricey, like now. If  trade issues are resolved, investors would get another opportunity to raise reserves even higher, likewise  with a cut in the fed funds rate.
…………………………………………………..
Tuesday   (June 18)
The biggest contributor to losses in the stock market is investors are humans. At extreme market highs, they get greedy. At lows, they get scared. It’s normal !
When stock markets are pricey relative to standard benchmarks, it is necessary for analysts like myself to warn of risk, because corrections in today’s stock market are so sharp and severe, all but the very nimble trader can  protect their portfolio before it takes a nasty hit by a plunge straight down.
So far, in this 10 year bull market, corrections have been followed by a an immediate rebound.
        The next one, or maybe the one after than WON’T ! It will come out of nowhere without warning as major investors stop buying and begin selling.
There will be no immediate rebound because the economy will be in a prolonged recession and the Fed unable to mount an effective stimulus.
         A drop in interest rates from an already low level will do little, and especially where individuals, corporations and the government are already over burdened with too much debt. We may see one severe recession or two smaller back-to-back recessions.  It will be a spender recession caused by inadequate cash and insufficient borrowing power across the board.
NOT SELLING ANYTHING,  I’M IN IT FOR THE LONG HAUL ?
      OK, that’s fine if you don’t mind waiting years to get even. But the “human” factor can thwart that dubious strategy.  Investors get scared after a 30% drop, thinking it will drop even more.   They Sell and never get back in until the market is once again hitting new highs !
The most disciplined investor will sell most of their portfolio when the market gets frothy and wait for big correction or bear market has run its course to move back in. Others will raise 30% cash, or so,  to reduce the damage when a correction occurs. .  The problem here is, sitting on cash in a late-stage  bull market when others are making money is not easy, they end up going “all-in.” That’s the primary reason investors get caught.
CONCLUSION
We have a presidential election and general election coming up next year and the Trump administration, Federal Reserve and Wall Street will stop at nothing to prevent a recession/bear market. The Fed will cut its fed funds rate and the others will unleash relentless and unsubstantiated “hype.”
It will be so very, very difficult for investors to NOT GET CAUGHT at the top of this bull market before a 35% -50% bear market.
No matter what, that’s why I urge a cash reserve relative to one’s tolerance for risk – -now.
…………………………………………………..
Monday  (June 17)
Friday’s economic reports  did not give the Fed enough reason to cut its fed funds rate.  While  Retail Sales and Industrial Production (manufacturing) were slightly better, Business Inventories continued to exceed the growth in sales this year and Consumer Sentiment slipped a bit from a month ago.
Even so, the latest Duke University/CFO Global Business Outlook indicated 48.1% of the CFOs surveyed expect the economy to enter a recession by mid-2020, 69% by the end of 2020.
USA TODAY reported on June 13 that Morgan Stanley’s Business Conditions Index dropped 32 points to 13 from 45, the biggest one-month decline on record and to the lowest level since December 2008, the heart of the Great Recession.
As I noted last month, Gary Shilling is bearish citing sluggish consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production and commercial and industrial loans, an inverting yield curve, and the prospect for declines in  Q2 and Q3 GDP, high levels of individual,  corporate and government debt, historically high price earnings ratio, , the high ratio of publicly owned  nonfinancial debt to assets, disastrous fiscal policies caused by the 2017 Tax Cut Jobs Act that gave corporations a 40% tax cut, but only a small cut to individuals.  Shilling was one of the few economists to warn readers in advance of the housing bubble and Great Recession/Bear Market  of 2007 – 2009.
WHEN WILL A RECESSION HAPPEN ?
It already is happening but in slow increments with a Federal Reserve that is desperately trying to head it off.
So, there is still a good chance the Fed will cut its fed funds rate on the 19th.
Why is this important ?
The Fed has clout, and in my opinion the Fed is cowed by the Trump administration and will do everything in its power to avoid Trump’s vitriol.
As I have warned countless times, once the Street begins to bail out, it is straight down. They all track the same indicators and will all get a SELL at the same time.
       I am hearing impatience from investors, doubt that a recession is looming, doubts that this bullet proof market can cave in and drop 25% 45%, just because the Fed has a magic wand and because the economy has not  imploded yet.
These doubts happen at market tops, memories are short, especially after an extended bull market. This is classic late bull market behavior.
……………………………………………………..
Thursday  (June 13)
What would prompt the Fed to cut its discount rate next Wednesday ?
Politics for one, but they can’t be that obvious.
A better answer: Friday’s economic reports, which  will be key – they must show weakness to justify a rate cut.
       Weakness in these reports suggests we are already in the early stages of a recession, so the Fed will have an excuse to cut its rate.  It’s their last chance before September 18, since there is no presser in July and no FOMC meet in August.
But really, what does a cut in rates do for the economy ?
Just the Fed’s decision not to cut rates in 2019 has driven the 30-year mortgage rate down to 3.82%  from November’s 4.94%, and homes are selling. Two homes on my street sold in a matter of days and above asking.
The housing industry is getting a new life after rising rates by the Fed over two years crushed sales and re-financings.
But how much of a boost would the rest of the economy get by a cut  ?  Individuals, businesses and governments, are already debt heavy, why would they  borrow more ? Granted, Corporations would use lower rates to borrow to buy back their stock, but an across-the-board stimulus to the economy is a stretch.
………………………………………………….
Wednesday  (Jun 12)
Jump ball today
though there were patient sellers during the last two days. This makes sense since the market rebounded  more than 6.5%  in six days in response to Fed Chair Powell’s strong hint the Fed will cut its fed funds rate in the near future.
I expect the cut to be on the 19th, otherwise it won’t happen until September 18, since there is no press conference after the July 30-31 meet and no meeting in August.
That leaves a week for traders to decide how they will play a likely rate cut on the 19th.  I may be one of the few who is calling for a cut this soon, though a softening economy and an election next year give the Fed a green light.
      Sharp plunges, some of the flash crash variety, come unexpectedly, so investors should have a sizable cash reserve to offset the adverse impact of a plunge, as well as, provide buyers a chance to pick up  stocks at lower  prices.
AS ALWAYS, be prepared for undue hype out of the Fed and White House.
………………………………………………………
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.
>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.com
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 Fears Recession – Plain and Simple

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,753
S&P 500: 2,954
Nasdaq Comp.:8,051
Russell 2000:1,563
Friday June 21, 2019
   8:59 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
One thing certain about the Fed, it continually manages to push stock prices to overvalued levels with rhetoric and occasionally action.
     If it is concerned with early evidence of a recession, it should say so flat out. The stock market would then be able to find a level that discounts  risk.
Shuffling back and forth like a bunch of drunk line dancers, it manages have it both ways all the while delaying the inevitable – a recession and a bear market.
The market must find a level that weighs both risk and opportunity, without this charade by the Fed.
The stock market is hitting all-time highs at a time:
-the White House is in a turmoil
Mid-East tensions are about to boil.
-individual, corporate and government debt has swelled to uncomfortable levels.
-international trade is in a flux adversely impacting the corporate decision process.
-global economies are on the edge of recession.
-signs of recession here in the United States have prompted bearish forecasts by
Morgan Stanley, whose Business Conditions Index had its biggest plunge  ever, A. Gary Shilling who has an outstanding track record for calling recessions, ands a survey by the Duke University/CFO Global Business Outlook which finds 48% of the CFOs surveyed see a recession this time next year.
ALL THIS WITH THE SHILLER PRICE/EARNINGS RATIO HIGHER THAN IT HAS EVER BEEN EXCEPT FOR 1999-2000, THE DOT-COM BUBBLE BURST BEAR MARKET THAN PLUNGED 50.50%.

……………………………………………………………
TECHNICAL

      The big question here is, why did the Fed reverse its policy earlier in the year from restraint to ease ?    What are they afraid of ?

Minor Support: DJIA:26,687;S&P 500:2,948;Nasdaq Comp.:8,029
Minor Resistance: DJIA:29,762; S&P 500:2,956;Nasdaq Comp.:8,052

………………………………………….
Thursday  (June 20)
What’s better than a Fed rate cut  yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decision is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

Wednesday  (June 19)
Yesterday’s surge in prices was attributed to news that Trump and China’s president Xi Jinping will meet at the G20 meeting in Japan next week to discuss  trade tariffs, currencies, etc.
Fine ! If they can resolve this drag on global economies, it would lessen the severity of the looming recession.
I also think the Street is front-running a potential decision by the Fed today to cut its fed funds rate, currently 2.5%.
Is that cause for celebration ?
Yes
, if you are buying a home, but No if you are relying on fixed income to supplement your living expenses.
Just bear in mind,  the Fed wouldn’t cut its rate unless  it is worried about a recession in 2020, a presidential election year.
Two questions here.
1) With individual, corporate and government debt at bloated levels, how much additional borrowing can be expected from lower rates ? Aren’t rates already low ?
2) With stocks selling at nearly twice historic price/earnings levels, the stock market is not pricing in a recession, even less so after a rate cut rally.
      I have been predicting  a rate cut since May 31, today we will see if I am premature.  While there is no press conference scheduled after the July 31 FOMC meeting, that does not preclude a rate cut then, however an announcement of a last minute presser would be a tip-off.
I have personally experienced 14 bear markets, all had at least one thing in common – no one believed a bear market could  happen.
       What is different today is the flash crash phenom where prices suddenly plunge10% – 15%.  This is due to heavy concentration by institutions which tend to key on the same indicators, all getting signals at the same time.
The only defense I know is to have a high cash reserve when the market is pricey, like now. If  trade issues are resolved, investors would get another opportunity to raise reserves even higher, likewise  with a cut in the fed funds rate.
…………………………………………………..
Tuesday   (June 18)
The biggest contributor to losses in the stock market is investors are humans. At extreme market highs, they get greedy. At lows, they get scared. It’s normal !
When stock markets are pricey relative to standard benchmarks, it is necessary for analysts like myself to warn of risk, because corrections in today’s stock market are so sharp and severe, all but the very nimble trader can  protect their portfolio before it takes a nasty hit by a plunge straight down.
So far, in this 10 year bull market, corrections have been followed by a an immediate rebound.
        The next one, or maybe the one after than WON’T ! It will come out of nowhere without warning as major investors stop buying and begin selling.
There will be no immediate rebound because the economy will be in a prolonged recession and the Fed unable to mount an effective stimulus.
         A drop in interest rates from an already low level will do little, and especially where individuals, corporations and the government are already over burdened with too much debt. We may see one severe recession or two smaller back-to-back recessions.  It will be a spender recession caused by inadequate cash and insufficient borrowing power across the board.
NOT SELLING ANYTHING,  I’M IN IT FOR THE LONG HAUL ?
      OK, that’s fine if you don’t mind waiting years to get even. But the “human” factor can thwart that dubious strategy.  Investors get scared after a 30% drop, thinking it will drop even more.   They Sell and never get back in until the market is once again hitting new highs !
The most disciplined investor will sell most of their portfolio when the market gets frothy and wait for big correction or bear market has run its course to move back in. Others will raise 30% cash, or so,  to reduce the damage when a correction occurs. .  The problem here is, sitting on cash in a late-stage  bull market when others are making money is not easy, they end up going “all-in.” That’s the primary reason investors get caught.
CONCLUSION
We have a presidential election and general election coming up next year and the Trump administration, Federal Reserve and Wall Street will stop at nothing to prevent a recession/bear market. The Fed will cut its fed funds rate and the others will unleash relentless and unsubstantiated “hype.”
It will be so very, very difficult for investors to NOT GET CAUGHT at the top of this bull market before a 35% -50% bear market.
No matter what, that’s why I urge a cash reserve relative to one’s tolerance for risk – -now.
…………………………………………………..
Monday  (June 17)
Friday’s economic reports  did not give the Fed enough reason to cut its fed funds rate.  While  Retail Sales and Industrial Production (manufacturing) were slightly better, Business Inventories continued to exceed the growth in sales this year and Consumer Sentiment slipped a bit from a month ago.
Even so, the latest Duke University/CFO Global Business Outlook indicated 48.1% of the CFOs surveyed expect the economy to enter a recession by mid-2020, 69% by the end of 2020.
USA TODAY reported on June 13 that Morgan Stanley’s Business Conditions Index dropped 32 points to 13 from 45, the biggest one-month decline on record and to the lowest level since December 2008, the heart of the Great Recession.
As I noted last month, Gary Shilling is bearish citing sluggish consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production and commercial and industrial loans, an inverting yield curve, and the prospect for declines in  Q2 and Q3 GDP, high levels of individual,  corporate and government debt, historically high price earnings ratio, , the high ratio of publicly owned  nonfinancial debt to assets, disastrous fiscal policies caused by the 2017 Tax Cut Jobs Act that gave corporations a 40% tax cut, but only a small cut to individuals.  Shilling was one of the few economists to warn readers in advance of the housing bubble and Great Recession/Bear Market  of 2007 – 2009.
WHEN WILL A RECESSION HAPPEN ?
It already is happening but in slow increments with a Federal Reserve that is desperately trying to head it off.
So, there is still a good chance the Fed will cut its fed funds rate on the 19th.
Why is this important ?
The Fed has clout, and in my opinion the Fed is cowed by the Trump administration and will do everything in its power to avoid Trump’s vitriol.
As I have warned countless times, once the Street begins to bail out, it is straight down. They all track the same indicators and will all get a SELL at the same time.
       I am hearing impatience from investors, doubt that a recession is looming, doubts that this bullet proof market can cave in and drop 25% 45%, just because the Fed has a magic wand and because the economy has not  imploded yet.
These doubts happen at market tops, memories are short, especially after an extended bull market. This is classic late bull market behavior.
……………………………………………………..
Thursday  (June 13)
What would prompt the Fed to cut its discount rate next Wednesday ?
Politics for one, but they can’t be that obvious.
A better answer: Friday’s economic reports, which  will be key – they must show weakness to justify a rate cut.
       Weakness in these reports suggests we are already in the early stages of a recession, so the Fed will have an excuse to cut its rate.  It’s their last chance before September 18, since there is no presser in July and no FOMC meet in August.
But really, what does a cut in rates do for the economy ?
Just the Fed’s decision not to cut rates in 2019 has driven the 30-year mortgage rate down to 3.82%  from November’s 4.94%, and homes are selling. Two homes on my street sold in a matter of days and above asking.
The housing industry is getting a new life after rising rates by the Fed over two years crushed sales and re-financings.
But how much of a boost would the rest of the economy get by a cut  ?  Individuals, businesses and governments, are already debt heavy, why would they  borrow more ? Granted, Corporations would use lower rates to borrow to buy back their stock, but an across-the-board stimulus to the economy is a stretch.
………………………………………………….
Wednesday  (Jun 12)
Jump ball today
though there were patient sellers during the last two days. This makes sense since the market rebounded  more than 6.5%  in six days in response to Fed Chair Powell’s strong hint the Fed will cut its fed funds rate in the near future.
I expect the cut to be on the 19th, otherwise it won’t happen until September 18, since there is no press conference after the July 30-31 meet and no meeting in August.
That leaves a week for traders to decide how they will play a likely rate cut on the 19th.  I may be one of the few who is calling for a cut this soon, though a softening economy and an election next year give the Fed a green light.
      Sharp plunges, some of the flash crash variety, come unexpectedly, so investors should have a sizable cash reserve to offset the adverse impact of a plunge, as well as, provide buyers a chance to pick up  stocks at lower  prices.
AS ALWAYS, be prepared for undue hype out of the Fed and White House.
………………………………………………………
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.
>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.com
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.

 

 

 

 

Usde Surge to Raise Cash Reserve to 50%

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,504
S&P 500: 2,926
Nasdaq Comp.:7,987
Russell 2000:1,555
Thursday June 20, 2019
   8:49 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
What’s Better Than a Fed rate Cut  Yesterday  ?
Promise Of Two Cuts This Year.
      The Fed passed on a fed funds rate cut yesterday, but came within a hair of promising two cuts before year-end.
       That’s great for home buyers/sellers, but a cruncher for people on fixed incomes, since interest rates across the board plummeted  after Fed Chief Jerome Powell’s presser yesterday.
Obviously Wall Street liked the end result, the market jumped yesterday and is soaring today with new all-time highs a given.
So what is the Fed really saying ?
Part of the Fed decisioon is cowing to President Trump whose vitriol would humble sensitive egos at the Fed if it didn’t attempt to head off a recession in coming months.
The primary reason for the Fed’s moon walk since January is it is scared stiff of a recession, especially in a presidential election year, and they have good reason for concern.
While the Street is thrilled for the tack the Fed taking, stocks are once again becoming seriously overpriced with the Shiller  S&P 5900 price/earnings ratio at 29.8, above that at the beginning of the Great Recession/Bear Market, above that hit in 1929, but below 44.2 hit in the dot com bubble in 1999. The S&P 500 price to sales ratio is at an all-time high of 2.18.
With a recession looming, the market is high RISK.  But memories of a 55% plunge in the S&P 500 in 2007-2009 are short and speculative fever has taken hold so further upside is possible, just not reasonable.

……………………………………………………………
TECHNICAL

      At these levels and with the Fed all but promising a rate cut or two by year end, it looks like the market has priced in at least one cut.
      Cash reserves should be at least to 40% on this surge in prices.

Minor Support: DJIA:26,457;S&P 500:2,926;Nasdaq Comp.:7,951
Minor Resistance: DJIA:26,756; S&P 500:2,953;Nasdaq Comp.:8,037

…………………………………………..
Wednesday  (June 19)
Yesterday’s surge in prices was attributed to news that Trump and China’s president Xi Jinping will meet at the G20 meeting in Japan next week to discuss  trade tariffs, currencies, etc.
Fine ! If they can resolve this drag on global economies, it would lessen the severity of the looming recession.
I also think the Street is front-running a potential decision by the Fed today to cut its fed funds rate, currently 2.5%.
Is that cause for celebration ?
Yes
, if you are buying a home, but No if you are relying on fixed income to supplement your living expenses.
Just bear in mind,  the Fed wouldn’t cut its rate unless  it is worried about a recession in 2020, a presidential election year.
Two questions here.
1) With individual, corporate and government debt at bloated levels, how much additional borrowing can be expected from lower rates ? Aren’t rates already low ?
2) With stocks selling at nearly twice historic price/earnings levels, the stock market is not pricing in a recession, even less so after a rate cut rally.
      I have been predicting  a rate cut since May 31, today we will see if I am premature.  While there is no press conference scheduled after the July 31 FOMC meeting, that does not preclude a rate cut then, however an announcement of a last minute presser would be a tip-off.
I have personally experienced 14 bear markets, all had at least one thing in common – no one believed a bear market could  happen.
       What is different today is the flash crash phenom where prices suddenly plunge10% – 15%.  This is due to heavy concentration by institutions which tend to key on the same indicators, all getting signals at the same time.
The only defense I know is to have a high cash reserve when the market is pricey, like now. If  trade issues are resolved, investors would get another opportunity to raise reserves even higher, likewise  with a cut in the fed funds rate.
…………………………………………………..
Tuesday   (June 18)
The biggest contributor to losses in the stock market is investors are humans. At extreme market highs, they get greedy. At lows, they get scared. It’s normal !
When stock markets are pricey relative to standard benchmarks, it is necessary for analysts like myself to warn of risk, because corrections in today’s stock market are so sharp and severe, all but the very nimble trader can  protect their portfolio before it takes a nasty hit by a plunge straight down.
So far, in this 10 year bull market, corrections have been followed by a an immediate rebound.
        The next one, or maybe the one after than WON’T ! It will come out of nowhere without warning as major investors stop buying and begin selling.
There will be no immediate rebound because the economy will be in a prolonged recession and the Fed unable to mount an effective stimulus.
         A drop in interest rates from an already low level will do little, and especially where individuals, corporations and the government are already over burdened with too much debt. We may see one severe recession or two smaller back-to-back recessions.  It will be a spender recession caused by inadequate cash and insufficient borrowing power across the board.
NOT SELLING ANYTHING,  I’M IN IT FOR THE LONG HAUL ?
      OK, that’s fine if you don’t mind waiting years to get even. But the “human” factor can thwart that dubious strategy.  Investors get scared after a 30% drop, thinking it will drop even more.   They Sell and never get back in until the market is once again hitting new highs !
The most disciplined investor will sell most of their portfolio when the market gets frothy and wait for big correction or bear market has run its course to move back in. Others will raise 30% cash, or so,  to reduce the damage when a correction occurs. .  The problem here is, sitting on cash in a late-stage  bull market when others are making money is not easy, they end up going “all-in.” That’s the primary reason investors get caught.
CONCLUSION
We have a presidential election and general election coming up next year and the Trump administration, Federal Reserve and Wall Street will stop at nothing to prevent a recession/bear market. The Fed will cut its fed funds rate and the others will unleash relentless and unsubstantiated “hype.”
It will be so very, very difficult for investors to NOT GET CAUGHT at the top of this bull market before a 35% -50% bear market.
No matter what, that’s why I urge a cash reserve relative to one’s tolerance for risk – -now.
…………………………………………………..
Monday  (June 17)
Friday’s economic reports  did not give the Fed enough reason to cut its fed funds rate.  While  Retail Sales and Industrial Production (manufacturing) were slightly better, Business Inventories continued to exceed the growth in sales this year and Consumer Sentiment slipped a bit from a month ago.
Even so, the latest Duke University/CFO Global Business Outlook indicated 48.1% of the CFOs surveyed expect the economy to enter a recession by mid-2020, 69% by the end of 2020.
USA TODAY reported on June 13 that Morgan Stanley’s Business Conditions Index dropped 32 points to 13 from 45, the biggest one-month decline on record and to the lowest level since December 2008, the heart of the Great Recession.
As I noted last month, Gary Shilling is bearish citing sluggish consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production and commercial and industrial loans, an inverting yield curve, and the prospect for declines in  Q2 and Q3 GDP, high levels of individual,  corporate and government debt, historically high price earnings ratio, , the high ratio of publicly owned  nonfinancial debt to assets, disastrous fiscal policies caused by the 2017 Tax Cut Jobs Act that gave corporations a 40% tax cut, but only a small cut to individuals.  Shilling was one of the few economists to warn readers in advance of the housing bubble and Great Recession/Bear Market  of 2007 – 2009.
WHEN WILL A RECESSION HAPPEN ?
It already is happening but in slow increments with a Federal Reserve that is desperately trying to head it off.
So, there is still a good chance the Fed will cut its fed funds rate on the 19th.
Why is this important ?
The Fed has clout, and in my opinion the Fed is cowed by the Trump administration and will do everything in its power to avoid Trump’s vitriol.
As I have warned countless times, once the Street begins to bail out, it is straight down. They all track the same indicators and will all get a SELL at the same time.
       I am hearing impatience from investors, doubt that a recession is looming, doubts that this bullet proof market can cave in and drop 25% 45%, just because the Fed has a magic wand and because the economy has not  imploded yet.
These doubts happen at market tops, memories are short, especially after an extended bull market. This is classic late bull market behavior.
……………………………………………………..
Friday (June 14)
This 10-year old economic expansion is long in the tooth, but thanks to Fed nurturing is slow to enter recession.
The stock market has experienced intense volatility since early 2018 when if plunged 12% followed by wide swings up and down, rallied to new highs in October 2018 before plunging 20% in Q4 2018 only to regain all that was lost, even hitting a new high in April this year.
Essentially, it began to anticipate a recession that failed to materialize twice in 18 months.
May Retail Sales were reported at 8:30 today and were up 0.5% vs. April’s gain of 0.6%.  Ex-auto they were up 0.5% vs. 0.3% in April.  Very little can be gleaned from this report.
      Industrial Production won’t be reported until 9:15 a.m., after I release this blog.  Business Inventories and Consumer Sentiment come at (10:00 a.m.).
Clearly, we have had more important economic reports, but this is what the Fed will be dealing with going into its FOMC meeting next Tuesday, if bad, these reports may just be what the Fed needs to justify doing what they really want to do anyway – cut the fed funds rate.
On March 21, the Fed signaled it would leave its rate at 2.5% through 2021 but the increasing prospects of a recession may force it to cut its rate, which had been cut to o.25% in response the 2007-2009 recession where it stayed for seven years until increased to 0.5% in December 2015.
The Street is mixed on a cut in rates.  Those not believing the Fed will cut rates next Wednesday point to Fed Chief Powell’s tendency to patiently wait for more and more  numbers.
………………………………………………
Thursday  (June 13)
What would prompt the Fed to cut its discount rate next Wednesday ?
Politics for one, but they can’t be that obvious.
A better answer: Friday’s economic reports, which  will be key – they must show weakness to justify a rate cut.
       Weakness in these reports suggests we are already in the early stages of a recession, so the Fed will have an excuse to cut its rate.  It’s their last chance before September 18, since there is no presser in July and no FOMC meet in August.
But really, what does a cut in rates do for the economy ?
Just the Fed’s decision not to cut rates in 2019 has driven the 30-year mortgage rate down to 3.82%  from November’s 4.94%, and homes are selling. Two homes on my street sold in a matter of days and above asking.
The housing industry is getting a new life after rising rates by the Fed over two years crushed sales and re-financings.
But how much of a boost would the rest of the economy get by a cut  ?  Individuals, businesses and governments, are already debt heavy, why would they  borrow more ? Granted, Corporations would use lower rates to borrow to buy back their stock, but an across-the-board stimulus to the economy is a stretch.
………………………………………………….
Wednesday  (Jun 12)
Jump ball today
though there were patient sellers during the last two days. This makes sense since the market rebounded  more than 6.5%  in six days in response to Fed Chair Powell’s strong hint the Fed will cut its fed funds rate in the near future.
I expect the cut to be on the 19th, otherwise it won’t happen until September 18, since there is no press conference after the July 30-31 meet and no meeting in August.
That leaves a week for traders to decide how they will play a likely rate cut on the 19th.  I may be one of the few who is calling for a cut this soon, though a softening economy and an election next year give the Fed a green light.
      Sharp plunges, some of the flash crash variety, come unexpectedly, so investors should have a sizable cash reserve to offset the adverse impact of a plunge, as well as, provide buyers a chance to pick up  stocks at lower  prices.
AS ALWAYS, be prepared for undue hype out of the Fed and White House.
………………………………………………………
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.
>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.com
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.

 

 

 

Street Salivating Over Prospect of Fed Rate Cut

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,465
S&P 500: 2,917
Nasdaq Comp.:7,953
Russell 2000:1,550
Wednesday June 19, 2019
   8:09 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Yesterday’s surge in prices was attributed to news that Trump and China’s president Xi Jinping will meet at the G20 meeting in Japan next week to discuss  trade tariffs, currencies, etc.
Fine ! If they can resolve this drag on global economies, it would lessen the severity of the looming recession.
I also think the Street is front-running a potential decision by the Fed today to cut its fed funds rate, currently 2.5%.
Is that cause for celebration ?
Yes
, if you are buying a home, but No if you are relying on fixed income to supplement your living expenses.
Just bear in mind,  the Fed wouldn’t cut its rate unless  it is worried about a recession in 2020, a presidential election year.
Two questions here.
1) With individual, corporate and government debt at bloated levels, how much additional borrowing can be expected from lower rates ? Aren’t rates already low ?
2) With stocks selling at nearly twice historic price/earnings levels, the stock market is not pricing in a recession, even less so after a rate cut rally.
      I have been predicting  a rate cut since May 31, today we will see if I am premature.  While there is no press conference scheduled after the July 31 FOMC meeting, that does not preclude a rate cut then, however an announcement of a last minute presser would be a tip-off.
I have personally experienced 14 bear markets, all had at least one thing in common – no one believed a bear market could  happen.
       What is different today is the flash crash phenom where prices suddenly plunge10% – 15%.  This is due to heavy concentration by institutions which tend to key on the same indicators, all getting signals at the same time.
The only defense I know is to have a high cash reserve when the market is pricey, like now. If  trade issues are resolved, investors would get another opportunity to raise reserves even higher, likewise  with a cut in the fed funds rate.  ……………………………………………………………
TECHNICAL

        At this point, it is hard to tell if a rate cut is already built into the market, which jumped 4.9% after Fed Chief hinted at a rate cut on June 4, in fact his comments reversed  a 7.6% May plunge in prices.

Minor Support: DJIA:26,367;S&P 500:2,911;Nasdaq Comp.:7,903
Minor Resistance: DJIA:26,957; S&P 500:2,934;Nasdaq Comp.:7,991

…………………………………………..
Tuesday   (June 18)

The biggest contributor to losses in the stock market is investors are humans. At extreme market highs, they get greedy. At lows, they get scared. It’s normal !
When stock markets are pricey relative to standard benchmarks, it is necessary for analysts like myself to warn of risk, because corrections in today’s stock market are so sharp and severe, all but the very nimble trader can  protect their portfolio before it takes a nasty hit by a plunge straight down.
So far, in this 10 year bull market, corrections have been followed by a an immediate rebound.
        The next one, or maybe the one after than WON’T ! It will come out of nowhere without warning as major investors stop buying and begin selling.
There will be no immediate rebound because the economy will be in a prolonged recession and the Fed unable to mount an effective stimulus.
         A drop in interest rates from an already low level will do little, and especially where individuals, corporations and the government are already over burdened with too much debt. We may see one severe recession or two smaller back-to-back recessions.  It will be a spender recession caused by inadequate cash and insufficient borrowing power across the board.
NOT SELLING ANYTHING,  I’M IN IT FOR THE LONG HAUL ?
      OK, that’s fine if you don’t mind waiting years to get even. But the “human” factor can thwart that dubious strategy.  Investors get scared after a 30% drop, thinking it will drop even more.   They Sell and never get back in until the market is once again hitting new highs !
The most disciplined investor will sell most of their portfolio when the market gets frothy and wait for big correction or bear market has run its course to move back in. Others will raise 30% cash, or so,  to reduce the damage when a correction occurs. .  The problem here is, sitting on cash in a late-stage  bull market when others are making money is not easy, they end up going “all-in.” That’s the primary reason investors get caught.
CONCLUSION
We have a presidential election and general election coming up next year and the Trump administration, Federal Reserve and Wall Street will stop at nothing to prevent a recession/bear market. The Fed will cut its fed funds rate and the others will unleash relentless and unsubstantiated “hype.”
It will be so very, very difficult for investors to NOT GET CAUGHT at the top of this bull market before a 35% -50% bear market.
No matter what, that’s why I urge a cash reserve relative to one’s tolerance for risk – -now.
…………………………………………………..
Monday  (June 17)
Friday’s economic reports  did not give the Fed enough reason to cut its fed funds rate.  While  Retail Sales and Industrial Production (manufacturing) were slightly better, Business Inventories continued to exceed the growth in sales this year and Consumer Sentiment slipped a bit from a month ago.
Even so, the latest Duke University/CFO Global Business Outlook indicated 48.1% of the CFOs surveyed expect the economy to enter a recession by mid-2020, 69% by the end of 2020.
USA TODAY reported on June 13 that Morgan Stanley’s Business Conditions Index dropped 32 points to 13 from 45, the biggest one-month decline on record and to the lowest level since December 2008, the heart of the Great Recession.
As I noted last month, Gary Shilling is bearish citing sluggish consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production and commercial and industrial loans, an inverting yield curve, and the prospect for declines in  Q2 and Q3 GDP, high levels of individual,  corporate and government debt, historically high price earnings ratio, , the high ratio of publicly owned  nonfinancial debt to assets, disastrous fiscal policies caused by the 2017 Tax Cut Jobs Act that gave corporations a 40% tax cut, but only a small cut to individuals.  Shilling was one of the few economists to warn readers in advance of the housing bubble and Great Recession/Bear Market  of 2007 – 2009.
WHEN WILL A RECESSION HAPPEN ?
It already is happening but in slow increments with a Federal Reserve that is desperately trying to head it off.
So, there is still a good chance the Fed will cut its fed funds rate on the 19th.
Why is this important ?
The Fed has clout, and in my opinion the Fed is cowed by the Trump administration and will do everything in its power to avoid Trump’s vitriol.
As I have warned countless times, once the Street begins to bail out, it is straight down. They all track the same indicators and will all get a SELL at the same time.
       I am hearing impatience from investors, doubt that a recession is looming, doubts that this bullet proof market can cave in and drop 25% 45%, just because the Fed has a magic wand and because the economy has not  imploded yet.
These doubts happen at market tops, memories are short, especially after an extended bull market. This is classic late bull market behavior.
……………………………………………………..
Friday (June 14)
This 10-year old economic expansion is long in the tooth, but thanks to Fed nurturing is slow to enter recession.
The stock market has experienced intense volatility since early 2018 when if plunged 12% followed by wide swings up and down, rallied to new highs in October 2018 before plunging 20% in Q4 2018 only to regain all that was lost, even hitting a new high in April this year.
Essentially, it began to anticipate a recession that failed to materialize twice in 18 months.
May Retail Sales were reported at 8:30 today and were up 0.5% vs. April’s gain of 0.6%.  Ex-auto they were up 0.5% vs. 0.3% in April.  Very little can be gleaned from this report.
      Industrial Production won’t be reported until 9:15 a.m., after I release this blog.  Business Inventories and Consumer Sentiment come at (10:00 a.m.).
Clearly, we have had more important economic reports, but this is what the Fed will be dealing with going into its FOMC meeting next Tuesday, if bad, these reports may just be what the Fed needs to justify doing what they really want to do anyway – cut the fed funds rate.
On March 21, the Fed signaled it would leave its rate at 2.5% through 2021 but the increasing prospects of a recession may force it to cut its rate, which had been cut to o.25% in response the 2007-2009 recession where it stayed for seven years until increased to 0.5% in December 2015.
The Street is mixed on a cut in rates.  Those not believing the Fed will cut rates next Wednesday point to Fed Chief Powell’s tendency to patiently wait for more and more  numbers.
………………………………………………
Thursday  (June 13)
What would prompt the Fed to cut its discount rate next Wednesday ?
Politics for one, but they can’t be that obvious.
A better answer: Friday’s economic reports, which  will be key – they must show weakness to justify a rate cut.
       Weakness in these reports suggests we are already in the early stages of a recession, so the Fed will have an excuse to cut its rate.  It’s their last chance before September 18, since there is no presser in July and no FOMC meet in August.
But really, what does a cut in rates do for the economy ?
Just the Fed’s decision not to cut rates in 2019 has driven the 30-year mortgage rate down to 3.82%  from November’s 4.94%, and homes are selling. Two homes on my street sold in a matter of days and above asking.
The housing industry is getting a new life after rising rates by the Fed over two years crushed sales and re-financings.
But how much of a boost would the rest of the economy get by a cut  ?  Individuals, businesses and governments, are already debt heavy, why would they  borrow more ? Granted, Corporations would use lower rates to borrow to buy back their stock, but an across-the-board stimulus to the economy is a stretch.
………………………………………………….
Wednesday  (Jun 12)
Jump ball today
though there were patient sellers during the last two days. This makes sense since the market rebounded  more than 6.5%  in six days in response to Fed Chair Powell’s strong hint the Fed will cut its fed funds rate in the near future.
I expect the cut to be on the 19th, otherwise it won’t happen until September 18, since there is no press conference after the July 30-31 meet and no meeting in August.
That leaves a week for traders to decide how they will play a likely rate cut on the 19th.  I may be one of the few who is calling for a cut this soon, though a softening economy and an election next year give the Fed a green light.
      Sharp plunges, some of the flash crash variety, come unexpectedly, so investors should have a sizable cash reserve to offset the adverse impact of a plunge, as well as, provide buyers a chance to pick up  stocks at lower  prices.
AS ALWAYS, be prepared for undue hype out of the Fed and White House.
………………………………………………………
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.
>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.com
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.

 

 

 

 

 

 

 

Cash Reserve a “Must” In Flash Crash Markets

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,113
S&P 500: 2,889
Nasdaq Comp.:7,845
Russell 2000:1,532
Tuesday June 18, 2019
   8:09 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The biggest contributor to losses in the stock market is investors are humans. At extreme market highs, they get greedy. At lows, they get scared. It’s normal !
When stock markets are pricey relative to standard benchmarks, it is necessary for analysts like myself to warn of risk, because corrections in today’s stock market are so sharp and severe, all but the very nimble trader can  protect their portfolio before it takes a nasty hit by a plunge straight down.
So far, in this 10 year bull market, corrections have been followed by a an immediate rebound.
        The next one, or maybe the one after than WON’T ! It will come out of nowhere without warning as major investors stop buying and begin selling.
There will be no immediate rebound because the economy will be in a prolonged recession and the Fed unable to mount an effective stimulus.
         A drop in interest rates from an already low level will do little, and especially where individuals, corporations and the government are already over burdened with too much debt. We may see one severe recession or two smaller back-to-back recessions.  It will be a spender recession caused by inadequate cash and insufficient borrowing power across the board.
NOT SELLING ANYTHING,  I’M IN IT FOR THE LONG HAUL ?
      OK, that’s fine if you don’t mind waiting years to get even. But the “human” factor can thwart that dubious strategy.  Investors get scared after a 30% drop, thinking it will drop even more.   They Sell and never get back in until the market is once again hitting new highs !
The most disciplined investor will sell most of their portfolio when the market gets frothy and wait for big correction or bear market has run its course to move back in. Others will raise 30% cash, or so,  to reduce the damage when a correction occurs. .  The problem here is, sitting on cash in a late-stage  bull market when others are making money is not easy, they end up going “all-in.” That’s the primary reason investors get caught.
CONCLUSION
We have a presidential election and general election coming up next year and the Trump administration, Federal Reserve and Wall Street will stop at nothing to prevent a recession/bear market. The Fed will cut its fed funds rate and the others will unleash relentless and unsubstantiated “hype.”
It will be so very, very difficult for investors to NOT GET CAUGHT at the top of this bull market before a 35% -50% bear market.
No matter what, that’s why I urge a cash reserve relative to one’s tolerance for risk – -now.
……………………………………………………………
TECHNICAL

        At this point, it is hard to tell if a rate cut is already built into the market, which jumped 4.9% after Fed Chief hinted at a rate cut on June 4, in fact his comments reversed  a 7.6% May plunge in prices.

Minor Support: DJIA:26,049;S&P 500:2,896;Nasdaq Comp.:7,843
Minor Resistance: DJIA:26,207; S&P 500:2,907;Nasdaq Comp.:7,861

…………………………………………..
Monday  (June 17)
Friday’s economic reports  did not give the Fed enough reason to cut its fed funds rate.  While  Retail Sales and Industrial Production (manufacturing) were slightly better, Business Inventories continued to exceed the growth in sales this year and Consumer Sentiment slipped a bit from a month ago.
Even so, the latest Duke University/CFO Global Business Outlook indicated 48.1% of the CFOs surveyed expect the economy to enter a recession by mid-2020, 69% by the end of 2020.
USA TODAY reported on June 13 that Morgan Stanley’s Business Conditions Index dropped 32 points to 13 from 45, the biggest one-month decline on record and to the lowest level since December 2008, the heart of the Great Recession.
As I noted last month, Gary Shilling is bearish citing sluggish consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production and commercial and industrial loans, an inverting yield curve, and the prospect for declines in  Q2 and Q3 GDP, high levels of individual,  corporate and government debt, historically high price earnings ratio, , the high ratio of publicly owned  nonfinancial debt to assets, disastrous fiscal policies caused by the 2017 Tax Cut Jobs Act that gave corporations a 40% tax cut, but only a small cut to individuals.  Shilling was one of the few economists to warn readers in advance of the housing bubble and Great Recession/Bear Market  of 2007 – 2009.
WHEN WILL A RECESSION HAPPEN ?
It already is happening but in slow increments with a Federal Reserve that is desperately trying to head it off.
So, there is still a good chance the Fed will cut its fed funds rate on the 19th.
Why is this important ?
The Fed has clout, and in my opinion the Fed is cowed by the Trump administration and will do everything in its power to avoid Trump’s vitriol.
As I have warned countless times, once the Street begins to bail out, it is straight down. They all track the same indicators and will all get a SELL at the same time.
       I am hearing impatience from investors, doubt that a recession is looming, doubts that this bullet proof market can cave in and drop 25% 45%, just because the Fed has a magic wand and because the economy has not  imploded yet.
These doubts happen at market tops, memories are short, especially after an extended bull market. This is classic late bull market behavior.
……………………………………………………..
Friday (June 14)
This 10-year old economic expansion is long in the tooth, but thanks to Fed nurturing is slow to enter recession.
The stock market has experienced intense volatility since early 2018 when if plunged 12% followed by wide swings up and down, rallied to new highs in October 2018 before plunging 20% in Q4 2018 only to regain all that was lost, even hitting a new high in April this year.
Essentially, it began to anticipate a recession that failed to materialize twice in 18 months.
May Retail Sales were reported at 8:30 today and were up 0.5% vs. April’s gain of 0.6%.  Ex-auto they were up 0.5% vs. 0.3% in April.  Very little can be gleaned from this report.
      Industrial Production won’t be reported until 9:15 a.m., after I release this blog.  Business Inventories and Consumer Sentiment come at (10:00 a.m.).
Clearly, we have had more important economic reports, but this is what the Fed will be dealing with going into its FOMC meeting next Tuesday, if bad, these reports may just be what the Fed needs to justify doing what they really want to do anyway – cut the fed funds rate.
On March 21, the Fed signaled it would leave its rate at 2.5% through 2021 but the increasing prospects of a recession may force it to cut its rate, which had been cut to o.25% in response the 2007-2009 recession where it stayed for seven years until increased to 0.5% in December 2015.
The Street is mixed on a cut in rates.  Those not believing the Fed will cut rates next Wednesday point to Fed Chief Powell’s tendency to patiently wait for more and more  numbers.
………………………………………………
Thursday  (June 13)
What would prompt the Fed to cut its discount rate next Wednesday ?
Politics for one, but they can’t be that obvious.
A better answer: Friday’s economic reports, which  will be key – they must show weakness to justify a rate cut.
       Weakness in these reports suggests we are already in the early stages of a recession, so the Fed will have an excuse to cut its rate.  It’s their last chance before September 18, since there is no presser in July and no FOMC meet in August.
But really, what does a cut in rates do for the economy ?
Just the Fed’s decision not to cut rates in 2019 has driven the 30-year mortgage rate down to 3.82%  from November’s 4.94%, and homes are selling. Two homes on my street sold in a matter of days and above asking.
The housing industry is getting a new life after rising rates by the Fed over two years crushed sales and re-financings.
But how much of a boost would the rest of the economy get by a cut  ?  Individuals, businesses and governments, are already debt heavy, why would they  borrow more ? Granted, Corporations would use lower rates to borrow to buy back their stock, but an across-the-board stimulus to the economy is a stretch.
………………………………………………….
Wednesday  (Jun 12)
Jump ball today
though there were patient sellers during the last two days. This makes sense since the market rebounded  more than 6.5%  in six days in response to Fed Chair Powell’s strong hint the Fed will cut its fed funds rate in the near future.
I expect the cut to be on the 19th, otherwise it won’t happen until September 18, since there is no press conference after the July 30-31 meet and no meeting in August.
That leaves a week for traders to decide how they will play a likely rate cut on the 19th.  I may be one of the few who is calling for a cut this soon, though a softening economy and an election next year give the Fed a green light.
      Sharp plunges, some of the flash crash variety, come unexpectedly, so investors should have a sizable cash reserve to offset the adverse impact of a plunge, as well as, provide buyers a chance to pick up  stocks at lower  prices.
AS ALWAYS, be prepared for undue hype out of the Fed and White House.
………………………………………………………
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.
>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.com
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.

 

 

 

 

 

 

I Am Not The Only One To See a Recession

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,089
S&P 500: 2,886
Nasdaq Comp.:7,796
Russell 2000:1,522
Monday June 17, 2019
   8:29 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Friday’s economic reports  did not give the Fed enough reason to cut its fed funds rate.  While  Retail Sales and Industrial Production (manufacturing) were slightly better, Business Inventories continued to exceed the growth in sales this year and Consumer Sentiment slipped a bit from a month ago.
Even so, the latest Duke University/CFO Global Business Outlook indicated 48.1% of the CFOs surveyed expect the economy to enter a recession by mid-2020, 69% by the end of 2020.
USA TODAY reported on June 13 that Morgan Stanley’s Business Conditions Index dropped 32 points to 13 from 45, the biggest one-month decline on record and to the lowest level since December 2008, the heart of the Great Recession.
As I noted last month, Gary Shilling is bearish citing sluggish consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production and commercial and industrial loans, an inverting yield curve, and the prospect for declines in  Q2 and Q3 GDP, high levels of individual,  corporate and government debt, historically high price earnings ratio, , the high ratio of publicly owned  nonfinancial debt to assets, disastrous fiscal policies caused by the 2017 Tax Cut Jobs Act that gave corporations a 40% tax cut, but only a small cut to individuals.  Shilling was one of the few economists to warn readers in advance of the housing bubble and Great Recession/Bear Market  of 2007 – 2009.
WHEN WILL A RECESSION HAPPEN ?
It already is happening but in slow increments with a Federal Reserve that is desperately trying to head it off.
So, there is still a good chance the Fed will cut its fed funds rate on the 19th.
Why is this important ?
The Fed has clout, and in my opinion the Fed is cowed by the Trump administration and will do everything in its power to avoid Trump’s vitriol.
As I have warned countless times, once the Street begins to bail out, it is straight down. They all track the same indicators and will all get a SELL at the same time.
       I am hearing impatience from investors, doubt that a recession is looming, doubts that this bullet proof market can cave in and drop 25% 45%, just because the Fed has a magic wand and because the economy has not  imploded yet.
These doubts happen at market tops, memories are short, especially after an extended bull market. This is classic late bull market behavior.
TECHNICAL
        At this point, it is hard to tell if a rate cut is already built into the market, which jumped 4.9% after Fed Chief hinted at a rate cut on June 4, in fact his comments reversed  a 7.6% May plunge in prices.

Minor Support: DJIA:25,896;S&P 500:2,868;Nasdaq Comp.:7,737
Minor Resistance: DJIA:26,217; S&P 500:2,901;Nasdaq Comp.:7,849

…………………………………………..
Friday (June 14)
This 10-year old economic expansion is long in the tooth, but thanks to Fed nurturing is slow to enter recession.
The stock market has experienced intense volatility since early 2018 when if plunged 12% followed by wide swings up and down, rallied to new highs in October 2018 before plunging 20% in Q4 2018 only to regain all that was lost, even hitting a new high in April this year.
Essentially, it began to anticipate a recession that failed to materialize twice in 18 months.
May Retail Sales were reported at 8:30 today and were up 0.5% vs. April’s gain of 0.6%.  Ex-auto they were up 0.5% vs. 0.3% in April.  Very little can be gleaned from this report.
      Industrial Production won’t be reported until 9:15 a.m., after I release this blog.  Business Inventories and Consumer Sentiment come at (10:00 a.m.).
Clearly, we have had more important economic reports, but this is what the Fed will be dealing with going into its FOMC meeting next Tuesday, if bad, these reports may just be what the Fed needs to justify doing what they really want to do anyway – cut the fed funds rate.
On March 21, the Fed signaled it would leave its rate at 2.5% through 2021 but the increasing prospects of a recession may force it to cut its rate, which had been cut to o.25% in response the 2007-2009 recession where it stayed for seven years until increased to 0.5% in December 2015.
The Street is mixed on a cut in rates.  Those not believing the Fed will cut rates next Wednesday point to Fed Chief Powell’s tendency to patiently wait for more and more  numbers.
………………………………………………
Thursday  (June 13)
What would prompt the Fed to cut its discount rate next Wednesday ?
Politics for one, but they can’t be that obvious.
A better answer: Friday’s economic reports, which  will be key – they must show weakness to justify a rate cut.
       Weakness in these reports suggests we are already in the early stages of a recession, so the Fed will have an excuse to cut its rate.  It’s their last chance before September 18, since there is no presser in July and no FOMC meet in August.
But really, what does a cut in rates do for the economy ?
Just the Fed’s decision not to cut rates in 2019 has driven the 30-year mortgage rate down to 3.82%  from November’s 4.94%, and homes are selling. Two homes on my street sold in a matter of days and above asking.
The housing industry is getting a new life after rising rates by the Fed over two years crushed sales and re-financings.
But how much of a boost would the rest of the economy get by a cut  ?  Individuals, businesses and governments, are already debt heavy, why would they  borrow more ? Granted, Corporations would use lower rates to borrow to buy back their stock, but an across-the-board stimulus to the economy is a stretch.
………………………………………………….
Wednesday  (Jun 12)
Jump ball today
though there were patient sellers during the last two days. This makes sense since the market rebounded  more than 6.5%  in six days in response to Fed Chair Powell’s strong hint the Fed will cut its fed funds rate in the near future.
I expect the cut to be on the 19th, otherwise it won’t happen until September 18, since there is no press conference after the July 30-31 meet and no meeting in August.
That leaves a week for traders to decide how they will play a likely rate cut on the 19th.  I may be one of the few who is calling for a cut this soon, though a softening economy and an election next year give the Fed a green light.
      Sharp plunges, some of the flash crash variety, come unexpectedly, so investors should have a sizable cash reserve to offset the adverse impact of a plunge, as well as, provide buyers a chance to pick up  stocks at lower  prices.
AS ALWAYS, be prepared for undue hype out of the Fed and White House.
………………………………………………………

Tuesday  (June 11)
The market action between May and June this year is a carbon copy of the market action between October and November 2018.
What happened in November 2018 is the market averages tested the October low, rallied sharply then plunged more than 16% to the December low.
A repeat of last  year’s pattern would take the market averages down to about DJIA: 24,650, S&P 500: 2,760, and Nasdaq Comp.:7,350 where the market would rebound briefly before a plunge of 15% -18%, that is “if” we get a repeat.
That pattern would be broken if the DJIA rises above 26,600, the S&P 500 above 2,940, and the  Nasdaq Comp.:8,100.
Bottom line: There is a chance we are close to a whipsaw pattern of trading that will result in a plunge in  prices in 4 to 6 weeks – no guarantees, of course, just keep an open mind and don’t chase stocks that have already rebounded, a good part of which may be short covering.
The Fed will attempt to prevent any major decline in prices going forward, but has already demonstrated it is politically biased.   All these Fed Governors sport high level pedigrees. Along with that is an ego and a sensitivity to the kind of visible criticism that President Trump  can vent.    Independence ???
I have no problem with Fed action to prevent a recession.  My blood boils when the Fed manipulates the market with “hints” that a cut  in their Fed funds rate is in the offing at a time the market is trying to adjust to the possibility of a recession.
       That announcement came the day after the market hit a four month low after breaking down from a top formation.   That’s MANIPULATION !
The markets MUST be allowed to trade freely.  By its action, the Fed prevented the market from finding a level that discounts the negatives present and foreseen.  What’s worse, it may just have sucked a lot of buyers in at a time a recession looms. At these levels, the market averages do not discount the recession the Fed sees.
I have been forecasting the Fed will cut its benchmark fed funds rate  on the 19th.  
Its July 30-31 meeting will not be accompanied by a press conference, so it is unlikely they will cut the rate then. If they announce an unscheduled press conference it would be a tip-off. They do not meet in August which leaves September 18, a long wait if they are trying to head off a recession.
……………………………………………………
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.
>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.
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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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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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