Ignore Fed and Administration Hype, Cash 80%

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,820
S&P 500: 2,961
Nasdaq Comp.:2,939
Russell 2000:1,520
Monday,  September 30, 2019
 9:14 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The Street tends to shrug off a lot of things that could end up hammering stock prices: war, recession, a bear market resulting from overvalued stocks facing an earnings recession that can be worsened by a recession, and now the potential for the impeachment of the nation’s president.
That’s what a 10-year long bull market can do to the people who benefitted the most – corporate management and Wall Street.
       At some point, the BIG money will hit the silk and it will be straight down  12% to 16% before investors can say ouch.  That’s just the first leg down.
That’s because the Fed, Street and Administration have propped this market up with hype about the economy and the magic of interest rate cuts !
Investors are being conned !  There are no new eras ! Bear markets happen !
All it takes is for several major institutions to break ranks and sell and others will follow.
The impact will be instantaneous as computer algos, mostly programmed to track the same bullish metrics, will get the sell at the same time.
The hype will continue in an attempt to prop the market hopefully through 2020 election year.
Impeachment a real  possibility, and that will lead to more divisiveness and  stifle consumer and investor confidence.
This one has the potential to get real ugly.
Stock markets recover from bear markets, so why not wait it out ?
For one, over the last 46 years we have had three bear markets with the S&P 500 dropping 50%.  Many investors got shaken out near the bottom not to return until long after the  market lows. Those who held on didn’t see portfolios regain losses for years.
Depending on one’s tolerance for risk, a cash reserve of 80% is justified

TECHNICAL
I do not like this market, even though odds are good the Fed will hype the market and/or the administration will release optimistic projections about trade. Odds are good that any rally from here will fail.  The Fed  has lost its clout about rates and why would China cave to trade concessions with Trump’s power sapped by the prospect of impeachment ?

……………………………………………………………
Minor Support: DJIA:26,626; S&P 500:2,920; Nasdaq Comp.:7,841
Minor Resistance: DJIA:26,950; S&P 500:2,973; Nasdaq Comp.:7,943
………………………………………………………….

Friday Sept. 27 “Street’s Arrogance to Risk to Precede  the Fall ?”
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
………………………………………………….
Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels.
………………………………………………..

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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’s Arrogance to Risk to Precede the Fall ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,891
S&P 500: 2,977
Nasdaq Comp.:8,030
Russell 2000:1,533
Friday,  September 27, 2019
 8:49 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
……………………………………………………………
Minor Support: DJIA:26,826; S&P 500:2,967; Nasdaq Comp.:7,996
Minor Resistance: DJIA:26,965; S&P 500:2,981; Nasdaq Comp.:8,053
………………………………………………………….

Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels.
………………………………………………..

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

Market Takes a Pretty Good Punch, but……..

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,970
S&P 500: 2,984
Nasdaq Comp.:8,077
Russell 2000:1,550
Thursday September 26, 2019
  9:11 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY: 
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
……………………………………………………………
Minor Support: DJIA:26,906; S&P 500:2,978; Nasdaq Comp.:8,043
Minor Resistance: DJIA:27,107; S&P 500:3,003; Nasdaq Comp.:8,129
………………………………………………………….
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels. 

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
…………………………………………………

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 Doesn’t Care About Impeachment, Just Trade

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,807
S&P 500: 2,966
Nasdaq Comp.:7,993
Russell 2000:1,532
Wednesday September 25, 2019
  9:11 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
      …………………………………………….
TECHNICAL
This is the 5th time in 20 months the DJIA and S&P 500 have attempted to break out and run.  The Dow Transports, NYSE Comp. and ValueLine “unweighted” Geometric Index are down over the period. The latter gives equal weight to all stocks regardless of market cap or price.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
Today’s market will start mixed with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
……………………………………………………………
Minor Support: DJIA:26,767; S&P 500:2,963; Nasdaq Comp.:7,981;
Minor Resistance: DJIA:26,925; S&P 500:2,981; Nasdaq Comp.:8,041
………………………………………………………….
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels. 

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
…………………………………………………

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

So Far, Market Has Gone Nowhere in 20 Months

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,949
S&P 500: 2,991
Nasdaq Comp.:8,112
Russell 2000:1,558
Tuesday September 24, 2019
  8:05 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels.
…………………………………………….

TECHNICAL
This is the 5th time in 20 months the DJIA and S&P 500 have attempted to break out and run.  YES, with more unsubstantiated hype about trade, it can, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
Today’s market will start on a positive note, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
Minor Support: DJIA:; S&P 500:; Nasdaq Comp.:;
Minor Resistance: DJIA:; S&P 500:; Nasdaq Comp.:
………………………………………………………….
Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
…………………………………………………

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

Bubble Trouble – Fed Mismanagement

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,935
S&P 500: 2,992
Nasdaq Comp.: 8,117
Russell 2000:1,539
Monday  September 23, 2019
  9:15 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
          ……………………………………………..
TECHNICAL

Friday’s rally failure suggests sellers are waiting to hit buyers  at slightly higher levels.  Today’s market will start on a positive note, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
Minor Support: DJIA:26,857 ; S&P 500:2,979 ; Nasdaq Comp.:8,071;
Minor Resistance: DJIA:26,991; S&P 500:2,999; Nasdaq Comp.:8,179
………………………………………………………….
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
…………………………………………………

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

How Much Risk Can You Afford ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,094
S&P 500: 3,006
Nasdaq Comp.:8,182
Russell 2000:1,561
Friday September 20, 2019
  9:28 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
  ……………………………………………..
TECHNICAL

Yesterday’s rally failure suggests sellers are waiting to hit buyers  at slightly higher levels.  Today’s market will start on a positive note, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
Minor Resistance: DJIA:27,306; S&P 500:3,001; Nasdaq Comp.:8,190
………………………………………………………….
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
……………………………………………………..

Friday  Sept. 13  “The Recession Decider”
RECESSION  – are we in one ?

We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

Follow the Bouncing Ball

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,147
S&P 500: 3,006
Nasdaq Comp.:8,177
Russell 2000:1,568
Thursday September 19, 2019
  9:14 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
……………………………………………..
TECHNICAL

Yesterday’s strong close should drive the market to new all-time highs. As always, a rally failure would  indicate the BIG money is using strength to ease out of the market.

Minor Support: DJIA:27,081;S&P 500:2,998;Nasdaq Comp.:8,153
Minor Resistance: DJIA:27,220; S&P 500:3,016; Nasdaq Comp.:8,217
………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
……………………………………………………..

Friday  Sept. 13  “The Recession Decider”
RECESSION  – are we in one ?

We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

A Bubble Waiting to Be Pricked

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,076
S&P 500: 2,997
Nasdaq Comp.:8,153
Russell 2000:1,584
Tuesday September 17, 2019
  9:12 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………..
TECHNICAL

This is classic “bubble” stuff. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations break down or look like a ho-hummer, the bears will take over.
Odds of new highs are good, but NOT sustainable.
But first, the Street must deal with the Iran/Saudi issue. Was Iran responsible for the attack on Saudi’s energy facilities over the weekend and will the United States retaliate militarily ?
While the market will have to pull back initially today in face of uncertainty over the Saudi oil incident, the real test will be the Fed’s decision on Wednesday.
        Failure to cut its fed funds rate would  whack it.   No one expects that. As noted above, there are ever so slight chances of inflation raising its ugly head.

………………………………………………………
Minor Support: DJIA:26,903;S&P 500:2,997;Nasdaq Comp.:8,136
Minor Resistance: DJIA:27,120; S&P 500:3,003; Nasdaq Comp.:8,159
………………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
Wednesday ????”

Friday  Sept. 13  “The Recession Decider”
RECESSION  – are we in one ?

We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..
Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..

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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

The Recession “Decider”

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,182
S&P 500:3,009
Nasdaq Comp.:8,194
Russell 2000:1,575
Friday September 13, 2019
  9:09 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
RECESSION  – are we in one ?
We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
TECHNICAL
This is classic “bubble” stuff. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations break down or look like a ho-hummer, the bears will take over.
Odds of new highs are good, but NOT sustainable.

………………………………………………………
Minor Support: DJIA:27,126;S&P 500:3,004;Nasdaq Comp.:8,176
Minor Resistance: DJIA:27,271; S&P 500:3,018; Nasdaq Comp.:8,219
………………………………………………………….
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
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Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
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Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

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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 122 months, the longest  in history, 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 is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 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.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.