BIG Bubbles…… BIG Burst

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,423
S&P 500: 3,373
Nasdaq: 9,711
Russell: 1,693
Friday February  14, 2020     7:58 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
I am going to run yesterday’s post again for weekend readers, since it is so relevant.  I experienced the bubble manias in the 1960s, 1970s, 1990s and mid-2000s first hand and remember them well.
As those bubbles expanded, a market top was the last thing investors expected. Corrections were short-lived as buyers pounced on any concession in price then went on to pay up for stocks believing  a market top couldn’t happen.
Today’s bubble is much like the Nifty Fifty (one decision blue chip stock craze) in the 1970s. Only one decision was made – BUY. Aside from Eastman Kodak and Polaroid, most of the 50 are still around.
They sold at extreme price/earnings multiples until the 1974-1975 recession/ bear markets lowered the boom with a thumping that took eight years to recover from.
Today the S&P 500 sells at extremely high P/Es relative to past market tops. While corporations  are aggressively buying back stock to shrink the bottom line producing a windfall for top executives and those lucky enough to have options for exercise, there comes a time when the BIG money locks in gains and stops buying stocks that are so overvalued.
         We saw it in Q4 2018 when the DJIA and S&P 500 dropped 20% in face of a looming recession. It took a major Fed policy change to head off the recession and trigger a huge rebound in the market which has evolved in the inflating bubble we have today.
I can only warn of the consequences of overstaying this bull market. Timing the burst of bubbles is next to impossible to read.  The burst rarely follows classic technical market top formations.
        On a given day, buyers will simply not show up and down the market will go 12% to 18% for openers.  Initially, investors jump in  thinking they are getting a gift with lower prices only to find out later that they  have been had.
READ BELOW: BUBBLES 1960S “ONICS,” 1970S Nifty Fifty…   ……………………………………………….
Minor Support: DJIA:29,301; S&P 500:3,361; Nasdaq Comp.:9,697
Minor Resistance: DJIA:29,477; S&P 500:3,381; Nasdaq Comp.:9,734
…………………………………………………………………

Thursday February 13 “Bubbles: 1960s “onics,” 1970s Nifty Fifty: Late 1990s Dot-Com Mania, 2020: ?????
      Yesterday’s market surge was attributed to a  reduced threat of Coronavirus, as well as Street’s perception that Sen. Sanders’ good showing in New Hampshire raises his odds of being Democrat candidate in November and very beatable by President Trump.
The truth is, today’s late-stage  bull market is a BUBBLE,  fueled by fears of missing out (FOMO) and the inebriated conviction that the party will last forever.  It will burst as all bubbles in the past did but timing is next to impossible. One day big buyers will not show up and stocks will  simply  plunge.
This happened in 1999 – 2000 when the Street hysterically bid up dot-com/tech stocks that had no chance of surviving as entities. All that was needed was dot-com in its name and investors rushed in to buy without thinking.
Most went out of business as dot-com stock prices dropped to “zero.”
It the 1960s, a name ending in “onics” was all a stock needed to soar relentlessly until the 1966,  and 1968-1970 bear markets zapped their appeal.
In the early 1970s it was the “one decision,” “Nifty Fifty” stocks that the Street believed should be bought and held indefinitely until the bear markets of 1973-1974 defrocked them of their bullet proof veneer. It took 8 – 10 years for them to recoup their losses.
Today the bubble sports a better quality company though they are historically  extremely overpriced well beyond values seen at prior market tops.
I sense the Street knows the end is near and is pumping the market up to eke out as much as possible before reality day.
What to do ?
Resist the temptation
to go all-in and have a cash reserve, because no one knows when the break will come and when it does it will be straight down because the BIG money won’t be there to prop the market up and drive it higher.
This is Kool Aid stuff and every bit as addicting to investors who want to wring out more and more stock market scores, and corporations buy in more  of their own stock before they run out of sight.
          It’s becoming a dumb/dumb market, the less you know the more money you can make.  It’s history repeating itself over and over again.
……………………………………………………………………………..

Wednesday February 12 – no  blog posted
Tuesday  Febuary 11,   Cash Is Actually an Investment
A new high for the S&P 500 and Nasdaq Comp. with the DJIA close behind.
It is clearly an institutional buying bubble, as the NYSE market composite, Dow Jones Transports and the “unweighted Value Line Composite” lag behind.
There is nowhere else to put one’s money, thus a stampede to gobble up stocks before they run higher.
       Make sense ?
YES, if you are a professional under pressure to perform for clients.
YES, if you are desperate to make more and more money to simply survive the relentless drain on daily costs.
NO, if you are aware how historically overvalued stocks are and cannot afford to take a 15% – 30% hit.
The Administration is pressuring the Fed to cut rates further, which if the economy is in a good place doesn’t make sense, except it would help Trump get re-elected.
Not all indicators are bullish, not everyone surveyed is bullish on the economy, so a rate cut this summer is possible.
The higher it goes, the more severe the crash.
Since not all savvy investors are chasing stocks, they will  at some point be a no-show.  The BIG money is not stupid, it didn’t get rich paying up for stocks.
……………………………………………………………………………………..

Monday February 10  “All Is Not Just Peachy  – CYA”
A closer look at the economy suggests all is not as well as we are led to believe.
InvesTech Research’s
Feb. 7 bulletin notes that the ISM Manufacturing Index posted its first expansion in five months thanks to early reactions to Phase 1 of the China trade deal.
However, InvesTech explains, the Chicago Purchasers Manufacturing Index (PMI), a leading indicator , plunged 5.4 points to 42.9%, the second lowest in this 10.6-year cycle. All five components of the index declined.
Additionally, the U.S. Leading Economic Index (LEI) declined in December crossing below its 18-month moving average, a warning signal. Over the past 16 months, the LEI has been flat.
Alternet.com published results  from the Washington Monthly’s Feb. 7 economic/political letter – summarized highlights include:
wage growth lags despite the  low unemployment rate with growth at plus 0.9%
accounting for the impact of  a 2.1% inflation
-the Tax Cuts Jobs Act (TCJA) did not produce a $4,000 pay raise for Americans, Worse yet, 91 of the Fortune 500 companies paid no federal taxes.  (essentially corporations got a 40% tax cut while the general public got  1% – 1.5%). The corporations spent the windfall on stock repurchases to shrink their bottom line, pump up their stocks and assure profitable exercise of executive stock options.!
-The TCJA did not produce a 4%-6% growth in GDP, and Q4 growth was only 2.1%
-The trade war cost American households $1,277 in 2019 according to the publication.  (I cannot confirm that and going forward that cost may be less if other savings result)
-Reportedly, the trade war generated a 24% increase in farm bankruptcies in 2019.
      OK, the Washington monthly is a liberal publication, but there is a  major league imbalance here with a huge gap between high net worth individuals and lower net worth/earning Americans.
THAT IS ECONOMICALLY UNHEALTHY.

With some 70% of  the GDP coming from consumer spending and household debt increasing to $14 trillion with auto loans, credit card and student loans debt the biggest contributors.
Very little can be done  about this imbalance, it is a result of changing times and a reduced bargaining power by employees in negotiating wages and salaries.
What’s worse and still not acknowledged is that automation and Artificial Intelligence will severely impact employment going forward leading to the nation’s greatest employment crisis ever. .
       WHAT IS AT ENORMOUS RISK NOW IS THE OVERVALUED PRICE PAID FOR THE STOCKS OF COMPANIES WHOSE FUTURE DEPENDS ON THE AVERAGE SPENDER WHICH  LESS BUYING AND BORROWING POWER GOING FORWARD.
ALL THE PLATITUDES AND OPTIMISM ABOUT THE ECONOMY ARE UTTER
RUBBISH, aka, BULLSHIT.
Suddenly, all this will come home to roost, as the BIG money walks away and sellers panic with an initial plunge of 12% – 18%. Depending on what news hits the market when it tries to bounce from these levels, another 30% down will be slashed from the market averages.
I do not know when this bubble will burst. I have warned about it at lower levels and have been wrong.  When it bursts, it will be straight down because the BIG money will not be there to catch stocks  and selling will accelerate.
CLEARLY, EVERYTHING LOOKS JUST PEACHY ! HOW ON EARTH CAN ANYTHING GO WRONG ?
WELL, THAT’S WHAT IT LOOKS LIKE AT MARKET TOPS.
…………………………………………………………………………;/
Friday Feb 7  “When Will The BIG Money Walk Away ?”
     This is mostly an institutional playground, big hitters duking it out, big corporations scrambling to buy back more of their own stocks before the price runs away, but contributing to their own problem by running their stock up in the process and averaging the cost of acquisition higher !!!
      If stocks were reasonably priced considering the Obama bull market is nearly 11 years old and economy a couple months short of that, as well, risk would be justified.
Insanity, greed, fear of missing out driving hope for another good year, but the persistent  3 a.m. wake up, cold sweat, angst that those in the know  feel knowing the  party may just be about to end with a double digit flash crash, as all the pros STOP BUYING and a vacuum sucks prices down trapping the uninformed, and those seeking to join the party at the top only to get crushed.
In a bear market these are the folks who sell out at the bottom, just like they bought in at the top.              SURE, THE ECONOMIC NUMBERS LOOK GREAT, UNEMPLOYMENT LOW, JOBS BEING CREATED, STOCK MARKET UP.
HOW CAN I SAY THESE THINGS ?

      BECAUSE THAT’S WHAT IT LOOKS LIKE WHEN THE PARTY IS OVER, THAT’S WHAT IT LOOKS LIKE WHEN A MAJOR BULL MARKET TOP IS FORMING !
WHEN ?   HARD TO PREDICT WHEN BUBBLES BURST.  WHY CHANCE IT.
The BIG money will keep pushing market leaders higher, others will be unable to resist the urge to load up even more, even borrow to buy stock.
Big scores in just a few days will be the topic of discussion. It won’t take long for investors to spend  anticipated stock market gains ahead of time.
What is scary is computers can come unwound, go batshit and with so many algos calling the shots, who knows what to expect.
I have repeatedly warned about a digital meltdown, that a hard copy of ky should be maintained regularly in case it needs to be proved.

    I think a thinking America, a Feeling America, an informed America, an hones America that demands the same from its leaders can do anything.  That has to start to happen    – NOW.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Thursday Feb 6 “Inflating Bubble – Inflating Risk
Back to a re-inflating bubble. Nothing has happened yet to prick it, and I am not sure what will. It’s the nature of bubbles. They can burst as a result of an event, or they just get sooo BIG they can’t get any bigger…and burst.
That’s where calling the shot defies analysis…….unless of course you keep warning it will burst which is what I have been doing.
       Most of my 57 years in this business  have keyed more on technical analysis but with a lot of weight given to fundamental, monetary, economic, political, psychological and seasonal analysis. Being able to address any one or all  of these elements is what got me back on CNBC frequently in the 1990s.
     In those days. It was one-on-one for 20 minutes, not a focus on a specialty.
The analyst had no idea what to expect, but wise to admit you did not have an answer.
There were other individuals who got on TV who were not from big firms but had great insight, but CNBC  changed the format to a more showtime preso and it was not new nor improved – just boring, a lot of the same faces saying little of interest.
You should know that, because in this business there always several ugly balls up in the air, any one of which can come down unexpectedly to change the  forecast. I endeavor to cover all in my pre-blog analysis, but try to boil it down into a faster read, which people hate to do today.
This market became historically overvalued over a year ago reaching valuations that turned prior markets down.
TECHNICALLY
         Something changed several years ago – the flash crash, sudden plunges when buyers didn’t show and seller panicked. These plunges come unexpectedly and require investors who don’t want to take a hit, or want to be prepared to buy some stocks lower or add to positions to have a cash reserve.

Memories tend to be short. With the bubble inflating like this I can only warn repeatedly of what will come and it will be ugly.  The more the bubble inflates the less you will take me seriously.
The 12% -18% flash Crash will strike and only then will investors appreciate building cash rather than risk as the market spirals from overvalued to more overvalued.
……………………………………………………………………….
Wednesday  Feb 5 : “El-Erian: Rate Cuts are Counter Productive; Daco: More Rate Cuts Coming”
Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.
……………………………………………………………..

Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
…………………………………………………
                                                                                                        
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 3.5% which was hit in September.  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.

 

 

 

 

 

 

 

 

 

 

 

Bubbles: 1960s “onics,” 1970s Nifty Fifty, Late 1990s Dot-Com Mania, 2020: ?????

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,551
S&P 500: 3,379
Nasdaq: 9,725
Russell: 1,689
Thursday  February  13, 2020     7:58 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Yesterday’s market surge was attributed to a  reduced threat of Coronavirus, as well as Street’s perception that Sen. Sanders’ good showing in New Hampshire raises his odds of being Democrat candidate in November and very beatable by President Trump.
The truth is, today’s late-stage  bull market is a BUBBLE,  fueled by fears of missing out (FOMO) and the inebriated conviction that the party will last forever.  It will burst as all bubbles in the past did but timing is next to impossible. One day big buyers will not show up and stocks will  simply  plunge.
This happened in 1999 – 2000 when the Street hysterically bid up dot-com/tech stocks that had no chance of surviving as entities. All that was needed was dot-com in its name and investors rushed in to buy without thinking.
Most went out of business as dot-com stock prices dropped to “zero.”
It the 1960s, a name ending in “onics” was all a stock needed to soar relentlessly until the 1966,  and 1968-1970 bear markets zapped their appeal.
In the early 1970s it was the “one decision,” “Nifty Fifty” stocks that the Street believed should be bought and held indefinitely until the bear markets of 1973-1974 defrocked them of their bullet proof veneer. It took 8 – 10 years for them to recoup their losses.
Today the bubble sports a better quality company though they are historically  extremely overpriced well beyond values seen at prior market tops.
I sense the Street knows the end is near and is pumping the market up to eke out as much as possible before reality day.
What to do ?
Resist the temptation
to go all-in and have a cash reserve, because no one knows when the break will come and when it does it will be straight down because the BIG money won’t be there to prop the market up and drive it higher.
This is Kool Aid stuff and every bit as addicting to investors who want to wring out more and more stock market scores, and corporations buy in more  of their own stock before they run out of sight.
          It’s becoming a dumb/dumb market, the less you know the more money you can make.  It’s history repeating itself over and over again.

    ……………………………………………….
Minor Support: DJIA:29,521; S&P 500:3,377; Nasdaq Comp.:9,747
Minor Resistance: DJIA:29,577; S&P 500:3,316; Nasdaq Comp.:9,747
…………………………………………………………………

Wednesday February 12 – no  blog posted
Tuesday  Febuary 11,   Cash Is Actually an Investment
A new high for the S&P 500 and Nasdaq Comp. with the DJIA close behind.
It is clearly an institutional buying bubble, as the NYSE market composite, Dow Jones Transports and the “unweighted Value Line Composite” lag behind.
There is nowhere else to put one’s money, thus a stampede to gobble up stocks before they run higher.
       Make sense ?
YES, if you are a professional under pressure to perform for clients.
YES, if you are desperate to make more and more money to simply survive the relentless drain on daily costs.
NO, if you are aware how historically overvalued stocks are and cannot afford to take a 15% – 30% hit.
The Administration is pressuring the Fed to cut rates further, which if the economy is in a good place doesn’t make sense, except it would help Trump get re-elected.
Not all indicators are bullish, not everyone surveyed is bullish on the economy, so a rate cut this summer is possible.
The higher it goes, the more severe the crash.
Since not all savvy investors are chasing stocks, they will  at some point be a no-show.  The BIG money is not stupid, it didn’t get rich paying up for stocks.
……………………………………………………………………………………..

Monday February 10  “All Is Not Just Peachy  – CYA”
A closer look at the economy suggests all is not as well as we are led to believe.
InvesTech Research’s
Feb. 7 bulletin notes that the ISM Manufacturing Index posted its first expansion in five months thanks to early reactions to Phase 1 of the China trade deal.
However, InvesTech explains, the Chicago Purchasers Manufacturing Index (PMI), a leading indicator , plunged 5.4 points to 42.9%, the second lowest in this 10.6-year cycle. All five components of the index declined.
Additionally, the U.S. Leading Economic Index (LEI) declined in December crossing below its 18-month moving average, a warning signal. Over the past 16 months, the LEI has been flat.
Alternet.com published results  from the Washington Monthly’s Feb. 7 economic/political letter – summarized highlights include:
wage growth lags despite the  low unemployment rate with growth at plus 0.9%
accounting for the impact of  a 2.1% inflation
-the Tax Cuts Jobs Act (TCJA) did not produce a $4,000 pay raise for Americans, Worse yet, 91 of the Fortune 500 companies paid no federal taxes.  (essentially corporations got a 40% tax cut while the general public got  1% – 1.5%). The corporations spent the windfall on stock repurchases to shrink their bottom line, pump up their stocks and assure profitable exercise of executive stock options.!
-The TCJA did not produce a 4%-6% growth in GDP, and Q4 growth was only 2.1%
-The trade war cost American households $1,277 in 2019 according to the publication.  (I cannot confirm that and going forward that cost may be less if other savings result)
-Reportedly, the trade war generated a 24% increase in farm bankruptcies in 2019.
      OK, the Washington monthly is a liberal publication, but there is a  major league imbalance here with a huge gap between high net worth individuals and lower net worth/earning Americans.
THAT IS ECONOMICALLY UNHEALTHY.

With some 70% of  the GDP coming from consumer spending and household debt increasing to $14 trillion with auto loans, credit card and student loans debt the biggest contributors.
Very little can be done  about this imbalance, it is a result of changing times and a reduced bargaining power by employees in negotiating wages and salaries.
What’s worse and still not acknowledged is that automation and Artificial Intelligence will severely impact employment going forward leading to the nation’s greatest employment crisis ever. .
       WHAT IS AT ENORMOUS RISK NOW IS THE OVERVALUED PRICE PAID FOR THE STOCKS OF COMPANIES WHOSE FUTURE DEPENDS ON THE AVERAGE SPENDER WHICH  LESS BUYING AND BORROWING POWER GOING FORWARD.
ALL THE PLATITUDES AND OPTIMISM ABOUT THE ECONOMY ARE UTTER
RUBBISH, aka, BULLSHIT.
Suddenly, all this will come home to roost, as the BIG money walks away and sellers panic with an initial plunge of 12% – 18%. Depending on what news hits the market when it tries to bounce from these levels, another 30% down will be slashed from the market averages.
I do not know when this bubble will burst. I have warned about it at lower levels and have been wrong.  When it bursts, it will be straight down because the BIG money will not be there to catch stocks  and selling will accelerate.
CLEARLY, EVERYTHING LOOKS JUST PEACHY ! HOW ON EARTH CAN ANYTHING GO WRONG ?
WELL, THAT’S WHAT IT LOOKS LIKE AT MARKET TOPS.
…………………………………………………………………………;/
Friday Feb 7  “When Will The BIG Money Walk Away ?”
     This is mostly an institutional playground, big hitters duking it out, big corporations scrambling to buy back more of their own stocks before the price runs away, but contributing to their own problem by running their stock up in the process and averaging the cost of acquisition higher !!!
      If stocks were reasonably priced considering the Obama bull market is nearly 11 years old and economy a couple months short of that, as well, risk would be justified.
Insanity, greed, fear of missing out driving hope for another good year, but the persistent  3 a.m. wake up, cold sweat, angst that those in the know  feel knowing the  party may just be about to end with a double digit flash crash, as all the pros STOP BUYING and a vacuum sucks prices down trapping the uninformed, and those seeking to join the party at the top only to get crushed.
In a bear market these are the folks who sell out at the bottom, just like they bought in at the top.              SURE, THE ECONOMIC NUMBERS LOOK GREAT, UNEMPLOYMENT LOW, JOBS BEING CREATED, STOCK MARKET UP.
HOW CAN I SAY THESE THINGS ?

      BECAUSE THAT’S WHAT IT LOOKS LIKE WHEN THE PARTY IS OVER, THAT’S WHAT IT LOOKS LIKE WHEN A MAJOR BULL MARKET TOP IS FORMING !
WHEN ?   HARD TO PREDICT WHEN BUBBLES BURST.  WHY CHANCE IT.
The BIG money will keep pushing market leaders higher, others will be unable to resist the urge to load up even more, even borrow to buy stock.
Big scores in just a few days will be the topic of discussion. It won’t take long for investors to spend  anticipated stock market gains ahead of time.
What is scary is computers can come unwound, go batshit and with so many algos calling the shots, who knows what to expect.
I have repeatedly warned about a digital meltdown, that a hard copy of ky should be maintained regularly in case it needs to be proved.

    I think a thinking America, a Feeling America, an informed America, an hones America that demands the same from its leaders can do anything.  That has to start to happen    – NOW.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Thursday Feb 6 “Inflating Bubble – Inflating Risk
Back to a re-inflating bubble. Nothing has happened yet to prick it, and I am not sure what will. It’s the nature of bubbles. They can burst as a result of an event, or they just get sooo BIG they can’t get any bigger…and burst.
That’s where calling the shot defies analysis…….unless of course you keep warning it will burst which is what I have been doing.
       Most of my 57 years in this business  have keyed more on technical analysis but with a lot of weight given to fundamental, monetary, economic, political, psychological and seasonal analysis. Being able to address any one or all  of these elements is what got me back on CNBC frequently in the 1990s.
     In those days. It was one-on-one for 20 minutes, not a focus on a specialty.
The analyst had no idea what to expect, but wise to admit you did not have an answer.
There were other individuals who got on TV who were not from big firms but had great insight, but CNBC  changed the format to a more showtime preso and it was not new nor improved – just boring, a lot of the same faces saying little of interest.
You should know that, because in this business there always several ugly balls up in the air, any one of which can come down unexpectedly to change the  forecast. I endeavor to cover all in my pre-blog analysis, but try to boil it down into a faster read, which people hate to do today.
This market became historically overvalued over a year ago reaching valuations that turned prior markets down.
TECHNICALLY
         Something changed several years ago – the flash crash, sudden plunges when buyers didn’t show and seller panicked. These plunges come unexpectedly and require investors who don’t want to take a hit, or want to be prepared to buy some stocks lower or add to positions to have a cash reserve.

Memories tend to be short. With the bubble inflating like this I can only warn repeatedly of what will come and it will be ugly.  The more the bubble inflates the less you will take me seriously.
The 12% -18% flash Crash will strike and only then will investors appreciate building cash rather than risk as the market spirals from overvalued to more overvalued.
……………………………………………………………………….
Wednesday  Feb 5 : “El-Erian: Rate Cuts are Counter Productive; Daco: More Rate Cuts Coming”
Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.
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Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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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 3.5% which was hit in September.  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.

 

 

 

 

 

 

 

 

 

 

Cash Is Actually an Investment

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,276
S&P 500: 3,352
Nasdaq: 9,628
Russell: 1,667
Tuesday  February  11, 2020     9:16 a.m.

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gbifr79@gmail.com
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TODAY:
A new high for the S&P 500 and Nasdaq Comp. with the DJIA close behind.
It is clearly an institutional buying bubble, as the NYSE market composite, Dow Jones Transports and the “unweighted Value Line Composite” lag behind.
There is nowhere else to put one’s money, thus a stampede to gobble up stocks before they run higher.
       Make sense ?
YES, if you are a professional under pressure to perform for clients.
YES, if you are desperate to make more and more money to simply survive the relentless drain on daily costs.
NO, if you are aware how historically overvalued stocks are and cannot afford to take a 15% – 30% hit.
The Administration is pressuring the Fed to cut rates further, which if the economy is in a good place doesn’t make sense, except it would help Trump get re-elected.
Not all indicators are bullish, not everyone surveyed is bullish on the economy, so a rate cut this summer is possible.
The higher it goes, the more severe the crash.
Since not all savvy investors are chasing stocks, they will  at some point be a no-show.  The BIG money is not stupid, it didn’t get rich paying up for stocks.

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Minor Support: DJIA:29,237; S&P 500:3,347; Nasdaq Comp.:9,613
Minor Resistance: DJIA:29,317; S&P 500:3,367; Nasdaq Comp.:9,687
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Monday February 10  “All Is Not Just Peachy  – CYA”
A closer look at the economy suggests all is not as well as we are led to believe.
InvesTech Research’s
Feb. 7 bulletin notes that the ISM Manufacturing Index posted its first expansion in five months thanks to early reactions to Phase 1 of the China trade deal.
However, InvesTech explains, the Chicago Purchasers Manufacturing Index (PMI), a leading indicator , plunged 5.4 points to 42.9%, the second lowest in this 10.6-year cycle. All five components of the index declined.
Additionally, the U.S. Leading Economic Index (LEI) declined in December crossing below its 18-month moving average, a warning signal. Over the past 16 months, the LEI has been flat.
Alternet.com published results  from the Washington Monthly’s Feb. 7 economic/political letter – summarized highlights include:
wage growth lags despite the  low unemployment rate with growth at plus 0.9%
accounting for the impact of  a 2.1% inflation
-the Tax Cuts Jobs Act (TCJA) did not produce a $4,000 pay raise for Americans, Worse yet, 91 of the Fortune 500 companies paid no federal taxes.  (essentially corporations got a 40% tax cut while the general public got  1% – 1.5%). The corporations spent the windfall on stock repurchases to shrink their bottom line, pump up their stocks and assure profitable exercise of executive stock options.!
-The TCJA did not produce a 4%-6% growth in GDP, and Q4 growth was only 2.1%
-The trade war cost American households $1,277 in 2019 according to the publication.  (I cannot confirm that and going forward that cost may be less if other savings result)
-Reportedly, the trade war generated a 24% increase in farm bankruptcies in 2019.
      OK, the Washington monthly is a liberal publication, but there is a  major league imbalance here with a huge gap between high net worth individuals and lower net worth/earning Americans.
THAT IS ECONOMICALLY UNHEALTHY.

With some 70% of  the GDP coming from consumer spending and household debt increasing to $14 trillion with auto loans, credit card and student loans debt the biggest contributors.
Very little can be done  about this imbalance, it is a result of changing times and a reduced bargaining power by employees in negotiating wages and salaries.
What’s worse and still not acknowledged is that automation and Artificial Intelligence will severely impact employment going forward leading to the nation’s greatest employment crisis ever. .
       WHAT IS AT ENORMOUS RISK NOW IS THE OVERVALUED PRICE PAID FOR THE STOCKS OF COMPANIES WHOSE FUTURE DEPENDS ON THE AVERAGE SPENDER WHICH  LESS BUYING AND BORROWING POWER GOING FORWARD.
ALL THE PLATITUDES AND OPTIMISM ABOUT THE ECONOMY ARE UTTER
RUBBISH, aka, BULLSHIT.
Suddenly, all this will come home to roost, as the BIG money walks away and sellers panic with an initial plunge of 12% – 18%. Depending on what news hits the market when it tries to bounce from these levels, another 30% down will be slashed from the market averages.
I do not know when this bubble will burst. I have warned about it at lower levels and have been wrong.  When it bursts, it will be straight down because the BIG money will not be there to catch stocks  and selling will accelerate.
CLEARLY, EVERYTHING LOOKS JUST PEACHY ! HOW ON EARTH CAN ANYTHING GO WRONG ?
WELL, THAT’S WHAT IT LOOKS LIKE AT MARKET TOPS.
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Friday Feb 7  “When Will The BIG Money Walk Away ?”
     This is mostly an institutional playground, big hitters duking it out, big corporations scrambling to buy back more of their own stocks before the price runs away, but contributing to their own problem by running their stock up in the process and averaging the cost of acquisition higher !!!
      If stocks were reasonably priced considering the Obama bull market is nearly 11 years old and economy a couple months short of that, as well, risk would be justified.
Insanity, greed, fear of missing out driving hope for another good year, but the persistent  3 a.m. wake up, cold sweat, angst that those in the know  feel knowing the  party may just be about to end with a double digit flash crash, as all the pros STOP BUYING and a vacuum sucks prices down trapping the uninformed, and those seeking to join the party at the top only to get crushed.
In a bear market these are the folks who sell out at the bottom, just like they bought in at the top.              SURE, THE ECONOMIC NUMBERS LOOK GREAT, UNEMPLOYMENT LOW, JOBS BEING CREATED, STOCK MARKET UP.
HOW CAN I SAY THESE THINGS ?

      BECAUSE THAT’S WHAT IT LOOKS LIKE WHEN THE PARTY IS OVER, THAT’S WHAT IT LOOKS LIKE WHEN A MAJOR BULL MARKET TOP IS FORMING !
WHEN ?   HARD TO PREDICT WHEN BUBBLES BURST.  WHY CHANCE IT.
The BIG money will keep pushing market leaders higher, others will be unable to resist the urge to load up even more, even borrow to buy stock.
Big scores in just a few days will be the topic of discussion. It won’t take long for investors to spend  anticipated stock market gains ahead of time.
What is scary is computers can come unwound, go batshit and with so many algos calling the shots, who knows what to expect.
I have repeatedly warned about a digital meltdown, that a hard copy of ky should be maintained regularly in case it needs to be proved.

    I think a thinking America, a Feeling America, an informed America, an hones America that demands the same from its leaders can do anything.  That has to start to happen    – NOW.
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Thursday Feb 6 “Inflating Bubble – Inflating Risk
Back to a re-inflating bubble. Nothing has happened yet to prick it, and I am not sure what will. It’s the nature of bubbles. They can burst as a result of an event, or they just get sooo BIG they can’t get any bigger…and burst.
That’s where calling the shot defies analysis…….unless of course you keep warning it will burst which is what I have been doing.
       Most of my 57 years in this business  have keyed more on technical analysis but with a lot of weight given to fundamental, monetary, economic, political, psychological and seasonal analysis. Being able to address any one or all  of these elements is what got me back on CNBC frequently in the 1990s.
     In those days. It was one-on-one for 20 minutes, not a focus on a specialty.
The analyst had no idea what to expect, but wise to admit you did not have an answer.
There were other individuals who got on TV who were not from big firms but had great insight, but CNBC  changed the format to a more showtime preso and it was not new nor improved – just boring, a lot of the same faces saying little of interest.
You should know that, because in this business there always several ugly balls up in the air, any one of which can come down unexpectedly to change the  forecast. I endeavor to cover all in my pre-blog analysis, but try to boil it down into a faster read, which people hate to do today.
This market became historically overvalued over a year ago reaching valuations that turned prior markets down.
TECHNICALLY
         Something changed several years ago – the flash crash, sudden plunges when buyers didn’t show and seller panicked. These plunges come unexpectedly and require investors who don’t want to take a hit, or want to be prepared to buy some stocks lower or add to positions to have a cash reserve.

Memories tend to be short. With the bubble inflating like this I can only warn repeatedly of what will come and it will be ugly.  The more the bubble inflates the less you will take me seriously.
The 12% -18% flash Crash will strike and only then will investors appreciate building cash rather than risk as the market spirals from overvalued to more overvalued.
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Wednesday  Feb 5 : “El-Erian: Rate Cuts are Counter Productive; Daco: More Rate Cuts Coming”
Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.
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Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
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Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
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One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
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Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
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No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
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Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
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Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
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Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
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TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
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Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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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 3.5% which was hit in September.  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.

 

 

 

 

 

 

 

 

All Is Not Just Peachy – CYA

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,102
S&P 500: 3,327
Nasdaq: 9,520
Russell: 1,656
Monday  February  10, 2020     8:49 a.m.

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gbifr79@gmail.com
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TODAY:
    A closer look at the economy suggests all is not as well as we are led to believe.
InvesTech Research’s
Feb. 7 bulletin notes that the ISM Manufacturing Index posted its first expansion in five months thanks to early reactions to Phase 1 of the China trade deal.
However, InvesTech explains, the Chicago Purchasers Manufacturing Index (PMI), a leading indicator , plunged 5.4 points to 42.9%, the second lowest in this 10.6-year cycle. All five components of the index declined.
Additionally, the U.S. Leading Economic Index (LEI) declined in December crossing below its 18-month moving average, a warning signal. Over the past 16 months, the LEI has been flat.
Alternet.com published results  from the Washington Monthly’s Feb. 7 economic/political letter – summarized highlights include:
wage growth lags despite the  low unemployment rate with growth at plus 0.9%
accounting for the impact of  a 2.1% inflation
-the Tax Cuts Jobs Act (TCJA) did not produce a $4,000 pay raise for Americans, Worse yet, 91 of the Fortune 500 companies paid no federal taxes.  (essentially corporations got a 40% tax cut while the general public got  1% – 1.5%). The corporations spent the windfall on stock repurchases to shrink their bottom line, pump up their stocks and assure profitable exercise of executive stock options.!
-The TCJA did not produce a 4%-6% growth in GDP, and Q4 growth was only 2.1%
-The trade war cost American households $1,277 in 2019 according to the publication.  (I cannot confirm that and going forward that cost may be less if other savings result)
-Reportedly, the trade war generated a 24% increase in farm bankruptcies in 2019.
      OK, the Washington monthly is a liberal publication, but there is a  major league imbalance here with a huge gap between high net worth individuals and lower net worth/earning Americans.
THAT IS ECONOMICALLY UNHEALTHY.

With some 70% of  the GDP coming from consumer spending and household debt increasing to $14 trillion with auto loans, credit card and student loans debt the biggest contributors.
Very little can be done  about this imbalance, it is a result of changing times and a reduced bargaining power by employees in negotiating wages and salaries.
What’s worse and still not acknowledged is that automation and Artificial Intelligence will severely impact employment going forward leading to the nation’s greatest employment crisis ever. .
       WHAT IS AT ENORMOUS RISK NOW IS THE OVERVALUED PRICE PAID FOR THE STOCKS OF COMPANIES WHOSE FUTURE DEPENDS ON THE AVERAGE SPENDER WHICH  LESS BUYING AND BORROWING POWER GOING FORWARD.
ALL THE PLATITUDES AND OPTIMISM ABOUT THE ECONOMY ARE UTTER
RUBBISH, aka, BULLSHIT.
Suddenly, all this will come home to roost, as the BIG money walks away and sellers panic with an initial plunge of 12% – 18%. Depending on what news hits the market when it tries to bounce from these levels, another 30% down will be slashed from the market averages.
I do not know when this bubble will burst. I have warned about it at lower levels and have been wrong.  When it bursts, it will be straight down because the BIG money will not be there to catch stocks  and selling will accelerate.
CLEARLY, EVERYTHING LOOKS JUST PEACHY ! HOW ON EARTH CAN ANYTHING GO WRONG ?
WELL, THAT’S WHAT IT LOOKS LIKE AT MARKET TOPS.
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Minor Support: DJIA:29,008; S&P 500:3,221; Nasdaq Comp.:9,497
Minor Resistance: DJIA:29,167; S&P 500:3,335; Nasdaq Comp.:9,527
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Friday Feb 7  “When Will The BIG Money Walk Away ?”
     This is mostly an institutional playground, big hitters duking it out, big corporations scrambling to buy back more of their own stocks before the price runs away, but contributing to their own problem by running their stock up in the process and averaging the cost of acquisition higher !!!
      If stocks were reasonably priced considering the Obama bull market is nearly 11 years old and economy a couple months short of that, as well, risk would be justified.
Insanity, greed, fear of missing out driving hope for another good year, but the persistent  3 a.m. wake up, cold sweat, angst that those in the know  feel knowing the  party may just be about to end with a double digit flash crash, as all the pros STOP BUYING and a vacuum sucks prices down trapping the uninformed, and those seeking to join the party at the top only to get crushed.
In a bear market these are the folks who sell out at the bottom, just like they bought in at the top.              SURE, THE ECONOMIC NUMBERS LOOK GREAT, UNEMPLOYMENT LOW, JOBS BEING CREATED, STOCK MARKET UP.
HOW CAN I SAY THESE THINGS ?

      BECAUSE THAT’S WHAT IT LOOKS LIKE WHEN THE PARTY IS OVER, THAT’S WHAT IT LOOKS LIKE WHEN A MAJOR BULL MARKET TOP IS FORMING !
WHEN ?   HARD TO PREDICT WHEN BUBBLES BURST.  WHY CHANCE IT.
The BIG money will keep pushing market leaders higher, others will be unable to resist the urge to load up even more, even borrow to buy stock.
Big scores in just a few days will be the topic of discussion. It won’t take long for investors to spend  anticipated stock market gains ahead of time.
What is scary is computers can come unwound, go batshit and with so many algos calling the shots, who knows what to expect.
I have repeatedly warned about a digital meltdown, that a hard copy of ky should be maintained regularly in case it needs to be proved.

    I think a thinking America, a Feeling America, an informed America, an hones America that demands the same from its leaders can do anything.  That has to start to happen    – NOW.
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Thursday Feb 6 “Inflating Bubble – Inflating Risk
Back to a re-inflating bubble. Nothing has happened yet to prick it, and I am not sure what will. It’s the nature of bubbles. They can burst as a result of an event, or they just get sooo BIG they can’t get any bigger…and burst.
That’s where calling the shot defies analysis…….unless of course you keep warning it will burst which is what I have been doing.
       Most of my 57 years in this business  have keyed more on technical analysis but with a lot of weight given to fundamental, monetary, economic, political, psychological and seasonal analysis. Being able to address any one or all  of these elements is what got me back on CNBC frequently in the 1990s.
     In those days. It was one-on-one for 20 minutes, not a focus on a specialty.
The analyst had no idea what to expect, but wise to admit you did not have an answer.
There were other individuals who got on TV who were not from big firms but had great insight, but CNBC  changed the format to a more showtime preso and it was not new nor improved – just boring, a lot of the same faces saying little of interest.
You should know that, because in this business there always several ugly balls up in the air, any one of which can come down unexpectedly to change the  forecast. I endeavor to cover all in my pre-blog analysis, but try to boil it down into a faster read, which people hate to do today.
This market became historically overvalued over a year ago reaching valuations that turned prior markets down.
TECHNICALLY
         Something changed several years ago – the flash crash, sudden plunges when buyers didn’t show and seller panicked. These plunges come unexpectedly and require investors who don’t want to take a hit, or want to be prepared to buy some stocks lower or add to positions to have a cash reserve.

Memories tend to be short. With the bubble inflating like this I can only warn repeatedly of what will come and it will be ugly.  The more the bubble inflates the less you will take me seriously.
The 12% -18% flash Crash will strike and only then will investors appreciate building cash rather than risk as the market spirals from overvalued to more overvalued.
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Wednesday  Feb 5 : “El-Erian: Rate Cuts are Counter Productive; Daco: More Rate Cuts Coming”
      Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.

Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
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Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
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One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
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Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
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No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
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Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
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Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
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Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
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TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
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Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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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 3.5% which was hit in September.  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.

 

 

 

 

 

 

 

When Will The BIG Money Walk Away ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,379
S&P 500: 3,345
Nasdaq: 9,572
Russell:
Friday  February  7, 2020     8:39 a.m.

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gbifr79@gmail.com
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TODAY:
This is mostly an institutional playground, big hitters duking it out, big corporations scrambling to buy back more of their own stocks before the price runs away, but contributing to their own problem by running their stock up in the process and averaging the cost of acquisition higher !!!
      If stocks were reasonably priced considering the Obama bull market is nearly 11 years old and economy a couple months short of that, as well, risk would be justified.
Insanity, greed, fear of missing out driving hope for another good year, but the persistent  3 a.m. wake up, cold sweat, angst that those in the know  feel knowing the  party may just be about to end with a double digit flash crash, as all the pros STOP BUYING and a vacuum sucks prices down trapping the uninformed, and those seeking to join the party at the top only to get crushed.
In a bear market these are the folks who sell out at the bottom, just like they bought in at the top.              SURE, THE ECONOMIC NUMBERS LOOK GREAT, UNEMPLOYMENT LOW, JOBS BEING CREATED, STOCK MARKET UP.
HOW CAN I SAY THESE THINGS ?

      BECAUSE THAT’S WHAT IT LOOKS LIKE WHEN THE PARTY IS OVER, THAT’S WHAT IT LOOKS LIKE WHEN A MAJOR BULL MARKET TOP IS FORMING !
WHEN ?   HARD TO PREDICT WHEN BUBBLES BURST.  WHY CHANCE IT.
The BIG money will keep pushing market leaders higher, others will be unable to resist the urge to load up even more, even borrow to buy stock.
Big scores in just a few days will be the topic of discussion. It won’t take long for investors to spend  anticipated stock market gains ahead of time.
What is scary is computers can come unwound, go batshit and with so many algos calling the shots, who knows what to expect.
I have repeatedly warned about a digital meltdown, that a hard copy of ky should be maintained regularly in case it needs to be proved.

    I think a thinking America, a Feeling America, an informed America, an hones America that demands the same from its leaders can do anything.  That has to start to happen    – NOW.

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Minor Support: DJIA:; S&P 500:; Nasdaq Comp.:
Minor Resistance: DJIA:; S&P 500:; Nasdaq Comp.:
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Thursday Feb 6 “Inflating Bubble – Inflating Risk
Back to a re-inflating bubble. Nothing has happened yet to prick it, and I am not sure what will. It’s the nature of bubbles. They can burst as a result of an event, or they just get sooo BIG they can’t get any bigger…and burst.
That’s where calling the shot defies analysis…….unless of course you keep warning it will burst which is what I have been doing.
       Most of my 57 years in this business  have keyed more on technical analysis but with a lot of weight given to fundamental, monetary, economic, political, psychological and seasonal analysis. Being able to address any one or all  of these elements is what got me back on CNBC frequently in the 1990s.
     In those days. It was one-on-one for 20 minutes, not a focus on a specialty.
The analyst had no idea what to expect, but wise to admit you did not have an answer.
There were other individuals who got on TV who were not from big firms but had great insight, but CNBC  changed the format to a more showtime preso and it was not new nor improved – just boring, a lot of the same faces saying little of interest.
You should know that, because in this business there always several ugly balls up in the air, any one of which can come down unexpectedly to change the  forecast. I endeavor to cover all in my pre-blog analysis, but try to boil it down into a faster read, which people hate to do today.
This market became historically overvalued over a year ago reaching valuations that turned prior markets down.
TECHNICALLY
         Something changed several years ago – the flash crash, sudden plunges when buyers didn’t show and seller panicked. These plunges come unexpectedly and require investors who don’t want to take a hit, or want to be prepared to buy some stocks lower or add to positions to have a cash reserve.

Memories tend to be short. With the bubble inflating like this I can only warn repeatedly of what will come and it will be ugly.  The more the bubble inflates the less you will take me seriously.
The 12% -18% flash Crash will strike and only then will investors appreciate building cash rather than risk as the market spirals from overvalued to more overvalued.
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Wednesday  Feb 5 : “El-Erian: Rate Cuts are Counter Productive; Daco: More Rate Cuts Coming”
      Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.

Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
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Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
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One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
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Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
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No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
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Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
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Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
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Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
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TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
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Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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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 3.5% which was hit in September.  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.

 

 

 

 

 

 

Inflating Bubble – Inflating Risk

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,290
S&P 500: 3,334
Nasdaq: 9,508
Russell: 1,681
Thursday  February  6, 2020     8:39 a.m.

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gbifr79@gmail.com
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TODAY:
Back to a re-inflating bubble. Nothing has happened yet to prick it, and I am not sure what will. It’s the nature of bubbles. They can burst as a result of an event, or they just get sooo BIG they can’t get any bigger…and burst.
That’s where calling the shot defies analysis…….unless of course you keep warning it will burst which is what I have been doing.
       Most of my 57 years in this business  have keyed more on technical analysis but with a lot of weight given to fundamental, monetary, economic, political, psychological and seasonal analysis. Being able to address any one or all  of these elements is what got me back on CNBC frequently in the 1990s.
     In those days. It was one-on-one for 20 minutes, not a focus on a specialty.
The analyst had no idea what to expect, but wise to admit you did not have an answer.
There were other individuals who got on TV who were not from big firms but had great insight, but CNBC  changed the format to a more showtime preso and it was not new nor improved – just boring, a lot of the same faces saying little of interest.
You should know that, because in this business there always several ugly balls up in the air, any one of which can come down unexpectedly to change the  forecast. I endeavor to cover all in my pre-blog analysis, but try to boil it down into a faster read, which people hate to do today.
This market became historically overvalued over a year ago reaching valuations that turned prior markets down.
TECHNICALLY
         Something changed several years ago – the flash crash, sudden plunges when buyers didn’t show and seller panicked. These plunges come unexpectedly and require investors who don’t want to take a hit, or want to be prepared to buy some stocks lower or add to positions to have a cash reserve.

Memories tend to be short. With the bubble inflating like this I can only warn repeatedly of what will come and it will be ugly.  The more the bubble inflates the less you will take me seriously.
The 12% -18% flash Crash will strike and only then will investors appreciate building cash rather than risk as the market spirals from overvalued to more overvalued.
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Minor Support: DJIA:29,147; S&P 500:3,327; Nasdaq Comp.:9,753
Minor Resistance: DJIA:29,367; S&P 500:3,347; Nasdaq Comp.:9,753
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Wednesday  Feb 5 : “El-Erian: Rate Cuts are Counter Productive; Daco: More Rate Cuts Coming”
Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.

Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
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Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
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One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
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Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
……………………………………………………………..
No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
…………………………………………………….
Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
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Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
………………………………………………………………….
Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
……………………….
TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
………………………………………………………………………………………
Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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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 3.5% which was hit in September.  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.

 

 

 

 

 

El-Erian: Rate Cuts are Counter Productive; Daco: More Rates Cuts Coming

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28, 807
S&P 500: 3,297
Nasdaq: 9,467
Russell: 1,656
Wednesday  February  5, 2020     8:39 a.m.

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gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Allianz’s Mohamed El-Erian   told Axios that, “Central bank stimulus may now be reaching a point where it’s ineffective if not counterproductive.”
     Oxford Economics chief U.S. economist, Gregory Daco, is predicting a couple more rate cuts this year in face of an adverse impact of the Coronavirus.
BUT WAIT a minute !  What about the ADP jobs report today showing January jobs added exceeded estimates by a wide margin  (202,000 vs 160,000 est.) ?
If the economy is gaining strength, will the Fed now have to raise rates ?
One of the first things you learn in this business is – “Don’t fight the Fed.”
While I generally respect the raw power of the Fed, I did not this time.
      Why ?
Because the Fed jumped the gun employing measures to stimulate the economy before it was vitally needed.  When we finally slip into recession after 11 years of expansion following the Great Recession, the Fed will have few measures to bring the country out of recession.

A year ago the Fed abruptly reversed its policy of higher interest rates and proceeded to verbally talk the country out of a looming recession and bear market which was already underway with a Q4 drop in the market averages of 20%.  Its three cuts on its fed funds rate in the second half of the year backed up all the hype that preceded the cuts.
Why ?
Re-elect President Trump ?
Didn’t want to be criticized for a recession on their watch ?
       This time around, they are delaying the inevitable, worse yet encouraging investors to jump into a market that is vastly overvalued.
This is classic bubble stuff and there is nothing anyone can do to convince investors how disastrous a fully invested position can be.
This is what it is like at market tops and always has been.  Does anyone think the big money will stand by and watch their paper profits vanish in a bear market ?
My guess based on the decline in margin debt, they have already begun their exit.
For more than a year I have urged a 30% cash reserve, and much, much more at times of great risk.  That’s in line with most of the analysts I have seen.  It all depends on how much one can afford to lose.
Markets always rebound to recoup losses ?   Problem with that is at bear market bottoms most investors are so scared of a further decline, they sell out – at the bottom.
The prospects are now increasing for a “Greater Recession/Greater Bear Market”, worse than 2007-2009.

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Minor Support: DJIA:28,797; S&P 500:3,291; Nasdaq Comp.:9,459
Minor Resistance: DJIA:28,936; S&P 500:3,317; Nasdaq Comp.:9,501
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Wednesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
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Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
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One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
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Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
……………………………………………………………..
No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
…………………………………………………….
Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
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Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
………………………………………………………………….
Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
……………………….
TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
………………………………………………………………………………………
Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
………………

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
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 3.5% which was hit in September.  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.

 

 

 

 

High Risk In Buying the OPEN Today

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,399
S&P 500: 3,248
Nasdaq: 9,273
Russell: 1,632
Tuesday  February  4, 2020     9:09 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
 …………………………………………………….
Minor Support: DJIA:28,276; S&P 500:3,237; Nasdaq Comp.:9,237
Minor Resistance: DJIA:28,517; S&P 500:3,253; Nasdaq Comp.:9,281
…………………………………………………………………

Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
……………………………………………………………………………….
Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
………………………………………………………………………..
One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
………………………………………………………….

Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
……………………………………………………………..
No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
…………………………………………………….
Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
………………………………………………………………

Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
………………………………………………………………….
Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
……………………….
TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
………………………………………………………………………………………
Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
………………

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
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 3.5% which was hit in September.  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 Golf Ball Bounce or An Old Softball Bounce

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,256
S&P 500: 3,225
Nasdaq: 98,150
Russell: 1,613
Monday  February  3, 2020     8:50 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
…………………………………………………….
Minor Support: DJIA:27,917; S&P 500:3,187; Nasdaq Comp.:9,037
Minor Resistance: DJIA:28,323; S&P 500:3,237; Nasdaq Comp.:9,167
…………………………………………………………………
Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
………………………………………………………………………..
One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
………………………………………………………….

Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
……………………………………………………………..
No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
…………………………………………………….
Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
………………………………………………………………

Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
………………………………………………………………….
Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
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TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
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Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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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 3.5% which was hit in September.  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.