Walks Like a Bear, Talks Like a…… Selling Climax Could Lead To a Rally Today or Monday at the Open

INVESTOR’S first read.com – Daily edge before the open
DJIA:  25,766
S&P 500: 2,979
Nasdaq: 8,560
Russell: 1,567
Friday, February  28, 2020   8:20 a.m.
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brooksie01@aol.com

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TODAY:
BEWARE OF HYPE, LIES AND MISINFORMATION COMING OUT OF THE FED, WASHINGTON AND THE STREET.  This is a presidential election year and there are absolutely no limits as to what can be said or done – none !
While that would be welcome to investors, it would suck them in at higher levels prior to another leg down in coming months (May)
A rally is likely  this morning and even a selling climax  today or at the open Monday with the DJIA reaching  lows of 24,560, S&P 500: 2,877 and Nasdaq Comp.: 8,237.
Monday would be the most likely low for the selling climax, since traders are wary of  negative news over the weekend.  But, the Fed and Administration may use the weekend to release statements designed to curb the carnage.
Odds favor a sharp rally from a climax low, which would recoup about onethird of the loss since mid-February.
More downside awaits, I expect losses in this bear market to exceed 45%, we have lost 13%+ already.  A bear market low could come as early as October.
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Yesterday, the plunge in the DJIA from its Feb.  12 all-time high reached the lower end of my forecast of a flash crash plunge of 12% to 18%.  The “trap door” phenom kicked in four days ago as buyers were suddenly a no show  creating a vacuum for stock prices, ergo a free fall -m straight down.

Expect the Fed to either cut its fed funds rate, pump even more money into the system, or promise both in the near future.
That would trigger a “gap” open which would be a “Bull Trap” where investors, thinking they are on board for a big run, discover the opposite – a fake out and a plunge in prices.
Yes Coronavirus is horrific, but it is not the only thing that terrifies the Street. A recession is imminent and quite likely a Democrat domination of the Presidency and both Houses of Congress.  That’s what scares the Street.
The Fed would take such action because it is panicking again seeing  trouble ahead.  Nine out of the last 10 recessions have been with a Republican in the White House, this would be 10 for 11.
Economic expansions since WW II have averaged 58 months (4.8 years). In June, this expansion will be 11 years old.
Here is what is going through investors minds now.  “If only my stocks could rebound to near where they fell from in mid-February, I would surely get out.”
Not going to happen. Too much damage has been done…..and it is not all Coronavirus, which had as much impact as this only because the stock market was so overvalued when news of its spread hit.
We either are in a recession or on the threshold of one as well as a major political upheaval.
BLAME THE FED AND ADMINISTRATIONM FOR RUNNING THE MARKET UP WITH NONSENSE ABOUT THE “ECONOMY BEING IN A GOOD PLACE.” IF IT WAS, WHY CUT RATES AND PUMP MONEY INTO THE SYSTEM ?
BOTTOM LINE: A rebound is inevitable, most likely fueled by Fed rate cuts and Administration bluster. It would be a bear market rally and  the Bull Market’s death rattle.  Bear in mind, any indication that Coronavirus’s spread is lessening and the DJIA by 1,500 points.
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Minor Support: DJIA:24,560; S&P 500:2,877; Nasdaq Comp.:8,237
Minor Resistance:28,197;DJIA:; S&P 500:3,017; Nasdaq Comp.:8,667
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Thursday February 27 “Here’s Where It Gets Tricky”
OK, the market averages have plunged 9% in days and we are looking at a big drop at the open. The tendency at bull market tops is to view the initial plunge as a gift to jump back in.
      In the last four such flash crashes, the market recovered to new highs.
      If this is the beginning of the first bear market in 11 years, anyone jumping back in on a rally will get hammered by the next leg down, which could be another 25% to 40% depending on how  economic, political, monetary and psychological  events play out.
Once a bull market disintegrates, all Hell breaks loose, things happen that no one dreamed of and  fear mounts.
Not until the “cauldron of fear boils over” will the market turn up from a bear market bottom leaving investors in the dust with huge losses.  Many will have sold out at the bottom convinced the market will go lower.
Odds favor a technical rebound today, triggered by Fed/Administration hype, but risks are high.  I believe fears of a spread of Coronavirus is partly to blame, the real danger is the economy which is dancing on the edge of sliding into recession.
      Fears of Coronavirus can vanish quickly, a slumping economy can’t. The Fed delayed a recession/bear market a year ago with its abrupt policy change toward ease, but a strong recovery did not develop.
Jumping back in today or in the near future may reward investors, but is the risk worth it.  I issue an occasional “buy” for nimble traders, who are capable of clipping a quick profit on a bounce from a short-term extreme down move in prices, BUT that is only for that kind of skill set.
Again, I repeat, there is an overwhelming urge to jump in after one of these flash crashes. While it would have paid off in the past, you do not want to be wrong this time around.
        The entire scene here (fundamental, technical, political, economic, monetary and psychological could get VERY, VERY UGLY !
       Sooo, what about the Street’s algorithms ?  Are they in ask no questions “buy” mode ?
       If they are now being tweaked for “risk” employing a defer purchase  strategy or worse yet a “sell” mode, we will see the “trap door” affect – straight down.
BOTTOM LINE: I think the economy will be what takes this market down with a bull market top leading a recession by 3-5 months.
A big but short-lived  rally will be triggered if news of a slowdown in the spread of Coronavirus  is reported.  But, it is really the economy that trumps everything.
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Wednesday February 26 “Buy: Nimble Traders only – More Downside Ahead”

Probable scenario: an opening rally followed by a sell off then a rally starting after 10:30.  Only the quick afoot.
Add fears of a Sanders presidency to Coronavirus as a reason the Street and press gives for the plunge in the stock market.
But these two issues  wouldn’t have had such an impact if the market was not as historically overvalued as it was (and still is).
What will crush this market is an 11-year old economy that is running out of steam.  The party is over – last call and  the stock market, which always leads recessions and economic recoveries is telling the Street a recession is looming.
We would be in the middle of one if the Fed hadn’t panicked a year ago with hype about easier money then cut its benchmark rate three times before year-end.
Their irresponsible action triggered a 40% + surge in the market averages,
sucking investors into a highly overvalued market.  The Fed only delayed the inevitable.
Expect the Fed to trot out its minions with all kinds of bluster about the economy being in a good place at least until November.
Expect the same from the Administration.
Do not buy it !
        We are ;looking at a bear market that will slash 35% – 55% off the market averages AS CLUELESS INSTITUTIONS REVISE THEIR “BUY ONLY” ALGOS TO DEFER PURCHASE/SELL.
WHY ?  Because they cannot afford huge losses on the magnitude of 50%, buy hold won’t do it as clients panic and accounts shift over to mother money managhers.

What fed the buying panic in recent years will feed a SELLING PANIC.
It happens !  It always happens and this one is overdue.
BOTTOM LINE: A sharp rebound can be expected as the Fed, Administration, and Street pundits fire off a zillion reasons why this eight-day crunch is temporary, that business is great.  At the very least this was a warning shot of worse to come.
More than likely, it is the beginning of a bear market.
Technical support capable of preventing more major downside at this time lies a little below yesterday’s close. This was a trading range established between February and October 2019.
A bear market scenario would have a 4-6 week rally stall in early March with another leg down.
Triggers could be one tiny smidge of encouraging news about Coronavirus, or as noted above the Fed, i.e. talk of another rate cut.
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Tuesday February 25 “Ignore Fed and Administration Hype”
As I have repeatedly said, a nasty correction was imminent, whether it turns into a bear market (down 20%), depends on what new negatives  hit the market when it attempts to rebound  from that initial correction.
Expect the Fed and Administration to rush out with hype about how good the economy is and what a great time it is to buy stocks.
Don’t buy it !  The hype from both sources has been relentless, but has served to draw investors into the market at extremely overvalued levels.
The U.S. will be lucky to avoid a recession/bear market this year.
Yesterday’s plunge in the market is being blamed on  the spread of coronavirus.  While I recognize the horrors of it, other negative factors are looming to put the survival of this bull market at risk.
Coronavirus is having a big impact now since the market was so overvalued when news of its increasing spread hit.
For one, the 11-year old economy is struggling and if it weren’t for the Fed stepping in with a lot of hype and three rate cuts last year, we would be in a full-blown recession bear market today and the President’s re-election chances diminished.
For another, even if the economy was not on the threshold of a recession, stocks are vastly overvalued (see Feb 24 post below).
What disturbs me most is the lack of truth and accuracy coming from all levels at the top. Nothing is believable and that is dangerous.
This market will get crushed by the economy. The stock market turns ahead of recessions/expansions, the lead time varies.
BOTTOM LINE: Expect a rally attempt in early trading, sparked by “hype.” A lot of  technical damage has been done in the last 7 days, but we have seen five freefalls like this over the last two years, all were followed by recoveries.
The S&P 500 has given up 5% of its value since February 19. That will attract buyers who see this as an opportunity. Overhead supply gets formidable at DJIA 28,720 and S&P 500: 3,315.
        As I have warned relentlessly, we are a high risk, overvaluation in the stock market exceeds all levels in the past except the dot-com bubble 1999-2000.
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Monday February 24, 2020 “I Am Not The Only One Seeing a Bubble Burst”
      This is a very dangerous market, especially since speculative fever is over the top. This is classic bull market top stuff.  It is a bubble and will burst at any time. The Fed and Administration will do everything in their power to prevent a bear market before November, but the new normal is a flash crash, a precipitous 12% – 18% plunge in prices without any warning except from a few of us, one of which is InvesTech Research (see below).
InvesTech Research came out swinging in its Feb.21 issue.  It  blasted the Fed for the “Powell Pivot,” its about-face 13 months ago resorting first to stimulative  rhetoric until it cut its fed funds rate in July followed by two more cuts, as well as  pumping money back into the system and undoing half of the monetary normalizing underway that started in 2017.
The “pivot” headed off a recession and bear market  but created the potential for asset bubbles in the stock market and real estate.
Driven by rate cuts, InvesTech’s  Housing [Bubble]  Bellweather Barometer is surging to extremes not seen since the 2005 real estate bubble burst that preceded the 2007-2009  Great Recession/Bear Market.
Corporate sales are not as easily manipulated as corporate earnings, InvesTech points out, noting that the Price/Sales Ratio of the S&P 500 has surged to a level not seen since the dot-com bubble burst in 1999-2000.
It’s widely known that the Price/Earning Ratio of the S&P 500 is extremely overvalued with the Shiller P/E higher than at any time over 100 years except the 1999-2000 dot-com bubble.
Additionally,  InvesTech  notes that the percent of IPOs with negative earnings  recently reached that same extreme level as in that 1999-2000 bubble burst.
With all the hoopla about Tesla (TSLA), few know it now sports a valuation  higher than that of Honda, Fiat Chrysler, GM and Ford combined.
While the media hypes a historically low unemployment rate, job openings are collapsing. While service employment is still increasing, goods-producing jobs  are tumbling.
InvesTech recommends a 35% cash reserve. If all this sounds familiar it is to readers here.
Bottom Line:   I am in good company with my warning of downside risk. Granted, the Fed will do everything in its power to prevent a recession/bear market in a presidential election year, including more rate cuts.
This is a big week for reports on the economy. The Chicago Fed National Activity Index comes at 8:30 Monday, the Dallas Fed Mfg. Survey at 10:30.
Aside from the Fed standing ready to cut rates if the economy weakens, we can expect the Administration to hype the Hell out of any report that suggests improvement and downplay any that doesn’t.
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Friday February 21, 2020 “Can Phase One Optimism Continue ?”

Yesterday, I wrote that any further weakening in the economy would spark another Fed cut in interest rates, but that was before the release of the Philly Fed Business Outlook for manufacturing and the Leading Economic Indicators (LEI) both of which exceeded  expectations  by a wide margin.  The Philly Fed showed a dramatic surge in business optimism and the LEI a rebound after more than a year of  no-growth.
How much of the rebound in these indicators reflects a rebirth of optimism after Phase One of the China trade agreement will be better known several months from now.
So far, the stock market has indicated some lack of buying in early trading, which suggests it is fully priced.  But, the stock market “is” a leading indicator of economic recession and recovery itself,  so one has to question whether its overvaluation has discouraged buyers at these levels.
What if the economic rebound is not just an initial reaction to the announcement of Phase One of the China  trade agreement and the economy  gains traction ?   That may force the Fed to increase rates, not good for an overvalued stock market.
Bottom line:  Where the economy and stock market go from here is a day-to-day challenge.  Yes, the stock market is historically overvalued, but the bubble phenom can enable it to become yet more overvalued.
But institutions are holding fat gains. Any threat of a recession and they will surely want to lock in gains and clearly not be buying at lofty levels, all of which suggests a major recession/bear market..
One has to accept the level of risk they can afford and raise cash accordingly. ……………………………………………….

Thursday February 20  “Prepare For Another Fed Rate Cut”
       Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
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Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

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Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
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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.
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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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 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.

 

 

 

 

 

 

 

 

Here’s Where It Gets Tricky

INVESTOR’S first read.com – Daily edge before the open
DJIA:  26,957
S&P 500: 3,116
Nasdaq: 8,980
Russell: 1,552
Thursday, February  27, 2020   9:14 a.m.
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brooksie01@aol.com

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TODAY:
BEWARE OF HYPE, LIES AND MISINFORMATION COMING OUT OF THE FED, WASHINGTON AND THE STREET.  This is a presidential election year and there are absolutely no limits as to what can be said or done – none !
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OK, the market averages have plunged 9% in days and we are looking at a big drop at the open. The tendency at bull market tops is to view the initial plunge as a gift to jump back in.
      In the last four such flash crashes, the market recovered to new highs.
      If this is the beginning of the first bear market in 11 years, anyone jumping back in on a rally will get hammered by the next leg down, which could be another 25% to 40% depending on how  economic, political, monetary and psychological  events play out.
Once a bull market disintegrates, all Hell breaks loose, things happen that no one dreamed of and  fear mounts.
Not until the “cauldron of fear boils over” will the market turn up from a bear market bottom leaving investors in the dust with huge losses.  Many will have sold out at the bottom convinced the market will go lower.
Odds favor a technical rebound today, triggered by Fed/Administration hype, but risks are high.  I believe fears of a spread of Coronavirus is partly to blame, the real danger is the economy which is dancing on the edge of sliding into recession.
      Fears of Coronavirus can vanish quickly, a slumping economy can’t. The Fed delayed a recession/bear market a year ago with its abrupt policy change toward ease, but a strong recovery did not develop.
Jumping back in today or in the near future may reward investors, but is the risk worth it.  I issue an occasional “buy” for nimble traders, who are capable of clipping a quick profit on a bounce from a short-term extreme down move in prices, BUT that is only for that kind of skill set.
Again, I repeat, there is an overwhelming urge to jump in after one of these flash crashes. While it would have paid off in the past, you do not want to be wrong this time around.
        The entire scene here (fundamental, technical, political, economic, monetary and psychological could get VERY, VERY UGLY !
       Sooo, what about the Street’s algorithms ?  Are they in ask no questions “buy” mode ?
       If they are now being tweaked for “risk” employing a defer purchase  strategy or worse yet a “sell” mode, we will see the “trap door” affect – straight down.
BOTTOM LINE: I think the economy will be what takes this market down with a bull market top leading a recession by 3-5 months.
A big but short-lived  rally will be triggered if news of a slowdown in the spread of Coronavirus  is reported.  But, it is really the economy that trumps everything.
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Minor Support: DJIA:26,613; S&P 500:3,083; Nasdaq Comp.:8,796
Minor Resistance: DJIA:27,267; S&P 500:3,148; Nasdaq Comp.:9,067
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Wednesday February 26 “Buy: Nimble Traders only – More Downside Ahead”

Probable scenario: an opening rally followed by a sell off then a rally starting after 10:30.  Only the quick afoot.
Add fears of a Sanders presidency to Coronavirus as a reason the Street and press gives for the plunge in the stock market.
But these two issues  wouldn’t have had such an impact if the market was not as historically overvalued as it was (and still is).
What will crush this market is an 11-year old economy that is running out of steam.  The party is over – last call and  the stock market, which always leads recessions and economic recoveries is telling the Street a recession is looming.
We would be in the middle of one if the Fed hadn’t panicked a year ago with hype about easier money then cut its benchmark rate three times before year-end.
Their irresponsible action triggered a 40% + surge in the market averages,
sucking investors into a highly overvalued market.  The Fed only delayed the inevitable.
Expect the Fed to trot out its minions with all kinds of bluster about the economy being in a good place at least until November.
Expect the same from the Administration.
Do not buy it !
        We are ;looking at a bear market that will slash 35% – 55% off the market averages AS CLUELESS INSTITUTIONS REVISE THEIR “BUY ONLY” ALGOS TO DEFER PURCHASE/SELL.
WHY ?  Because they cannot afford huge losses on the magnitude of 50%, buy hold won’t do it as clients panic and accounts shift over to mother money managhers.

What fed the buying panic in recent years will feed a SELLING PANIC.
It happens !  It always happens and this one is overdue.
BOTTOM LINE: A sharp rebound can be expected as the Fed, Administration, and Street pundits fire off a zillion reasons why this eight-day crunch is temporary, that business is great.  At the very least this was a warning shot of worse to come.
More than likely, it is the beginning of a bear market.
Technical support capable of preventing more major downside at this time lies a little below yesterday’s close. This was a trading range established between February and October 2019.
A bear market scenario would have a 4-6 week rally stall in early March with another leg down.
Triggers could be one tiny smidge of encouraging news about Coronavirus, or as noted above the Fed, i.e. talk of another rate cut.
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Tuesday February 25 “Ignore Fed and Administration Hype”
As I have repeatedly said, a nasty correction was imminent, whether it turns into a bear market (down 20%), depends on what new negatives  hit the market when it attempts to rebound  from that initial correction.
Expect the Fed and Administration to rush out with hype about how good the economy is and what a great time it is to buy stocks.
Don’t buy it !  The hype from both sources has been relentless, but has served to draw investors into the market at extremely overvalued levels.
The U.S. will be lucky to avoid a recession/bear market this year.
Yesterday’s plunge in the market is being blamed on  the spread of coronavirus.  While I recognize the horrors of it, other negative factors are looming to put the survival of this bull market at risk.
Coronavirus is having a big impact now since the market was so overvalued when news of its increasing spread hit.
For one, the 11-year old economy is struggling and if it weren’t for the Fed stepping in with a lot of hype and three rate cuts last year, we would be in a full-blown recession bear market today and the President’s re-election chances diminished.
For another, even if the economy was not on the threshold of a recession, stocks are vastly overvalued (see Feb 24 post below).
What disturbs me most is the lack of truth and accuracy coming from all levels at the top. Nothing is believable and that is dangerous.
This market will get crushed by the economy. The stock market turns ahead of recessions/expansions, the lead time varies.
BOTTOM LINE: Expect a rally attempt in early trading, sparked by “hype.” A lot of  technical damage has been done in the last 7 days, but we have seen five freefalls like this over the last two years, all were followed by recoveries.
The S&P 500 has given up 5% of its value since February 19. That will attract buyers who see this as an opportunity. Overhead supply gets formidable at DJIA 28,720 and S&P 500: 3,315.
        As I have warned relentlessly, we are a high risk, overvaluation in the stock market exceeds all levels in the past except the dot-com bubble 1999-2000.
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Monday February 24, 2020 “I Am Not The Only One Seeing a Bubble Burst”
      This is a very dangerous market, especially since speculative fever is over the top. This is classic bull market top stuff.  It is a bubble and will burst at any time. The Fed and Administration will do everything in their power to prevent a bear market before November, but the new normal is a flash crash, a precipitous 12% – 18% plunge in prices without any warning except from a few of us, one of which is InvesTech Research (see below).
InvesTech Research came out swinging in its Feb.21 issue.  It  blasted the Fed for the “Powell Pivot,” its about-face 13 months ago resorting first to stimulative  rhetoric until it cut its fed funds rate in July followed by two more cuts, as well as  pumping money back into the system and undoing half of the monetary normalizing underway that started in 2017.
The “pivot” headed off a recession and bear market  but created the potential for asset bubbles in the stock market and real estate.
Driven by rate cuts, InvesTech’s  Housing [Bubble]  Bellweather Barometer is surging to extremes not seen since the 2005 real estate bubble burst that preceded the 2007-2009  Great Recession/Bear Market.
Corporate sales are not as easily manipulated as corporate earnings, InvesTech points out, noting that the Price/Sales Ratio of the S&P 500 has surged to a level not seen since the dot-com bubble burst in 1999-2000.
It’s widely known that the Price/Earning Ratio of the S&P 500 is extremely overvalued with the Shiller P/E higher than at any time over 100 years except the 1999-2000 dot-com bubble.
Additionally,  InvesTech  notes that the percent of IPOs with negative earnings  recently reached that same extreme level as in that 1999-2000 bubble burst.
With all the hoopla about Tesla (TSLA), few know it now sports a valuation  higher than that of Honda, Fiat Chrysler, GM and Ford combined.
While the media hypes a historically low unemployment rate, job openings are collapsing. While service employment is still increasing, goods-producing jobs  are tumbling.
InvesTech recommends a 35% cash reserve. If all this sounds familiar it is to readers here.
Bottom Line:   I am in good company with my warning of downside risk. Granted, the Fed will do everything in its power to prevent a recession/bear market in a presidential election year, including more rate cuts.
This is a big week for reports on the economy. The Chicago Fed National Activity Index comes at 8:30 Monday, the Dallas Fed Mfg. Survey at 10:30.
Aside from the Fed standing ready to cut rates if the economy weakens, we can expect the Administration to hype the Hell out of any report that suggests improvement and downplay any that doesn’t.
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Friday February 21, 2020 “Can Phase One Optimism Continue ?”

Yesterday, I wrote that any further weakening in the economy would spark another Fed cut in interest rates, but that was before the release of the Philly Fed Business Outlook for manufacturing and the Leading Economic Indicators (LEI) both of which exceeded  expectations  by a wide margin.  The Philly Fed showed a dramatic surge in business optimism and the LEI a rebound after more than a year of  no-growth.
How much of the rebound in these indicators reflects a rebirth of optimism after Phase One of the China trade agreement will be better known several months from now.
So far, the stock market has indicated some lack of buying in early trading, which suggests it is fully priced.  But, the stock market “is” a leading indicator of economic recession and recovery itself,  so one has to question whether its overvaluation has discouraged buyers at these levels.
What if the economic rebound is not just an initial reaction to the announcement of Phase One of the China  trade agreement and the economy  gains traction ?   That may force the Fed to increase rates, not good for an overvalued stock market.
Bottom line:  Where the economy and stock market go from here is a day-to-day challenge.  Yes, the stock market is historically overvalued, but the bubble phenom can enable it to become yet more overvalued.
But institutions are holding fat gains. Any threat of a recession and they will surely want to lock in gains and clearly not be buying at lofty levels, all of which suggests a major recession/bear market..
One has to accept the level of risk they can afford and raise cash accordingly. ……………………………………………….

Thursday February 20  “Prepare For Another Fed Rate Cut”
       Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
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Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

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Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
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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.
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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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 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.

 

 

 

 

 

Buy: Nimble Traders Only – More Downside Ahead

INVESTOR’S first read.com – Daily edge before the open
DJIA:   27,081
S&P 500: 3,128
Nasdaq: 8,965
Russell: 1,571
Tuesday, February  26, 2020   9:14 a.m.
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brooksie01@aol.com

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TODAY:
Probable scenario: an opening rally followed by a sell off then a rally starting after 10:30.  Only the quick afoot.
Add fears of a Sanders presidency to Coronavirus as a reason the Street and press gives for the plunge in the stock market.
But these two issues  wouldn’t have had such an impact if the market was not as historically overvalued as it was (and still is).
What will crush this market is an 11-year old economy that is running out of steam.  The party is over – last call and  the stock market, which always leads recessions and economic recoveries is telling the Street a recession is looming.
We would be in the middle of one if the Fed hadn’t panicked a year ago with hype about easier money then cut its benchmark rate three times before year-end.
Their irresponsible action triggered a 40% + surge in the market averages,
sucking investors into a highly overvalued market.  The Fed only delayed the inevitable.
Expect the Fed to trot out its minions with all kinds of bluster about the economy being in a good place at least until November.
Expect the same from the Administration.
Do not buy it !
We are ;looking at a bear market that will slash 35% – 55% off the market averages AS CLUELESS INSTITUTIONS REVISE THEIR “BUY ONLY” ALGOS TO DEFER PURCHASE/SELL.
WHY ?  Because they cannot afford huge losses on the magnitude of 50%, buy hold won’t do it as clients panic and accounts shift over to mother money managhers.

What fed the buying panic in recent years will feed a SELLING PANIC.
It happens !  It always happens and this one is overdue.
BOTTOM LINE: A sharp rebound can be expected as the Fed, Administration, and Street pundits fire off a zillion reasons why this eight-day crunch is temporary, that business is great.  At the very least this was a warning shot of worse to come.
More than likely, it is the beginning of a bear market.
Technical support capable of preventing more major downside at this time lies a little below yesterday’s close. This was a trading range established between February and October 2019.
A bear market scenario would have a 4-6 week rally stall in early March with another leg down.
Triggers could be one tiny smidge of encouraging news about Coronavirus, or as noted above the Fed, i.e. talk of another rate cut.
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Minor Support: DJIA:27,534; S&P 500:3,151; Nasdaq Comp.:9.192
Minor Resistance: DJIA:27,401; S&P 500:3,167; Nasdaq Comp.:9,097
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Tuesday February 25 “Ignore Fed and Administration Hype”
As I have repeatedly said, a nasty correction was imminent, whether it turns into a bear market (down 20%), depends on what new negatives  hit the market when it attempts to rebound  from that initial correction.
Expect the Fed and Administration to rush out with hype about how good the economy is and what a great time it is to buy stocks.
Don’t buy it !  The hype from both sources has been relentless, but has served to draw investors into the market at extremely overvalued levels.
The U.S. will be lucky to avoid a recession/bear market this year.
Yesterday’s plunge in the market is being blamed on  the spread of coronavirus.  While I recognize the horrors of it, other negative factors are looming to put the survival of this bull market at risk.
Coronavirus is having a big impact now since the market was so overvalued when news of its increasing spread hit.
For one, the 11-year old economy is struggling and if it weren’t for the Fed stepping in with a lot of hype and three rate cuts last year, we would be in a full-blown recession bear market today and the President’s re-election chances diminished.
For another, even if the economy was not on the threshold of a recession, stocks are vastly overvalued (see Feb 24 post below).
What disturbs me most is the lack of truth and accuracy coming from all levels at the top. Nothing is believable and that is dangerous.
This market will get crushed by the economy. The stock market turns ahead of recessions/expansions, the lead time varies.
BOTTOM LINE: Expect a rally attempt in early trading, sparked by “hype.” A lot of  technical damage has been done in the last 7 days, but we have seen five freefalls like this over the last two years, all were followed by recoveries.
The S&P 500 has given up 5% of its value since February 19. That will attract buyers who see this as an opportunity. Overhead supply gets formidable at DJIA 28,720 and S&P 500: 3,315.
        As I have warned relentlessly, we are a high risk, overvaluation in the stock market exceeds all levels in the past except the dot-com bubble 1999-2000.
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Monday February 24, 2020 “I Am Not The Only One Seeing a Bubble Burst”
      This is a very dangerous market, especially since speculative fever is over the top. This is classic bull market top stuff.  It is a bubble and will burst at any time. The Fed and Administration will do everything in their power to prevent a bear market before November, but the new normal is a flash crash, a precipitous 12% – 18% plunge in prices without any warning except from a few of us, one of which is InvesTech Research (see below).
InvesTech Research came out swinging in its Feb.21 issue.  It  blasted the Fed for the “Powell Pivot,” its about-face 13 months ago resorting first to stimulative  rhetoric until it cut its fed funds rate in July followed by two more cuts, as well as  pumping money back into the system and undoing half of the monetary normalizing underway that started in 2017.
The “pivot” headed off a recession and bear market  but created the potential for asset bubbles in the stock market and real estate.
Driven by rate cuts, InvesTech’s  Housing [Bubble]  Bellweather Barometer is surging to extremes not seen since the 2005 real estate bubble burst that preceded the 2007-2009  Great Recession/Bear Market.
Corporate sales are not as easily manipulated as corporate earnings, InvesTech points out, noting that the Price/Sales Ratio of the S&P 500 has surged to a level not seen since the dot-com bubble burst in 1999-2000.
It’s widely known that the Price/Earning Ratio of the S&P 500 is extremely overvalued with the Shiller P/E higher than at any time over 100 years except the 1999-2000 dot-com bubble.
Additionally,  InvesTech  notes that the percent of IPOs with negative earnings  recently reached that same extreme level as in that 1999-2000 bubble burst.
With all the hoopla about Tesla (TSLA), few know it now sports a valuation  higher than that of Honda, Fiat Chrysler, GM and Ford combined.
While the media hypes a historically low unemployment rate, job openings are collapsing. While service employment is still increasing, goods-producing jobs  are tumbling.
InvesTech recommends a 35% cash reserve. If all this sounds familiar it is to readers here.
Bottom Line:   I am in good company with my warning of downside risk. Granted, the Fed will do everything in its power to prevent a recession/bear market in a presidential election year, including more rate cuts.
This is a big week for reports on the economy. The Chicago Fed National Activity Index comes at 8:30 Monday, the Dallas Fed Mfg. Survey at 10:30.
Aside from the Fed standing ready to cut rates if the economy weakens, we can expect the Administration to hype the Hell out of any report that suggests improvement and downplay any that doesn’t.
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Friday February 21, 2020 “Can Phase One Optimism Continue ?”

Yesterday, I wrote that any further weakening in the economy would spark another Fed cut in interest rates, but that was before the release of the Philly Fed Business Outlook for manufacturing and the Leading Economic Indicators (LEI) both of which exceeded  expectations  by a wide margin.  The Philly Fed showed a dramatic surge in business optimism and the LEI a rebound after more than a year of  no-growth.
How much of the rebound in these indicators reflects a rebirth of optimism after Phase One of the China trade agreement will be better known several months from now.
So far, the stock market has indicated some lack of buying in early trading, which suggests it is fully priced.  But, the stock market “is” a leading indicator of economic recession and recovery itself,  so one has to question whether its overvaluation has discouraged buyers at these levels.
What if the economic rebound is not just an initial reaction to the announcement of Phase One of the China  trade agreement and the economy  gains traction ?   That may force the Fed to increase rates, not good for an overvalued stock market.
Bottom line:  Where the economy and stock market go from here is a day-to-day challenge.  Yes, the stock market is historically overvalued, but the bubble phenom can enable it to become yet more overvalued.
But institutions are holding fat gains. Any threat of a recession and they will surely want to lock in gains and clearly not be buying at lofty levels, all of which suggests a major recession/bear market..
One has to accept the level of risk they can afford and raise cash accordingly. ……………………………………………….

Thursday February 20  “Prepare For Another Fed Rate Cut”
       Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
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Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

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Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
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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.
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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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 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
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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.

 

 

 

 

Ignore Fed and Administration Hype

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,960  –
S&P 500: 3,225   –
Nasdaq: 9,221
Russell: 1,628
Monday, February  25, 2020   8:45 a.m.
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gbifr79@gmail.com
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TODAY:
As I have repeatedly said, a nasty correction was imminent, whether it turns into a bear market (down 20%), depends on what new negatives  hit the market when it attempts to rebound  from that initial correction.
Expect the Fed and Administration to rush out with hype about how good the economy is and what a great time it is to buy stocks.
Don’t buy it !  The hype from both sources has been relentless, but has served to draw investors into the market at extremely overvalued levels.
The U.S. will be lucky to avoid a recession/bear market this year.
Yesterday’s plunge in the market is being blamed on  the spread of coronavirus.  While I recognize the horrors of it, other negative factors are looming to put the survival of this bull market at risk.
Coronavirus is having a big impact now since the market was so overvalued when news of its increasing spread hit.
For one, the 11-year old economy is struggling and if it weren’t for the Fed stepping in with a lot of hype and three rate cuts last year, we would be in a full-blown recession bear market today and the President’s re-election chances diminished.
For another, even if the economy was not on the threshold of a recession, stocks are vastly overvalued (see Feb 24 post below).
What disturbs me most is the lack of truth and accuracy coming from all levels at the top. Nothing is believable and that is dangerous.
This market will get crushed by the economy. The stock market turns ahead of recessions/expansions, the lead time varies.
BOTTOM LINE: Expect a rally attempt in early trading, sparked by “hype.” A lot of  technical damage has been done in the last 7 days, but we have seen five freefalls like this over the last two years, all were followed by recoveries.
The S&P 500 has given up 5% of its value since February 19. That will attract buyers who see this as an opportunity. Overhead supply gets formidable at DJIA 28,720 and S&P 500: 3,315.
        As I have warned relentlessly, we are a high risk, overvaluation in the stock market exceeds all levels in the past except the dot-com bubble 1999-2000.

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Minor Support: DJIA:; S&P 500:; Nasdaq Comp.:
Minor Resistance: DJIA:; S&P 500:; Nasdaq Comp.:
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Monday February 24, 2020 “I Am Not The Only One Seeing a Bubble Burst”
      This is a very dangerous market, especially since speculative fever is over the top. This is classic bull market top stuff.  It is a bubble and will burst at any time. The Fed and Administration will do everything in their power to prevent a bear market before November, but the new normal is a flash crash, a precipitous 12% – 18% plunge in prices without any warning except from a few of us, one of which is InvesTech Research (see below).
InvesTech Research came out swinging in its Feb.21 issue.  It  blasted the Fed for the “Powell Pivot,” its about-face 13 months ago resorting first to stimulative  rhetoric until it cut its fed funds rate in July followed by two more cuts, as well as  pumping money back into the system and undoing half of the monetary normalizing underway that started in 2017.
The “pivot” headed off a recession and bear market  but created the potential for asset bubbles in the stock market and real estate.
Driven by rate cuts, InvesTech’s  Housing [Bubble]  Bellweather Barometer is surging to extremes not seen since the 2005 real estate bubble burst that preceded the 2007-2009  Great Recession/Bear Market.
Corporate sales are not as easily manipulated as corporate earnings, InvesTech points out, noting that the Price/Sales Ratio of the S&P 500 has surged to a level not seen since the dot-com bubble burst in 1999-2000.
It’s widely known that the Price/Earning Ratio of the S&P 500 is extremely overvalued with the Shiller P/E higher than at any time over 100 years except the 1999-2000 dot-com bubble.
Additionally,  InvesTech  notes that the percent of IPOs with negative earnings  recently reached that same extreme level as in that 1999-2000 bubble burst.
With all the hoopla about Tesla (TSLA), few know it now sports a valuation  higher than that of Honda, Fiat Chrysler, GM and Ford combined.
While the media hypes a historically low unemployment rate, job openings are collapsing. While service employment is still increasing, goods-producing jobs  are tumbling.
InvesTech recommends a 35% cash reserve. If all this sounds familiar it is to readers here.
Bottom Line:   I am in good company with my warning of downside risk. Granted, the Fed will do everything in its power to prevent a recession/bear market in a presidential election year, including more rate cuts.
This is a big week for reports on the economy. The Chicago Fed National Activity Index comes at 8:30 Monday, the Dallas Fed Mfg. Survey at 10:30.
Aside from the Fed standing ready to cut rates if the economy weakens, we can expect the Administration to hype the Hell out of any report that suggests improvement and downplay any that doesn’t.
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Friday February 21, 2020 “Can Phase One Optimism Continue ?”

Yesterday, I wrote that any further weakening in the economy would spark another Fed cut in interest rates, but that was before the release of the Philly Fed Business Outlook for manufacturing and the Leading Economic Indicators (LEI) both of which exceeded  expectations  by a wide margin.  The Philly Fed showed a dramatic surge in business optimism and the LEI a rebound after more than a year of  no-growth.
How much of the rebound in these indicators reflects a rebirth of optimism after Phase One of the China trade agreement will be better known several months from now.
So far, the stock market has indicated some lack of buying in early trading, which suggests it is fully priced.  But, the stock market “is” a leading indicator of economic recession and recovery itself,  so one has to question whether its overvaluation has discouraged buyers at these levels.
What if the economic rebound is not just an initial reaction to the announcement of Phase One of the China  trade agreement and the economy  gains traction ?   That may force the Fed to increase rates, not good for an overvalued stock market.
Bottom line:  Where the economy and stock market go from here is a day-to-day challenge.  Yes, the stock market is historically overvalued, but the bubble phenom can enable it to become yet more overvalued.
But institutions are holding fat gains. Any threat of a recession and they will surely want to lock in gains and clearly not be buying at lofty levels, all of which suggests a major recession/bear market..
One has to accept the level of risk they can afford and raise cash accordingly. ……………………………………………….

Thursday February 20  “Prepare For Another Fed Rate Cut”
       Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
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Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

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Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
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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.
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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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 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
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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.

 

 

 

I Am Not The Only One Seeing a Bubble Burst

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,986
S&P 500: 3,337
Nasdaq: 9,576
Russell: 1,678
For Monday, February  24, 2020    Sent Sunday evening at 5:55 p.m.
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NOTE: I am sending Monday’s blog tonight, since I will be unable to send it early Monday morning. This means that I will not have access Monday morning to include here.

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gbifr79@gmail.com
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TODAY:
      This is a very dangerous market, especially since speculative fever is over the top. This is classic bull market top stuff.  It is a bubble and will burst at any time. The Fed and Administration will do everything in their power to prevent a bear market before November, but the new normal is a flash crash, a precipitous 12% – 18% plunge in prices without any warning except from a few of us, one of which is InvesTech Research (see below).
InvesTech Research came out swinging in its Feb.21 issue.  It  blasted the Fed for the “Powell Pivot,” its about-face 13 months ago resorting first to stimulative  rhetoric until it cut its fed funds rate in July followed by two more cuts, as well as  pumping money back into the system and undoing half of the monetary normalizing underway that started in 2017.
The “pivot” headed off a recession and bear market  but created the potential for asset bubbles in the stock market and real estate.
Driven by rate cuts, InvesTech’s  Housing [Bubble]  Bellweather Barometer is surging to extremes not seen since the 2005 real estate bubble burst that preceded the 2007-2009  Great Recession/Bear Market.
Corporate sales are not as easily manipulated as corporate earnings, InvesTech points out, noting that the Price/Sales Ratio of the S&P 500 has surged to a level not seen since the dot-com bubble burst in 1999-2000.
It’s widely known that the Price/Earning Ratio of the S&P 500 is extremely overvalued with the Shiller P/E higher than at any time over 100 years except the 1999-2000 dot-com bubble.
Additionally,  InvesTech  notes that the percent of IPOs with negative earnings  recently reached that same extreme level as in that 1999-2000 bubble burst.
With all the hoopla about Tesla (TSLA), few know it now sports a valuation  higher than that of Honda, Fiat Chrysler, GM and Ford combined.
While the media hypes a historically low unemployment rate, job openings are collapsing. While service employment is still increasing, goods-producing jobs  are tumbling.
InvesTech recommends a 35% cash reserve. If all this sounds familiar it is to readers here.
Bottom Line:   I am in good company with my warning of downside risk. Granted, the Fed will do everything in its power to prevent a recession/bear market in a presidential election year, including more rate cuts.
This is a big week for reports on the economy. The Chicago Fed National Activity Index comes at 8:30 Monday, the Dallas Fed Mfg. Survey at 10:30.
Aside from the Fed standing ready to cut rates if the economy weakens, we can expect the Administration to hype the Hell out of any report that suggests improvement and downplay any that doesn’t.
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Minor Support: DJIA:28,951; S&P 500:3,381; Nasdaq Comp.:9,546
Minor Resistance: DJIA:29,097; S&P 500:3,349; Nasdaq Comp.:9,600
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Friday February 21, 2020 “Can Phase One Optimism Continue ?”

Yesterday, I wrote that any further weakening in the economy would spark another Fed cut in interest rates, but that was before the release of the Philly Fed Business Outlook for manufacturing and the Leading Economic Indicators (LEI) both of which exceeded  expectations  by a wide margin.  The Philly Fed showed a dramatic surge in business optimism and the LEI a rebound after more than a year of  no-growth.
How much of the rebound in these indicators reflects a rebirth of optimism after Phase One of the China trade agreement will be better known several months from now.
So far, the stock market has indicated some lack of buying in early trading, which suggests it is fully priced.  But, the stock market “is” a leading indicator of economic recession and recovery itself,  so one has to question whether its overvaluation has discouraged buyers at these levels.
What if the economic rebound is not just an initial reaction to the announcement of Phase One of the China  trade agreement and the economy  gains traction ?   That may force the Fed to increase rates, not good for an overvalued stock market.
Bottom line:  Where the economy and stock market go from here is a day-to-day challenge.  Yes, the stock market is historically overvalued, but the bubble phenom can enable it to become yet more overvalued.
But institutions are holding fat gains. Any threat of a recession and they will surely want to lock in gains and clearly not be buying at lofty levels, all of which suggests a major recession/bear market..
One has to accept the level of risk they can afford and raise cash accordingly. ……………………………………………….

Thursday February 20  “Prepare For Another Fed Rate Cut”
       Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
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Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

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Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
…………………………………………………………………………;/

 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.

 

 

 

 

 

 

Can Phase One Trade Optimism Continue ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,219
S&P 500: 3,373
Nasdaq: 9,750
Russell: 1,696
Friday, February  21, 2020     9:51 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Yesterday, I wrote that any further weakening in the economy would spark another Fed cut in interest rates, but that was before the release of the Philly Fed Business Outlook for manufacturing and the Leading Economic Indicators (LEI) both of which exceeded  expectations  by a wide margin.  The Philly Fed showed a dramatic surge in business optimism and the LEI a rebound after more than a year of  no-growth.
How much of the rebound in these indicators reflects a rebirth of optimism after Phase One of the China trade agreement will be better known several months from now.
So far, the stock market has indicated some lack of buying in early trading, which suggests it is fully priced.  But, the stock market “is” a leading indicator of economic recession and recovery itself,  so one has to question whether its overvaluation has discouraged buyers at these levels.
What if the economic rebound is not just an initial reaction to the announcement of Phase One of the China  trade agreement and the economy  gains traction ?   That may force the Fed to increase rates, not good for an overvalued stock market.
Bottom line:  Where the economy and stock market go from here is a day-to-day challenge.  Yes, the stock market is historically overvalued, but the bubble phenom can enable it to become yet more overvalued.
But institutions are holding fat gains. Any threat of a recession and they will surely want to lock in gains and clearly not be buying at lofty levels, all of which suggests a major recession/bear market..
One has to accept the level of risk they can afford and raise cash accordingly. ……………………………………………….
Minor Support: DJIA:29,131; S&P 500:3,3656; Nasdaq Comp.:9,717
Minor Resistance: DJIA:29,283; S&P 500:3,381; Nasdaq Comp.:9,779
……………………………………………………….
Thursday February 20  “Prepare For Another Fed Rate Cut”
       Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
…………………………………………………………………….
Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

…………………………………………………………………

Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
…………………………………………………………………………;/

 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.

 

 

 

 

 

Prepare For Another Fed Rate Cut

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,348
S&P 500: 3,386
Nasdaq: 9,817
Russell: 1,692
Thursday, February  20, 2020     9:11 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Pardon me, when I return to my warning about the bubble in stock prices, which stands to inflate from  bubble  to a pre-burst  status.
A flash crash at any time.
Actually, we have had several bubble bursts since early January 2018 which preceded  a 12% plunge in less than two weeks. The bubble re-inflated again in June then burst in early October followed by a 20% plunge in Q4.
So yes, they do burst and will burst again.  Timing is difficult.
January, a year ago the Fed decided it had couldn’t let  a normal  self-correcting economic cycle take its course  and intervened with hype of easier money and three cuts in its fed funds rate starting in July.
It worked, at least for now, but especially for the stock market which soared more than 44% in 14 months.
While a recession was delayed, a recovery is suspect.
I believe the Fed will cut rates again regardless of what it says and that it would clearly look like they were trying to ensure President Trump of re-election in November.
What concerns me is that the Fed has set the stage for a horrendous crunch in stock prices.  It single handedly has inflated the bubble and sucked millions of unsuspecting investors into the market at overvaluation levels seen only once in 100+ years.   Lambs led to the slaughter.
I believe in stock prices trading freely without interference by the Fed and less micro-management of the economy, as well.  The Fed has consistently created economic contractions and recoveries with interest rate policy changes and that is interfering with normal economic cycles.
……………………………………………….
Minor Support: DJIA:29,317; S&P 500:3,381; Nasdaq Comp.:9,807
Minor Resistance: DJIA:29,373; S&P 500:3,387; Nasdaq Comp.:9,821
……………………………………………………….
Wednesday  Feb 19, 2020  “The Fed Holds The Trump Card”

While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .

…………………………………………………………………

Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
…………………………………………………………………………;/

 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.

 

 

 

 

The Fed Holds The Trump Card

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,232
S&P 500: 3,370
Nasdaq: 9 ,732
Russell: 1,653
Wednesday  February  19, 2020     9:03 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
While the Fed has stated it does not expect to cut rates again this year, it will if the economy  begins to weaken, the result being President Trump’s re-election  chances will be vastly improved.
        The Fed’s about-face on policy a year ago headed off a recession/bear market, which would have been devastating for Trump’s re-election.
The Street favors re-election, so further Fed rate cuts should  be bullish.
But investors can’t bet the ranch on that simplistic conclusion.
If the economy is “in a good place” as Fed Chief Jerome Powell claims, why the need to cut rates  ?
          Then too, with a historically overvalued stock market, what else can the Fed do to pump it up, more importantly, what can the Fed do to trigger a recovery if the economy sinks into a recession and the  stock market plunges ?
 Bottom line:  We are in uncharted waters, downside risk outweighs upside potential.  What worked a year ago when the Fed stepped in to delay a recession/bear market may not work this time with the S&P 500 up more than 43% after its 20%, Q4, 2018 plunge.
A rate cut, or just a hint of one coming out of the FOMC minutes today, could trigger a rally.  What’s more, how much more stimulus is left to push the an 11-year old bull market  higher when it already  is more overvalued than any bull market in the past 100 years except for the 1999 – 2000 dot-com speculative pig-out ?   Easy does it .
 ……………………………………………….
Minor Support: DJIA:29,156; S&P 500:3,357; Nasdaq Comp.:9,721
Minor Resistance: DJIA:29,297; S&P 500:3,373; Nasdaq Comp.:9,757
…………………………………………………………………

Tuesday, February 18, 2020 “Cash “is” an Investment”
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.
…………………………………………………………………………;/

 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH “is” An Investment

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,398
S&P 500: 3,380
Nasdaq: 9,731
Russell: 1,687
Tuesday February  18, 2020     9:03 a.m.

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
Cash “is” an investment.
1) It is a cushion against portfolio losses in a major sell off/bear market (down 30% – 50%).
2) It  is a reserve for emergencies avoiding the need to sell stock.
3) It is a reservoir  that can be tapped to buy at lower prices in the event a major correction.
What an investors does not want to do is to be forced to sell after a major hit to their portfolio. For example, if they have a major expense looming like college expenses or a house, or uncovered medical expenses. Or they are withdrawing funds from an IRA or retirement account, nursing home or simply need funds when income sources vanish.
Why don’t investors want to maintain a cash reserve ?
1) They want to maximize return.
2) Fear of mission out (FOMO) on opportunities to score.
3) Greed, a normal human emotion. It intensifies as bull markets surge.
4) Hype – by the Fed, Administration, Street pundits and the Press which reports the market hitting new highs though it may only be by a miniscule gain.
5) Money managers. Financial advisers get paid for investment in stocks, not cash.  The responsible, savvy and gutsy ones will raise a lot of cash as a bull market matures even at risk of losing an account.
Every bull market top I have experienced since 1966 has been marked by these issues, and they are not hard to spot. All one has to do is objectively track their own emotions.
-Are you spending next year’s projected winnings ahead of time ?
-Do you instantly reject any case for a bear market however reasonable ?
-You can’t wait for the market to open to check your stocks.
-You are foolishly buying a stock simply because you hope to sell it to some other fool at a higher price.
Doesn’t the stock market ALWAYS REBOUND TO NEW HIGHS ?
So far it always has.  But the problem is it is only normal to be overwhelmed with fear when the stock market is plunging.  The broad-based, blue chip S&P 500 declined more than 50% in the last two bear markets (1998-2000, 2007-2009).
Once a market drops 40% the “I can’t stand it anymore” pressure forces investors to sell, sometimes most of their portfolio and usually close to the bear market bottom denying them the opportunity to benefit from next bull market.
The buy/hold no matter what mentality has its downside.  It can take years for the market to recoup bear market losses.  A cash reserve would have minimized those losses, even provided an investor to buy-in at lower prices.
CONCLUSION:  The market will jump and drop on reports of an increase or decrease in new cases of Coronavirus, but the market’s  trend will be determined by other factors, primarily the outlook for the economy over the next 6 to 9 months.
January’s Industrial Production took another hit, dropping 0.3% (m/m)bringing the annual rate of decline to 0.8%. With only one exception over 50 years, this kind of weakness has resulted in a recession.
One year ago, a change in Fed policy prevented (delayed) a recession and triggered a surge in stock prices.   If the Fed sees any new weakness in the economy, it will cut rates for the fourth and fifth time since last summer to prevent a recession/bear market in a presidential election year practically assuring President Trump his re-election even though it has vowed not to cut rates again.
Personally, I don’t think the Fed should be in the business of micro-managing the economy and stock market. This kind of meddling impedes both from  making normal and healthy adjustments that ensure stable markets going forward.
A flash crash (3-day plunge of 12%+) can occur at any time. Like a rogue wave, they are unpredictable.  Easy does it !!  A  cash reserve of at least 30% is simply smart.  Under the circumstances, I’d prefer a 60% reserve.

……………………………………………….
Minor Support: DJIA:29,357; S&P 500:3,37; Nasdaq Comp.:9,721
Minor Resistance: DJIA:29,426; S&P 500:3,387; Nasdaq Comp.:9,736
…………………………………………………………………

Friday February 14 “BIG Bubbles….. BIG Burst
  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…   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.

 

 

 

 

 

 

 

 

 

 

 

 

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.
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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.