Why, Oh Why Would the Fed Cut Rates ????

INVESTOR’S first read.com – Daily edge before the open
DJIA :27,219
S&P 500: 2,984
Nasdaq Comp.:8,185
Russell 2000: 1,550
Thursday July 18, 2019
   8:27 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The Street has celebrated a cut in the Fed funds rate on the 31st in advance, without considering two things.  One, it may not happen.  Two, the Fed would be doing so to head off a recession.
No recession has ever occurred without a bear market accompanying it. In fact, Fed interest rate cuts have preceded all  recessions in the last 50 years.
So why the celebration ?
       Does the Street believe the Fed can prevent a recession ?
Possible !
       If it can’t, the stock market is headed south, especially since it is significantly overpriced. Based on the Shiller price/earnings ratio, the S&P 500 is pricier than at any time ever except the 2000 – 2002 bubble-burst fiasco, which triggered a 50% drop in the S&P 500 (78% drop Nasdaq Comp.).
Buyers of stocks are seeking some kind of yield, since that is no longer possible in bonds.  That’s fine so long as an investor doesn’t see the value of their stocks drop 20% or more.
At some point, buyers will walk away, realizing paying up for stocks with the risk of recession running high. That will contribute to a downdraft in stocks. That will trigger selling in stocks. That will be the beginning of a bear market.
There are no “new eras.” Reality rules. At best, the Fed can delay a recession/bear market, it will happen.
…………………………………………….
TECHNICAL
Minor Support: DJIA:27,157; S&P 500:2,987;Nasdaq Comp.:8,168
Minor Resistance: DJIA:27,251; S&P500:2,989;Nasdaq Comp.:8,193

………………………………………….
Wednesday (July 17)    “Street Awaits Q2 Earnings + Fed Rate Cut”

Q2 earnings will have an impact on stocks this month.  FactSet is expecting S&P 500 Q2 earnings to decline  3.0%, however for all of 2019, it is forecasting a gain of 4.3%.
Any growth better or worse than that will impact the market accordingly.
At this point, the Fed calls the shots.  It has not done anything with interest rates, but is expected to cut its fed funds rate on July 31.
The Fed  has managed to run stock prices up 28% since Late December with rhetoric alone after it abruptly changed Fed policy from restraint to ease, surprisingly days after raising its rate December 19 !!
While the Fed is responding to a global foot race to cut interest  rates (some to negative), in face of global economic weakness, I think the US Fed sees a recession looming and wants to head it off before 2020, a presidential election year.
      No recession has ever occurred without a bear market, which tend to start  (and end) before a recession is officially declared.
      FYI: generally, a recession is declared after two consecutive declines in the GDP. Officially, the National Bureau of Economic Research (NBER) makes that decision bases on a host of data, and with a lag time of months.
What to do: The market is pricey !  But speculative fever is running high so it can go higher.  At these levels, RISK is high, and the new normal for stock prices is for sharp corrections rather than slow trending ones. A cash reserve of 30%-35% is a good idea.

 

Tuesday     (July 16)
If the Fed Can Prevent a Recession
First, re-read yesterday’s post below.
     If the Fed can prevent a recession with an  interest rate/QE policy,
we won’t have a bear market, but will have corrections of 5% – 11% from time to time,  assuming  we don’t have a runaway speculative binge leading to a bubble burst and correction in excess of 30%.
This happened at the 2000 – 2002  dot-com bull market top, one which led to a 50% drop in the S&P 500 and 78% plunge in Nasdaq Comp. index.
Currently the Shiller cyclically adjusted price/earnings ratio for the S&P 500 is 30.74, 85% above its historic mean.  The high for the S&P’s P/E in the dot-com boom was 44.19, hit in December 1999.
Today’s market is not driven by hundreds of  absurdly overpriced stocks as was the case in 2000 – 2002, so a P/E of 44 won’t be achieved.
Clearly, the Fed has the Street’s back. Any major decline will be met with Fed action or just verbal hype up to a point.
         If the fed fails to prevent a recession, we will have a bear market, and all those investors who rushed it to buy at current levels will get hammered.

    

 

Monday  (July 14)
There Has Never Been a Recession Without a Bear Market

ONE: There is one reason
the Fed abruptly reversed its interest rate policy from restraint to ease – It sees a serious risk of RECESSION.

TWO: There has never been a recession that has NOT been accompanied by a bear market (decline ranging from S&P 500 20% to 55%). There have been bear markets that were NOT accompanied by recessions ( 1961-1962, 1966, 1971, 1987).

The buyers’ panic we are seeing now, which started  four days ago with Fed hints of a rate cut and with the S&P 500 more overvalued than at any time except the  2000-2002, dot-com bubble burst (S&P 500 down 50%, Nasdaq Comp. down 78%) has all the makings of  becoming another a bubble burst.

In January, the Fed reversed policy to one of “ease” when the S&P 500 plunged 20% in Q4. Since then, it has nurtured the stock market back up with hints of a rate cut and misleading comments about stock values and the economy’s health.

Obviously, the Street is assuming the Fed will be able to prevent a recession, ergo, the heavy buying.  If they are wrong, we will have a nasty bear market which will be devastating to all investors especially, those rushing in to buy at these levels.

Even if the Fed can prevent a recession, stocks are pricey at these levels.
………………………………………………………………………
Friday    (July 12) “Oh My, Not Another Perfect Storm”
Three of the Dow’s 30 stocks, Goldman Sachs (GS +4.54), United Healthcare (UNH +12.41), and Boeing (BA +6.65) accounted for 160 points of the Dow’s 227-point rise (70%) yesterday, while the broader based S&P 500  advanced less than a third as much, the Nasdaq Comp. declined as did the unweighted Value Line Composite.
Yesterday, the DJIA gave the impression the market was hotter than it was, and that distortion could be a warning sign.
This is the fourth time the DJIA and S&P 500 have probed this area since January 2018 after interim  plunges of 12% (Jan/Feb 2018); 20% (Q4 2018) and 8% (May/June 2019).
       The last two rebounds were mostly orchestrated by comments by Fed Chief Jerome Powell who came close to guaranteeing the Street the Fed will cut interest rates.
Again, I ask – WHY does the Fed see a need to cut rates ?
Again, I add -the Fed must expect a recession, and clearly they don’t want that to happen just prior to, or during a presidential election year.
         Sooooo, at least verbally, the Fed is talking the stock market up, sucking investors in to stocks even knowing there is a high risk of recession conditions that have always hammered stocks.
The responsible thing to do
would be to outline what the economy’s problems are -manufacturing, home building costs (tariffs), consumer spend, excess debt at all levels, and risk for equities.
With interest rates tanking, investors are seeking a return in stocks, which thanks to Fed hype, are providing that through appreciation and to a lesser degree– a dividend yield.
Ironically, it is the institutions who are getting sucker punched this time, the little guy has been selling having sold $25 billion of stocks in the week ending July 2 as the market was hitting new highs.
Yet, another PERFECT STORM !
………………………………………………….

Thursday  (July 11)  “Fed – Drunk With Power ?”

Should the Fed intentionally drive up stock prices at a time it has changed its interest rate policy to head off a recession ?
If this is not intentional, these bankers are clueless about risk.
The Fed’s rhetoric was mostly responsible for turning  the market around in January after a 20%, Q4 plunge in the S&P 500 last year, likewise after a 7.6% plunge in May/June.
But why now with the market averages at all-time highs should it soft-peddle the increasing evidence of a recession with comments like, “a number of government policy issues have yet to be resolved, including trade  developments, the federal debt ceiling, and Brexit ?”
Why not tell it like it is ?  The 10-year economic recovery is over.  Global economies are slumping.
LET THE STOCK MARKET FIND A LEVEL THAT DISCOUNTS THE REAL PROBLEMS LOOMING OUT THERE.
TELL US, WE CAN HANDLE IT. THE MARKET WILL TRADE LOWER, BUT WILL EVENTUALLY WHEN THE TRUTH IS KNOWN.
        Lower rates help borrowers, but hurts people on fixed income. Borrowing at the individual, corporate and government is uncomfortably high, so more borrowing to goose the economy is limited.
The Fed claims independence, Fed Chief Powell denies he is political, but is doing everything to head off a recession in a presidential election year, and sustain a bull market on top of that.
It is what it is. My problem is all this rhetoric is driving stocks up, sucking investors in at a time business sucks and that IS NOT IN ANYONE’s INTEREST —-except the BIG money which is probably selling into the strength. Damn !
………………………………………….
Wednesday    (July 10)
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.
……………………………………………..
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
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 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Street Awaits: Q2 Earnings + Fed Rate Cut

INVESTOR’S first read.com – Daily edge before the open
DJIA :27,335
S&P 500: 3,004
Nasdaq Comp.:8,222
Russell 2000: 1,561
Wednesday  July 17, 2019
   8:27 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Q2 earnings
will have an impact on stocks this month.  FactSet is expecting S&P 500 Q2 earnings to decline  3.0%, however for all of 2019, it is forecasting a gain of 4.3%.
Any growth better or worse than that will impact the market accordingly.
At this point, the Fed calls the shots.  It has not done anything with interest rates, but is expected to cut its fed funds rate on July 31.
The Fed  has managed to run stock prices up 28% since Late December with rhetoric alone after it abruptly changed Fed policy from restraint to ease, surprisingly days after raising its rate December 19 !!
While the Fed is responding to a global foot race to cut interest  rates (some to negative), in face of global economic weakness, I think the US Fed sees a recession looming and wants to head it off before 2020, a presidential election year.
      No recession has ever occurred without a bear market, which tend to start  (and end) before a recession is officially declared.
      FYI: generally, a recession is declared after two consecutive declines in the GDP. Officially, the National Bureau of Economic Research (NBER) makes that decision bases on a host of data, and with a lag time of months.
What to do: The market is pricey !  But speculative fever is running high so it can go higher.  At these levels, RISK is high, and the new normal for stock prices is for sharp corrections rather than slow trending ones. A cash reserve of 30%-35% is a good idea.
…………………………………………….
TECHNICAL
Minor Support: DJIA:27,304; S&P 500:3,0001;Nasdaq Comp.:8,212
Minor Resistance: DJIA:27,374; S&P500:3011;Nasdaq Comp.:8,236

………………………………………….
Tuesday     (July 16)
If the Fed Can Prevent a Recession
First, re-read yesterday’s post below.
     If the Fed can prevent a recession with an  interest rate/QE policy,
we won’t have a bear market, but will have corrections of 5% – 11% from time to time,  assuming  we don’t have a runaway speculative binge leading to a bubble burst and correction in excess of 30%.
This happened at the 2000 – 2002  dot-com bull market top, one which led to a 50% drop in the S&P 500 and 78% plunge in Nasdaq Comp. index.
Currently the Shiller cyclically adjusted price/earnings ratio for the S&P 500 is 30.74, 85% above its historic mean.  The high for the S&P’s P/E in the dot-com boom was 44.19, hit in December 1999.
Today’s market is not driven by hundreds of  absurdly overpriced stocks as was the case in 2000 – 2002, so a P/E of 44 won’t be achieved.
Clearly, the Fed has the Street’s back. Any major decline will be met with Fed action or just verbal hype up to a point.
         If the fed fails to prevent a recession, we will have a bear market, and all those investors who rushed it to buy at current levels will get hammered.

    

 

Monday  (July 14)
There Has Never Been a Recession Without a Bear Market

ONE: There is one reason
the Fed abruptly reversed its interest rate policy from restraint to ease – It sees a serious risk of RECESSION.

TWO: There has never been a recession that has NOT been accompanied by a bear market (decline ranging from S&P 500 20% to 55%). There have been bear markets that were NOT accompanied by recessions ( 1961-1962, 1966, 1971, 1987).

The buyers’ panic we are seeing now, which started  four days ago with Fed hints of a rate cut and with the S&P 500 more overvalued than at any time except the  2000-2002, dot-com bubble burst (S&P 500 down 50%, Nasdaq Comp. down 78%) has all the makings of  becoming another a bubble burst.

In January, the Fed reversed policy to one of “ease” when the S&P 500 plunged 20% in Q4. Since then, it has nurtured the stock market back up with hints of a rate cut and misleading comments about stock values and the economy’s health.

Obviously, the Street is assuming the Fed will be able to prevent a recession, ergo, the heavy buying.  If they are wrong, we will have a nasty bear market which will be devastating to all investors especially, those rushing in to buy at these levels.

Even if the Fed can prevent a recession, stocks are pricey at these levels.
………………………………………………………………………
Friday    (July 12) “Oh My, Not Another Perfect Storm”
Three of the Dow’s 30 stocks, Goldman Sachs (GS +4.54), United Healthcare (UNH +12.41), and Boeing (BA +6.65) accounted for 160 points of the Dow’s 227-point rise (70%) yesterday, while the broader based S&P 500  advanced less than a third as much, the Nasdaq Comp. declined as did the unweighted Value Line Composite.
Yesterday, the DJIA gave the impression the market was hotter than it was, and that distortion could be a warning sign.
This is the fourth time the DJIA and S&P 500 have probed this area since January 2018 after interim  plunges of 12% (Jan/Feb 2018); 20% (Q4 2018) and 8% (May/June 2019).
       The last two rebounds were mostly orchestrated by comments by Fed Chief Jerome Powell who came close to guaranteeing the Street the Fed will cut interest rates.
Again, I ask – WHY does the Fed see a need to cut rates ?
Again, I add -the Fed must expect a recession, and clearly they don’t want that to happen just prior to, or during a presidential election year.
         Sooooo, at least verbally, the Fed is talking the stock market up, sucking investors in to stocks even knowing there is a high risk of recession conditions that have always hammered stocks.
The responsible thing to do
would be to outline what the economy’s problems are -manufacturing, home building costs (tariffs), consumer spend, excess debt at all levels, and risk for equities.
With interest rates tanking, investors are seeking a return in stocks, which thanks to Fed hype, are providing that through appreciation and to a lesser degree– a dividend yield.
Ironically, it is the institutions who are getting sucker punched this time, the little guy has been selling having sold $25 billion of stocks in the week ending July 2 as the market was hitting new highs.
Yet, another PERFECT STORM !
………………………………………………….

Thursday  (July 11)  “Fed – Drunk With Power ?”

Should the Fed intentionally drive up stock prices at a time it has changed its interest rate policy to head off a recession ?
If this is not intentional, these bankers are clueless about risk.
The Fed’s rhetoric was mostly responsible for turning  the market around in January after a 20%, Q4 plunge in the S&P 500 last year, likewise after a 7.6% plunge in May/June.
But why now with the market averages at all-time highs should it soft-peddle the increasing evidence of a recession with comments like, “a number of government policy issues have yet to be resolved, including trade  developments, the federal debt ceiling, and Brexit ?”
Why not tell it like it is ?  The 10-year economic recovery is over.  Global economies are slumping.
LET THE STOCK MARKET FIND A LEVEL THAT DISCOUNTS THE REAL PROBLEMS LOOMING OUT THERE.
TELL US, WE CAN HANDLE IT. THE MARKET WILL TRADE LOWER, BUT WILL EVENTUALLY WHEN THE TRUTH IS KNOWN.
        Lower rates help borrowers, but hurts people on fixed income. Borrowing at the individual, corporate and government is uncomfortably high, so more borrowing to goose the economy is limited.
The Fed claims independence, Fed Chief Powell denies he is political, but is doing everything to head off a recession in a presidential election year, and sustain a bull market on top of that.
It is what it is. My problem is all this rhetoric is driving stocks up, sucking investors in at a time business sucks and that IS NOT IN ANYONE’s INTEREST —-except the BIG money which is probably selling into the strength. Damn !
………………………………………….
Wednesday    (July 10)
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.
……………………………………………..
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
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 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If the Fed Can Prevent a Recession

INVESTOR’S first read.com – Daily edge before the open
DJIA :27,358
S&P 500: 3,014
Nasdaq Comp.:8,258
Russell 2000: 1,561
Tuesday  July 16, 2019
   9:14a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
     First, re-read yesterday’s post below.
     If the Fed can prevent a recession with an  interest rate/QE policy,
we won’t have a bear market, but will have corrections of 5% – 11% from time to time,  assuming  we don’t have a runaway speculative binge leading to a bubble burst and correction in excess of 30%.
This happened at the 2000 – 2002  dot-com bull market top, one which led to a 50% drop in the S&P 500 and 78% plunge in Nasdaq Comp. index.
Currently the Shiller cyclically adjusted price/earnings ratio for the S&P 500 is 30.74, 85% above its historic mean.  The high for the S&P’s P/E in the dot-com boom was 44.19, hit in December 1999.
Today’s market is not driven by hundreds of  absurdly overpriced stocks as was the case in 2000 – 2002, so a P/E of 44 won’t be achieved.
Clearly, the Fed has the Street’s back. Any major decline will be met with Fed action or just verbal hype up to a point.
         If the fed fails to prevent a recession, we will have a bear market, and all those investors who rushed it to buy at current levels will get hammered.

    

…………………………………………….
TECHNICAL
Minor Support: DJIA:27,347; S&P 500:3,013;Nasdaq Comp.:8,254
Minor Resistance: DJIA:27,460 ; S&P500:3,026;Nasdaq Comp.:8,288

………………………………………….
SHORT & SWEET:
There Has Never Been a Recession Without a Bear Market

ONE: There is one reason
the Fed abruptly reversed its interest rate policy from restraint to ease – It sees a serious risk of RECESSION.

TWO: There has never been a recession that has NOT been accompanied by a bear market (decline ranging from S&P 500 20% to 55%). There have been bear markets that were NOT accompanied by recessions ( 1961-1962, 1966, 1971, 1987).

The buyers’ panic we are seeing now, which started  four days ago with Fed hints of a rate cut and with the S&P 500 more overvalued than at any time except the  2000-2002, dot-com bubble burst (S&P 500 down 50%, Nasdaq Comp. down 78%) has all the makings of  becoming another a bubble burst.

In January, the Fed reversed policy to one of “ease” when the S&P 500 plunged 20% in Q4. Since then, it has nurtured the stock market back up with hints of a rate cut and misleading comments about stock values and the economy’s health.

Obviously, the Street is assuming the Fed will be able to prevent a recession, ergo, the heavy buying.  If they are wrong, we will have a nasty bear market which will be devastating to all investors especially, those rushing in to buy at these levels.

Even if the Fed can prevent a recession, stocks are pricey at these levels.
………………………………………………………………………
Friday    (July 12) “Oh My, Not Another Perfect Storm”
Three of the Dow’s 30 stocks, Goldman Sachs (GS +4.54), United Healthcare (UNH +12.41), and Boeing (BA +6.65) accounted for 160 points of the Dow’s 227-point rise (70%) yesterday, while the broader based S&P 500  advanced less than a third as much, the Nasdaq Comp. declined as did the unweighted Value Line Composite.
Yesterday, the DJIA gave the impression the market was hotter than it was, and that distortion could be a warning sign.
This is the fourth time the DJIA and S&P 500 have probed this area since January 2018 after interim  plunges of 12% (Jan/Feb 2018); 20% (Q4 2018) and 8% (May/June 2019).
       The last two rebounds were mostly orchestrated by comments by Fed Chief Jerome Powell who came close to guaranteeing the Street the Fed will cut interest rates.
Again, I ask – WHY does the Fed see a need to cut rates ?
Again, I add -the Fed must expect a recession, and clearly they don’t want that to happen just prior to, or during a presidential election year.
         Sooooo, at least verbally, the Fed is talking the stock market up, sucking investors in to stocks even knowing there is a high risk of recession conditions that have always hammered stocks.
The responsible thing to do
would be to outline what the economy’s problems are -manufacturing, home building costs (tariffs), consumer spend, excess debt at all levels, and risk for equities.
With interest rates tanking, investors are seeking a return in stocks, which thanks to Fed hype, are providing that through appreciation and to a lesser degree– a dividend yield.
Ironically, it is the institutions who are getting sucker punched this time, the little guy has been selling having sold $25 billion of stocks in the week ending July 2 as the market was hitting new highs.
Yet, another PERFECT STORM !
………………………………………………….

Thursday  (July 11)  “Fed – Drunk With Power ?”

Should the Fed intentionally drive up stock prices at a time it has changed its interest rate policy to head off a recession ?
If this is not intentional, these bankers are clueless about risk.
The Fed’s rhetoric was mostly responsible for turning  the market around in January after a 20%, Q4 plunge in the S&P 500 last year, likewise after a 7.6% plunge in May/June.
But why now with the market averages at all-time highs should it soft-peddle the increasing evidence of a recession with comments like, “a number of government policy issues have yet to be resolved, including trade  developments, the federal debt ceiling, and Brexit ?”
Why not tell it like it is ?  The 10-year economic recovery is over.  Global economies are slumping.
LET THE STOCK MARKET FIND A LEVEL THAT DISCOUNTS THE REAL PROBLEMS LOOMING OUT THERE.
TELL US, WE CAN HANDLE IT. THE MARKET WILL TRADE LOWER, BUT WILL EVENTUALLY WHEN THE TRUTH IS KNOWN.
        Lower rates help borrowers, but hurts people on fixed income. Borrowing at the individual, corporate and government is uncomfortably high, so more borrowing to goose the economy is limited.
The Fed claims independence, Fed Chief Powell denies he is political, but is doing everything to head off a recession in a presidential election year, and sustain a bull market on top of that.
It is what it is. My problem is all this rhetoric is driving stocks up, sucking investors in at a time business sucks and that IS NOT IN ANYONE’s INTEREST —-except the BIG money which is probably selling into the strength. Damn !
………………………………………….
Wednesday    (July 10)
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.
……………………………………………..
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
Monday     (July 8)
A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
……………………………………………

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 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Never a Recession Without a Bear Market

Never a Recession Without a Bear Market
INVESTOR’S first read.com – Daily edge before the open
DJIA :27,332
S&P 500: 3,013
Nasdaq Comp.:8,244
Russell 2000: 1,571
Monday  July 15, 2019
   9:14a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
SHORT & SWEET:
ONE: There is one reason
the Fed abruptly reversed its interest rate policy from restraint to ease – It sees a serious risk of RECESSION.

TWO: There has never been a recession that has NOT been accompanied by a bear market (decline ranging from S&P 500 20% to 55%). There have been bear markets that were NOT accompanied by recessions ( 1961-1962, 1966, 1971, 1987).

The buyers’ panic we are seeing now, which started  four days ago with Fed hints of a rate cut and with the S&P 500 more overvalued than at any time except the  2000-2002, dot-com bubble burst (S&P 500 down 50%, Nasdaq Comp. down 78%) has all the makings of  becoming another a bubble burst.

In January, the Fed reversed policy to one of “ease” when the S&P 500 plunged 20% in Q4. Since then, it has nurtured the stock market back up with hints of a rate cut and misleading comments about stock values and the economy’s health.

Obviously, the Street is assuming the Fed will be able to prevent a recession, ergo, the heavy buying.  If they are wrong, we will have a nasty bear market which will be devastating to all investors especially, those rushing in to buy at these levels.

Even if the Fed can prevent a recession, stocks are pricey at these levels.
…………………………………………….
TECHNICAL
Minor Support: DJIA:27,266 ; S&P 500:3,003;Nasdaq Comp.:8,226
Minor Resistance: DJIA:27,431 ; S&P500:3,023;Nasdaq Comp.:8,247

………………………………………….
Friday    (July 12) “Oh My, Not Another Perfect Storm”
Three of the Dow’s 30 stocks, Goldman Sachs (GS +4.54), United Healthcare (UNH +12.41), and Boeing (BA +6.65) accounted for 160 points of the Dow’s 227-point rise (70%) yesterday, while the broader based S&P 500  advanced less than a third as much, the Nasdaq Comp. declined as did the unweighted Value Line Composite.
Yesterday, the DJIA gave the impression the market was hotter than it was, and that distortion could be a warning sign.
This is the fourth time the DJIA and S&P 500 have probed this area since January 2018 after interim  plunges of 12% (Jan/Feb 2018); 20% (Q4 2018) and 8% (May/June 2019).
       The last two rebounds were mostly orchestrated by comments by Fed Chief Jerome Powell who came close to guaranteeing the Street the Fed will cut interest rates.
Again, I ask – WHY does the Fed see a need to cut rates ?
Again, I add -the Fed must expect a recession, and clearly they don’t want that to happen just prior to, or during a presidential election year.
         Sooooo, at least verbally, the Fed is talking the stock market up, sucking investors in to stocks even knowing there is a high risk of recession conditions that have always hammered stocks.
The responsible thing to do
would be to outline what the economy’s problems are -manufacturing, home building costs (tariffs), consumer spend, excess debt at all levels, and risk for equities.
With interest rates tanking, investors are seeking a return in stocks, which thanks to Fed hype, are providing that through appreciation and to a lesser degree– a dividend yield.
Ironically, it is the institutions who are getting sucker punched this time, the little guy has been selling having sold $25 billion of stocks in the week ending July 2 as the market was hitting new highs.
Yet, another PERFECT STORM !
………………………………………………….

Thursday  (July 11)  “Fed – Drunk With Power ?”

Should the Fed intentionally drive up stock prices at a time it has changed its interest rate policy to head off a recession ?
If this is not intentional, these bankers are clueless about risk.
The Fed’s rhetoric was mostly responsible for turning  the market around in January after a 20%, Q4 plunge in the S&P 500 last year, likewise after a 7.6% plunge in May/June.
But why now with the market averages at all-time highs should it soft-peddle the increasing evidence of a recession with comments like, “a number of government policy issues have yet to be resolved, including trade  developments, the federal debt ceiling, and Brexit ?”
Why not tell it like it is ?  The 10-year economic recovery is over.  Global economies are slumping.
LET THE STOCK MARKET FIND A LEVEL THAT DISCOUNTS THE REAL PROBLEMS LOOMING OUT THERE.
TELL US, WE CAN HANDLE IT. THE MARKET WILL TRADE LOWER, BUT WILL EVENTUALLY WHEN THE TRUTH IS KNOWN.
        Lower rates help borrowers, but hurts people on fixed income. Borrowing at the individual, corporate and government is uncomfortably high, so more borrowing to goose the economy is limited.
The Fed claims independence, Fed Chief Powell denies he is political, but is doing everything to head off a recession in a presidential election year, and sustain a bull market on top of that.
It is what it is. My problem is all this rhetoric is driving stocks up, sucking investors in at a time business sucks and that IS NOT IN ANYONE’s INTEREST —-except the BIG money which is probably selling into the strength. Damn !
………………………………………….
Wednesday    (July 10)
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.
……………………………………………..
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
Monday     (July 8)
A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
……………………………………………

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 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oh My, Not Another Perfect Storm ?

INVESTOR’S first read.com – Daily edge before the open
DJIA :27,088
S&P 500: 2,999
Nasdaq Comp.:8,196
Russell 2000: 1,557
Friday  July 12, 2019
   9:14a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Three of the Dow’s 30 stocks, Goldman Sachs (GS +4.54), United Healthcare (UNH +12.41), and Boeing (BA +6.65) accounted for 160 points of the Dow’s 227-point rise (70%) yesterday
, while the broader based S&P 500  advanced less than a third as much, the Nasdaq Comp. declined as did the unweighted Value Line Composite.
Yesterday, the DJIA gave the impression the market was hotter than it was, and that distortion could be a warning sign.
This is the fourth time the DJIA and S&P 500 have probed this area since January 2018 after interim  plunges of 12% (Jan/Feb 2018); 20% (Q4 2018) and 8% (May/June 2019).
       The last two rebounds were mostly orchestrated by comments by Fed Chief Jerome Powell who came close to guaranteeing the Street the Fed will cut interest rates.
Again, I ask – WHY does the Fed see a need to cut rates ?
Again, I add -the Fed must expect a recession, and clearly they don’t want that to happen just prior to, or during a presidential election year.
         Sooooo, at least verbally, the Fed is talking the stock market up, sucking investors in to stocks even knowing there is a high risk of recession conditions that have always hammered stocks.
The responsible thing to do
would be to outline what the economy’s problems are -manufacturing, home building costs (tariffs), consumer spend, excess debt at all levels, and risk for equities.
With interest rates tanking, investors are seeking a return in stocks, which thanks to Fed hype, are providing that through appreciation and to a lesser degree– a dividend yield.
Ironically, it is the institutions who are getting sucker punched this time, the little guy has been selling having sold $25 billion of stocks in the week ending July 2 as the market was hitting new highs.
Yet, another PERFECT STORM !
…………………………………………….
FYI:
Value Line unweighted average ????   Yes, we have the DJIA which is price-weighted giving big moves in higher priced stocks more weight than the same percentage move in a lower priced stock.
Then we have the Standard & Poor’s 500 and Nasdaq Comp. which are market-value weighted (shares x price), then the Value Line Comp. which gives equal weight to all stocks in its composite. The percentage change for each stock is averaged out to get the change in the average.  ……………………………………………………………
TECHNICAL
Minor Support: DJIA:27,003; S&P 500:2,976;Nasdaq Comp.:8,167
Minor Resistance: DJIA: 27,167; S&P500:3,007;Nasdaq Comp.:8,213

………………………………………….
Thursday  (July 11)  Fed – Drunk With Power ?

Should the Fed intentionally drive up stock prices at a time it has changed its interest rate policy to head off a recession ? If this is not intentional, these bankers are clueless about risk.
The Fed’s rhetoric was mostly responsible for turning  the market around in January after a 20%, Q4 plunge in the S&P 500 last year, likewise after a 7.6% plunge in May/June.
But why now with the market averages at all-time highs should it soft-peddle the increasing evidence of a recession with comments like, “a number of government policy issues have yet to be resolved, including trade  developments, the federal debt ceiling, and Brexit ?”
Why not tell it like it is ?  The 10-year economic recovery is over.  Global economies are slumping.
LET THE STOCK MARKET FIND A LEVEL THAT DISCOUNTS THE REAL PROBLEMS LOOMING OUT THERE.
TELL US, WE CAN HANDLE IT. THE MARKET WILL TRADE LOWER, BUT WILL EVENTUALLY WHEN THE TRUTH IS KNOWN.
        Lower rates help borrowers, but hurts people on fixed income. Borrowing at the individual, corporate and government is uncomfortably high, so more borrowing to goose the economy is limited.
The Fed claims independence, Fed Chief Powell denies he is political, but is doing everything to head off a recession in a presidential election year, and sustain a bull market on top of that.
It is what it is. My problem is all this rhetoric is driving stocks up, sucking investors in at a time business sucks and that IS NOT IN ANYONE’s INTEREST —-except the BIG money which is probably selling into the strength. Damn !
………………………………………….
Wednesday    (July 10)
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.
……………………………………………..
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
Monday     (July 8)
A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
…………………………………………………..

Friday   (July 5)
The Street really doesn’t know what to do next.  Recently, it has keyed on the prospect for the Fed reducing interest rates  in an effort to head off a recession, which in my opinion has actually started in bits and pieces.
The prospect of a recession and lower Fed rates, triggered a stampede to lock in interest rates before they plunged. This massive buying of bonds ramped up their prices and consequently drove rates down sharply, the 10-year Treasury plunging to 2%.
This also triggered buying in stocks, especially higher yielding stocks, which  doesn’t make much sense. If the Fed sees a recession, stocks will be adversely impacted if one actually develops.
The Street wants the party to go on forever, 10 years isn’t enough. This is classic late stage bull market behavior ensuring a bad ending when eventually savvy buyers exit and sellers enter, slowly at first, then increasing as reality sets in, ending in panic and a bear market bottom.
Can’t happen this time ?  Don’t bet on it !
This time could be real ugly. There is little the Fed can do to stop a recession and bear market. Lower interest rates from already low levels won’t help much.  Reviving QE will have limited impact. Congress already passed a monster tax cut.
This is what happens at bull 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 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FED – Drunk With Power ?


INVESTOR’S
first read.com – Daily edge before the open
DJIA :26,860
S&P 500: 2,993
Nasdaq Comp.:8,202
Russell 2000:
Thursday  July 11, 2019
   8:58 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
      Should the Fed intentionally drive up stock prices at a time it has changed its interest rate policy to head off a recession ? If this is not intentional, these bankers are clueless about risk.
The Fed’s rhetoric was mostly responsible for turning  the market around in January after a 20%, Q4 plunge in the S&P 500 last year, likewise after a 7.6% plunge in May/June.
But why now with the market averages at all-time highs should it soft-peddle the increasing evidence of a recession with comments like, “a number of government policy issues have yet to be resolved, including trade  developments, the federal debt ceiling, and Brexit ?”
Why not tell it like it is ?  The 10-year economic recovery is over.  Global economies are slumping.
LET THE STOCK MARKET FIND A LEVEL THAT DISCOUNTS THE REAL PROBLEMS LOOMING OUT THERE.
TELL US, WE CAN HANDLE IT. THE MARKET WILL TRADE LOWER, BUT WILL EVENTUALLY WHEN THE TRUTH IS KNOWN.
        Lower rates help borrowers, but hurts people on fixed income. Borrowing at the individual, corporate and government is uncomfortably high, so more borrowing to goose the economy is limited.
The Fed claims independence, Fed Chief Powell denies he is political, but is doing everything to head off a recession in a presidential election year, and sustain a bull market on top of that.
It is what it is. My problem is all this rhetoric is driving stocks up, sucking investors in at a time business sucks and that IS NOT IN ANYONE’s INTEREST —-except the BIG money which is probably selling into the strength. Damn !
……………………………………………………………
TECHNICAL
Minor Support: DJIA:26,717; S&P 500:2,976;Nasdaq Comp.:8.115
Minor Resistance: DJIA: 26,974; S&P500:3,004;Nasdaq Comp.:8,223

………………………………………….
Wednesday    (July 10)
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.
……………………………………………..

 

Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
Monday     (July 8)
A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
…………………………………………………..

Friday   (July 5)
The Street really doesn’t know what to do next.  Recently, it has keyed on the prospect for the Fed reducing interest rates  in an effort to head off a recession, which in my opinion has actually started in bits and pieces.
The prospect of a recession and lower Fed rates, triggered a stampede to lock in interest rates before they plunged. This massive buying of bonds ramped up their prices and consequently drove rates down sharply, the 10-year Treasury plunging to 2%.
This also triggered buying in stocks, especially higher yielding stocks, which  doesn’t make much sense. If the Fed sees a recession, stocks will be adversely impacted if one actually develops.
The Street wants the party to go on forever, 10 years isn’t enough. This is classic late stage bull market behavior ensuring a bad ending when eventually savvy buyers exit and sellers enter, slowly at first, then increasing as reality sets in, ending in panic and a bear market bottom.
Can’t happen this time ?  Don’t bet on it !
This time could be real ugly. There is little the Fed can do to stop a recession and bear market. Lower interest rates from already low levels won’t help much.  Reviving QE will have limited impact. Congress already passed a monster tax cut.
This is what happens at bull market tops.
……………………………………………………..
Tuesday    (July 2)
      The stock market has been hanging tough in face of numerous negatives, including political turmoil, war worries, tariff disruptions and a slump in corporate earnings.
The market has gotten a big lift  from an abrupt reversal in Federal Reserve policy, hints of lower rates and administration hype.
      So far, the Street has totally ignored the prospect of a recession, even though the Fed’s about face on interest rates indicates it is scared stiff a recession will hit starting this year and in 2020, a presidential election year
Three economic reports yesterday confirmed their fears.
June’s PMI (50.6) hit a 10-year low
June’s ISM (51.7) is still sliding since its peak a year ago.
Construction spend in May slid 0.8% below projections.
In my opinion, an S&P 500 price/earnings -ratio does not adequately discount the angst of a recession. Historically the Shiller P/E at 30.2 is higher than any bull market top except the dot-com bubble burst market in 2000, which led to 50% plunge in the S&P 500.
At some point, the Street will have to face reality. When it does, odds favor everyone will do it at the same time.
…………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Street Hopes Fed Chief Powell Will Lean Toward Rate Cut Today

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,783
S&P 500: 2,979
Nasdaq Comp.:8,141
Russell 2000: 1,562
Wednesday  July 10, 2019
   8:58 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.

……………………………………………………………
TECHNICAL
Minor Support: DJIA:26,857; S&P 500:2,6747;Nasdaq Comp.:8,126
Minor Resistance: DJIA:26,907 ; S&P500:2,993;Nasdaq Comp.:8,173

………………………………………….
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
Monday     (July 8)
A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
…………………………………………………..

Friday   (July 5)
The Street really doesn’t know what to do next.  Recently, it has keyed on the prospect for the Fed reducing interest rates  in an effort to head off a recession, which in my opinion has actually started in bits and pieces.
The prospect of a recession and lower Fed rates, triggered a stampede to lock in interest rates before they plunged. This massive buying of bonds ramped up their prices and consequently drove rates down sharply, the 10-year Treasury plunging to 2%.
This also triggered buying in stocks, especially higher yielding stocks, which  doesn’t make much sense. If the Fed sees a recession, stocks will be adversely impacted if one actually develops.
The Street wants the party to go on forever, 10 years isn’t enough. This is classic late stage bull market behavior ensuring a bad ending when eventually savvy buyers exit and sellers enter, slowly at first, then increasing as reality sets in, ending in panic and a bear market bottom.
Can’t happen this time ?  Don’t bet on it !
This time could be real ugly. There is little the Fed can do to stop a recession and bear market. Lower interest rates from already low levels won’t help much.  Reviving QE will have limited impact. Congress already passed a monster tax cut.
This is what happens at bull market tops.
……………………………………………………..
Tuesday    (July 2)
      The stock market has been hanging tough in face of numerous negatives, including political turmoil, war worries, tariff disruptions and a slump in corporate earnings.
The market has gotten a big lift  from an abrupt reversal in Federal Reserve policy, hints of lower rates and administration hype.
      So far, the Street has totally ignored the prospect of a recession, even though the Fed’s about face on interest rates indicates it is scared stiff a recession will hit starting this year and in 2020, a presidential election year
Three economic reports yesterday confirmed their fears.
June’s PMI (50.6) hit a 10-year low
June’s ISM (51.7) is still sliding since its peak a year ago.
Construction spend in May slid 0.8% below projections.
In my opinion, an S&P 500 price/earnings -ratio does not adequately discount the angst of a recession. Historically the Shiller P/E at 30.2 is higher than any bull market top except the dot-com bubble burst market in 2000, which led to 50% plunge in the S&P 500.
At some point, the Street will have to face reality. When it does, odds favor everyone will do it at the same time.
…………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Street Hopes Fed Chief Powell Leans Toward Rate Cut

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,783
S&P 500: 2,979
Nasdaq Comp.:8,141
Russell 2000: 1,562
Wednesday  July 10, 2019
   8:58 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Today, it’s all about Fed Chief Powell, who testifies  before the House Financial Services Committee today.
The Street is hoping for a clue how the Fed will rule on cutting the Fed Funds rate July 31.
Expectations were running high for a cut until a better than expected Jobs report threatened move the Fed away from a cut which might be premature if the economy is getting a second wind.
Powell has been catching flack from President Trump for not cutting rates sooner.  While Powell denied Trump’s pressure is influencing his decision, he and his directors have verbally rescued stocks on two occasions.
A Rate cut decision will come at the end of the month, and the market is up at this time, so I doubt he will say much to goose stocks higher.
The Fed must be careful here, its credibility is at risk after its reversal in January after a December rate cut.

……………………………………………………………
TECHNICAL
Minor Support: DJIA:26,857; S&P 500:2,6747;Nasdaq Comp.:8,126
Minor Resistance: DJIA:26,907 ; S&P500:2,993;Nasdaq Comp.:8,173

………………………………………….
Tuesday  (July 9)
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………….
Monday     (July 8)
A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
…………………………………………………..

Friday   (July 5)
The Street really doesn’t know what to do next.  Recently, it has keyed on the prospect for the Fed reducing interest rates  in an effort to head off a recession, which in my opinion has actually started in bits and pieces.
The prospect of a recession and lower Fed rates, triggered a stampede to lock in interest rates before they plunged. This massive buying of bonds ramped up their prices and consequently drove rates down sharply, the 10-year Treasury plunging to 2%.
This also triggered buying in stocks, especially higher yielding stocks, which  doesn’t make much sense. If the Fed sees a recession, stocks will be adversely impacted if one actually develops.
The Street wants the party to go on forever, 10 years isn’t enough. This is classic late stage bull market behavior ensuring a bad ending when eventually savvy buyers exit and sellers enter, slowly at first, then increasing as reality sets in, ending in panic and a bear market bottom.
Can’t happen this time ?  Don’t bet on it !
This time could be real ugly. There is little the Fed can do to stop a recession and bear market. Lower interest rates from already low levels won’t help much.  Reviving QE will have limited impact. Congress already passed a monster tax cut.
This is what happens at bull market tops.
……………………………………………………..
Tuesday    (July 2)
      The stock market has been hanging tough in face of numerous negatives, including political turmoil, war worries, tariff disruptions and a slump in corporate earnings.
The market has gotten a big lift  from an abrupt reversal in Federal Reserve policy, hints of lower rates and administration hype.
      So far, the Street has totally ignored the prospect of a recession, even though the Fed’s about face on interest rates indicates it is scared stiff a recession will hit starting this year and in 2020, a presidential election year
Three economic reports yesterday confirmed their fears.
June’s PMI (50.6) hit a 10-year low
June’s ISM (51.7) is still sliding since its peak a year ago.
Construction spend in May slid 0.8% below projections.
In my opinion, an S&P 500 price/earnings -ratio does not adequately discount the angst of a recession. Historically the Shiller P/E at 30.2 is higher than any bull market top except the dot-com bubble burst market in 2000, which led to 50% plunge in the S&P 500.
At some point, the Street will have to face reality. When it does, odds favor everyone will do it at the same time.
…………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At Some Point, Big Money Will Break Ranks and SELL !

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,806
S&P 500: 2,975
Nasdaq Comp.:8,098
Russell 2000: 1,561
Tuesday  July 9, 2019
   8:51 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
As long as the Street’s computer algorithms are programmed to buy at the market and on dips, the market will  avoid a bear market.

At some point, the outlook for the economy and corporate earnings will become bleak so bleak these algos will have to be reprogrammed to adjust for risk by selling.  Since many of these institutions key on the same indicators, they will all begin selling at the same time.
This selling  pressure combined  with a sudden absence of buying will take the market straight down  12% -16%.
That becomes the juncture where the Street will decide how bad things really are. If the economic outlook is worsening, the market will have to sell off enough to adjust for that, you then have a bear market – down 35% – 45%.
At its extreme,  very few of the gutsiest investors will be buying, just like very few are selling now assured the institutions’ algos will not let a bear market happen.
WHEN ?
At some point, some major institutions will break ranks and sell, setting off a stampede.  There is no good reason for the S&P 500 to sell at 30 times earnings when a recession looms, corporate earnings are turning  negative, debt at the individual, corporate and government level is too high, a Mid-East war possible, and uncertainty escalating about the ability of our government to address pressing problems.
……………………………………………………………
TECHNICAL
Minor Support: DJIA:26,657; S&P 500:2,956;Nasdaq Comp.:8,051

………………………………………….
Monday     (July 8)

A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.
…………………………………………………..

Friday   (July 5)
The Street really doesn’t know what to do next.  Recently, it has keyed on the prospect for the Fed reducing interest rates  in an effort to head off a recession, which in my opinion has actually started in bits and pieces.
The prospect of a recession and lower Fed rates, triggered a stampede to lock in interest rates before they plunged. This massive buying of bonds ramped up their prices and consequently drove rates down sharply, the 10-year Treasury plunging to 2%.
This also triggered buying in stocks, especially higher yielding stocks, which  doesn’t make much sense. If the Fed sees a recession, stocks will be adversely impacted if one actually develops.
The Street wants the party to go on forever, 10 years isn’t enough. This is classic late stage bull market behavior ensuring a bad ending when eventually savvy buyers exit and sellers enter, slowly at first, then increasing as reality sets in, ending in panic and a bear market bottom.
Can’t happen this time ?  Don’t bet on it !
This time could be real ugly. There is little the Fed can do to stop a recession and bear market. Lower interest rates from already low levels won’t help much.  Reviving QE will have limited impact. Congress already passed a monster tax cut.
This is what happens at bull market tops.
……………………………………………………..
Tuesday    (July 2)
      The stock market has been hanging tough in face of numerous negatives, including political turmoil, war worries, tariff disruptions and a slump in corporate earnings.
The market has gotten a big lift  from an abrupt reversal in Federal Reserve policy, hints of lower rates and administration hype.
      So far, the Street has totally ignored the prospect of a recession, even though the Fed’s about face on interest rates indicates it is scared stiff a recession will hit starting this year and in 2020, a presidential election year
Three economic reports yesterday confirmed their fears.
June’s PMI (50.6) hit a 10-year low
June’s ISM (51.7) is still sliding since its peak a year ago.
Construction spend in May slid 0.8% below projections.
In my opinion, an S&P 500 price/earnings -ratio does not adequately discount the angst of a recession. Historically the Shiller P/E at 30.2 is higher than any bull market top except the dot-com bubble burst market in 2000, which led to 50% plunge in the S&P 500.
At some point, the Street will have to face reality. When it does, odds favor everyone will do it at the same time.
…………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Happens at Every Bull Market Top

INVESTOR’S first read.com – Daily edge before the open
DJIA :26,922
S&P 500: 2,990
Nasdaq Comp.:8,161
Russell 2000: 1,575
Monday  July 8, 2019
   9:24 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

A better than expected jobs report Friday appears to have squashed the Street’s hopes for aggressive action by the Fed to cut interest rates.
So, the Street is back on the “bad news is good news, and good news is bad news” mentality.  Jeeeeeeez !
There are other economic indicators and most have been pointing down, like manufacturing (here and abroad), a slump in the Leading Economic Indicator (LEI), encompassing 10 key economic areas, personal consumption expenditures, after-tax disposable personal income, retail sales, housing, and consumer confidence.
Regardless of the back and forth banter between the Federal Reserve Chair  Powell and President Trump, the Fed is determined to head off a recession in 2020.
It will try to talk the economy out of recession or cut interest rates to do so.
The market is up 6% since Fed Chief Powell “hinted” that the Fed will cut rates and six months since the Fed abruptly reversed its policy from restraint to ease when signs of economic weakness flashed.
Interest rates have plunged dramatically in recent months, but the Street wants more, as if that would head off a recession – delay it, maybe, head it off no.
The market is some 30% – 40% overvalued, yet buyers press on as if nothing is wrong.
        That is classic late-stage bull market behavior – THIS HAPPENS AT EVERY BULL MARKET TOP.

……………………………………………………………
TECHNICAL
Minor Support: DJIA:26,821; S&P 500:2,977;Nasdaq Comp.:8,126
Resistance: DJIA:26,967; S&P 500:2,996; Nasdaq Comp.:8,171

………………………………………….
Friday   (July 5)
TODAY:

The Street really doesn’t know what to do next.  Recently, it has keyed on the prospect for the Fed reducing interest rates  in an effort to head off a recession, which in my opinion has actually started in bits and pieces.
The prospect of a recession and lower Fed rates, triggered a stampede to lock in interest rates before they plunged. This massive buying of bonds ramped up their prices and consequently drove rates down sharply, the 10-year Treasury plunging to 2%.
This also triggered buying in stocks, especially higher yielding stocks, which  doesn’t make much sense. If the Fed sees a recession, stocks will be adversely impacted if one actually develops.
The Street wants the party to go on forever, 10 years isn’t enough. This is classic late stage bull market behavior ensuring a bad ending when eventually savvy buyers exit and sellers enter, slowly at first, then increasing as reality sets in, ending in panic and a bear market bottom.
Can’t happen this time ?  Don’t bet on it !
This time could be real ugly. There is little the Fed can do to stop a recession and bear market. Lower interest rates from already low levels won’t help much.  Reviving QE will have limited impact. Congress already passed a monster tax cut.
This is what happens at bull market tops.

Tuesday    (July 2)
      The stock market has been hanging tough in face of numerous negatives, including political turmoil, war worries, tariff disruptions and a slump in corporate earnings.
The market has gotten a big lift  from an abrupt reversal in Federal Reserve policy, hints of lower rates and administration hype.
      So far, the Street has totally ignored the prospect of a recession, even though the Fed’s about face on interest rates indicates it is scared stiff a recession will hit starting this year and in 2020, a presidential election year
Three economic reports yesterday confirmed their fears.
June’s PMI (50.6) hit a 10-year low
June’s ISM (51.7) is still sliding since its peak a year ago.
Construction spend in May slid 0.8% below projections.
In my opinion, an S&P 500 price/earnings -ratio does not adequately discount the angst of a recession. Historically the Shiller P/E at 30.2 is higher than any bull market top except the dot-com bubble burst market in 2000, which led to 50% plunge in the S&P 500.
At some point, the Street will have to face reality. When it does, odds favor everyone will do it at the same time.
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Monday   (July)

The announcement out of the G20 meeting over the weekend that  trade talks  between the U.S. and China would resume, that further escalation was deferred is giving the stock market a boost today.
      The market sensed this late last week as key  technical indicators that were stalling got a second wind to the positive and signaled a strong rebound this week.
The key will be momentum, can the rally have legs. The good thing about hype about meetings, prospective agreements, a truce, etc. is it works short-term, the bad thing is investors rush in thinking something good has happened only to discover that it really hasn’t.
The Street wants to party and will do so until well after last call. My responsibility to readers is to warn them of risk when no one sees it.
We are on the edge of slipping into a recession. If we weren’t, the Fed wouldn’t be running scared after abruptly reversing its policy on interest rates to one of ease from one of  tightening.
Greed at tops and fear at bottoms makes it next to impossible for investors to begin getting on the right side of the market at key turns. When the market gets “pricey,” investors should raise cash, because at some point, the market is going down. It may be a correction, or a bear market.
     When the market has been pummeled  unmercifully, investors should begin easing back into  stocks – not all-out, or all-in, but gradually, since exact tops and bottoms are hard to pinpoint.
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Friday  (Jun 28)

Signs of a recession are cropping up everywhere for those who objectively will see them.  Yet, the Street keeps buying running stocks up to historically extremely overvalued levels, obviously expecting the Fed to cut interest rates if the economy falls off the cliff.
This is classic late stage bull market stuff, happens at every market top. The unwillingness to buy at extremely undervalued levels is characteristic at bear market bottoms.  Humans doing what they do best – being human.
If one must play, they should play with a limited amount of one’s funds while maintaining a healthy cash reserve to reduce the carnage when the market goes straight down.
Monday I asked, “Is the BIG money selling while all else are  buying ?”
      Yes, according to InvesTech Research which points out that Margin Debt, (borrowings to buy stock) has been falling off over the past 16 months. Margin Debt is taken on by savvy traders who leverage positions to make more money, fully knowing risks are increased.  Their exit should indicate they are locking in profits.
Jesse Felder, The Felder Report agrees saying, “Leveraged investors could be signaling a bear market is now underway,” and backed it up with graphs. He noted, “Margin debt is now falling at an annual rate of 15%, a level of de-risking that has always been accompanied by a minimum 20% decline in the S&P 500 over the past half century.”
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Thursday   (June 27)
On balance, this is not a good week for economic indicators: Jobless Claims  and  Retail and Wholesale Inventories up, Durable Goods , New Home Sales, Consumer Confidence, Retail Sales, Net Exports, and  the Dallas Fed Business Index are down.  The third estimate for Q1 GDP at a 3.1%  an annual rate of growth is unchanged.
As I have been saying, we are in the early stages of a recession. It will gain momentum in spite of a Fed rate cut on July 31 or September 18 at the latest.
Once underway, the Fed will not be able to stop a recession, slow down its intensity – yes, stop no.
So why is the Stock market hovering at new highs ?
The Street thinks it can ignore a recession and look out to 2020 – 2012.
       After all, the average recession going back to 1945 lasts less than a year.
But, as I have repeatedly noted, stocks are overvalued heading into a recession and  extremely overvalued at the mid-point of a recession.  The Shiller P/E at 29.7 is 80%  higher than its historic norm of 16.6.
        Humans being human, will get scared when the market tumbles 15%, 20%, 30% and sell driving prices lower.
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Wall Street’s problem is they do not want the party to end. Some big hitters will break ranks and sell, others will follow.
In the interim, there will be buyers in response3 to promises of success in trade talks and a Fed rate cut, but most of that is priced into the market.
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Wednesday  (June 26)
The G-20 will meet Friday and Saturday in Osaka, Japan where Presidents Trump and Xi Jinping  are expected to discuss trade, but without any major breakthrough, except a promise to meet for further discussions in the near future.
We should get a better idea of how global economies a faring, as well as input on the impact of Trump’s tariffs.
Fed Chief Powell has insisted the Fed won’t cut its fed funds rate to please Trump, which leads me to believe he will anyhow, not to  avoid the President’s criticism, but  to head off a recession.
I have warned of a recession for many months, and believe it is already underway.
The Street doesn’t share my concern, it is still in a buy mode, or shall I say its computer algorithms are still bullish.
That will end in a 12% – 18% plunge as everyone on the Street gets a SELL signal at the same time.
When ?  Don’t know !
Bad news doesn’t do it, a dysfunctional government doesn’t do it, an overvalued stock market doesn’t deter  paying up for stocks.
On a given day no one will show up to buy, and prices will plunge followed by sellers and more downside as it becomes obvious, this should have happened six months ago, before the Fed stepped in with its hype that the “economy is in a good place”  to prevent the market from finding a genuine comfort level that discounts a recession.
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Tuesday   (June 25)
There are just too many balls up in the air for the Street to decide what to do next.  This week is loaded with economic reports that could pressure  the Fed to cut rates on July 31, which I previously thought was unlikely because there is no press conference scheduled for that day, and for a rate cut they would want one. Should they schedule a press conference, it would be a tip-off they are cutting rates.
Key economic reports today are: New Home Sales (9:00), Consumer Confidence (10:00), Richmond Fed. Bus. (10:00).
The G20 meeting in Japan will be held Friday and Saturday.  President Trump and China’s President Xi Jinping have agreed to talk trade at the summit, but expectations of tangible progress are low.
The U.S./Iran issue will remain uncertain at least until next week.
Then too, we have a stock market at all-time highs, which by many standards is over-priced and due for a technical correction  after a sharp 8.7%, Fed-induced surge.
The Street is undeterred by all exterior events, at least until it becomes aware how vulnerable the market is. This indifference and self-fulfilling  tunnel vision is typical of late stage bull markets.
The market will hang tough until someone breaks ranks to stop buying, worse yet start selling, then it will be straight down.
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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 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 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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