RISK Level Rises – Will Trade News Disappoint ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,132
S&P 500: 3,168
Nasdaq: 8,717
Russell: 1,694
Friday  December 13,  2019
     9:14 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Yesterday’s blog noted a “USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.”
That’s pretty much what has happened, though the possibility exists that there my be a rollback of some existing tariffs.
The market celebrated the news with a 200-point jump in the DJIA yesterday, but traders may be selling into the news today.
The risk of jumping in today is that the market’s high valuation has discounted a lot of trade progress expectations, then too, promises like this have led to disappointment so often in the past.
        Even so, humans being human, the temptation to jump in is hard to resist.  All this will combine with a host of forecasts by the Street about 2020.
Risk level – very high
………………………………………….
Minor Support: DJIA:28,051; S&P 500:3,167; Nasdaq Comp.:8,681
Minor Resistance: DJIA:28,217; S&P 500:3,187; Nasdaq Comp.:8,747
………………………………………………………….

Thursday December 12 “No More Cuts in Interest Rates”
       Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceedes in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
TECHNICAL
Expect a lot of volatility between now and year-end as institutions adjust portfolios for what they expect in 2020. …………………………………………………………

 

Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
      In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
………………………………………………..
Tuesday December 11 “Street Not Sure Which Path to Take Path – Most or Least Travelled”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.
……………………………………………………………………………………….

Monday December 9 “Lot of Balls Up In the Air, Any One of Which Could Come Down…”

Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted.
……………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

No More Cuts in Interest Rates

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,911
S&P 500: 3,141
Nasdaq: 8.654
Russell: 1,631
Thursday  December 12,  2019
     8:58 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Yesterday, the Fed announced it will hold interest rates at the current level (1.50-1.75), which surprised no one.
It has achieved its goal, delaying the inevitable,  a recession after 10.5 years of economic expansion.
What hasn’t changed is the fact the stock market remains historically overvalued.  But, it can become more overvalued as it did in the dot-com bubble bull that ran from September 1998 to January 2000 when the bubble burst hammering the S&P 500 down more than 50% and the Nasdaq Comp. down 78%.
The entire bull market has been driven in a big way by corporations buying back their own stock, putting a floor under any attempts to move downward and pressing stocks upward providing  a major benefit to top management where shareholdings are the largest and options reward management.
Strangely, in face of a generally buoyant market, the Wall Street Journal just reported that private investors have  withdrawn $220.8 billion from stock mutual funds and invested the proceedes in money market funds and bond funds.
In his “Great Stuff” newsletter, Banyan Hill alerts readers to the Fed’s flooding of  the repo market with billions of dollars, warning if the repo market dries up, there is no lender of last resort for institutions, hedge funds,  and Real Estate Investment Trusts, adding that something is decidedly wrong, a large financial institution, a large bank or hedge fund or more are in trouble.
TECHNICAL
Expect a lot of volatility between now and year-end as institutions adjust portfolios for what they expect in 2020. A USMC trade deal may be announced in coming days, but may already be priced into the market.  Expect it to be followed by optimistic news on the U.S./China trade negotiations most likely a postponement of the December 15 date for new tariffs on $160 billion of Chinese goods.
………………………………………….
Minor Support: DJIA:27,881; S&P 500:3,139; Nasdaq Comp.:8,668
Minor Resistance: DJIA:27,949; S&P 500:3,144; Nasdaq Comp.:8,668
………………………………………………………….

Wednesday December 11 “Stock Market Will Tell Us When we Are in Recession”
     
In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.
………………………………………………..
Tuesday December 11 “Street Not Sure Which Path to Take Path – Most or Least Travelled”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.
……………………………………………………………………………………….

Monday December 9 “Lot of Balls Up In the Air, Any One of Which Could Come Down…”

Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted.
……………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

Stock Market Will Tell Us When We Are in Recession

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,881
S&P 500: 3,132
Nasdaq: 8,616
Russell: 1,631
Wednesday  December 11,  2019
     9:10 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
In addition to news flow from the Fed, Administration hype, trade, impeachment, and pundit projections on the economy and stock market, the market will be buffeted by year-end tax selling and institutional portfolio switches to dress up year-end reports for clients.
If the Street appears to ignore this news flow, some of which should not be ignored, it is because computer algorithms are calling the shots and events have to stray far from the base to rattle the cage.
Right now the economy is on the threshold of recession with manufacturing well into recession but housing and services hanging tough.
Those who thought a recession would hit by now (myself included) have been wrong which does not mean investors should be sure the coast is clear to load up on debt and stocks.
Recessions happen, and there has never been a recession without a bear market, the latter starting several months before the former starts.
Generally, it is thought that a recession is marked by two consecutive declines in GDP. That may be most of the time, but the real scorekeeper for the start and end of recessions in the National Bureau  of Economic Research and they dbase decisions on a lot of factors beyond the GDP alone.
What’s more, they don’t render a decision that a recession started or ended until months after the fact.
BOTTOM LINE:  The stock market will tell us when we are in a recession. A rally after the initial decline will fail to follow through, yielding to yet another decline, and so on in spite of what the Fed, the Administration and the Street pundits say.
By then the market will be down 30%,  and it will be too late for investors to do much but ride it out. That’s why, so late in the game, it is smart to have a healthy cash reserve.


TECHNICAL

Expect a lot of volatility between now and year-end.

………………………………………….
Minor Support: DJIA:27,851; S&P 500:3,131; Nasdaq Comp.:8,597
Minor Resistance: DJIA:27,911; S&P 500:3,137; Nasdaq Comp.:8,627
………………………………………………………….

Tuesday December 11 “Street Not Sure Which Path to mTake – Most or Least Travelled”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.
……………………………………………………………………………………….

Monday December 9 “Lot of Balls Up In the Air, Any One of Which Could Come Down…”

Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted.
……………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

Monday December 9 “Lot of Balls Up In the Air, Any One of Which Could Come Down…”

Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted.
……………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

Street Not Sure Which Path to Take – Most or Least Travelled

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,909
S&P 500: 3,135
Nasdaq: 8,621
Russell: 1,629
Tuesday December 10,  2019
     9:16 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The Federal Open Market Committee (FOMC) meets today with a report forthcoming tomorrow  by Fed Chief Jerome Powell.
I expect he will hedge his position saying it will lower rates if the economy falters, but stop short of saying it will raise  rates if the economy heats up.
As usual, he will say the economy is in “a good place,” even though the Fed has raised rates three times since August.
The Street is not sure what to do. The market is pricey, so buying carries above average risk especially with the market so news sensitive.
Democrats and Republicans appear to be ready to pass  the U.S. -Mexico-Canada Agreement (USMCA) on trade  with an announcement coming as early as next week.  Additionally, I expect the Administration to announce the postponement of new  tariffs  of 15% on $156 billion  on electronics, phones and toys scheduled to take effect December 15. Anything to the contrary would hit the market.
Finally, it is the year end when stocks trade irregularly as institutions and investors make portfolio changes looking ahead to a new year.                                                                                                                           TECHNICAL
Expect a lot of volatility between now and year-end. As expected, The market is being whipsawed by inconsistent projections out of the White House on trade.
………………………………………….
Minor Support: DJIA:27,851; S&P 500:3,131; Nasdaq Comp.:8,597
Minor Resistance: DJIA:27,943; S&P 500:3,137; Nasdaq Comp.:8,631
………………………………………………………….

Monday December 9 “Lot of Balls Up In the Air, Any One of Which Could Come Down…”

Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted.
……………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

Lot of Balls Up In The Air, Any One of Which Can Come Down……

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,015
S&P 500: 3,145
Nasdaq: 8,656
Russell: 1,633
Monday  December 9,  2019
     9:16 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Projecting the direction of the stock has always been complicated by the fact there are always several balls up in the air any one of which can come down to change the picture, sometimes dramatically, or so I have written often.
Today more than any time in memory, that is true.
One week our economy looks like it will plunge into recession, the next like the economic expansion that started more than 10 years ago will continue though irregularly for months on end.
Tariffs and trade policies continue to baffle strategists, one day the Trump administration says  a deal should wait until after next year’s election, the next day it says a deal is close.
More recently, the rumors are that with last week’s blow-out jobs report, the U.S. can walk away from any deal with China, the latter feeling pain from a decline in exports.
Until a month ago, the stock market declined and rose sharply no less than seven times over 24 months before resolving the pattern on the upside mostly in response to Fed policy and hopes for a resolution of a deal on trade that would remove the tariffs that are beginning to hurt economies globally.
Manufacturing has been in a recession for four months, but services and homebuilding are still buoyant. The Fed has cut interest rates three time this year, but without more damage to the economy will not cut rates further.
It’s anyone’s guess what will happen on trade. My guess is a postponement of the December hike by the U.S. in tariffs until next year.
So far, the Street could care less about impeachment, even more than the presidency is at risk. That’s an arrogant way to deal with something that could have far-reaching consequences, but 10 years of economic prosperity and bull market tends to create a tunnel vision that obscures perspective.
Buying here is risky, but I can understand why that is hard to accept, with speculative fever rising.
A bubble ?   Yes, however it’s a matter of how much it inflates until it pops.
One thing I am sure of, it will burst when just about everyone is bullish, when a “new era” in economic expansion and Dow 50,000 is universally accepted. TECHNICAL
Expect a lot of volatility between now and year-end. As expected, The market is being whipsawed by inconsistent projections out of the White House on trade.
………………………………………….
Minor Support: DJIA:27,951; S&P 500:3,143; Nasdaq Comp.:8.641
Minor Resistance: DJIA:28,067; S&P 500:3,151; Nasdaq Comp.:8,677
………………………………………………………….

Friday, December 6 “Recession ? Not Yet  However Market Fully Priced
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
………………………………………………………………………………
Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

Recession ? Not Yet However Market Fully Priced

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,677
S&P 500: 3,117
Nasdaq: 8,570
Russell: 1,614
Friday  December 6,  2019
     9:14 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
Yesterday, I quoted Moody’s Chief Economist Mark Zandi as seeing trouble in the  jobs  market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
But the BLS Employment Situation report today tells a different story reporting  266,000 were added in November well above  the projected 187,000.
While the BLS report also includes government jobs added, as well as Gm employees returning from a strike, the conclusion has to be the jobs sector is still strong assuming there was no distortion in the numbers and a revision downward in December.
While manufacturing  is in its fourth month of contraction, the economy must be considered as struggling, but not down for a ten-count, not even an eight-count.
We may be on the threshold of recession, but are not there yet. Historically, the stock market tops out ahead of the beginning of recessions. We will have to let that one play out.
Credit the Fed’s three cuts in interest rates this year for extending the 10 year old economic expansion.
       As for stocks, they are still very historically  overpriced with hopes that a trade deal will prevent a major correction/bear market. Corporations will still goose their own stocks (and the market averages) with buybacks.
Good  news, or lack of bad news suggests the Fed will not be cutting rates further any time soon, though the White House is pressuring it to do so.
What to do:
Investors without a sizable cash reserve should raise one in line with their tolerance for risk.
TECHNICAL
Expect a lot of volatility between now and year-end. As expected, The market is being whipsawed by inconsistent projections out of the White House on trade.
………………………………………….
Minor Support: DJIA:27,617; S&P 500:3.111; Nasdaq Comp.:8,551
Minor Resistance: DJIA:27,888; S&P 500:3,366; Nasdaq Comp.:8,630
………………………………………………………….

Thursday December 5 “Puppets on Wall Street Whipsawed Again By the Puppeteer”
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
…………………………………………………………..
Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

Puppets on Wall Street Whipsawed by the Puppeteer

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,647
S&P 500: 3,112
Nasdaq: 8,566
Russell: 1,613
Thursday  December 5,  2019
     8:48 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Once again the Street is reacting to  news flow about a trade deal, plunging when President Trump suggested it would be a good idea to wait until after next year’s election to strike a deal, then reversing himself and running stocks back up with a comment that a trade deal is close.
How naïve ! One would hope for more sophistication at such high financial levels.
Moody’s Chief Economist Mark Zandi sees trouble in the job market referring to  the ADP survey where  67,000 new jobs were created in November, well below the 190,000 projected by economists and below the 100,000 jobs needed each month to keep the unemployment rate from rising.
New jobs have been the mainstay of an extended economic recovery where a contraction in manufacturing is in its fourth month of recession.
It is an economy driven by both low interest rates and a waning momentum after 10 years of economic expansion.
It is a stock market driven by Fed nurturing and corporate buy-backs, which  according to a Goldman Sachs (GS) report are on track to top $1 trillion  in bids for SD&P 500 stocks this year.
Corporations are using cash and borrowings to fund their buybacks which have exceeded free cash flow for the first time since the 2007 – 2009 financial crisis.
While Goldman sees a slowdown in purchases, buybacks will continue to push stocks upward though may not be able to prevent a bear market where selling from other sources override the impact of buying by corporations.
The idea with buybacks is to increase earnings per share by reducing outstanding shares, as well as drive the price of stocks up for major shareholders and executives’ option exercise and share exit opportunities.
It will all be decided by the economy.  Will it slip into recession ? If so, we will go into a bear market, how severe depends on what news hits it on the way down.
The alternative would be a sluggish economy with pockets of strength and weakness and possibly stagflation, inflation but no growth.
In any event, the stock market is historically overvalued  witn more downside than upside potential.
TECHNICAL
Expect a lot of volatility between now and year-end. As expected, The market is being whipsawed by inconsistent projections out of the White House on trade.
………………………………………….
Minor Support: DJIA:27,601; S&P 500:3,111; Nasdaq Comp.:8,521
Minor Resistance: DJIA:26,697; S&P 500:3,117; Nasdaq Comp.:8,586
………………………………………………………….

Wednesday, December 4 “Rally after This Correction Sets Up Bear Market”

       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
…………………………………………………………………..
Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………

Tuesday November 26 “Fed’s Powell: Economic Glass More Than Half Full ?”
Really ?
Speculation is rising from hot to Scorching as the  smaller company Russell 2000 jumps more than 2% in a day to all-time highs. This is more bubble stuff and almost impossible for investors to ignore.
Gotta get in on this, is the mindset, hock the jewels and bet the ranch.  Who could blame anyone when the market keeps running from overvalued to incredibly overvalued, but who cares as long as it keeps rising.   Beyond classic late stage bull market, this is out of sight and much like the dot-com bubble in 1999-2000.
Fed’s Powell says the economic glass is more than half full.  I am awaiting economist A. Gary Shilling’s “INSIGHT” to confirm whether  Powell is right or wrong.
My bearishness is based on two things.  One,  Shilling’s well documented conclusion that our economy is in the early stages of recession, two, the extreme overvaluation of the S&P 500.
There has never been a recession without an accompanying bear market.
Does the market “know all” ?
Not if you consider we have had 8 bear markets since 1980, two of which were in excess of 50%.
Monday, November 25 “Risk Rises as Bubble Inflates Further”  I would refer to the Stock Trader’s Almanac more often if my space here was not limited.  Give it to yourself for Christmas. Not only does it contain more relevant information about everything you need (and want) to know about seasonal and timely trading, but it is accompanied by regular commentary. (Contact:800-762-2974)
The “Best Six Months” for owning stocks (Nov.1 to Apr 1) is one of its outstanding discoveries. It highlights a few year-end phenoms like the tendency for market weakness before Thanksgiving Day and strength after.
      The “Santa Claus Rally” was discovered in 1972 by founder Yale Hirsch whose jungle, “If Santa Should Fail to Call, Bears may Come to Broad and Wall,” sums it up in a few words.
Monday November 254  “Risk Rises as Bubble Inflates Further”
      “The Only Free Lunch” on Wall Street occurs in late December as stocks hitting 52-week new lows selectively cough up over-sold bargains  that will rebound after the tax selling abates.  December 20 is projected to be the bottom this year..
We live in uncertain times, both the economic expansion and bull market are long in the tooth. I have to go back to late 1972/early 1973 to find a time that I feel parallels the current time for economic. Stock market and political drama. Clearly we are witnessing a bubble in the stock market and it just keeps inflating.  CAREFUL ! The lure to go all in, even borrow to buy stocks becomes irresistible at these junctures.
……………………………………………………………………
Friday November 22  “Tariffs to Start Hurting Companies”
Here’s where push comes to shove.   Axios AM reports that “Big retailers are refusing to accept tariff price increases from their brand suppliers, telling the companies they will have to either eat the tariff costs or find another buyer.”
This stands to adversely impact the smaller companies that can afford it the least.  The next round of tariff increases will hit on December 15.
While I expect that date to be pushed into 2020, the ability for corporation managements to plan for the future must be next to impossible.
A tariff  increase would be the final straw in the efforts to avoid a recession.
I have never seen investors ignore serious warning signs to this extent.
It must be computer algos that are programmed to ignore bad news, or are not programmed to understand the dangers that exist for not adjusting for potential adversity.
Looking back, I assume many money managers and analysts will regret letting an algo do their thinking for them.
      Bull markets do end. Bear markets happen.
…………………………………………………
Thursday Nov. 21 “Too Many Lies and Misinformation”
Reuters reported Wednesday that the phase one trade deal   may be pushed into 2020.  Whoa ! Didn’t Trump’s economic guru Larry Kudlow announce last week that the U.S. and China were “getting close to reaching a trade deal….that “It’s not done yet, but there has been very good progress and the talks have been very constructive.”
Misleading statements like these  go back at least  to February with  Kudlow’s hype on trade progress like “fantastic”, good headway”, “positive surprises”, “lots of momentum” raising hopes for investors only to be dashed by news of no progress.
While the Fed is truthful, it falls short of being forthcoming.  The economy is not in a good place.
What happens when the Street discovers this endless spew of nonsense is no less that a Ponzi scheme to buy time until November 2020. 
Too much is at stake for  investors, some who have been chased into stocks in search of a return, others up in years and unable to afford a huge hit to their portfolio, yet others caught up in the cruise control bull market mania, only to get skewered by a massive plunge to reality in the stock market as a recession, already underway, becomes reality.
IT IS NOT TOO LATE TO RAISE CASH, A LOT OF IT, EVEN THOUGH RETURNS ON CASH ARE NEXT TO NOTHING.
The stock market sells at a price/earnings higher than any in the past except the dot-com bull market top in March 2000, which was followed by a 50% plunge in the S&P 500 and 78% plunge in the Nasdaq Comp.
       BOTTOM LINE:  This stock market does not discount any negatives, not a recession, not a stall in earnings, not impeachment, or  an endless haggle over trade.
Does the market “know all” ?
       That’s what  “they” say.  But the record says something different with  eight bear markets since 1980, two with drops in excess of 50%.
……………………………………………………………………….
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

Year-End Rally After This Correction Sets Up Bear Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,502
S&P 500: 3,093
Nasdaq: 8,520
Russell: 1,602
Wednesday December 3,  2019
     9:12 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
       Wait until after the next election for a trade deal between the U.S. and China ?   That statement was made by President Trump yesterday mostly triggering a sharp drop in stock prices across the board.
Really ?   I don’t believe that. I expect the December 15% tariffs on $160 billion of Chinese goods to be delayed and some sort of progress to be made before year end or sometime early next year. Today, Trump now says, trade talks with China are going well.  Go figure.
A continuation of yesterday’s late-day rebound can be expected in early trading, but there is a risk of a drop to DJIA: 27,370, S&P 500:3,060, Nasdaq Comp.: 8,390 which would be a one-third retracement of the October 2 to November 27 rally.
This being the year end, stocks may not get down that much. A year end rally into early January  could set up a major correction into March and possibly lead to a bear market. It depends on news flow, especially in an election year where polarization are hitting new highs, if not the market.
Will President Trump resign ?  Clearly that is not what anyone is expecting. But  investors need to consider the possibility.  Initially, resignation would hammer stock prices, perhaps for five hours before stabilization. Beyond that, the market’s direction depends on economic news flow. A market as historically overpriced as this one, is vulnerable.
What to do in such an environment ?  Have a sizable cash reserve.  There has never been a recession without a bear market.  Downside here is greater than upside.  With the new normal in the market being vertical plunges in stock prices, investors without a cash reserve won’t be able to react quick enough to raise cash once a plunge begins.
TECHNICAL
Expect a lot of volatility between now and year-end. The market is spooked by disappointment in poor progress in trade.  Expect news releases that hint at new optimism on trade. That will be an attempt to reverse the plunge in prices, even generate a rally. At some point, the market will ignore the hype and keep plunging.

………………………………………….
Minor Support: DJIA:27,417; S&P 500:3,087; Nasdaq Comp.:8,491
Minor Resistance: DJIA:27,637; S&P 500:3,103; Nasdaq Comp.:8,537
………………………………………………………….

Tuesday Dec 3 “Investors Need a Good Dose of the Truth From Fed and Administration”
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
………………………………………………………………………………..
Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………

Tuesday November 26 “Fed’s Powell: Economic Glass More Than Half Full ?”
Really ?
Speculation is rising from hot to Scorching as the  smaller company Russell 2000 jumps more than 2% in a day to all-time highs. This is more bubble stuff and almost impossible for investors to ignore.
Gotta get in on this, is the mindset, hock the jewels and bet the ranch.  Who could blame anyone when the market keeps running from overvalued to incredibly overvalued, but who cares as long as it keeps rising.   Beyond classic late stage bull market, this is out of sight and much like the dot-com bubble in 1999-2000.
Fed’s Powell says the economic glass is more than half full.  I am awaiting economist A. Gary Shilling’s “INSIGHT” to confirm whether  Powell is right or wrong.
My bearishness is based on two things.  One,  Shilling’s well documented conclusion that our economy is in the early stages of recession, two, the extreme overvaluation of the S&P 500.
There has never been a recession without an accompanying bear market.
Does the market “know all” ?
Not if you consider we have had 8 bear markets since 1980, two of which were in excess of 50%.
Monday, November 25 “Risk Rises as Bubble Inflates Further”  I would refer to the Stock Trader’s Almanac more often if my space here was not limited.  Give it to yourself for Christmas. Not only does it contain more relevant information about everything you need (and want) to know about seasonal and timely trading, but it is accompanied by regular commentary. (Contact:800-762-2974)
The “Best Six Months” for owning stocks (Nov.1 to Apr 1) is one of its outstanding discoveries. It highlights a few year-end phenoms like the tendency for market weakness before Thanksgiving Day and strength after.
      The “Santa Claus Rally” was discovered in 1972 by founder Yale Hirsch whose jungle, “If Santa Should Fail to Call, Bears may Come to Broad and Wall,” sums it up in a few words.
Monday November 254  “Risk Rises as Bubble Inflates Further”
      “The Only Free Lunch” on Wall Street occurs in late December as stocks hitting 52-week new lows selectively cough up over-sold bargains  that will rebound after the tax selling abates.  December 20 is projected to be the bottom this year..
We live in uncertain times, both the economic expansion and bull market are long in the tooth. I have to go back to late 1972/early 1973 to find a time that I feel parallels the current time for economic. Stock market and political drama. Clearly we are witnessing a bubble in the stock market and it just keeps inflating.  CAREFUL ! The lure to go all in, even borrow to buy stocks becomes irresistible at these junctures.
……………………………………………………………………
Friday November 22  “Tariffs to Start Hurting Companies”
Here’s where push comes to shove.   Axios AM reports that “Big retailers are refusing to accept tariff price increases from their brand suppliers, telling the companies they will have to either eat the tariff costs or find another buyer.”
This stands to adversely impact the smaller companies that can afford it the least.  The next round of tariff increases will hit on December 15.
While I expect that date to be pushed into 2020, the ability for corporation managements to plan for the future must be next to impossible.
A tariff  increase would be the final straw in the efforts to avoid a recession.
I have never seen investors ignore serious warning signs to this extent.
It must be computer algos that are programmed to ignore bad news, or are not programmed to understand the dangers that exist for not adjusting for potential adversity.
Looking back, I assume many money managers and analysts will regret letting an algo do their thinking for them.
      Bull markets do end. Bear markets happen.
…………………………………………………
Thursday Nov. 21 “Too Many Lies and Misinformation”
Reuters reported Wednesday that the phase one trade deal   may be pushed into 2020.  Whoa ! Didn’t Trump’s economic guru Larry Kudlow announce last week that the U.S. and China were “getting close to reaching a trade deal….that “It’s not done yet, but there has been very good progress and the talks have been very constructive.”
Misleading statements like these  go back at least  to February with  Kudlow’s hype on trade progress like “fantastic”, good headway”, “positive surprises”, “lots of momentum” raising hopes for investors only to be dashed by news of no progress.
While the Fed is truthful, it falls short of being forthcoming.  The economy is not in a good place.
What happens when the Street discovers this endless spew of nonsense is no less that a Ponzi scheme to buy time until November 2020. 
Too much is at stake for  investors, some who have been chased into stocks in search of a return, others up in years and unable to afford a huge hit to their portfolio, yet others caught up in the cruise control bull market mania, only to get skewered by a massive plunge to reality in the stock market as a recession, already underway, becomes reality.
IT IS NOT TOO LATE TO RAISE CASH, A LOT OF IT, EVEN THOUGH RETURNS ON CASH ARE NEXT TO NOTHING.
The stock market sells at a price/earnings higher than any in the past except the dot-com bull market top in March 2000, which was followed by a 50% plunge in the S&P 500 and 78% plunge in the Nasdaq Comp.
       BOTTOM LINE:  This stock market does not discount any negatives, not a recession, not a stall in earnings, not impeachment, or  an endless haggle over trade.
Does the market “know all” ?
       That’s what  “they” say.  But the record says something different with  eight bear markets since 1980, two with drops in excess of 50%.
……………………………………………………………………….
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

Investors Need a Dose of Truth From Fed and Administration

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,783
S&P 500: 3,223
Nasdaq: 8,567
Russell: 1,607
Monday December 2,  2019
     9:07 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The Street is beginning to expect a U.S./China deal on trade will be delayed until year end or early 2020. That shouldn’t surprise anybody, we have seen promises and projections delayed in the past so often it is becoming the new normal.
      The key is the economy which has been hovering on the threshold of recession for a year.
This is a Fed-stoked bull market that is characterized by  hype from the Fed and Administration every time the market takes a hit. A few more days like yesterday and  the Fed will be hyping lower rates and an economy that in Fed Chief Powell’s words is “in a good place.”
      A lie !
It isn’t in a good place if the Fed is slashing interest rates.
What’s more, the Administration will be hyping progress on trade (again).
Too much of a good thing has its downside. A 10 year-old bull market and economic recovery breed arrogance, denial and tunnel vision.
Bear markets happen, some investors ride them out recouping paper losses after a couple years, some raise cash to protect  portfolio values and to invest at lower prices.  The savvy pro is out all together and back in close to the lows.
What is a shame is, many get scared after a 30% plunge and sell out totally with huge losses and never get back in – too scared.
       WHAT INFURIATES ME ABOUT THIS FED AND ADMINISTRATION IS THEY AREN’T TRUTHFUL AND INVESTORS ARE GOING TO GET CLOBBERED.
Expect more hype by the Fed and Administration in an effort to stop a further decline in the stock market. Why ?  I have my suspicions.
      I have been targeting the first week in January as the beginning of a bear market. While a bear may be in progress now, I hold to that expecting a year-end rally into early January, which most likely won’t top the November 27 all-time highs. This would be the most dangerous rally in this bull market.
 TECHNICAL
Expect a lot of volatility between now and year-end. The market is spooked by disappointment in poor progress in trade.  Expect news releases that hint at new optimism on trade. That will be an attempt to reverse the plunge in prices, even generate a rally. At some point, the market will ignore the hype and keep plunging.

………………………………………….
Minor Support: DJIA:27,598; S&P 500:3,101; Nasdaq Comp.:8,536
Minor Resistance: DJIA:27,748; S&P 500:3,107; Nasdaq Comp.:8,561
………………………………………………………….

Monday December 2  “Year End Portfolio Adjustments Cloud Picture”

So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
…………………………………………………………………………..
Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………

Tuesday November 26 “Fed’s Powell: Economic Glass More Than Half Full ?”
Really ?
Speculation is rising from hot to Scorching as the  smaller company Russell 2000 jumps more than 2% in a day to all-time highs. This is more bubble stuff and almost impossible for investors to ignore.
Gotta get in on this, is the mindset, hock the jewels and bet the ranch.  Who could blame anyone when the market keeps running from overvalued to incredibly overvalued, but who cares as long as it keeps rising.   Beyond classic late stage bull market, this is out of sight and much like the dot-com bubble in 1999-2000.
Fed’s Powell says the economic glass is more than half full.  I am awaiting economist A. Gary Shilling’s “INSIGHT” to confirm whether  Powell is right or wrong.
My bearishness is based on two things.  One,  Shilling’s well documented conclusion that our economy is in the early stages of recession, two, the extreme overvaluation of the S&P 500.
There has never been a recession without an accompanying bear market.
Does the market “know all” ?
Not if you consider we have had 8 bear markets since 1980, two of which were in excess of 50%.
Monday, November 25 “Risk Rises as Bubble Inflates Further”  I would refer to the Stock Trader’s Almanac more often if my space here was not limited.  Give it to yourself for Christmas. Not only does it contain more relevant information about everything you need (and want) to know about seasonal and timely trading, but it is accompanied by regular commentary. (Contact:800-762-2974)
The “Best Six Months” for owning stocks (Nov.1 to Apr 1) is one of its outstanding discoveries. It highlights a few year-end phenoms like the tendency for market weakness before Thanksgiving Day and strength after.
      The “Santa Claus Rally” was discovered in 1972 by founder Yale Hirsch whose jungle, “If Santa Should Fail to Call, Bears may Come to Broad and Wall,” sums it up in a few words.
Monday November 254  “Risk Rises as Bubble Inflates Further”
      “The Only Free Lunch” on Wall Street occurs in late December as stocks hitting 52-week new lows selectively cough up over-sold bargains  that will rebound after the tax selling abates.  December 20 is projected to be the bottom this year..
We live in uncertain times, both the economic expansion and bull market are long in the tooth. I have to go back to late 1972/early 1973 to find a time that I feel parallels the current time for economic. Stock market and political drama. Clearly we are witnessing a bubble in the stock market and it just keeps inflating.  CAREFUL ! The lure to go all in, even borrow to buy stocks becomes irresistible at these junctures.
……………………………………………………………………
Friday November 22  “Tariffs to Start Hurting Companies”
Here’s where push comes to shove.   Axios AM reports that “Big retailers are refusing to accept tariff price increases from their brand suppliers, telling the companies they will have to either eat the tariff costs or find another buyer.”
This stands to adversely impact the smaller companies that can afford it the least.  The next round of tariff increases will hit on December 15.
While I expect that date to be pushed into 2020, the ability for corporation managements to plan for the future must be next to impossible.
A tariff  increase would be the final straw in the efforts to avoid a recession.
I have never seen investors ignore serious warning signs to this extent.
It must be computer algos that are programmed to ignore bad news, or are not programmed to understand the dangers that exist for not adjusting for potential adversity.
Looking back, I assume many money managers and analysts will regret letting an algo do their thinking for them.
      Bull markets do end. Bear markets happen.
…………………………………………………
Thursday Nov. 21 “Too Many Lies and Misinformation”
Reuters reported Wednesday that the phase one trade deal   may be pushed into 2020.  Whoa ! Didn’t Trump’s economic guru Larry Kudlow announce last week that the U.S. and China were “getting close to reaching a trade deal….that “It’s not done yet, but there has been very good progress and the talks have been very constructive.”
Misleading statements like these  go back at least  to February with  Kudlow’s hype on trade progress like “fantastic”, good headway”, “positive surprises”, “lots of momentum” raising hopes for investors only to be dashed by news of no progress.
While the Fed is truthful, it falls short of being forthcoming.  The economy is not in a good place.
What happens when the Street discovers this endless spew of nonsense is no less that a Ponzi scheme to buy time until November 2020. 
Too much is at stake for  investors, some who have been chased into stocks in search of a return, others up in years and unable to afford a huge hit to their portfolio, yet others caught up in the cruise control bull market mania, only to get skewered by a massive plunge to reality in the stock market as a recession, already underway, becomes reality.
IT IS NOT TOO LATE TO RAISE CASH, A LOT OF IT, EVEN THOUGH RETURNS ON CASH ARE NEXT TO NOTHING.
The stock market sells at a price/earnings higher than any in the past except the dot-com bull market top in March 2000, which was followed by a 50% plunge in the S&P 500 and 78% plunge in the Nasdaq Comp.
       BOTTOM LINE:  This stock market does not discount any negatives, not a recession, not a stall in earnings, not impeachment, or  an endless haggle over trade.
Does the market “know all” ?
       That’s what  “they” say.  But the record says something different with  eight bear markets since 1980, two with drops in excess of 50%.
……………………………………………………………………….
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

Year-End Portfolio Adjustments Cloud Picture

INVESTOR’S first read.com – Daily edge before the open
DJIA: 28,051
S&P 500: 3,i40
Nasdaq: 8,665
Russell: 1,624
Friday  November 29, 2019
     9:07 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
   So, here we are, year end, a time when stocks do weird things – go up when logic says they should go down and go down when they are expected to go up.
Much of this mish-mash is due to year-end adjustments made in portfolios by institutions to rid losers and add stocks that may look good in annual reports, even lure in prospective new clients.
It is also a time when the Street’s pundits issue annual forecasts for the coming year, a rather fruitless exercise since looking out 6 to 12 months is nearly impossible considering the many things that can happen that are not foreseeable.
At best, analysts can refer to possibilities that must be taken seriously like a recession or economic recovery, Fed actions, corporate earnings.
The big unknown is the outcome of  the election in November. Will one party be in control, by how much, or will   control be split down the middle ?
That spells uncertainty which suggests a stalemate or a down market.
With the economy struggling to avoid a recession, will one develop and when.          There has never been a recession without a bear market, bear markets without a recession, yes.
With the market hovering around all-time highs, odds favor lower prices at some point next year.  My expectations is for a turndown in early January.
       But we have had five “turndowns” in the S&P 500since January 2018 ranging from 7.6% to 20.6%, any one of which could have been the beginning of a bear market.
But a rebound occurred after each decline. Will the next decline be followed by a rebound or a bear market  ?
TECHNICAL
Expect a lot of volatility between now and year-end. Currently there is minor resistance a smidge above current levels, but futures indicate lower prices today.

………………………………………….
Minor Support: DJIA:27,987; S&P 500:3,137; Nasdaq Comp.:8,647
Minor Resistance: DJIA:28.077; S&P 500:3.143; Nasdaq Comp.:8,677
………………………………………………………….

Wednesday November 27 “Bubble, Bubble, Bubble”

The dot-com bubble saw a fivefold increase in the Nasdaq Composite between 1995 and 2000 followed by a 77% plunge after the bubble burst. It took 12 years for the Nasdaq to get back to  its 2000 peak price of 5,048.
       In December 1996, Fed Chief Alan Greenspan referred to surging speculation in high tech stocks as “irrational exuberance.”
His warning came four years too early as investors enchanted by the open-ended potential for dot-com companies, scrambled to get on board before the train left the station without them.  Most of these dot-com companies had little substance to justify anyone buying them, which proved to be true starting on March 12, 2000.
Add a new acronym to your growing list. It’s FOMO, short for “Fear Of Missing Out.”  Yes, fear of missing a chance to make more money, ergo buying stocks regardless of excessive valuation.  The idea for doing such a foolish thing is an investor expects to sell their stocks to  greater fool at a higher price.
Today’s market is looking like another inflating bubble in route to a burst. It too has been fed by an economic expansion lasting 10 years and a historically extreme price/earnings ratio, 30.8 versus a historic norm of 16.6.
What to do:
Since these manias tend to chug on relentlessly like the pink rabbit, it is best to simply raise a healthy cash reserve, even though that is the last thing you want to do.  At some point the bubble will burst with a 12%-18% vertical plunge in the market, just for openers.
………………………………………………………………………………

Tuesday November 26 “Fed’s Powell: Economic Glass More Than Half Full ?”
Really ?
Speculation is rising from hot to Scorching as the  smaller company Russell 2000 jumps more than 2% in a day to all-time highs. This is more bubble stuff and almost impossible for investors to ignore.
Gotta get in on this, is the mindset, hock the jewels and bet the ranch.  Who could blame anyone when the market keeps running from overvalued to incredibly overvalued, but who cares as long as it keeps rising.   Beyond classic late stage bull market, this is out of sight and much like the dot-com bubble in 1999-2000.
Fed’s Powell says the economic glass is more than half full.  I am awaiting economist A. Gary Shilling’s “INSIGHT” to confirm whether  Powell is right or wrong.
My bearishness is based on two things.  One,  Shilling’s well documented conclusion that our economy is in the early stages of recession, two, the extreme overvaluation of the S&P 500.
There has never been a recession without an accompanying bear market.
Does the market “know all” ?
Not if you consider we have had 8 bear markets since 1980, two of which were in excess of 50%.
Monday, November 25 “Risk Rises as Bubble Inflates Further”  I would refer to the Stock Trader’s Almanac more often if my space here was not limited.  Give it to yourself for Christmas. Not only does it contain more relevant information about everything you need (and want) to know about seasonal and timely trading, but it is accompanied by regular commentary. (Contact:800-762-2974)
The “Best Six Months” for owning stocks (Nov.1 to Apr 1) is one of its outstanding discoveries. It highlights a few year-end phenoms like the tendency for market weakness before Thanksgiving Day and strength after.
      The “Santa Claus Rally” was discovered in 1972 by founder Yale Hirsch whose jungle, “If Santa Should Fail to Call, Bears may Come to Broad and Wall,” sums it up in a few words.
Monday November 254  “Risk Rises as Bubble Inflates Further”
      “The Only Free Lunch” on Wall Street occurs in late December as stocks hitting 52-week new lows selectively cough up over-sold bargains  that will rebound after the tax selling abates.  December 20 is projected to be the bottom this year..
We live in uncertain times, both the economic expansion and bull market are long in the tooth. I have to go back to late 1972/early 1973 to find a time that I feel parallels the current time for economic. Stock market and political drama. Clearly we are witnessing a bubble in the stock market and it just keeps inflating.  CAREFUL ! The lure to go all in, even borrow to buy stocks becomes irresistible at these junctures.
……………………………………………………………………
Friday November 22  “Tariffs to Start Hurting Companies”
Here’s where push comes to shove.   Axios AM reports that “Big retailers are refusing to accept tariff price increases from their brand suppliers, telling the companies they will have to either eat the tariff costs or find another buyer.”
This stands to adversely impact the smaller companies that can afford it the least.  The next round of tariff increases will hit on December 15.
While I expect that date to be pushed into 2020, the ability for corporation managements to plan for the future must be next to impossible.
A tariff  increase would be the final straw in the efforts to avoid a recession.
I have never seen investors ignore serious warning signs to this extent.
It must be computer algos that are programmed to ignore bad news, or are not programmed to understand the dangers that exist for not adjusting for potential adversity.
Looking back, I assume many money managers and analysts will regret letting an algo do their thinking for them.
      Bull markets do end. Bear markets happen.
…………………………………………………
Thursday Nov. 21 “Too Many Lies and Misinformation”
Reuters reported Wednesday that the phase one trade deal   may be pushed into 2020.  Whoa ! Didn’t Trump’s economic guru Larry Kudlow announce last week that the U.S. and China were “getting close to reaching a trade deal….that “It’s not done yet, but there has been very good progress and the talks have been very constructive.”
Misleading statements like these  go back at least  to February with  Kudlow’s hype on trade progress like “fantastic”, good headway”, “positive surprises”, “lots of momentum” raising hopes for investors only to be dashed by news of no progress.
While the Fed is truthful, it falls short of being forthcoming.  The economy is not in a good place.
What happens when the Street discovers this endless spew of nonsense is no less that a Ponzi scheme to buy time until November 2020. 
Too much is at stake for  investors, some who have been chased into stocks in search of a return, others up in years and unable to afford a huge hit to their portfolio, yet others caught up in the cruise control bull market mania, only to get skewered by a massive plunge to reality in the stock market as a recession, already underway, becomes reality.
IT IS NOT TOO LATE TO RAISE CASH, A LOT OF IT, EVEN THOUGH RETURNS ON CASH ARE NEXT TO NOTHING.
The stock market sells at a price/earnings higher than any in the past except the dot-com bull market top in March 2000, which was followed by a 50% plunge in the S&P 500 and 78% plunge in the Nasdaq Comp.
       BOTTOM LINE:  This stock market does not discount any negatives, not a recession, not a stall in earnings, not impeachment, or  an endless haggle over trade.
Does the market “know all” ?
       That’s what  “they” say.  But the record says something different with  eight bear markets since 1980, two with drops in excess of 50%.
……………………………………………………………………….
Wednesday November 20 “All It Takes Is For A Few Big Hitters to Break Ranks and Sell”
      I wish I could bring good news, who likes to start the day with negativity ?  There are pockets of strength with recent jumps in Boeing (BA: +8.3%, Disney: DIS: +15%, Lam Research: LCRX: +22%), but sudden moves like those are part buying for appreciation potential. As well as short covering.
This is late stage bull market behavior. The Street doesn’t want the party to end. MarketWatch reports that the Hulbert Stock Newsletter Sentiment index reflects bullish readings of 65.6%, that’s higher than 95% of the readings since the dot-com bubble burst that preceded drops of 50% for the S&P 500  and 78% for the Nasdaq Comp. between 2000 and 2002.
IMHO, this bull market has been driven to extreme valuations by corporations buying back stock and hype, by the Fed on interest rate policy and the Administration on trade hopes.
IMHO, we are on the threshold of a bear market and recession, if we aren’t in one already.
The normal tendency for investors is to hang in as long as possible to make just one more score before the downturn starts.
That’s where the pummeling  begins and it doesn’t end until fear triggers a lot of selling at the bottom of the bear market.
………………………………………………………………………………….
Tuesday  November 20 “Reminds Me of 1973-1974 (S&P 500 – 49.9%)
       In my “Folly Sci 20/20”, I  contended that President Trump will not be the Republican candidate  in 2020.  If that is the case, odds are good the Republicans will lose control of the White House and most likely  control of Congress.
While the stock market has done well during Democrat presidencies (depending on when you start your calculations), the Street currently favors Republicans.
Whether Trump runs and is beaten or resigns for health or other reasons, the news  would rock the stock market.
This stock market is on cruise control driven by computer algos that obviously have not been programmed to consider a market without Trump.
          In the early 1970s, it was the “One Decision” stocks, the “Nifty Fifty,” stocks that investors should buy and hold forever.   This market reminds me of that one-way mentality.  Price/earnings ratios  for the Fifty were as excessive then as they are now for the S&P 500, which at 30.4 for the Shiller P/E  is 82% above the arithmetic mean.
Holding them would have ultimately been profitable (Polaroid and Xerox exceptions), 7 bear markets and  4 recessions over 15 years stood to force their sale at some time.
CONCLUSION:  At some point, reality will set in – there are no new eras for stocks, never have been.  Recessions happen and bear markets  consistently accompany recessions.
I have been wrong about the timing of a bear market.  This market mania will continue for days, weeks or a month or two until the spell is snapped by an event or until buyers are a no-show.
The first week in January comes to mind, possibly because the current scene reminds me of 1973, the beginning of the 1973-1974  bear market ( recession  Nov. 1973 – Mar. 1975), a period  marred by  President Nixon’s resignation in face of impeachment proceedings and the OPEC oil embargo.
When it breaks, there will be little time to react, in fact the first jog down will look like a buying opportunity before a straight down 12% -18% plunge.
……………………………………………………………………….

Monday  November 18  “Bulls Fear Nothing…Is There a Message here ?”
The Federal Open Market Committee (FOMC) meets Wednesday but no presser is scheduled.  Even so. a follow up commentary  can be expected.  I see nothing new except platitudes about the economy being in a good place (it isn’t).
       Leading economic indicators for October will be reported Thursday  at 10 a.m. and are expected to mark the third straight decline in this important index. It is doubtful  the Street will react.
The main focus here is on trade talks which the Administration claims are going well ??
In spite of the fact House impeachment proceedings are not going well for President Trump, the Street does not seem to care.
All told, the Street is not concerned with anything, and that is classic bull market arrogance/denial.
When the bear strikes, it will be straight down 12% -18% for openers.
When ?
Early January is a good bet.
………………………………………………………………………….
 Friday  Nov 15  “Bear Market….. WHY ?
Why a bear market ?
   A couple things come to mind.
Lies, lies, lies at the highest level,  a clueless indifferent public, press bias, debt, debt, debt, arrogance, greed, denial, earnings, inequality imbalance, overvaluation assets (stocks, real estate) ………. Too few people expect it.
What will the bear look like ?
Straight down.  Traders, hedge funds and fast money will hit the exits first and overwhelm cruise-control buyers. The public will follow and the institutions will hold out until fear and pressure by clients screaming “raise cash.”
       FYI that happens near the bottom when everyone wants out and few (myself) are urging readers to work back in.
After an initial plunge of 12% – 18%, numerous attempts to rally will fail as new negatives and negative pundit commentary pound the market lower.
WHAT MUST BE UNDERSTOOD HERE IS:  there are no new eras, no markets that go uncorrected.  Excesses get punished beyond reason just like bull markets run to excess beyond reason.
EXTREMES: If one has the smarts and psychological discipline the exploitation of extremes is how BIG money is made.
Unfortunately, this is so much about human behavior the buy low/sell high adage is almost impossible to achieve.
This economy is phony, the market is phony and our governance is phony. That spells TROUBLE.
        WHEN ?   January !
WHY ?   More in coming days.
…………………………………………………………………….
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.