All Is Not Just Peachy – CYA

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

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

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

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

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

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

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

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

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

When Will The BIG Money Walk Away ?

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

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

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

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

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

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

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

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

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

Inflating Bubble – Inflating Risk

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

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

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

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

Tuesday  Feb 4,  “High Risk in Buying the Open Today”
      A three-day, 14% plunge in the Shanghai Composite Index was reversed yesterday triggering a sharp rally in global stock markets including those in the united States.
Yesterday’s rally wasn’t very impressive, but the prospect for today’s open is.
The sharp reversal in China’s stock market in face of the spread of the Coronavirus epidemic will run U.S. stocks up at the open, the key will be is the China impact only temporary ?
       More important are the reports on the economy  this week.  Both manufacturing gauges (PMI, ISM)  bounced in January after six month slides. The Construction Index rose 1.4% in December, but all of 2019 was down 0.3%, the worst since 2011.
Factory orders come at 10 a.m. today, the ADP Employment Report tomorrow at 8:15 and Employment Situation Report at 8:30 Friday.
TECHNICAL:  Today’s rally is triggered on what is happening in China’s markets, however the longer term direction will depend on the economy.
There is major resistance at DJIA 28,800 (S&P 500: 3,284).
This is a risky rally to “chase”, especially at the open which may be the high for the day.
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Monday February 3 “A Golf Ball Bounce or Old Softball Bounce”
We have seen sharp breaks like this numerous times in the past, some much sharper than the two in late January.
The key will be in the strength in the attempt to rebound.
I don’t think Coronavirus has much to do with it other than some uneasiness going into the weekend.
The Fed, Street, bull pundits, Administration and the press have spent all the hype they have in their arsenal to keep the party going late into the night.
At some point a correction will continue down with eager investors jumping in thinking lower prices are a gift before realizing they have been snookered by a bear market and it’s too late to head off huge losses.
Again, the read here is the intensity of rebounds – is it a golf ball bouncing or an old playground soft ball ?
Big week for economic reports. ISM Mfg, PMI Mfg and Construction Spend at 10:00 today; Factory Orders at 10 tomorrow ADP Employment at 8:15 a.m. Wednesday, Employment Sit. 8:30 Friday.
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Friday January 31,  “Bulls Must Reverse Bad Start Today”
       The market shrugged off concerns yesterday about Coronavaris and rallied with gains by Microsoft (MSFT), Goldman Sachs (GS) and Visa (V) leading the way.
Futures indicate lower prices at the open.  Technically, the direction of the market today is important. Yesterday’s sharp bounce back improved the short-term picture, but a sell off would  raise odds the market is headed lower.
The bulls are hanging tough but are at risk.
The key here is the fact the market is historically  overvalued  by a lot.
Whether today’s market is a forever bull market or just another bull that sucks everyone in with their last ounce of savings only to devour  a third or a half of it in a ruthless plunge.
With computer algos calling a lot of the shots, the market may never cede to the bears, clearly if the algos relentlessly signal “buy.”
But what if the economy begins to suck some serious wind and corporate earnings stagnate as consumers (70% of economy) run out of cash and borrowing power ?
The algos only have to signal “defer purchase”  to create a vacuum that ordinary selling pounds stock prices down.
And if the algos signal “sell” ?   Bombs away !
………………………………………………………………………..
One of the characteristics of all bull market tops is that just about everyone pro, and amateur, can’t see any downside risk. I have experienced every bear market since 1962 and they sported that characteristic.
………………………………………………………….

Thursday  January 30, 2020 “January Bull Market Top”
As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.
……………………………………………………………..
No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
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Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
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Monday January 20  “Fed’s Panic Creates Bubble That Will Hurt Investors”
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
………………………………………………………………….
Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
……………………….
TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
………………………………………………………………………………………
Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

Whether the signing of Phase One of  the U.S./China  trade agreement will pull U.S. manufacturing out of its recessionary slump is  questionable. Manufacturing is in the worst slump since the Great Recession (2007-2009).
The rebound would have to be pronounced to justify the lofty multiples that stocks sell for.  The announcement yesterday did little to boost stocks even though the  market averages hit new highs early in the day.
The financial press likes to bark about the market hitting new highs even if only by a fraction.  The result, a further inflation of the bubble.
It is possible the Street will realize the trade agreement will have little impact on the economy and sell much to everyone’s  surprise, not mine.
My market analysis encompasses many factors – technical, fundamental, economic, monetary, psychological, seasonal and political.  The key is to give the proper weighting to these inputs.
The market is least sensitive to politics, which is unfortunate since the  current instability of our political system starting at the top can break this market which is already on the edge of a cliff, fundamentally and possibly economically.
Clearly, the Fed has enormous clout.
Two things bother me.  One, the Fed lied. They told us the economy is “in a good place,” yet proceeded to slash rates and pump more money into the system.
For me, that destroys its credibility.   Can I believe anything they say in the future.                 Two,  what can they do if this weak economy slides into a recession ?
These are  measures the Fed employs  in recessions and at bear market bottoms.   Either they panicked or are politically motivated.
By their actions they have jacked up a market that is historically overvalued, sucking unsuspecting  investors in in face of  what I think could be a devastating bear market.
YES, I HAVE BEEN VERY EARLY ON MY WARNING WITH THIS ONE. WITH BEAR MARKETS, EARLY IS BETTER THAN LATE.  IT’S BEST TO BE WRONG WITH ONE’S MONEY IN THEIR POCKET THAN IN A PORTFOLIO THAN DROPS 30%.
Everything I am seeing is phony, bullshit and lies.   THAT SHOULD QUALIFY AS THE BIGGEST SELL SIGNAL OF ALL TIME.
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Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

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

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

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

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

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

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

High Risk In Buying the OPEN Today

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

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

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

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

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

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A Golf Ball Bounce or An Old Softball Bounce

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

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

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

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

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

January Bull Market Top ?

January Bull Market Top ?
INVESTOR’S
first read.com – Daily edge before the open
DJIA: 28,743
S&P 500: 3,273
Nasdaq: 9,275
Russell: 1,649
Thursday  January 30, 2020     9:04

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
      As I have emphasized for over a month, I believe January would mark the beginning of a major correction  with an initial drop of 12% – 18% and 35% – 45% if a bear market develops.  The latter would require new political, economic and international negatives.
I think the Street is in denial about a “forever bull market.”  This is so typical at bull market tops.   It is only human to want the party to go on forever, to add a multiplier to one’s portfolio notching it up 15% -20% over the next year.
This bull has lasted far longer than I expected.
I did not expect the Fed to panic a year ago,  abruptly reversing policies, pumping money into the system and eventually cutting its benchmark fed funds rate.  To its credit, the Fed headed off a recession/bear market, but expended  tools it will need when the economy begins another slide.
Stock markets turn down ahead of the beginning of recessions.
NOTE:
       As noted last week, I have encountered  internet access problems related to a change in residence which I hope were resolved today.
On numerous occasions going back more than a year I have warned about a digital meltdown where our access to the internet, GPS, etc. will vanish.  Hard copy of information is necessary, including ANYTHING that needs to be accessed or where of ownership  critical.
       I do not feel many individuals could function today without electronic devices much less think without asking an one of many devices for an answer.

     I plan to publish as regularly as in the past but may once again run into internet access problems.
…………………………………………………….
Minor Support: DJIA:28,728; S&P 500:3,271; Nasdaq Comp.:9,251
Minor Resistance: DJIA:28,787; S&P 500:3,277; Nasdaq Comp.:9,286
………………………………………………………….

No blog published between Jan 23 and today.
Thursday  January 23, “Word Out From Davos: Desperation for Yield”
       So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.
…………………………………………………….
Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
………………………………………………………………

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

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Word Out From Davos: “Desperation for Yield”

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,196
S&P 500: 3,320
Nasdaq: 9,370
Russell: 1,685
Wednesday  January 22, 2020     9:04

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
So that’s why the Street is buying stocks at extremely overvalued levels. OK, so you buy a stock to get a 1.5% – 2.5% yield but lose 35% in a bear market.  Really ?
InvesTech Research has been warning readers about a recession/bear market referring to a host of economic and stock market indicators, all screaming “excess.”
InvesTech draws a parallel to the dot-com tech bubble of the 1990s which ended in a 50% drop in the S&P500  and a 72% plunge in the Nasdaq Comp.
It refers to the non-inflation adjusted S&P 500 P/E at 24.6 in the 91st percentile over 92 years as one of the most overvalued markets in history.
Corporate profits of all corporations peaked in 2014 and are lower today than in 2012.
Margin debt (borrowing to buy stock has slipped indicating the BIG money is exiting.
The ISM Manufacturing Index and New Orders Index are  in the fifth month of contraction the lowest level since 2009. While services are still positive, both the ISM Non-Manufacturing and New Orders indexes have been declining from 2018 highs.
InvesTech’s founder, James B. Stack, concludes his January letter with,” It has clearly turned into  silly season in higher risk assets….instead of having a single bubble, there are multiple bubbles of dangerous proportion lurking in the shadows…and the Federal Reserve has injected a moral hazard into all of them in 2019 with its implied guarantee of support and assurance of loss.  One can only guess the fallout will occur, or the consequences when the next recession strikes.”
I agree totally. I have been urging a cash reserve of at least 30% for over a year, and in some cases 50% – 100%.  While very early, I would rather be wrong with cash in reserve than declining stocks which when the downturn hits will be straight down.

…………………………………………………….
Minor Support: DJIA:29,053; S&P 500:3,311; Nasdaq Comp.:9,327
Minor Resistance: DJIA:29,257; S&P 500:3324; Nasdaq Comp.:9,387
………………………………………………………….

Tuesday January 21, “The Times Do Not Justify Excessive Valuations
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will
and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
………………………………………………………………

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

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Times Do Not Justify Excessive Valuatiojs

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,348
S&P 500: 3,329
Nasdaq: 9,388
Russell: 1,699
Tuesday  January 21, 2020     9:04

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
      I called for the beginning of a major  correction in the first week of January, but it didn’t happen. I still think it will and depending on what  negatives hit the market when it is down and attempting to rebound, it could become a bear market.
Bull bubbles burst for two reasons.  Major negative news can do it, or the bubble just gets too large and bursts on its own.
Uncertainties and impeachment didn’t do it which leaves bursting because it has exceeded all reasonable justification.
The latter has been true for many months based on reasonable measures of value.  Based on the Shiller price/earnings ratio the average of 10 years of S&P 500 earnings adjusted for inflation.
There are other ways to do the math, but relatively speaking it is scary-high.
This market cannot stand any BIG money selling or simply not buying.
That would result in a flash crash (12%-18%) straight down. At 31.9, the Shiller PE is 90% above the mathematical mean. It is higher than all bull market tops  except the 1999  dot-com bubble high of 44.
The Buffett indicator is flashing RED. It is a ratio of market cap (shares outstanding X price) to the nation’s GDP.  At 153%, it far exceeds market tops of 137% (2007) and 146% (1999).
CONCLUSION
:  What’s so good about today to justify such excessive valuations ?
The Fed had to slash interest rates to avert a recession a year ago and head off a bear market that had a 20% head start. Even so, the economy is still struggling.
Our nation’s governance is a huge question mark with our country as divided as during the Vietnam War.  Our infrastructure is visibly crumbling and we have no money to repair it. We have alienated long-standing allies and abandoned treaties that would improve our global competitiveness and security.
       These deserve respect and demanding respect is what the stock market has done consistently over a hundred years.
…………………………………………………….
Minor Support: DJIA:29,323; S&P 500:3,226; Nasdaq Comp.:9,377
Minor Resistance: DJIA:29,387; S&P 500:3,247; Nasdaq Comp.:9,917
………………………………………………………….

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

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
…………………………………………………                                                                                                               
What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fed’s Panic Creates Bubble That Will Hurt Investors

INVESTOR’S first read.com – Daily edge before the open
DJIA: 29,348
S&P 500: 3,329
Nasdaq: 9,388
Russell: 1,699
Monday  January 20, 2020     9:04

………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
TODAY:
The Fed’s action a year ago to reverse its policy by slashing interest rates pulled the economy and stock market out of a recession/bear market with a presidential election only a year out. I strongly believe it just delayed the inevitable.
      It’s action triggered a resurgence in the housing industry and related industries, but so far did little for manufacturing.
It extended a bull market from historically overvalued to a bubble status and sucked a lot of unsuspecting investors in believing the best is yet to come !
The problem with Fed tampering is it goes counter to normal economic and stock market  trends.  Eventually, a price will be paid. People, businesses and investors  will get caught up in the new era bulletproof mentality and get overextended, as they have so often over the years and get crushed.
Recessions  happen, bear markets happen.
        The two hardest things for investors to do is walk away from late-stage bull markets and start investing when bear markets have devastated stock prices.
The United States is mired in a political/governance crisis, with major league damage to its credibility  and long-standing relationships worldwide.
That deserves respect !
What deserves attention is, the Fed panicked a year ago and implemented anti-recession  measures before a recession got underway.  By its action it pumped stock prices higher before a bear market got underway.
These are things they normally do when recessions/bear markets have run their normal course need to be reversed.  They will have no more arrows in their quiver when a recession does come.  Recessions/bear markets happen, always have, always will.
Meanwhile, the bubble in stock prices  may expand  further before a straight down 12% -18% correction and  a bear market depending on what hits it on the way down.
“Don’t fight the Fed” they say.  Maybe they have too much clout – too many think-alike, pompous bankers,  too removed from reality.
…………………………………………………….
Minor Support: DJIA:29,323; S&P 500:3,316; Nasdaq Comp.:9,377
Minor Resistance: DJIA:29,387; S&P 500:3,347; Nasdaq Comp.:9,917
………………………………………………………….

Friday January 20, 2020 “INSANITY !”
Yes, that is what  this rush to buy stocks is all about as the stock market far surpasses levels that have turned   markets down in the past.
That is what happens in bull markets, investors scrambling to buy anything even borrowing to buy stocks fearful of missing out on another score.
This is classic bull market behavior, but it has been 12 years since the Street has seen a bull market top, so memories of danger don’t stand a chance  of saving investors from what lies ahead – a 30% -45% crunch, this time one without an immediate rebound.
THIS IS MY “I CAN’T STAND IT ANYMORE” POINT WHERE INVESTORS WITH CASH SIMPLY MAKE THE PLUNGE ABSOLUTELY SURE THE MARKET IS GOING MUCH HIGHER.
The same phenom overpowers investors at bottoms when  investors just can’t stand to hold stocks another day, hour, minute and sell everything  just at the time the market is turning up.
        Tops and bottoms are the greatest challenge investors (pros included) face.
I expect a January bull market top, thought it would  have occurred in the first week of the month.  Hype by the Administration stand to pump prices higher, a reality check of how little the two trade pacts will contribute to  the economy  will be ignored.
……………………….
TECHNICAL:
     I continue to believe the BIG money will cash in its chips this month, that 2020 will defy the odds mark a huge correction. Depending on what news hits the market when it attempts to rebound from that correction, we could sink further into a bear market.
The stock market has a way of punishing investors who disrespect it, and the arrogance of the bulls now is hitting extremes.  The new normal is  the “flash crash”  computerized decisions by enormous institutions to not only to stop buying but the sell.
That spells –“straight down” 12% -18% ……for openers.
………………………………………………………………………………………
Thursday, January 16, 2020 “The Biggest Sell Signal of All Time”

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

Wednesday, January 15, 2020 “Survey: CFOs See Recession in 2020
A  Deloitte consulting firm survey recently found 150 CFOs of large firms seeing a recession starting in 2020.  That could well be, since 9 of the last 10 recessions have occurred with a Republican in the White House.
      Historically, the stock market turns down and up before recessions begin and end with a lead time varying generally around 3 to 6 months.
Since there has never been a recession without a bear market, that would support my warning of a bear market starting this month.  While I picked January 3rd as the date for it to start, January is a month where a lot of funds become available for investment, and news of  trade deals is likely to bring in extra buying.
But these are not normal times. Impeachment proceedings  stand to divide a country which is already divided and a recession looms, one that has been delayed by the Fed’s policy panic a year ago.
The pros like to sell into bubbles and investor euphoria so announcements by the Administration about trade deals  and outlandish projections about economic prosperity  as a result would provide just  that kind of opportunity.
I hear and read it relentlessly – “New Highs, this bull market can’t end.”
Yes, I have heard the same disbelief before every bull market top going back to 1966. The pattern repeats itself – memories are short and people are human.
This is not because people are stupid, it is because they are human and succumb to greed at tops and fear at bottoms.
These are very dangerous times for the United States, and a government under siege.  Only an out of control late-stage bull market  can ignore the risks investors face today and they will pay a huge price for their folly.
……………………………………………………..
Tuesday, January 14, 2020 “Fear Drives Bull Bubbles and Bear Busts”
      Stock market bubbles feed on fear.
Whoa, isn’t fear  what drives stocks lower and lower in a bear market ?
Precisely, but it is also fear of missing out (FOMO) on the next move up that drives stocks  higher and higher in a bubble.
It’s been 20 years since the last classic stock market bubble so it should surprise no one that few investors and even pros remember the relentless and irresistibly higher push to new highs  in stock prices that sucked unsuspecting investors in prior to  a devastating crunch in stocks.
The Internet craze in the late 1990s drove dot-com stocks to stratospheric levels,  pushing the Nasdaq Composite to 200 times earnings. People quit jobs to day-trade, employees of dot-com stocks became overnight millionaires when their company went public. All that was needed for a stock was dot-com in its name. The Nasdaq Comp plunged 72% between March 2000 and September 2001.
Rising prices draw buyers  in and that drives stocks higher. Corrections are short-lived as investors view lower prices as a gift.
Four things are inflating the bubble further and further todayCorporate buy-back of shares has been the single biggest driver of stocks, Fed policy (three rate cuts in less than a year), Street hype (don’t want party to end), and computer algorithms which are mainly programmed  with a buy bias.
It is the latter  that will likely trigger a bear market as too many algos will eventually be re-programmed to account for risk, most likely when it appears the Fed will raise rates again.  Too much money will react to  the same sell signal and it will be straight down, a flash crash, the new normal for corrections.
We have not experienced a flash crash bear market since 1987 (Black Monday) when the DJIA plunged 22.6% on October 19, primarily due to a computer related problem called computer programming.
Can’t happen today ?  Don’t bet on it !
Bear markets happen.  If you have plenty of money to ride it out, don’t care about maximizing gains, or are faced with looming large expenses a bear market may not matter.
If it does, raise a cash reserve (the last thing anyone wants to do now.
………………………………………………………………………….

Monday, January 13, 2010 “Dual Risk: Stock and Bond Bubble”

One  reason for the strength in the stock market is there is nowhere else to get a return on one’s investment with interest rates so low.
Well, that means long-term bond prices are near historic highs along with the stock market.
       A year ago, the Fed reversed a policy of raising interest rates, panicked and cut the rate of its benchmark fed funds rate to head off  a looming recession, even though it claimed the economy was in a good place.
       Both bond prices and stock prices soared, and aside from  a continuing recession in U.S. manufacturing,  retail sales and housing responded favorably.
        UNSEEN DANGER:
In spite of the Fed’s efforts, a recession is inevitable, as is a bear market.  In a recent survey, 95% of CFOs indicated they expect a recession to hit this year or early next.
But what if  the economy suddenly rebounds ?
The Fed will be forced to raise interest rates causing long-term bond prices to plunge possibly 15% – 25% more than wiping out the annual yield of 3.0% – 3.5%.  With the stock market as historically overvalued as it is now, a Fed tightening would whack the stock market.
We are witnessing a bubble phenom in stock prices.  No one wants the party to end which is classic bubble mentality.
Some will raise a healthy cash position and reduce the  horrific impact of  bear market which has always accompanied recessions.
Others will pay the price, a 30% – 40% hit in their portfolio which will take several years before they see a return to where the carnage started.  Some of those will panic and sell out close to the bottom and never regain their losses.
……………………………………………………………
Friday January 10, 2020 “Buffett Indicator Flashing Sell

Ever try to wade into a stormy surf, worse yet get out a little too deep and try to get back ?  When it becomes unhinged, the stock market mimics a stormy surf. It won’t be long before the Street develops respect for its rage.
The disrespect the Street shows for  this overpriced market reminds me  of just that.  No one wants to get in the way of what is coming when the Street scrambles to grab their winnings and beat everyone else to the door.
      I cringe at all the lies about EVERYTHING !  What happens when the truth outs  ?
Why all the bullishness ?  A crisis didn’t happen, so the Street buys ?  And what if the crisis is not over ?  Only an algo can be so stupid.
Anyone who believes that several harmless missiles lobbed into unoccupied turf is Iran’s response to the killing of the number two leader in Iran is naive. More to come, but done in a manner that does  not give the White House enough reason to respond.
       U.S. corporations on a roll ?    If so, how come 40% are losing money, the highest since the 1990s.
        Investors  should prepare for the day when all this silliness hits the wall and sets a trapdoor for sellers trying to find a buyer for the stock they bought at higher prices thinking someone would buy it from them at a higher price.
This is classic bull market top stuff. It is next to impossible to  stop until something happens.  A jolting piece of news (Mid-East, Trump resignation) or simply the BIG money walks away.
NO one believes the party  is anywhere near over.  I have seen this arrogance/greed a dozen times, it gets ugly.
Greed at tops, fear at bottoms.
The Buffett indicator is flashing SELL !  This is a ratio of market valuation of all stocks to the nation’s GDP. It hit 146% prior to the dot-com bubble burst in 2000 prior to the crash that hammered the S&P 500 down 37% and Nasdaq Comp. 72%.
The indicator reached 137%  before  and the 2007 – 2009 Great Recession which hit the S&P 500 57% and Nasdaq Comp. 56%.
         It has now crossed 150%
……………………………………………………………………
Thursday  Jan 9   It’s All Lies  and Bullshit   Time to CYA
     Analysts in addition to me, are warning  readers to raise cash, some for many months.  Some like InvesTech Research have been on the threshold of a sell for months, referring to economic and stock market indicators that are historically at extremes.
     Ned Davis Research has always been on top of the market. MarketWatch reported yesterday the highly respected analytic firm stated that the market has never been so overvalued, explaining earnings are overstated due to buybacks by corporations without which earnings may  not be growing much at all.
The company noted the ratio of market values to overall profits suggests price/earnings ratios are 80% above the long-term norm.
The price/sales ratio of S&P 500 companies is more overvalued than before the 2000 dot-com crash (S&P 500: down 57%, Nasdaq: down 72%) and the 2007 – 2009 bear market ( S&P 500: down 37%, Nasdaq Comp.: down 56%)
A correction back to reason  will occur, but it needs a trigger.  A sudden resumption in the U.S./Iran crisis could trigger a correction.
If  new  negatives whack the market when it is down, we would then have a bear market.
       I believe two things.  One, the Iran crisis is just beginning.   Two, the BIG money will slip away if it hasn’t already and institutions will realize the downside is so much greater than the upside and will sell  while their record is still attractive enough to attract new business.
Everyone heads for a narrow exit at the same time, ergo  flash crash

…………………………………………………….

Wednesday January 8, 2020 “Crisis Over ?? Don’t Bet on It !”
When tensions were at there highest last evening, it looked like the DJIA would open 300 points lower today, but Iran’s response was a non-event and a statement by its foreign minister, Javal Zarif, that Iran took and “concluded” proportionate measures in self-defense under Article 51 of the U.N. Charter  assures the Street it’s safe to buy.
If that is not the case, uncertainty will prevail and the market decline.
I suspect Iran’s response is just beginning, that  what is yet to come is less direct, one which doesn’t give the U.S. a reason to retaliate. Reportedly, Iran has a significant presence in all areas of the Mid-East.  Yesterday’s missile attack can’t possibly sate  its people’s rage for revenge.
Only computers could ignore the dangers here.
       The Street may rush in here, assured nothing can stop this bull market which is nearly 11 years old.  That’s the kind of thinking that has accompanied every bull market top in the past.
With interest rates at such low levels, investors must buy stocks to either get a dividend yield or to get appreciation in the stock’s value. That works until a bull market is over.
At some point, I expect the BIG money to  stop buying and to sell. That is what will usher in a bear market. They may have already started, but corporate buy-backs and the investment of cash that institutions get in a new year stand to offset that selling….for now.
…………………………………………………………….
Tuesday, January 6, 2020 “Algos Not Programmed for This”
      This is what computer algo investing is all about – a one-way street – “buy.”  How could the algos be programmed to anticipate and analyze the risks of the  killing of Iran’s General Soleimani and the potential for a wider war in the Mid-East ?
They can’t – only  humans beings thinking on their feet can do that. At some point, the algos will have to be re-programmed for risk or set aside for hands-on investing and that’s when we get another flash crash, this time an extended one.
What should happen does not have to happen short-term, but does over the long-term.
This is a phony  market, propped up by Street and Fed hype and especially corporate buy-backs. It has been historically overvalued  for many months, but as we have seen in 1998-2000 it can get more overvalued.
      The key for investors is, when do they raise enough cash to survive the inevitable bear market ?  Sell too early and an investor could have made more money. Sell to late and it could take an investor years to recoup their losses.
………………………………………………………………..
Monday, January 6, 2020 “Bear Market: Rampage of Ruin”

Once the spell is broken, once the perception that the stock market can not sustain a decline, once the computer algos are tweaked to consider the unlikely, the impossible, to abandon an untethered bullish bias, that’s when an ugly bear market begins,  it’s a rampage of ruin.
You aren’t going to hear it from the news media, talk show hosts, publishers of upscale opinion or money managers, their client base doesn’t want to hear it, IT DOESN”T SELL OR DRAW TRAFFIC.
But insignificant market analysts like myself BEHOLDEN TO NO SPECIAL INTERESTS BUT ARMED WITH DECADES OF EXPERIENCE CAN TELL THE TRUTH STARTING WITH  – I can’t stand all the lying at the top, all the self-serving hype and manipulation.    There is a price to be paid for this and that is where things get ugly in the stock market … and economy and people’s lives.
The difference this time around
is the Fed can’t bail the economy and stock market out with a policy change, they blew that a year ago when they panicked by a declining stock market and economy in the early stages of recession.
The result: a deferred recession and an overvalued stock market that becomes more overvalued. Instead of falling out of the 41st floor, this market will be falling out of the 81st floor all because of manipulation.
Rigged ?   Yes, at times, not by a secret committee meeting in someone’s corner office in Manhattan or off in someone’s den in Oyster Bay, but by a mentality that this is a new era where buyers will be rewarded by rising prices indefinitely.  Once reality sets in, that mindset vanishes.
With so many decisions made by computers today, any withdrawal from an, “Ask no questions – just keep buying” would have an immediate and devastating effect on stock prices.    Better hope it doesn’t happen.
As for Iran.  The consequences of killing  General  Solemani are beginning to surface.   My concern is that Trump’s decision  to strike now is all about impeachment and re-election, not international strategy.
If so, as a nation, as investors, we are at HUGE risk.  As I noted Friday (READ “Bear Market to be Worse  Than 2007-2009 – Everything is a Lie”) below.
Once this “bulletproof” spell is broken it will be straight down, and a quick Fed orchestrated recovery won’t bail out the bear market or the economy that will suffer as a result.”
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Friday, January 3,2020
“Bear Market to be Worse Than 2007-2009 – Everything is a LIE !”
The market will try to shake off the killing of the Iranian General, but this market is more overvalued than at any time over the past 100 years except the dot-com bubble burst 1998 – 2000 which pounded the S&P 500 down 57% and Nasdaq 78%.
     I have urged readers to raise cash countless times before this, and have been wrong…….. but not unwise,  as time will tell after the market gets crushed by a 35% -48% drubbing.
Bull markets tend to feed on themselves as the Fed, Street, highly leveraged traders and incumbent administration want the party to continue.
Bull markets press on well beyond reasonable value in a state of vulnerability  until some event triggers a return to reason, a bear market.
A year ago, the Fed headed off a recession with a complete about face in policy featuring three cuts in its fed funds rate. It bought time, but did investors a great injustice – it  delayed the inevitable  – a recession and bear market.
Its hype claimed the “economy was in a good place” which was a lie, if it was in a good place why did the Fed cut its benchmark interest rate three times in six months ?

      On August 19, 2007,  I sensed our economy and stock market were  at risk of a severe  correction and wrote the following:

“The perfect storm in our financial markets

is looming….It will take a heroic effort internationally

 to avert a meltdown of  huge magnitude…Trading in

everything may have to be stopped until some sort of

sanity is restored…This can get real ugly…No one has

a handle on the leverage amassed in  derivatives  ..No

one has a true handle on how precarious the situation out

there is, and that uncertainty feeds on itself prompting

increased selling…With few buyers, stocks tank…

Only when a cauldron of fear begins to boil do you have

 a market that is reasonably safe to invest in.”

     Two, months later, the worst recession/bear market since the 1930s began taking the S&P 500 down 54%.

On March 10, 2009, with the DJIA at 6,800,  I went against  panic in the Street and issued a Special Bulletin “BUY,” one day after the actual bear market bottom, a bear market that took 50% off the S&P 500.
Like today, I had  alerted readers to an unprecedented buying opportunity for weeks before the bear market bottom. Bottoms are much easier to read than tops because the Street, Fed and  party in power don’t want a top to develop.
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Thursday January 2, 2020 “Bull Bubble Burst This Week”
      Yes, the bubble inflates further, casting doubts on all warnings of overvaluation and sucking every prospective investor in with all the money they have left save those who borrow to buy even more stock.
Not much I can say except this is classic behavior of investors at market tops.
FYI: They  are equally feverish at market bottoms except they are then selling convinced the market is going lower.
This scenario has been written about hundreds of times over the years in how to invest successfully books, but greed and fear are a staple in human emotions and in all fairness no one can be blamed for being greedy when stocks are rising relentlessly, or being mortified by stocks that  plummet every day.
Memories of the carnage of the 1999/2000 bear market and the 2007/2009 bear market  are distant, in fact, I doubt many on the Street today were even employed in the business for the 1999-2000  bubble burst.
Futures trading indicate a big  jump at the open, and that should convince just about everyone that 2020 will be a banner year.
That’s unfortunate…very unfortunate.
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Tuesday December31, 2019 “2020 To Be Extremely Volatile”
     I have been watching year-end activity and still expect an early January correction, which could become a bear market depending what hits it when it is about to rebound.
Fed hype and rate cuts, hype about trade pacts, and corporate buy-backs have kept the bull market intact in spite of slower earnings growth and a recession in manufacturing.
Yesterday’s selling (lack of buying) could be the beginning of what I expected for the first week of January, but volatility is what happens in the stock market in December.
No one wants the party to end.  The Fed will have a difficult time stopping a correction this time around like it did in Q4, 2018 when the S&P 500 plunged 20%.
It’s abrupt policy change to that of three successive rate cuts in the fed funds rate not only headed off a bear market, it extended the economic expansion.
All things considered, the market has outrun the looming negatives, political and economic  uncertainty, and investors who are ignoring reality that parties like this eventually do END.
Only contrarians can reject the urge to go all-in.
Like I have said many times the Street never thinks bull markets can ever end at market tops and never thinks bear markets will ever end at market bottoms.
As I  wrote above, this last leg up Dec. 2118 to Dec 2019 is all about Fed hype and rate cuts trade talk resolution,  and corporate buy-backs.  What can any one or all of these do with stock prices at all-time highs ?
At some point, buyers will vanish and sellers take over, the result another flash crash.
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Friday December 27 “ Party Over – Last Call Jan 3
     Classic year-end rally. Expect sellers to show up to put gains into the 2020
tax year.  IMHO, early January will mark the end of the 10-year bull market as political uncertainties surface along with renewed worries about  a recession.
In a real world, these risks are worth considering. Maybe the Street thinks it can ride out a recession/bear market, but fear mounts as stocks slide and investors begin to panic. A 50% decline takes a double to recover, not to mention years.
To its credit, the abrupt change in Fed policy last January averted a recession, but temporarily.
       I am one of the few who believes Donald Trump will not run for the presidency next year, will resign for health reasons or otherwise.
I am most bullish when no one is bullish. Today, everyone is bullish – look at all the buying and at record highs !!!
While the S&P 500 appreciated 32% more under President Obama’s first 35 months in office, Wall Street has strongly endorsed Donald Trump’s election, and stands to be disappointed if he is not re-elected or doesn’t finish his first term.
I think the party is over.
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Monday  December 23 “ Bull Market Top January 3 ?”

No one believes that, but………….
    Most portfolios have been tweaked for tax purposes and to purge losers going into what is expected to be another good year.
This seems just a little too pat for me with some key indicators challenging all-time high levels.
The Shiller S&P 500  price/earnings ratio  of 30.9  has only been topped by the 1999 dot-com bull market top of 44.  While that leaves the current S&P room to rum, any duplication of that outlandish speculative binge of enormously overvalued dot-com stocks is more than a stretch.
Rising uncertainties as the November presidential elections approach are likely to put a lid on investor enthusiasm setting up  a strong possibility of a major sell-off in 2020, and I think that can start in early January starting as early as the 3rd or 6th.
       To its credit, the Fed prevented a recession from starting last year with its abrupt change in policy and three cuts in its fed funds rate.  Time will tell, whether a recession was avoided or just delayed.
Is it worth the risk of buying now after such a run and with so many uncertainties looming ?  I don’t think so. The downside risk far outweighs the upside potential.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.5% which was hit in September.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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