Increase Cash Reserves as Market Pushes Higher

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,384
S&P 500: 2,879
Nasdaq Comp.:7,891
Russell 2000:1,567
Friday, April 5
, 2019   9:03  a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
TODAY:
The market is driven  by expectations of a cut in the fed funds rate, a deal on trade between the U.S. and China and a fear of missing out on higher stock prices in a 10-year old bull market that racked up a 332% gain since it started in early March 2009.
The surge since December 26 has recouped nearly all the losses in the October-December plunge (DJIA: -19.2%, S&P 500: -20.2%, Nasdaq Comp.: 23.9%).
Most likely the surge will continue to new highs where the BIG money stands to use the euphoria to do some selling.
If the Fed can’t rekindle  strong economic growth with a combination of hype and rate cuts, we will slide into a recession.  In that case stock prices are at risk for a 30% + correction, more if new negatives hit the market after it has declined significantly.
Even if economic growth is rekindled by the Fed, the market is pricey. But, in a market where speculative frenzy is on the increase, going against the tide goes against human nature.
……………………………………………………………..
TWO DAYS AGO:
I have to keep the following for emphasis and new readers:
Of the last 13 Fed credit crunches, 12 resulted in a recession
. The sole exception occurred in 1998 when the Fed cut its discount rate in face of the Russian financial crisis that had global  repercussions. Its move  delayed a recession until March 2001 but triggered a speculative blow off in stock prices led by dot-com companies and a bear market with a 50% loss by the S&P 500 and 78% loss  in the Nasdaq Comp..
So, let’s assume we get a recession, what can the Fed and the administration do to pull us out of it?
Cut taxes ?   No, we did that with a 40% slash in corporate taxes (1% for individuals). Corporations now account for 5% of the tax monies the federal government receives, hardly adequate considering all the benefits they receive.
Cut interest rates ?  They are still too low to make a difference.
Borrow ?  It’s too late for that, individual, corporate and government debt is already too high.
BOTTOM LINE: When a recession comes it will be ugly and long.
As I explained last week, I believe the Fed will lower its fed funds rate this summer (May 31 or June 19) to head off a recession ahead of the presidential election year.
 Last Friday, Trump’s economic adviser, Larry Kudlow, urged the Fed to cut its fed funds rate by 50 basis points. This suggests the White House is very concerned about the economy.
However, a cut in the fed funds rate preceded the last four recessions, so a move like this is ominous, unless it heads off a recession, i.e. a soft landing.
I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
      If the market averages reach new highs, that forecast will be wrong, but won’t change my belief a bear market is imminent.
TECHNICAL:
New DJIA support is: 26,353, S&P 500:2,874 and Nasdaq Comp: 7,880.
      The market averages broke out above conventional resistance levels Friday and followed through strongly yesterday.
      Major resistance now is DJIA: 26,527; S&P 500: 2,915; Nasdaq Comp.:7,997
The new normal is the flash crash, or steep plunge that does not allow an investor to raise cash except at sharply lower prices. A cash reserve in advance helps reduce the carnage, and in some cases is necessary to avoid a disaster.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.7%. Currently, it tracks  2019 earnings gains/losses at Q1: -3.9%, Q2: +0.1%, Q3: +1.7%, and Q4: +8.3%;
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections, however he Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
ECONOMY:
February Retail Sales  declined 0.2%, though January’s sales were revised up sharply.  PMI manufacturing Index for March was flat.  Business inventoies rose at a faster pace than sales, a potential red flag. The ISM Manufacturing Index came in at the high end of projections. Construction Spendingg jumped 1.0%v in February.
Good news on housing. A sharp drop in mortgage rates has triggered a jump in mortgage apps, especially refinancing apps which surged 12% in the March 22 week and also purchase apps which were up 6%.
The final estimate for Q4 GDP came in at an annual rate of 2.2%, down from the last estimate of 2.6%.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about. ………………………………………………………………….
Fed Damned if they did and damned if they didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1 Earnings Will Be Down, Does the Street Care

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,212
S&P 500: 2,873
Nasdaq Comp.:7,895
Russell 2000:1,560
Thursday, April 4
, 2019   7:40  a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
TODAY:
         Like the tireless pink rabbit, this market just plods on leading anyone who is paying attention to think it will press higher indefinitely.
The Street is looking beyond 2019 earnings, which will be flat-to-down, and on to 2020, which is expected to return to double-digit increases……UNLESS a recession intervenes.
Odds of that are high even with intervention by the Fed. Another contributor to the Street’s enthusiasm is China’s economic rebound, as well as the prospect of a trade deal that ends the tariff war between the number one and number two economies.
A surge based on the announcement of a trade deal would provide an excellent opportunity to raise a healthy cash reserve in anticipation of a sell off in coming weeks, possibly early May as ugly Q1 earnings dominate financial news.
YESTERDAY:
Of the last 13 Fed credit crunches, 12 resulted in a recession
. The sole exception occurred in 1998 when the Fed cut its discount rate in face of the Russian financial crisis that had global  repercussions. Its move  delayed a recession until March 2001 but triggered a speculative blow off in stock prices led by dot-com companies and a bear market with a 50% loss by the S&P 500 and 78% loss  in the Nasdaq Comp..
So, let’s assume we get a recession, what can the Fed and the administration do to pull us out of it?
Cut taxes ?   No, we did that with a 40% slash in corporate taxes (1% for individuals). Corporations now account for 5% of the tax monies the federal government receives, hardly adequate considering all the benefits they receive.
Cut interest rates ?  They are still too low to make a difference.
Borrow ?  It’s too late for that, individual, corporate and government debt is already too high.
BOTTOM LINE: When a recession comes it will be ugly and long.
As I explained last week, I believe the Fed will lower its fed funds rate this summer (May 31 or June 19) to head off a recession ahead of the presidential election year.
 Last Friday, Trump’s economic adviser, Larry Kudlow, urged the Fed to cut its fed funds rate by 50 basis points. This suggests the White House is very concerned about the economy.
However, a cut in the fed funds rate preceded the last four recessions, so a move like this is ominous, unless it heads off a recession, i.e. a soft landing.
I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
      If the market averages reach new highs, that forecast will be wrong, but won’t change my belief a bear market is imminent.
TECHNICAL:
New DJIA support is: 26,153, S&P 500:2,863 and Nasdaq Comp: 7,843.
      The market averages broke out above conventional resistance levels Friday and followed through strongly yesterday.
      Major resistance now is DJIA: 26,497; S&P 500: 2,867; Nasdaq Comp.:7,896.
The new normal is the flash crash, or steep plunge that does not allow an investor to raise cash except at sharply lower prices. A cash reserve in advance helps reduce the carnage.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.7%. Currently, it tracks  2019 earnings gains/losses at Q1: -3.9%, Q2: +0.1%, Q3: +1.7%, and Q4: +8.3%;
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections, however he Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
ECONOMY:
February Retail Sales  declined 0.2%, though January’s sales were revised up sharply.  PMI manufacturing Index for March was flat.  Business inventoies rose at a faster pace than sales, a potential red flag. The ISM Manufacturing Index came in at the high end of projections. Construction Spendingg jumped 1.0%v in February.
Good news on housing. A sharp drop in mortgage rates has triggered a jump in mortgage apps, especially refinancing apps which surged 12% in the March 22 week and also purchase apps which were up 6%.
The final estimate for Q4 GDP came in at an annual rate of 2.2%, down from the last estimate of 2.6%.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about. ………………………………………………………………….
Fed Damned if they did and damned if they didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

Street Ignores 2019 Earnings Slump, Look to 2020

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,179
S&P 500: 2,867
Nasdaq Comp.:7,848
Russell 2000:1,553
Wednesday, April 3
, 2019   9:07  a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET
        Of the last 13 Fed credit crunches, 12 resulted in a recession. The sole exception occurred in 1998 when the Fed cut its discount rate in face of the Russian financial crisis that had global  repercussions. Its move  delayed a recession until March 2001 but triggered a speculative blow off in stock prices led by dot-com companies and a bear market with a 50% loss by the S&P 500 and 78% loss  in the Nasdaq Comp..
So, let’s assume we get a recession, what can the Fed and the administration do to pull us out of it?
Cut taxes ?   No, we did that with a 40% slash in corporate taxes (1% for individuals). Corporations now account for 5% of the tax monies the federal government receives, hardly adequate considering all the benefits they receive.
Cut interest rates ?  They are still too low to make a difference.
Borrow ?  It’s too late for that, individual, corporate and government debt is already too high.
BOTTOM LINE: When a recession comes it will be ugly and long.
As I explained last week, I believe the Fed will lower its fed funds rate this summer (May 31 or June 19) to head off a recession ahead of the presidential election year.
 Last Friday, Trump’s economic adviser, Larry Kudlow, urged the Fed to cut its fed funds rate by 50 basis points. This suggests the White House is very concerned about the economy.
However, a cut in the fed funds rate preceded the last four recessions, so a move like this is ominous, unless it heads off a recession, i.e. a soft landing.
I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
      If the market averages reach new highs, that forecast will be wrong, but won’t change my belief a bear market is imminent.
TECHNICAL:
New DJIA support is: 26,153, S&P 500:2,863 and Nasdaq Comp: 7,833.
      The market averages broke out above conventional resistance levels Friday and followed through strongly yesterday.
      Major resistance now is DJIA: 26,497; S&P 500: 2,880; Nasdaq Comp.:7,896.
The urge to jump in with both feet is becoming irresistible as prices surge.
It’s human nature, but it can be one’s undoing.
The new normal is the flash crash, or steep plunge that does not allow an investor to raise cash except at sharply lower prices. A cash reserve in advance helps reduce the carnage.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.7%. Currently, it tracks  2019 earnings gains/losses at Q1: -3.9%, Q2: +0.1%, Q3: +1.7%, and Q4: +8.3%;
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections, however he Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
ECONOMY:
February Retail Sales  declined 0.2%, though January’s sales were revised up sharply.  PMI manufacturing Index for March was flat.  Business inventoies rose at a faster pace than sales, a potential red flag. The ISM Manufacturing Index came in at the high end of projections. Construction Spendingg jumped 1.0%v in February.
Good news on housing. A sharp drop in mortgage rates has triggered a jump in mortgage apps, especially refinancing apps which surged 12% in the March 22 week and also purchase apps which were up 6%.
The final estimate for Q4 GDP came in at an annual rate of 2.2%, down from the last estimate of 2.6%.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about. ………………………………………………………………….
Fed Damned if they did and damned if they didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

Street Betting on Fed Rate Cut designed to Head Off Recession

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,258
S&P 500: 2,867
Nasdaq Comp.:7,828
Russell 2000:1,556
Tuesday, April 2
, 2019   7:03  a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET
The Street jumped in to buy aggressively yesterday, because China’s economy is pulling out of the worst slump in 28 years.
That’s a crock because the U.S. economy is still slipping.
I think the Street suspects the Fed will cut its fed funds rate in the near future, desperate to head off a recession in an election year.
As I explained last week,
I believe the Fed will lower its fed funds rate this summer (May 31 or June 19) if the economy continues to slip.
The Fed wants to achieve  a soft landing, and  reverse the current economic weakness before it reaches a recession, and the best way to achieve that is  lowering the fed funds rate.
Friday, Trump’s economic adviser, Larry Kudlow, urged the Fed to cut its fed funds rate by 50 basis points. This suggests the White House is very concerned about a recession in 2020.
However, a cut in the fed funds rate preceded the last four recessions, so a move like this is ominous, unless it heads off a recession, i.e. a soft landing.
The Fed abandoned a policy of rising rates in the early 1990s, extending the economic recovery until the recession in 2001.
I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
If the market averages reach new highs, that forecast will be wrong, but won’t change my belief a bear market is imminent.
TECHNICAL:
New DJIA support is: 26,167, S&P 500:2,857 and Nasdaq Comp: 7,786.
      The market averages broke out above conventional resistance levels Friday and followed through strongly yesterday.
      Resistance now is DJIA: 26,497; S&P 500: 2,880; Nasdaq Comp.:7,896.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.7%. Currently, it tracks  2019 earnings gains/losses at Q1: -3.9%, Q2: +0.1%, Q3: +1.7%, and Q4: +8.3%;
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections, however he Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
ECONOMY:
February Retail Sales  declined 0.2%, though January’s sales were revised up sharply.  PMI manufacturing Index for March was flat.  Business inventoies rose at a faster pace than sales, a potential red flag. The ISM Manufacturing Index came in at the high end of projections. Construction Spendingg jumped 1.0%v in February.
Good news on housing. A sharp drop in mortgage rates has triggered a jump in mortgage apps, especially refinancing apps which surged 12% in the March 22 week and also purchase apps which were up 6%.
The final estimate for Q4 GDP came in at an annual rate of 2.2%, down from the last estimate of 2.6%.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about. ………………………………………………………………….
Fed Damned if they did and damned if they didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 Seeks Soft Landing Before Election Year

INVESTOR’S first read.com – Daily edge before the open deal 
DJIA: 25,717
S&P 500: 2,815
Nasdaq Comp.:7,669
Russell 2000:1,535
Friday, March 29
, 2019   9:05 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET:
I believe the Fed will lower its fed funds rate this summer if the economy continues to slip.  The move would come after a FOMC meeting on May 31 or June 19 when a press conference is held. No presser is scheduled for July31 and no FOMC meeting scheduled for August.
That leaves the next possibility September 18.  The Trump administration is determined to avoid a recession in 2020, a presidential election year and this Fed will do everything possible to accommodate it.
The Fed wants to achieve  a soft landing, it wants to reverse the current economic weakness before it reaches a recession, and it will try to do that by aggressively  lowering the fed funds rate, the sooner the better.
A cut in the fed funds rate preceded the last four recessions, so a move like this is ominous, unless it heads off a recession, i.e. a soft landing.
The Fed last abandoned a policy of rising rates in the early 1990s, extending the economic recovery until the recession in 2001.
I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
Generally, a drop of 20% in the S&P 500 comprises a bear market, but the rebound since December 26, with the help of the Fed’s timely policy change, has led technicians to disregard Q4’s action as a blip, unless of course the market heads south again to new lows.
The key here is whether the Fed can trigger a rebound in a tired economy. They already stopped the Q4 carnage with an abrupt policy change.
TECHNICAL:
New DJIA support is: 25,630, S&P 500:2,806 and Nasdaq Comp: 7,651.
      Bulls need a break above DJIA: 25,755; S&P 500: 2,826; Nasdaq Comp.:7,715.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.8%, Thompson Reuters ReFinitir sees a gain of 3.4%
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections. The Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
BOEING:
In my blog Friday March 15, with Boeing (BA) now 374 but then 374, I warned it was at further risk, with the next support level at 300. I noted that as one of the Dow 30, a drop of that magnitude would take 495 points off the DJIA, a price-weighted average, Boeing being the highest priced stock in the average.  This is one of those corporate crises that  just won’t go away, and that is enough to scare buyers away until it drops to a level that discounts the unknown. It traded huge volume around 365, which should have been enough to turn it around, yet Friday it slipped lower. Crunch the numbers in a hundred ways, and you still can’t eliminate the nagging “what ifs.” The company has implemented a software fix for its anti-stall feature, which it believes solves its problems. If the Street accepts this, the stock should rebound and grounded planes should be put back in service.
……………………………………………………….
ECONOMY:
Good news on housing. A sharp drop in mortgage rates has triggered a jump in mortgage apps, especially refinancing apps which surged 12% in the March 22 week and also purchase apps which were up 6%.
The final estimate for Q4 GDP came in at an annual rate of 2.2%, down from the last estimate of 2.6%.
Q1 auto sales are  expected to drop 2.5% (y/y) according to a CNBC report.
The Richmond Fed Mfg. Index slipped across the board  in March to 10 from 16 slightly below projections.
Consumer Confidence  for March took a hit, the index dropping to 124.1 from 131.4.
February Housing Starts were reported Tuesday morning and were down 4.2% – not good, but more time is needed to see if lower mortgage rates take attract buyers.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about.
On the positive last week, New Home Sales rebounded sharply 11.8%,  builder sentiment picked up (but traffic down), and jobless claims slowed. However, wholesale inventories rose, factory orders were flat and the U.S government plunged deeper into the red for the nation’s first five months of its fiscal year.
………………………………………………………………..                                                                                                                                                                                        TRADE: At this level, a resolution to the U.S./China talks is most likely priced into the market, aside from a one-day spike when a deal is announced.
What is not priced in is “no deal” or a disappointing deal, what’s more, further deterioration in the economy is not  priced in either, because that raises the risk of  recession (see below).
Both sides want a deal. Trump is on a wrenching losing streak and needs a win even if it means concessions, China’s industrial output is at a 17-year low.
A late April date is targeted for a trade deal.
………………………………………………………………….
Fed Damned if they did and damned if the didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 Drop in Fed Funds Rate Precedes Recessions

INVESTOR’S first read.com – Daily edge before the open deal 
DJIA: 25,625
S&P 500: 2,805
Nasdaq Comp.:7,643
Russell 2000:1,523
Thursday, March 28
, 2019   9:05 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET:
The market has now been trading is a sideways consolidation range, which is normal after a big upmove. This will have to be resolved up or down, and that will hinge on the flow of economic news and the Fed’s reaction to the news. More bad news and the Fed will lower its fed funds rate.
Logically, that should goose the market. Historically, a lowering of the rate has preceded a recession.  That’s why the Fed lowers the rate, it is its first step in countering a recession.
The following is unchanged from yesterday and viable at least for the near-term.
Mounting concerns  about weak spots in the economy is keeping a lid on stock prices.  I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
Generally, a drop of 20% in the S&P 500 comprises a bear market, but the rebound since December 26, with the help of the Fed’s timely policy change, has led technicians to disregard Q4’s action as a blip, unless of course the market heads south again to new lows.
The key here is whether the Fed can trigger a rebound in a tired economy. They already stopped the Q4 carnage with an abrupt policy change.
I now expect a cut in the fed funds rate, which could come as early as the FOMC’s May 30 meeting if economic indicators indicate  our economy is heading for a recession. June 19 would be the next possible date.
It would have to be a FOMC meeting accompanied by a Fed Chief  Powell press conference. None is scheduled for July 31, which leaves September18 – no August FOMC meeting.
By all accounts, the Fed will want to avoid a recession in 2020, a presidential election year.
TECHNICAL:
DJIA support is: 25,403, S&P 500:2,785 and Nasdaq Comp: 7,580. Both rebounded from these levels yesterday.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.8%, Thompson Reuters ReFinitir sees a gain of 3.4%
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections. The Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
BOEING:
In my blog Friday March 15, with Boeing (BA) now 374 but then 374, I warned it was at further risk, with the next support level at 300. I noted that as one of the Dow 30, a drop of that magnitude would take 495 points off the DJIA, a price-weighted average, Boeing being the highest priced stock in the average.  This is one of those corporate crises that  just won’t go away, and that is enough to scare buyers away until it drops to a level that discounts the unknown. It traded huge volume around 365, which should have been enough to turn it around, yet Friday it slipped lower. Crunch the numbers in a hundred ways, and you still can’t eliminate the nagging “what ifs.” The company has implemented a software fix for its anti-stall feature, which it believes solves its problems. If the Street accepts this, the stock should rebound and grounded planes should be put back in service.
……………………………………………………….
ECONOMY:
Good news on housing. A sharp drop in mortgage rates has triggered a jump in mortgage apps, especially refinancing apps which surged 12% in the March 22 week and also purchase apps which were up 6%.
The final estimate for Q4 GDP came in at an annual rate of 2.2%, down from the last estimate of 2.6%.
Q1 auto sales are  expected to drop 2.5% (y/y) according to a CNBC report.
The Richmond Fed Mfg. Index slipped across the board  in March to 10 from 16 slightly below projections.
Consumer Confidence  for March took a hit, the index dropping to 124.1 from 131.4.
February Housing Starts were reported Tuesday morning and were down 4.2% – not good, but more time is needed to see if lower mortgage rates take attract buyers.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about.
On the positive last week, New Home Sales rebounded sharply 11.8%,  builder sentiment picked up (but traffic down), and jobless claims slowed. However, wholesale inventories rose, factory orders were flat and the U.S government plunged deeper into the red for the nation’s first five months of its fiscal year.
………………………………………………………………..                                                                                                                                                                                        TRADE: At this level, a resolution to the U.S./China talks is most likely priced into the market, aside from a one-day spike when a deal is announced.
What is not priced in is “no deal” or a disappointing deal, what’s more, further deterioration in the economy is not  priced in either, because that raises the risk of  recession (see below).
Both sides want a deal. Trump is on a wrenching losing streak and needs a win even if it means concessions, China’s industrial output is at a 17-year low.
A late April date is targeted for a trade deal.
………………………………………………………………….
Fed Damned if they did and damned if the didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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 To Cut Rates At May 30 Meeting if Economy Lags

Fed To Cut Rates At May 31 Meeting If  Economy Lags
INVESTOR’S
first read.com – Daily edge before the open deal 
DJIA: 25,657
S&P 500: 2,818
Nasdaq Comp.:7,691
Russell 2000:1,528
Wednesday, March 27
, 2019   9:11 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET:
Mounting concerns  about weak spots in the economy is keeping a lid on stock prices.  I have said for months that I believe we are in the early stages of a recession, that a bear market started last October with the first leg coming in Q4 of DJIA: 19.2%, S&P 500: 20.2%, and the Nasdaq Comp. of:23.8%.
Generally, a drop of 20% in the S&P 500 comprises a bear market, but the rebound since December 26, with the help of the Fed’s timely policy change, has led technicians to disregard Q4’s action as a blip, unless of course the market heads south again to new lows.
The key here is whether the Fed can trigger a rebound in a tired economy. They already stopped the Q4 carnage with an abrupt policy change.
I now expect a cut in the fed funds rate, which could come as early as the FOMC’s May 30 meeting if economic indicators indicate  our economy is heading for a recession. June 19 would be the next possible date.
It would have to be a FOMC meeting accompanied by a Fed Chief  Powell press conference. None is scheduled for July 31, which leaves September18 – no August FOMC meeting.
By all accounts, the Fed will want to avoid a recession in 2020, a presidential election year.
TECHNICAL:
DJIA support is: 25,380, S&P 500:2,785 and Nasdaq Comp: 7,580.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.8%, Thompson Reuters ReFinitir sees a gain of 3.4%
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections. The Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
BOEING:
In my blog Friday March 15, with Boeing (BA) now 370 but then 374, I warned it was at further risk, with the next support level at 300. I noted that as one of the Dow 30, a drop of that magnitude would take 495 points off the DJIA, a price-weighted average, Boeing being the highest priced stock in the average.  This is one of those corporate crises that  just won’t go away, and that is enough to scare buyers away until it drops to a level that discounts the unknown. It traded huge volume around 365, which should have been enough to turn it around, yet Friday it slipped lower. Crunch the numbers in a hundred ways, and you still can’t eliminate the nagging “what ifs.”
……………………………………………………….
ECONOMY:
Q1 auto sales are  expected to drop 2.5% (y/y) according to a CNBC report.
The Richmond Fed Mfg. Index slipped across the board  in March to 10 from 16 slightly below projections.
Consumer Confidence  for March took a hit, the index dropping to 124.1 from 131.4.
February Housing Starts were reported Tuesday morning and were down 4.2% – not good, but more time is needed to see if lower mortgage rates take attract buyers.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about.
On the positive last week, New Home Sales rebounded sharply 11.8%,  builder sentiment picked up (but traffic down), and jobless claims slowed. However, wholesale inventories rose, factory orders were flat and the U.S government plunged deeper into the red for the nation’s first five months of its fiscal year.
………………………………………………………………..                                                                                                                                                                                        TRADE: At this level, a resolution to the U.S./China talks is most likely priced into the market, aside from a one-day spike when a deal is announced.
What is not priced in is “no deal” or a disappointing deal, what’s more, further deterioration in the economy is not  priced in either, because that raises the risk of  recession (see below).
Both sides want a deal. Trump is on a wrenching losing streak and needs a win even if it means concessions, China’s industrial output is at a 17-year low.
A late April date is targeted for a trade deal.
………………………………………………………………….
BREXIT:
Parliament has seized control of the Brexit process from Prime Minister  Theresa May and will begin to vote on key issues possibly another referendum.
Politico urged Americans not to freak out about Brexit, quoting Allianz’s Mohamed A. El-Erian who said  disorderly   Brexit would be disruptive for the UK in the short-term…but less disruptive for Europe and, constitute only a blip in the  US and most of the rest of the world. Thursday Britain’s Parliament approved  U.K. Prime Minister Theresa May’s bid to delay Brexit until late May.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Fed Damned if they did and damned if the didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Street in Denial – Market Highly Vulnerable

INVESTOR’S first read.com – Daily edge before the open deal 
DJIA: 25,516
S&P 500: 2,798
Nasdaq Comp.:7,637
Russell 2000:1,512
Tuesday, March 26
, 2019   8:53 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET:
Watching and waiting – that’s what the Fed said it would do before  making a decision on pushing rates up or down.  That’s what the Street is doing, though I think their decision process is tainted by wishful thinking, the desire for the 10-year old bull market/ economic expansion to continue indefinitely.
The Fed has spoiled the Street rotten with its micro-managing of both the stock market and the economy.
The latter is fine with me, it is the managing of the stock market that troubles me, because a lot of people will get hurt if the Fed props up a market that would otherwise find a realistic level that discounts looming negatives at much lower prices.
THE RESULT: What we have seen in the past, a sudden realization on the Street that the level of stock prices is much too high, then whooooosh    down it goes – off 12% – 15% before anyone can cry “ouch!”…or worse.
Odds favor that the next 19 months will feature an accelerating deterioration in the economy, one constitutional crisis after another, and a nosedive in confidence.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.8%, Thompson Reuters ReFinitir sees a gain of 3.4%
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections. The Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
BOEING:
In my blog Friday March 15, with Boeing (BA) now 363 but then 374, I warned it was at further risk, with the next support level at 300. I noted that as one of the Dow 30, a drop of that magnitude would take 495 points off the DJIA, a price-weighted average, Boeing being the highest priced stock in the average.  This is one of those corporate crises that  just won’t go away, and that is enough to scare buyers away until it drops to a level that discounts the unknown. It traded huge volume around 365, which should have been enough to turn it around, yet Friday it slipped lower. Crunch the numbers in a hundred ways, and you still can’t eliminate the nagging “what ifs.”
……………………………………………………….
ECONOMY:
February Housing starts were reported this morning and were down 4.2% – not good, but more time is needed to see if lower mortgage rates take attract buyers.
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
The Philly Fed Survey for February showed a sharp rebound to index of 13.7 from depressed levels, however the 6-month outlook for new orders [plunged 10.5 points to 21.8.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about.
On the positive last week, New Home Sales rebounded sharply 11.8%,  builder sentiment picked up (but traffic down), and jobless claims slowed. However, wholesale inventories rose, factory orders were flat and the U.S government plunged deeper into the red for the nation’s first five months of its fiscal year.
………………………………………………………………..
           TRADE: At this level, a resolution to the U.S./China talks is most likely priced into the market, aside from a one-day spike when a deal is announced.
What is not priced in is “no deal” or a disappointing deal, what’s more, further deterioration in the economy is not  priced in either, because that raises the risk of  recession (see below).
Both sides want a deal. Trump is on a wrenching losing streak and needs a win even if it means concessions, China’s industrial output is at a 17-year low.
A late April date is targeted for a trade deal.
………………………………………………………………….
BREXIT:
Parliament has seized control of the Brexit process from Prime Minister  Theresa May and will begin to vote on key issues possibly another referendum.
Politico urged Americans not to freak out about Brexit, quoting Allianz’s Mohamed A. El-Erian who said  disorderly   Brexit would be disruptive for the UK in the short-term…but less disruptive for Europe and, constitute only a blip in the  US and most of the rest of the world. Thursday Britain’s Parliament approved  U.K. Prime Minister Theresa May’s bid to delay Brexit until late May.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Fed Damned if they did and damned if the didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets Jittery as Global Economies Struggle

INVESTOR’S first read.com – Daily edge before the open deal 
DJIA: 25,5012
S&P 500: 2,800
Nasdaq Comp.:7,642
Russell 2000:1,505
Monday, March 25
, 2019   8:53 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET:
Thursday’s headline, “Fed Can’t Say It, But Fears  Recession/Bear Market,” makes more sense today after Friday’s ugly plunge.
The  Fed reversed policy on a dime in January, which was right if they see a recession looming, BUT they erred in hyping the economy as “rosy” and “in a good place.” Their failure to tell it like it is sucked a lot of investors into the market at prices higher than exist now. This isn’t hindsight, I said it when they made these statements – a no brainer.
I believe the bear market started in October and a recession is underway though piece by piece.
……………………………………………………….
EARNINGS: For 2019, FactSet expects a gain of 3.8%, Thompson Reuters ReFinitir sees a gain of 3.4%
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections. The Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..
Flattening Yield Curve:
Blame for Friday’s plunge in prices was shared by a flattening in the yield curve and deteriorating  global economies. They were referring to the narrowing between the yield on the 10-year treasury and the 2-year to 12 basis points.
Basically, the yield curve is the difference between short-term  and long-term treasury interest rates. They invert when short rates exceed long rates. An inversion has preceded 9 recessions since 1955.
However, as a precision forecaster, it has a problem, the lag time between a signal can range between one and three years. An inversion preceded the 2007-2009 financial crisis by 24 months.
…………………………………………………………
BOEING:
In my blog Friday March 15, with Boeing (BA) now 363 but then 374, I warned it was at further risk, with the next support level at 300. I noted that as one of the Dow 30, a drop of that magnitude would take 495 points off the DJIA, a price-weighted average, Boeing being the highest priced stock in the average.  This is one of those corporate crises that  just won’t go away, and that is enough to scare buyers away until it drops to a level that discounts the unknown. It traded huge volume around 365, which should have been enough to turn it around, yet Friday it slipped lower. Crunch the numbers in a hundred ways, and you still can’t eliminate the nagging “what ifs.”
……………………………………………………….
ECONOMY:
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%. The Trump administration is projecting growth of 3.1%.
The Philly Fed Survey for February showed a sharp rebound to index of 13.7 from depressed levels, however the 6-month outlook for new orders [plunged 10.5 points to 21.8.
Also Thursday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about.
On the positive last week, New Home Sales rebounded sharply 11.8%,  builder sentiment picked up (but traffic down), and jobless claims slowed. However, wholesale inventories rose, factory orders were flat and the U.S government plunged deeper into the red for the nation’s first five months of its fiscal year.
………………………………………………………………..
           TRADE: At this level, a resolution to the U.S./China talks is most likely priced into the market, aside from a one-day spike when a deal is announced.
What is not priced in is “no deal” or a disappointing deal, what’s more, further deterioration in the economy is not  priced in either, because that raises the risk of  recession (see below).
Both sides want a deal. Trump is on a wrenching losing streak and needs a win even if it means concessions, China’s industrial output is at a 17-year low.
A late April date is targeted for a trade deal.
………………………………………………………………….
BREXIT: Politico urged Americans not to freak out about Brexit, quoting Allianz’s Mohamed A. El-Erian who said  disorderly   Brexit would be disruptive for the UK in the short-term…but less disruptive for Europe and, constitute only a blip in the  US and most of the rest of the world. Thursday Britain’s Parliament approved  U.K. Prime Minister Theresa May’s bid to delay Brexit until late May.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Fed Damned if they did and damned if the didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Needs Sideways Consolidation Trading Range

INVESTOR’S first read.com – Daily edge before the open deal 
DJIA:25,962
S&P 500:2,854
Nasdaq Comp.:7,838
Russell 2000:1,562
Friday, March 22
, 2019   8:03 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
THE MARKET:
      I don’t think the Fed would cut its fed funds rate unless it believes a recession is unavoidable. That’s why it put its policy of raising rates on hold. The economy is definitely slowing, the global economy more so.
Like Fed Chief Powell said Wednesday, it’s a wait and see situation.
The Street sees this as a return to the good old days when the Fed verbally and policy-wise nurtured the economy and stock market along  following the Great Recession/ Bear market.
If they are right, we will see new all-time highs.  If wrong, a lot of investors will  lose a lot of money.
This is what I have referred to as a cruise control, or an automatic pilot market.
Therein lies the danger. Just about the time investors thought it was safe to close one’s eyes, worse yet, go all-in, some on  margin.
          According to Fed Chief Jerome Powell, the Fed does not plan any increases in its fed funds rate this year.   At his post-FOMC press conference yesterday, Powell explained, “The data we’re seeing are not currently sending a signal,” adding  “When they do clarify, we will act appropriately.”
Last December, the Fed indicated it would increase its benchmark interest rate twice in 2019. The Fed reversed that policy abruptly in January in face of a global economic slowdown.
The rate has a major impact on  mortgages, credit cards and borrowing in general, and is a major tool in executing its policy of heating up or cooling down the economy.
Based on what the economic reports in recent months are reflecting, that suggests a drop in the fed funds rate is imminent if the economy does not pick up.
From what I see, a cut in the fed funds rate would indicate the Fed sees an increasing possibility of a recession.  The last three recessions ( 2007-2009, 2001,1990-1991) were preceded by cuts in the Funds rate, as the Fed changed policy to counter a looming recession.
While the Street would welcome a cut, it would not be a buy signal.
       What is needed now is for the market to roll over into a sideways consolidation trading range where stock prices are more reasonably priced for whatever outcome develops.
If that happens, the market should trade between S&P 500 2,700 and 2,850, and 25,000 and 26,200 on the DJIA.
……………………………………………………….
EARNINGS: The only change here is FactSet reduced 2019 projections for the S&P 500 further this week with 2019 coming in at +3.9%, down from +4.1% a week ago. Q1 is running at a minus 3.4%.
A Morgan Stanley study shows  a downturn in S&P 500 earnings growth has consistently triggered a plunge in stock prices. Analysts have been slashing 2019 earnings projections. The Street is betting on a rebound in 2020. If they start slashing projections for 2020, we have the next leg of the bear market.
………………………………………………………..       
ECONOMY:
In his press conference Wednesday, Fed Chief Powell noted the Fed cut its 2019 projected growth for GDP to 2.1% from 2.3%.
The Philly Fed Survey for February showed a sharp rebound to index of 13.7 from depressed levels, however the 6-month outlook for new orders [plunged 10.5 points to 21.8.
Also yesterday, February’s Leading Economic Indicators grew at a 0.2 % rate, modest but a lot better than January’s minus 0.1% rate. Three consecutive changes in one direction or another signals a change in a economic trend. The trend over the last four months has been irregular and flat, which is what the Fed is concerned about.
Tuesday, Econoday.com reported  Factory Orders slowed into year-end and only rose 0.1 percent in January, but capital goods (nondefense ex-aircraft) jumped 0.8 percent, indicating business investment  snapped out of its  doldrums.  Unfortunately, at an increase of only 0.1 percent, unfilled orders reflect weakness.
………………………………………………………………..
TRADE: At this level, a resolution to the U.S./China talks is most likely priced into the market, aside from a one-day spike when a deal is announced.
What is not priced in is “no deal” or a disappointing deal, what’s more, further deterioration in the economy is not  priced in either, because that raises the risk of  recession (see below).
Both sides want a deal. Trump is on a wrenching losing streak and needs a win even if it means concessions, China’s industrial output is at a 17-year low.
A late April date is targeted for a trade deal.
………………………………………………………………….
BREXIT: Politico urged Americans not to freak out about Brexit, quoting Allianz’s Mohamed A. El-Erian who said  disorderly   Brexit would be disruptive for the UK in the short-term…but less disruptive for Europe and, constitute only a blip in the  US and most of the rest of the world. Thursday Britain’s Parliament approved  U.K. Prime Minister Theresa May’s bid to delay Brexit until late May.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Fed Damned if they did and damned if the didn’t:
Based on what I am seeing in reports on the economy, we need a couple months to put the government shutdown, and Q4’s crunch in the market and economy behind us.      We also need to see if the Fed’s change in policy from one of raising interest rates to one of “wait and see” can head off a recession.
      I think the failure of the Fed to acknowledge the seriousness of weaknesses in the economy was a huge blunder. Their referral a month ago to the economy as :”rosy” was simply not true. As a result that assessment plus a U-turn on policy triggered a stampede in the stock market.
      Now, if  the Fed is right and the economy heats up, they will have to return to a policy of raising rates which will turn the market down from inflated levels.
If they are wrong and the economy slips into recession, stocks will turn down from inflated levels.
Either way, the Fed has increased the risk for investors.      Good news on tariffs will spike the market. That would be a good opportunity to raise cash, a lot of it.
……………………………………………..
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
> While Q4 corporate profits are very impressive, analysts are dramatically slashing estimates for 2019. FactSet now sees Q1 this year at minus 3.2% down from minus 2.7% a week ago; Q2 at plus 0.3% down from plus 1.0%; Q3 at plus 1.9%  down from plus 2.4% and Q4 at plus 8.5% down from plus 9.9%. For the year they see an earnings gain of plus 4.1% down from plus 4.8% a week ago..     The Street may be looking beyond 2019 to 2020 when it sees a rebound in earnings.  That’s sheer insanity.    By then, a recession will be underway.  When the Street sees its folly, it will slash 2020 earnings like it is slashing this year’s.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.

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 THE PRESIDENCY PROBLEM
Special Counsel Robert Mueller, the Southern District of New York ands the State of New York are  closing in on President Trump, et al, and  this is going to get ugly.  So far, the Street has ignored the issue. Bad news for Trump may not adversely impact stock prices, good news would jettison them, since it raises the odds that Trump would be re-elected in 2020.
      There are other issues that can crush the market (debt, fiscal crisis, depression), but extended dysfunction in the highest office in our country has the potential for immeasurable damage to stock prices.
Investors must be prepared for the possibility of this happening. If it doesn’t play out that way, be very grateful.
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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.