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Pleasure or profit? Investor or trader? Uncertainty or uncertainty?

There’s one overwhelming message in the markets — depressing uncertainty.

Will we close the government? Will earnings fall? Will growth slow? Will we have a recession in 2019? Will our Trade Wars with China ever get solved? Will FANG stocks ever stop falling? Will we ever get a little irrational exuberance? Is hedgie Gundlach right? As he said a few days ago….

Yesterday, Goldman Sachs wrote

The ongoing rout seems to reflect a self-reinforcing interplay between fundamental worries-including slowing global growth, less accommodative policy and rising geopolitical and domestic tensions-and a collapse of liquidity that is magnifying the downward pressure on asset prices. According to our colleagues in Global Investment Research, the liquidity of S&P 500 futures is 70% lower than it was at this time last year while the same measure for single stocks is 42% lower. Moreover, corporations are currently in their “blackout window” prior to releasing quarterly earnings next month, removing another source of important market sponsorship.

That’s pretty bleak. My bolding.

Will the Fed ever stop raising rates?

Right now, the Fed is key to stock prices.

Here’s a chart showing how the Fed’s higher interest rates quickly lead to recessions.

You can play with the chart here.

My smart investor friend called this morning and said he wanted to buy some high-yielding stocks.

I said beware of trying to catch falling knives.

Sell stocks which have:

  1. Fallen more than 15%, and/or
  2. Whose prospects have changed for the worse, and worse — what I call cockroach stocks. My classic is Facebook. Yuch.

Perhaps it’s time to resurrect our old standby?

A little in the mattress is better than a slap in the belly with a cold fish — which is what the stockmarket is delivering today.

Play tennis. Bike riding. Binge watch Netflix.

Investor or Trader?

Some readers ask me: Are you an investor or a trader?

To clear things up: I’m an investor. With one proviso:

When some of my chosen stocks no longer work or go to irrational heights, I’ll sell them.

You’ll find my “logic” in this column. I write it to clear my thoughts. I hope you find them useful.

Talk to your local restaurants about not using plastic straws.

Here’s why:

I watched this video three times. Then I watched videos of turtles caught up in the rubbish that we humans throw into the ocean.

Talk to your local restaurants. Tell them to use paper straws, which degrade in the oceans — not plastic ones that don’t.

Favorite recent New Yorker cartoons


The Power of a Badge…..

A DEA officer stops at a ranch in Texas , and talks with an old rancher.

He tells the rancher, “I need to inspect your ranch for illegally grown drugs..”

“The rancher says, “Okay, but do not go in that field over there,” as he points out the location.

The DEA officer explodes, “Mister, I have the authority of the Federal Government with me.”

Reaching into his rear pants pocket, he removes his badge and proudly displays it to the rancher. “See this badge? This badge means I am allowed to go wherever I wish…. On any land. No questions asked or answers given. Have I made myself clear? Do you understand?”

The rancher nods politely, apologizes, and goes about his chores…..

A short time later, the old rancher hears loud screams and sees the DEA officer running for his life chased by the rancher’s big Santa Gertrudis bull……

With every step the bull is gaining ground on the officer. It seems likely he’ll get gored before he reaches safety. The officer is clearly terrified. The rancher throws down his tools, runs to the fence and yells at the top of his lungs…..

” Your badge. Show him your BADGE ! “

HarryNewton
Harry Newton, who’s looking forward to a house full of family this weekend — two children, two in-laws, four grandchildren. Tomorrow Dairy Queen for lunch and Mary Poppins Returns for an afternoon matinee. Heh, my GM short is working. I can now afford the lunch and the movie. (Just kidding.) Enjoy the weekend. We’re still alive. Smile:

3 Comments

  1. LTinvestor says:

    Harry – there is almost no chance the fed raises rates in the first half of 2019, FF futures are a pretty good indicator for the shorter term and are saying the Fed is done. The economy is slowing and inflation is peaking and the Fed will have that info early in the year and it will be clear they will be pausing.

    I recommend you follow the Hedgeye Research team, they would have made you alot of $$ – they got of tech in the fall and long treasuries – a home run.

    As for the Straws – all the ocean dumping is Asian counties – the US doesn’t dump trash in the ocean , so those plastic straws you use in the US aren’t going up anythings nose.

    • Dan Todd says:

      You’re wrong. The Fed is taking an auto-pilot approach which means it won’t be consulting the FF futures or any other metrics other than inflation and possibly unemployment numbers. You’re talking about the FEd as if it’s a rational entitity and concerned with the stock market. Under Jay Powell it is not. Did you even watch Powell’s press conference last week? HE cares not one whit about the stock market. Even IF inflation is peaking Powell will continue raising just so it doesn’t look like he’s caving in to the president.

    • Dan Todd says:

      Hedgeye is a perma-bear site. If you’d followed them the past nine years you’d have missed out of 300% upside. The site also seems to be anti-index funds. For investors who don’t really understand the market index funds are the only game.