Thursday, January 5, 2017

Its still a bull market in early 2017

STOCK PRICES AROUND THE WORLD ARE STRONGER AGAIN as our international Index has risen another 58 “points” or a bit more than 0.5% and although we are suspicious of this continued strength and although we are certain that a correction of some consequence shall happen “of a sudden” and only when it is obviously very least expected, one cannot take an overtly bearish stance for that would be folly. 

Again we shall simply suggest that this remains a bull market and that in a bull market that one is suspicious of one shall do best by being neutral of equities on balance, and so we are.

We are acting as a good “hedged” fund would act, being long of the things we like while being hedged against broad market risk at the same time.

Appearing on CNBC’s “Fast Money” last evening we again said that we wish to own the “things that if dropped on your foot shall hurt.” That is, we wish to own the simple things incumbent in economic growth: steel; ball bearings manufacturers; railroads that move “stuff” and the like. This is an old story; but it is nonetheless a very good one. If auto sale are as strong as they are domestically…as noted above… and if they are stronger still in China and Asia, then steel demand shall remain strong. Further, if the Chinese government wishes to crack down upon manufacturers there because of air pollution concerns, steel manufacturing in China may slow, with global demand still remaining rather high and thus forcing steel buyers to the US or perhaps to India. Sometimes, simple makes sense and in this instance, fully hedged “simple” might make the most sense of all.

Tuesday, December 27, 2016

Be long but fearful of a sharp correction

We shall once again suggest that new purchases of stocks at these levels shall prove to be ill-advised in the not too distant future. 

Trend remains upward and fighting that trend…opposing that trend… or worse, being short into that trend is and has been debilitating. The proper course of action, obviously, is to be long of equities but fearful of the inevitable correction, which will be violent and sharp when it happens.

Finally, what does bother us is this: that the economy here in the US is strong and shall grow stronger in the New Year as the “animal spirits” of the populace generally are aroused after years of being caged. But… and this is the most difficult “but” of all… aren’t stronger economic circumstances good for equity values, one might reasonably ask? The answer is, “Not always” and the reason is that when the monetary authorities are erring toward tighter policies as evidenced currently by the sharp contraction in the adjusted monetary base AND as the economy strengthens capital moves from the capital markets… from equities… into new plant, equipment and labor.

It is quite common, historically, for economies to strengthen AND for equity values to fall during times such as that, just as it is quite common for equities to rise even as recessions deepen as the monetary authorities are then erring upon the side of monetary expansion while the demand for plant, equipment and labor is faltering. This is the “harsh” secret of economic expansions and economic contractions when compared to equity valuations that is all too often misunderstood and this is our great fear at the moment.

Nonetheless, for now, and until the current great good fun of this bull market has run its course, the trend is up; the music is playing; the women are beautiful; the men are well mannered and the punch bowl is still on the table.

via zh

Thursday, December 22, 2016

Dennis Gartman correctly predicts Fed rate hike

The Fed follows what the market does. Fed has never been a leader in rates whether to the upside or downside. Fed has always been a follower of the markets and the markets have taken the rates higher and will probably continue to do so.  

Tuesday, December 20, 2016

Trump's infrastructure spending will boost commodity stocks

The incoming president has made it abundantly clear he will focus attention on several areas, infrastructure being primary, defense being secondary and I think … I want to own the things that if I drop them on my foot will hurt: Steel, ball bearings, railroads that sort of thing. I think we will see continued movement into those very simple things,

The real movement now is that we will see a movement towards the Mahoney Valley which is where steel was born here in the United States.