Aggregate Trading: When “Up Days” are Down

Burton Malkiel’s book, “A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing,” made the case long ago that as “investment tools” darts work pretty well.

Others have said much the same thing; noting that on any given day, the odds of making money in the market are a lot closer to 50-50 than we otherwise might wish to believe.  So much so, that just buying a long position and staying long, can outperform something like 90% of investment guru’s.

That’s one of the reasons I cobbled up the Aggregate approach and started the Peoplenomics.com website.  Because if you invest in the totality of markets, you can eliminate at least some of the pitfalls associated with individual stocks.

In other words, the odds of Tesla stock making a violent up or down move is higher (thanks to the mercurial personality of Elon Musk), is vastly higher than the entire S&P 500 or Russell 2000 index having a similar (or greater) amount of volatility.

This is not to say, however, that singular stocks can’t do better in the long-run than the overall market.  Of course, there will always be stand-outs.  It’s just that when they come along, it’s hard to spot the next Microsoft in the “awkward age” between IPO and a half-billion.  Of course, as companies grow and the strength of product becomes clear (and I did mention indispensable, right?) people will clamor to get on-board.

Still, being inherently lazy is a virtual, often times.  “Let the trend be your friend” is one of the oldest sayings on Wall St.

So why mention all this?

Because yesterday was a picture-perfect day in  terms of illustrating how the Aggregate view can be more useful than even a single index – like the Dow Jones.

You see Monday, the Dow rose just over 39-points.  But, in our way of viewing markets, it was a downer of a day – in keeping with our outlook for a decline to the bottom of the trend channel.

That’s because while the Dow was up 15-hundredth’s of a percent, the NASDAQ was down just over 67-hundredth’s of a percent while the S&P was down 4-one hundredth’s of a percent.

Thing about people is we all have a tendency to  “watch that which we can frame” and not what we’re unfamiliar with.  Point is, on an Aggregate basis, with equal dollars in the Dow, S&P, and NASDAQ, you would have lost money yesterday.

This odd way of looking at finance arrived here in the period prior to 2000 when it became clear that while out-sized gains were being made in the then red-hbot NASDAQ tech stocks, the rest of the market held down average portfolio performance.

Yet, when the market tanked in the Tech Wreck which wipe-out between $5 and %8-trillion of investor net work, stock peddlers disingenuously and quite quietly focused on the larger cap indices like the S&P and Dow to sell shares.

Long rap, and sorry to go on, but it was pretty clear in our work that we would continue to drift down.  And when I got up this morning to see if it was looking like time to “go long” yet, I was again struck by the “painting of the tape” – which is when one stock (or index) argues that the reason of solid financial decision-making has been suspended.  (They haven’t been.)

Which gets us to eyeing when the bottom in the small wave 4 can be expected.  In this snip, the level “tail” on the chart is projected out several days, but you can see the gist of where I think we are:

The yellow area is when we get into “projected” performance if things were to continue unchanged for the next week.  They will change, of course, but with the careful use of trend channels and the like, we can at least make better-informed decisions about how to lose money to the commercials on Wall Street.

FedSpeak and NFIB

Kaplan, Harker, and Williams of the Fed will be speaking today.  We expect that the rubber-chicken circuit will hear more about how well the economy is doing and how yes, rates are likely to go up again at the Fed December meeting.

The amount of talk has us wondering if the hike might come earlier (like at the November 7/8 meeting) or if they will hold off until the turkey leftovers are gone, the December 18/19 meeting.

To a degree, it will depend on whether they judge the economy as “hot enough” to handle higher rates.  Toward that end, the NFIB Indicator just out offers guidance:

“Washington, D.C. (October 9, 2018) — The NFIB Small Business Optimism Index continued its historic 23-month positive trend, with a reading of 107.9 in September, the third highest reading in the survey’s 45-year history.  In the small business half of the economy, 2018 has produced 45-year record high measures of job openings, hiring plans, actual job creation, compensation increases (actual and planned), profit growth, and inventory investment.

The September 2018 survey showed:

• Actual capital spending in the past few months rose significantly.
• Average employment change per firm was solid.
• Owners bulked up inventories.
• Compensation increases set a new record.

Where the NFIB report is a useful guide is when it comes to what small business owners are willing to spend money on.  If you’ve never run a small business, it can be nerve-wracking, because if you get it wrong, you can be personally on the line.  Small business doesn’t have the option (in most cases) of “spreading the pain” to investors.

So, when the NFIB report says…

“Actual investment spending improved as prospects for the economy remain strong. Sixty percent of owners reported capital outlays, up four points from August. Of those making expenditures, 41 percent reported spending on new equipment (up two points), 26 percent acquired vehicles (up four points), and 16 percent improved or expanded facilities (down two points)….”

We take that as a pretty good sign that the “Trump Bump” will continue.

Which Gets Us To Politics

My pal, the visiting Major and I were sitting around the other day reminiscing about toys from our youth.  One of them was the “Wrong Way Chicane” – a popular slot car set-up.  (Not too different from the modern-day “AFX Slot Track Chicane Set, L&R.” except we used slot cars and train sets for head-on collisions and such…great fun.)

Anyway, we’ve recently been whining about the “wrong way chican(ery)” party and they seem unable to comprehend the simple idea that people vote their wallets.

When things like the NFIB survey come out, it should tell anyone with half a brain (which includes a few lefties) that despite the hyperbole, the world is NOT ending.  People will vote the dinner table ticket.

Webolutionaries Don’t Get It

Which sets up the “wrong-way chicane” business going on in Portland, Oregon,.

There, Antifa (*the hate American clown posse) has decided to come out of their barricades and begin directing traffic.  See the video over here.

To be honest, Elaine once looked at Oregon.  But in a miracle of political geography three things have happened:  Local government in Portland (and several other left-dominated cities) have effectively abdicated.  Next, sensing the powerlessness of elective government, the Webolutionaries have taken it uip[on themselves to “own the streets” (which is the whole point…to pretend they are in charge) and this could well turn into the next front in the (partly Soros-funded) effort to take-down America.

I expect these latter-day highwaymen will soon be collecting tolls to fund their “revolusionary BS” and the liberalista of the 9th Circus will probably excuse it.  But, thanks to a somewhat more Constitutionally-oriented Supreme Court, perhaps we can get back to making and living, rather than whining and aggitating.

Or not.

Snips and Quips

Blowhards hit Florida: The Entire Florida Panhandle Is Now Under a Hurricane Warning As Michael Approaches.

As oil goes up Unions accuse Chevron of ‘massive’ tax avoidance via the Netherlands.

Gee, think Rod Rosenstein might lie (garsh, Mickey!) “FBI lawyer’s testimony at odds with Rosenstein denial on ‘wire’ report.”

Global Caliphate leftovers grab: Russia sends troops and missiles into Libya in bid to enforce stranglehold on the West.

Digital devices may continue to be reasonably priced.  Especially since DRAM and NAND Flash Products to See Price Decline in 4Q18 and 2019 due to Gap Between Supply and Demand, Says TrendForce.

Mark your calendar for tomorrow which is World Mental Health Day: “We Sail In The Same Boat.’ An Award-Winning Psychiatrist Shares Insights for World Mental Health Day.”

Today, we’re satisfied to “turn over an old Leif” because this is Erickson Day.

Old news travels slow.

Who did the land bridge crossers displace?

Lingons without klingons to us all, then.