First thing I did this morning when I got up was run to the big screen in the living room and fire up FinViz to see how the futures were doing.
As subscribers know, I’ve got my butt way, way, WAY long the market because by my calcumlations (sic) the Dow should begin to go screaming higher.
Well, lo and behold, brothers & sisters, my prophesy seems to be working out a bit today. (I find prophesy is much easier when it’s based on hundreds of VLOOKUPS in Excel or a deep Access table or 3…)
The Eurostoxx 50 was up 0.67% which we assume means the Dow MIGHT go up similarly because all markets are entrained – the basis of our Aggregated Markets work. This all boils down to what MIGHT turn into a 135-point rally before the close today which half a dozen nice dinners out into you-know-who’s “He’s Sold the Plane” fund.
With the Fed set to announce the next rate hike this coming Wednesday, we expect to see even MORE hot money rolling into stocks and presto! Screaming rally and Peoplenomics subscriber’s biggest problem will be when to hold their Scrooge McDuck parties.
Before we get to the point of the opening headline – the Jobs Report – I must respond to my friend Don el Bono (Spanish for financial bonds) down in Who’s town.
He sent me an email this week and said words to the effect “With bond yields ay 2.57% and the Dividends on stocks running 1.99% where’s the big incentive to jump ship?”
See here, el Bono, this is called being ahead of the market – way ahead. When the RATES GO UP the YIELD GOES DOWN for bonds. We are only one move out of three that the Fed will be doing.
When we get part this one, I wouldn’t be surprised to see the yields (*not the interest rate) drop while the interest rates mull it over with a third rate hike likely in June.
Now, sure, the dividends might not have caught up yet, but when some of the gunpoint health insurance comes off, a few people will start spending more and that SHOULD get the massive repositioning going. The herd is always slow to catch on.
We have to believe that a few of the brighter bond holders will want to move into stocks because when the government has to print up gobs of fresh money (as we raise the national debt ceiling), what will happen?
I trust you saw that T-Sec Mnuchin is already telling Congress ‘Here it comes…’
We ALL know what happens to bonds when rates go up. Their prices will fall. NPV and all that.
But stocks – being a fractional ownership position (like owning an apartment building) will likely go up a while longer because their valuation is a market function, not a financial calculation.
In great stock bubbles, speculation rules, not the cooler headed colleagues of Don el Bono. They are bewildered by such thinking, but a glass of Uncle George’s Kentucky cure and a few hands of five-card ought to teach ‘em stock trading fundamental. The term Liar’s Poker describes many markets and ALL Bubbles.
In the meantime, if you look, you’ll see one of the longest bull markets is bonds – since their rates peaked in 1981 – which meant they have been going up in price since then – which was the absolute price bottom.
My family did really well, by the way. I remember Pappy building handfuls of 15% yielding WPPS bonds to build nuclear reactors. They were never built, and the bonds were eventually called, but not till rates had fallen to the 10% range. Pappy loved it.
A few see it and my deflationist pal Jas Jain was one-such fellow. He devised a rolling six-ack of bonds and laddered ‘em down. He absolutely nailed it which is why he’s probably made enough by now to buy the rest of Tehachapi.
But anyone who doesn’t START with the understand of ultra-long wave economics and then work into the shorter (sub-cycles) from there will miss the fact that bonds have gone from 15% yields in 1981 to effectively zero percent last year.
Now, the foot is on the other shoe.
We have put in a bottom.
As we go higher with rates, we should see a stock bubble that’s huge (which explains the McDuck parties) but it will also be followed by a drop back to the bottom.
Bottoms are often double-dip affairs like that – you can see it in most stock trends.
Stock will run up, then come down, start to recover, and then put in a second bottom…that’s when the long term players come in, not before. Unless, like now, we’re in the Belly of the Bull that has to collapse to complete the ultra-long wave wash-out.
So we ride the Bull up.
How high? Well when the BTCes and the Fools Peddling Dinars and the multi-level types pile in, then the top is near. This is a full-on mania, make no mistake about it. When the Uber drivers pass out stock tips…yeah…then we might be toping.
Not yet, though.
The market will eventually tell us (which is what all this Aggregate Markets crap is about) when to head to the short side again.
By the time it’s over, maybe six to ten years out, bonds will be back to historical interest rates – around 5-6% and stocks will offer a competing dividend yield (perhaps between 6-7%) but first we have to go to extremes.
Extremes is where the money is.
We play those variances because we love money. We’re not fans of poverty. That’s un-American. We don’t go fishing for free lunch, we go looking for opportunity.
As we scream higher, we could see the dividends on stocks drop to as low as 1% – as the Dow roars on towards the 30,000 area.
Then, when things get to the top with say a Dow oif 33,650, you can then figure it will revert to one sixth of that value – or even lower – because manias always go to opposite extremes.
One sixth of a 30,000 Dow would be around 5,000 – and yep – we plan to be around to play it. It’s a volatility play, more than logical “investment.”
This may be one of those rare times that only comes along every three or four lifetimes when a modest sum can be run up to a seven figure portfolio. Of course, you’ll be demonized six-ways to Sunday. Greedster on the way up, and devilish short-seller on the way down. Here’s a T.S. chit for the chaplain.
I can deal with those kinds of labels, thank you.
As this rally continues – and we think it MIGHT for a while (only the data is driving now) we were pleased to pay enough income taxes this year that we were only a very small fractional load on the Social Security Trust Fund. We didn’t give back as much as we got from SS, but closer than most.
Our financial goal is to become independent of Social Security at some point..,.but we shall see how the trades go.
Then will come the larger problem:
- If you get a million or five down the road, will the money buy anything?
- Will the government still be intact?
- And will the trading firms really let you walk out of the casino with a boatload of cash?
All in due time, I guess. Those be high-class problems to anticipate.
Now, where were we…oh yeah, the jobs report:
‘Bout Them Jobs
Press release du jour here:
Total nonfarm payroll employment increased by 235,000 in February, and the unemployment rate was little changed at 4.7 percent, the U.S. Bureau of Labor Statistics reported today.
Employment gains occurred in construction, private educational services, manufacturing, health care, and mining. Household Survey Data The number of unemployed persons, at 7.5 million, changed little in February. The unemployment rate, at 4.7 percent, was little changed over the month but was down from 4.9 percent a year earlier. (See table A-1.)
Among the major worker groups, the unemployment rate decreased for Whites to 4.1 percent in February, while the jobless rates for adult men (4.3 percent), adult women (4.3 percent), teenagers (15.0 percent), Blacks (8.1 percent), Asians (3.4 percent), and Hispanics (5.6 percent) showed little or no change. (See tables A-1, A-2, and A-3.)
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.8 million in February and accounted for 23.8 percent of the unemployed. Over the year, the number of long-term unemployed was down by 358,000
The closely watched employment participation rate was up a 10th to 63%.
This will the “not in the labor force dropped 176,000 – another positive.
As soon as the data came out, Futures popped up toward a +100 opening.
More interesting to me was that only 124,000 jobs were “estimated into existence” by the CES Birth-Death Model.
And in the Alternative Measures of Labor Underutilization? U-6 (Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force) dropped 2-10ths down to 9.2%.
Hours worked held steady and average weekly wages were up a buck-thirty-five.
Bash du Jour
The NY Times headlines “Is Trump being Investigated?’No Comment,’ Justice Dept. Says”
That left me scratching my head.
All reporters KNOW (or should) that NO law enforcement agency EVER can telegraph what it’s doing until something becomes a matter of the public record.
Is this just another case of Obama’s buddies (and his posse and NY Slimes) trying to reinforce the idea that Trump was under investigation?
We ought to see some revelations shortly but the attempt to cast the President as being under investigation ought to be backed up with something other than wicked innuendo, I would think.
So is the WaPo’s latest wedgie-drive: “Do Trump’s own surrogates actually believe what he says? Here’s a clue.”
Asking for an Invasion?
If I were the nutter in charge of North Korea, this sounds like the kind of internal turmoil to be taken advantage of:
Maybe NK is not so opportunistic, but what has logic got to do with them, anyway?
OOPArt du Jour
Another one of those Out Of Place Artifacts, perhaps? Check out Archeologists in Egypt discover massive statue in Cairo slum in the Minneapolis Star-Trib this morning.
LOL, kidding. Not in Bean Town: