The clock is ticking.
I’ve been telling you for some weeks now – in fact a few days after the all-time-high in our Aggregate Index January 26th – that it is time to be extremely cowardly. Not that we didn’t score some nice lunch money on the recent bounce. But the clock is ticking.
We’re also not the only ones to notice. Bloomberg this morning rolls with “Morgan Stanley Says Stock Slide Was Appetizer for Real Deal.” Unlike Morgan Stanley, we’ll even tell you an idealized date based on our work: Around March 22nd.
That’s because it is common (though nothing is guaranteed and this is not financial advice) for major market declines to begin 55-days after an all-time-high. The best-known of these is 1929 if you need reminding.
This is not baked in the cake, cast in stone, or welded steel as future predictions go. It’s more like wandering into a sports book and making a show bet on a horse that has come in first-place under similar track conditions with a similar-weight jockey. The nag may not be in the winner’s circle, but you can maybe make a little lunch money.
Still, there IS a way the approach disaster could be avoided: We could go on to a new all-time high before about the middle of March. We can’t rule that out, so we’re not placing short-side bets…YET.
Talking their Book?
A second Bloomberg story shows this still to be a possibility as “BlackRock Says Buy U.S. Stocks as Tax Plan Supercharges Earnings.”
The term “talking their book” is worthy of deep study. Let’s say you’re an aging significant player and you want to unload a huge long position in the market. In other words, you hold millions of shares of stock.
“Talking your book” would involve making fluffy comments along the lines that the future’s so bright, gotta wear shades.
Thing is: While the public wanders in, you’d unload your shares into these “weak hands” and sit either short and enjoy the ride down, or remain in cash until the market bottoms. Which happens when the last of the weak hands capitulates.
Why is the BlackRock a flag to us?
It’s all about the new corporate tax plan.
To be sure, reducing the maximum corporate rate to 21 percent is a good thing. That likely will in the long-run increase returns on stocks and even make C-level players rich via their options.
But not yet.
At least in many companies.
That’s because in these times of consumer super-saturation we observe that many companies have expanded through acquisitions.
In many acquisitions – especially including high tech – the acquired company is worth grabbing because it hasn’t made any money to speak of, having sunk so much resource into new product.
Such an acquisition target brings two things to the table generally: A new product in a usually complimentary product AND A TAX LOSS CARRYFORWARD.
The trick most business writers are not writing about boils down to this: A tax loss carry-forward (e.g. a write-off) has a much higher value in a 35% corporate tax rate world than is does in a 21% corporate tax rate world.
(Yes, we covered this for Peoplenomics subscribers several weeks back. They’ve had time to noodle on this and crank it into their investing (and speculation) decisions.
As a result of the tax law change, plenty of big companies – but mainly those who’ve been aggressive in mergers and acquisitions (M&A) will have to take a one-time write-down on the value of the tax loss carry-forward booked from an acquired company.
This is not to say BlackRock is wrong: In the long-term investing in stocks is a reasonable thing to do. But with caveats.
The first is it requires a sense of judgment. Only one way to get this: Make real investments and manage their outcomes. My ‘cost of education’ wrought from bad investment decisions is well into six figures over a lifetime.
But the good news is the smart investments have prevailed.
This gets to the second point: The Fed is ALWAYS making more money that is necessary. The result of this is the purchasing power of money is almost ALWAYS going down.
The Big Lie in education circles goes back to the liberal spin in the Great Depression (when socialism was flowering).
It was referred to at the general rise of prevailing prices. But, in fact, prices didn’t go up: The government printed so much money that it watered-down purchasing power.
It was an easy sell because it seemed that Prices Go Up.
It took unusual depth to comprehend that the reason was it just took more of the “worth less” money to buy the same things.
Except Mugabe didn’t have a banker’s marketing machine. In America we spew drivel about Modern Monetary Theory (MMT) which is a fancy way to printing your way through a massive deflation.
At the same time, we artificially stimulate non-productive sectors of industry because there really aren’t enough jobs. We make up welfare to – in effect – buy off the poor and keep them from revolting. And if that doesn’t work, we now have NORTHCOM as a backup.
(Read up on chartalism here.) Bread and Circuses 4.0. Release candidate 5 should be along shortly.
We’ve circled March 22 with good reason, but the switchman is drunk and this train wreck could still end up elsewhere. In the meantime, we’re mindful not to stick our hands out the window or trade positions with more than a short-term technical basis.
We Will Find the News – Or Make It Dept.
NewsBusters is out with “CNN and MSNBC Helped Russia Sow Discord by Promoting Fake Anti-Trump Rally.” Though it’s hardly a surprise. I think we may have labeled CNN the Clinton News Network at some point.
It’s also no surprise that “Michael Moore Participated In Russia-Sponsored Anti-Trump Rally.”
Perhaps Mueller could indict some news organizations? Is that asking too much?
Speaking of Mueller & Fishing Etc…
After so far only producing a joke indictment against 13- Russians – who are not subject to US law (so why bother?) we think there’s something about to pop in the Michael Flynn case.
The basic deal here is the government likely withheld exculpatory evidence when it strong-armed a plea deal out of Mike Flynn.
The judge in the case seems to have made it clear: The government has to give the defense exculpatory (get you off)_ evidence as part of any plea – not after the fact.
On reason we expect the government has misbehaved? “Mueller deputy Andrew Weissmann has a reputation for hard-charging tactics — and sometimes going too far”
Conviction rates over truth & justice, anyone?
I’m not sure how long Mueller’s fishing expedition will keep going, but until someone takes Clinton to task (and jail) for funding the “dossier” it’s all an insult to all patriots to be force-fed this charade.
Or, maybe that’s the point?
Read about Fake News – the Game over here.
With what we take to be a straight-faced headline, the Washington/Amazon Post asks “Can a party founded by a comedian run a major European country? Italy may soon find out.”
The story missed the line I might have woven in: Give the Italian’s Al Franken’s number and seek counsel.
We saw this in USA Today “Are boys ‘broken’? Another mass shooting renews debate on toxic masculinity” and wondered if the headline is back-asswards.
Wouldn’t the forced-feminization of males in ‘Mercia be a valid view, as well?
We are well-down the path to criminalizing heterosexuality – in case you haven’t figured the rad-left & SJW agendas. No normal in the new normal, yah hear? (Don’t look at me that way…I don’t feel “safe”…) FMTT what bullshit. GTFU.
Media bullies. Still, they’re doing the Kremlin’s agenda, keeping ‘Merica divided and imploding.
Market looks to open down 180-odd Dow points.
Face it: Would YOU invest in a country this stupid?