Turkey Week: Toms or Stocks?

The market (an hour before the open) was set to open right about even with last week’s close.  We would normally expect a bit of a pullback after options week, but it’s not a regular-enough pattern to make any dough with. Not that I haven’t tried.

For now, a one-half percent decline in Japan overnight rippled into Europe early, but was shaken-off leaving this 3 /12-day workweek for investors as a probable small rally to flat one here.

While we could do a half-hour of “stand-up” on what a joke the market is (especially the recent Hindenburg Omen and another technical indicator crossing that last happened in 2008) for now the hype is about what a great year is coming in 2018.  Leading the cheering section is Goldman.

(Continues below)

 

While a little eggnog and holiday cheer are fine, if Goldman is really forecasting four rate hikes in 2018, I’d offer they might want to step away from the punch bowl for a while.  Strong coffee seems in order.

There’s hype – and then there’s reality.  Let’s run through some of the latter to balance our outlook:

  • While the House has squeaked out a tax plan, its fate in the Senate is “iffy.”
  • The problems of raising interest rates have remained unchanged:  Not only did the 10-year Treasury note (symbol: ^TNX) close last week at 2.35%, when we look at the accumulated national debt there is a serious problem.  Since the Fed doesn’t usually raise less than a quarter percent, let’s think through the math problem:  Assuming a $21-trillion federal debt, the touted series of rate hikes would bump federal debt payments up $210-billion on top of existing promises.
  • A recovery in Housing is nice to hypothecate, but it’s not likely to get too much traction for a number of sociological reasons.  One of which is Millennials moving in with parents while the other is the growth in the LBGT sector which tends to have lower offspring rates. (duh)  Who needs a house stuffed with kids when you can have a life?
  • Even IF the planned reduction in federal taxes on corporations survives the Senate, the process of reindustrializing America is not something that will take place in a year.  This is long-term trend stuff.
  • The Oil Glut is being eaten down.  Again, we look at depletion and we have to ask where’s the replacement drilling?  Nada and Bupkis.
  • Then there are the problems of Korea.  The NorK’s are out of control and China has not resolved anything yet.  Sure, nice to release a few sports figures after a dinner-request: The biggie is still the crazy kid with nukes – and that problem hasn’t gone away.

Related to this, we need to be very circumspect about the mess repositioning itself in the Middle East.  As military affairs advisor Warhammer notes, the sabre rattling by the newly reorganized Saudis – who will be led by the promoter of the Yemen conflict should worry everyone:

“Here’s one good financial reason why the rest of the world should be paying attention to the rise of MBS, the monarch-in-waiting and force behind the Saudi/Yemen war, and a looming Saudi armed conflict with Iran.

Oil price CRISIS? How war between Saudi Arabia and Iran could see costs SOAR by 500%.”

And, unless the Goldman outlook for four hikes is based on a quadrupling of oil prices (and not organic economic growth) we see a terrible problem ahead in the oil patch:  It’s hard to gin-up capital to field necessary additional E&P (exploration & production) work when rates are rising, especially when there’s no gas lines and the glut is still fresh in investor mindsets.

Regardless, a less ebullient forecast seems to make more sense to us, especially once the blow-off in Bitcoins is complete.

To be sure,  Bitcoins are up to $8,070 at press time and we still see a case for Bitcoin to go as high as $9,500 in Q1.  This is based on bubble comparisons but until they move decidedly higher, we will also point out the odds of a classic head & shoulders topping process can’t be discarded, yet.

Bitcoin True Believers might want to head over to Investopedia and read up on this technical pattern which really can spoil Ure day, if you get it wrong.

Is there some good news?

Oh sure:  No sign of nukes flying today. Charles Manson is dead. And sure, the plague outbreak in Madagascar seems to have been contained in time to prevent it from “going global.”  Unless you read the bombshell report which reveals how serious the threat remains, even now.

I don’t want to sound like a sourpuss on the Goldman outlook because we do understand how the future is made. (*More on this in tomorrow’s Coping column.)

But for now, allow me to dress it up in some Federal Reserve-like language:

Our judgement is that on balance, while the first few months of 2018 may see another upside run much as is shown in our Peoplenomics.com charts for subscribers (where we’re ending a macro-level Elliott third wave, going into a fourth and eyeing a final fifth wave), there is an increasing chance of systemic instability from multiple causes.

Pension funds are in trouble due to extended low returns, there’s war-talk in the Middle East, plague is still lurking in East Africa, and the attacks on Trump are bound to bear some kind of fruit as the Mueller fishing expedition has reportedly asked for a whole slew of documents from the US Department of Justice.

You may safely bet-your-ass they are not asking for documents about how the Teflon prez meeting with Loretta Lynch on the jets at Phoenix went.

Still, hope springs that Mueller will at least attempt a charade of honesty and bipartisanship about the general crookedness on both sides of the political aisle.  You can sense change in the wind when the NY Times roles with a story wondering is long-ago special prosecutor Ken Starr was right about Teflon Bill.

Like a sorry game of golf, investors are set to tee-off the week with little new information to consider.

  • Leading Economic Indicators are due this morning; we look at that as an anagram for LIE.
  • Tomorrow the Chicago Fed’s National Activity report arrives.  Then Wednesday, there’s the Durable Goods orders.
  • Thursday promises to be a real turkey, though, with no mail, no banks, and the perpetuation of the folks from Europe, in effect, showing up to steal the country out from under the indigenous peoples.
  • Friday. the markets have a half-day for what’s traditionally “national call your broker day” but since the advent of online account access, who needs ’em?
  • The Fed money supply and balance sheet will come out long after everyone’s headed out the Long Island Expressway and the bars in the Hamptons are down to standing room only (SRO).

So, suspect as we are, instead of partying down Friday at the early close, we’ll probably hang around just out of morbid curiosity.

In the Old Reporter’s World, if you’re going to fart in church, best do it when the parishioners have left for other places.  Early closes are grand opportunities to pass…er…reports.

Not that there are many big Truth Leaks to come, but the best time to leak is when the markets have a vacation mindset and no one’s around to rant.

We’ll have leftovers Friday after we scan the data due out during Friday’s 1 PM to 5 PM information/trading gap.

Reader Notes:

We have completed some of our server work.  There are a few projects still to go including some structural design issues that will happen over Christmas.

We should be turning-up simplified design AMP pages shortly, which should speed phone and droid displays.

Peoplenomics Wednesday will be a mid-quarter economic review (upon which our 2018 outlook will be based).  Note that our long-term indicator hasn’t wavered and has been long since last November 16th, though, so it hasn’t been a bad year here in the Ure household.

And in light of this morning’s Coping on the lack of adventure anymore, we should have a real treat for subscribers Saturday:  An article about a River of Gold that runs underground in the western U.S.

Off to more book-editing.  Moron the ‘morrow…

Comments

Turkey Week: Toms or Stocks? — 19 Comments

  1. George, I’m a little nervous about this new tax plan. Hmmmm I read this, this morning.

    http://www.businessinsider.com/trump-tax-plan-take-home-pay-75000-salary-2017-11

    Now, I make a little bit more than that.. And I get 2 of my kids to deduct this year. But idk, seems like I’m going to get the shaft this year. It’s not like another divorce (still paying off the second one but I’m down to the thousands not 10’s of thousands)

    What do you do? Roll with whatever comes ure way.

    Off to grab 18 gears

    0

    • seems like I get the shaft every year what I never understood is I know people that make ten times what we do and I pay twice as much as they do in taxes.. even though I pay in a ton of money I still end up having to pay more after the tax man gets done..Then of course I don’t want to mess with the IRS so I make sure there aren’t any questionable deductions I would rather pay a little more than not enough.

      • Progressive income tax, as I explained to the spouse, it is like our city water bill, when they re-CON-fig-ured it, the rich got a water bill tax break, and those of us on the lower usage end got the increase (shaft). After decades of listening to the BS to lower our ‘footprint’, we did it, and got rewarded for it! Same with the income tax and any tax plan they pass up there…remember, Trump doesn’t write em, but, yes, he has to sign em. In the beginning, when the word was God…oh excuse me, in the beginning of this whole tax overhaul ‘spree’ many things were bandied about which DID look good for the true under $250,000’ers…but same as with Obama, he did pass a tax increase on to the middle and lower classes via Obamacare (and other things like the reduction in tax free set aside from $5,000 to $2,500, but no body squeaked then!), this will most likely end up the same. Think of it like this, after years of convincing everyone they need a house, now they are talking about taking away interest deductions and property tax deductions! So, if they take away those two sacred items, I know for one, I will have to either rent my house to pay for the property taxes in the upcoming years, or move to a state with income tax, but low property taxes and not work. Seems to me, as they keep closing all the doors, i.e., loop holes, we will just have to keep skipping through the cracks. Those rich folks just write the laws to suit their semi’s (no insult to -O-).

  2. FUD this, FUD that, but it is all just FUD. The PRICE, not Value, but price of Bitcoin is $8200 and rising, it looks as though $10k by New Years.The rise in price due to Network Effect, has been too fast and high lately and will need to correct. Bitcoin historically corrects and this time should be no different.This will be the THE store of value going forward, with majority of Core Developers supporting this “store of value” path. So the next Coin up for currency replacement to be used for everyday transactions, will probably be LiteCoin, which is currently priced at about $73.00 per coin. The original big three coins (Bitcoin,Etherium,LiteCoin)have been around for for at least 5 years now. But the best news regarding Bitcoins is next month everybody can start trading Bitcoin Futures on the Chicago Mercantile Exchange (CME)Now even the Wahoo’s living in the Texas outback can Short Bitcoin!! Good luck with that!

  3. George, one last question to help me figure out your investing strategy. If you had followed your Peoplenomic’s strategy you stated on 01/20/16, would you have made more or less money in the market than using the FOGOD strategy?

    Peoplenomics 01/20/16 – I used to do this, but after 2004, or so, it got to be where market dynamics have changed.  Whether this was because of backdoor operations of major banks (like the Fed) can’t be proven.  But since that time, I’ve made more money by reducing expenses, playing only major moves (3’s) and religiously following the 17-week moving average which right now has been short or cash for a while.

    • The thing is you can’t play FOGOD most of the time. In other words, most of the time, you are long, in the trend channel because govt has biased the trend channel up with the constant growth and constant money supply growth. It’s going up over time, like it, or not.
      FOGOD is ONLY when you are at the TOP of a trend channel, That way you can catch a big turn and not lose the 5-10 percent move.\
      Where FOGOD runs into trouble is when the trend channel fails and you get a series of advancing minuets and then you come only to the channel top of the macro channel or bottom of the minuets channel.
      Never back-tested it…just took out a modest short to ‘see how it works’…
      Help?

  4. “Word’s cannot express the sadness the nation feels for the dealing with the death of C.M..” So many condolences in the US media that the none-US-world may easily conclude that C.M. must have been a former president. (Not much of a difference) ;-)

    P.S. What a world we’re blessed with.

  5. the news.. DOOM and GLOOM… then there are the positive ones GLOOM and DOOM… I have had more people come up to me just in the last two weeks to ask what I think about whether or not there is going to be an emp or war etc..
    My answer.. Don’t worry about it.. an emp or contagion war.. well war will hit these shores this time.. so far we have been lucky.. it depends on what the puppet masters want. they sure don’t want their propperties to be involved in anything.. a nuke.. would destroy everything for centuries.. no money in that.. emp.. same thing.. most of the currency is on a server someplace and we all know an electronic number and a piece of paper doesn’t mean squat in a society sent back five thousand years.. contagions.. hmm there again once it is released they don’t want to see their own lineage destroyed.. the underground bunkers.. funny most of them are build in fault line areas or in lava flow so they are basically tombs..
    the biggest thing.. there isn’t a darn thing anyone can do about any of it..

  6. Syria ain’t over yet, even if it’s been dropped from the US news merry-go-round:

    http://turcopolier.typepad.com/sic_semper_tyrannis/2017/11/httpssouthfrontorgsyrian-war-al-bukamal-is-liberated-what-now.html#comments

    Don’t know what to make of this, other than Russia is being most careful to avoid getting over involved on the ground. The US is busy trying to undermine Russia and feed the ISIS bunch weapons, even to the point of doing supported extractions of ISIS personnel. Israel is goading everyone in sight, and KSA is sending money, because that is all they can do. It may yet get ugly, since everyone seems to have designated Iran as the center of some “axis-of-evil”.

    George is right about replacement drilling – the capital isn’t allocated there, not with rig counts at 50% or less of where they were 5 years ago. The money will return, but not until price rise seems both inevitable and sustainable. By then it will take a couple of years for it to make it into the exploration stream.

    GE buying Baker Hughes and then slashing all their experienced personnel is similar to what many oil megacorps have done these last few years. Boomers are leaving and many have already left for the back pasture due to this latest downturn. Millenials don’t have the numbers to replace the expertise, just more computing power. It seems that many of us boomers have gotten scooped up by the Chinese, Canadians and other countries in the last 3-4 years as American companies kicked us to the curb.

    Funny that my clients are mostly overseas now, where 5 years ago they were mostly domestic.

    In addition, industry regulations post-Macondo have gotten even more crazy, with permit prices more than doubling and certified schooling almost tripling in price – makes getting into the drilling end of the business harder, which will get very problematic when things try to turn around.

  7. If the Madagascar plague, et ‘al, concerns you, might I suggest Primal Panacea by Dr. Thomas Levy, available from Amazon.com? Also, the Living Proof dvd’s might be of interest. Just a suggestion.

      • Been there, done that are the fur rondez in 73, or so, in anchorage – way c0ool experience. like riding a snow mobile with no engine noise, but a bunch of damn barking…non-stop contin0ous barking…

      • Hey now! Hahahah I grew up in alaska! Mom said it was 4 degrees and clear blue sky’s yesterday. ;) dogs barking is a good thing, it means they are still alive.

      • And didn’t you know all that barking, is just joy in motion? That’s what I tell myself when our big adopted mix of 100 plus pounds of love immediately starts his deep boom-box barking as he’s doing his business in the wee hours of the a.m. and I have to shush him up and bring him in. I do believe it is his way of speaking to the world – “I’m ALIVE and proud of it!”