Faltering Thursday – Trumpdown Continues to Weigh on the Markets

As of this morning, the 50-day moving averages are:

  • Dow 24,364, now 24,072 on /YM
  • S&P 2,628, now 2,604 on /ES 
  • Nasdaq (100) 6,640, now 6,650 on /NQ
  • NYSE 11,924, now 11,850, (no futures)
  • Russell 1,450, now 1,449 on /RTY

To say that we are at a critical inflection point in the market would be a huge understatement and, as I noted in Tuesday morning's PSW Report, we took precautions against a downturn by adding hedges to our Short-Term Portfolio in Monday's Live Member Chat Room – just in case things spiral further out of control.

On the whole though, we're still a bit optimistic, though we are looking to cash out some longs today – so we will have less to hedge against, which, in turn, makes our existing hedges more powerful (as they will be hedging a smaller amount of longs).  It's going to be easier to have a positive event – like ending the shut-down or agreeing with China or a Brexit Deal – than it is likely to have an event even more negative than the damage we're causing to ourselves (maybe that strange asteriod is an alien invasion?).

Meanwhile, our current economic momentum is down so SOMETHING needs to change or things will really start falling apart.  Both the US and China are suffering from Trump's idiocy and the US is also suffering from Trump's other idiocy but the UK has their own team of idiots that are ruining their economy with a little help from the idiots in the EU, who seem to flip-flop between dancing on England's grave and worrying that an unscripted Brexit will also be the beginning of the end for their Union as well.

Maybe I might have changed 
And not been so cruel 
Not been such a fool 
Whatever was done is done 
I just can't recall 
It doesn't matter at all 

You see it's all clear 
You were meant to be here 
From the beginning – ELP

The markets turned sour…
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Which Way Wednesday – Brexit Deal Fails, US Government Continues to Not Open

Brexit failed by a 2:1 margin yesterday.

With just 10 weeks (March 29th) to Brexit day, the UK faces a "hard brexit" where they quit the EU without any trade deals, which would throw all of Europe into total chaos.  British PM, Theresa May essentially demanded a "No Confidence" vote after the defeat and her challengers were happy to call for it so today her leadership will be put up for vote but I doubt she would have called for it if she wasn't sure she would be keeping her job – despite the widespread dissatisfaction with the Brexit negotiations.  

If, however, May has miscalculated and is removed from office, CHAOS is not a big enough word to describe the weeks ahead as the entire Government would have to be re-formed with new leadership – all the while as the clock ticks towards the hard date of March 29th.  As you can see, the Euro is tumbling and that's pushing the Dollar back to 96, which is putting pressure on US Equities and Commodities, which trade in Dollars.  

All this uncertainty is slowing the UK economy, which is getting dangerously close to a recession and this morning Goldman Sachs said that, while they do not see a US Recession in 2019, they do see a sharp slowdown with very low profit growth from 2018.  

A survey of 500 U.S. institutional investors by Natixis in December showed that the majority felt that the longest bull market in history will come to an end in 2019. Forty-one percent of those surveyed said they would be reducing allocations to U.S. equities.  The growth outlook for 2019 is also beset with trade concerns, a slowdown in China, Brexit and political uncertainty in Europe making forecasts for the global economy tricky.

The indexes made constructive moves yesterday, hopefully consolidating to get back above their 50-day moving averages but it's a tricky time as any negative move will be seen as a technical rejection of those averages – and that could trigger a whole new round of selling.  I'd say that could easily happen if May loses her vote this afternoon.

 

Technical Tuesday – Trumpdown Keeps Markets Weak

Well, we're making no progress.

On Friday we looked at our bounce levels and we were encouraged that we'd improved enough to be a bit more confident into the weekend but the ongoing Government shutdown by the President is making us more and more concerned every day – especially with the mounting evidence that President Trump may be a Russian Agent who's actual intent is to weaken this country.  Still, the entire GOP is going along with this insanity and they can't all be in Putin's pocket – can they?

Even if Trump isn't destroying America on behalf of Vladimir Putin, he's still destroying America so we added some hedges to our Short-Term Portfolio yesterday in our Live Member Chat Room in order to lock in our recent profits as well as to protect ourselves from the next Twitter rampage coming out of the oval office.

Trump is meeting with Congress this morning and, hopefully, it will go better than Friday's meeting, where he threw a tantrum and walked out because Nancy Pelosi said no to his wall – even after he offered her candy.  Meanwhile, you can see the Brits debating Brexit all day and all night in their Parliament because, when something important is affecting your Government – a real Government tends to focus on the problem.

That's a live feed – how cool is that?

Image result for british parliamentDon't even try to compare that to CSpan – it will make you cry.  British Parliament is based on debate and consensus so any MP is a skilled orator – it's basically a job requirement.  Most of our Congresspeople can't put two coherent sentences together without their entire staff working overtime to prep them and God forbid our Congresspeople get interrupted – that's game over for them but that's the entire game in the UK – a much better way to discuss the issues.  

With about an hour to go before the markets open, the Futures are down a bit and that may not seem bad but the Dow (/YM) Futures were up 200 points around midnight and have since collapsed…
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Monday Market Mayhem – Trumpdown, Day 22

Image result for no government shutdownAt the end of this week, we'll have gone a month without a Government.

That's kind of dangerous as people may begin to realize they don't need a Government.  Well, rich people don't need a Government – poor people are screwed…  Federal workers are screwed as they didn't get paychecks on Friday, despite 420,000 of them being considered "essential" and working without pay.  When you go to work you spend money on gas, tolls, lunch, day care – it's not like the Government is just asking people to work for free – they are essentially forcing people to dig into their own pockets to support Trump's madness.

Not only that but missing bill payments due to not getting paid will impact the Federal Workers' credit ratings – damaging them and their families for years to come.  #TrumpDontCare

Meanwhile, nothing is getting done and that's slowing US commerce down and we're talking a month – that's 10% of the year and we're not going to be back to 100% right after the shutdown ends as there must be piles and piles of backlogged things sitting on the desks of the 380,000 furloughed workers as well.  Already the Wall Street Journal has estimated that this shutdown will bring GDP growth for Q1 down to 2.2% from 3.1% for all of 2018 – another month and we'll be below 1.5% but it will give Trump an excuse for failing to deliver on his GDP promises – and he needs an excuse because nothing Trump has done has really helped the economy anyway. 

Related imageWe're right in the middle of Flu Season and 30 people are dead and 9,000 people are hospitalized but money to the CDC's Influenza Program (our front-line defense against a national outbreak) has been cut off and that means we have no coordinated program to track and identify flu strains, which is how doctors get guidlines for treatment and how vaccine makers are able to prepare batches of antibiotics to contain the outbreaks.  In other words, not only are people going to die during Trump's little temper tantrum, but this could lay the groudwork for a massive outbreak – the kind that usually doesn't
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TGIF – Market Rally Pauses Just Shy of our Weekly Goals

Image result for stock market dead cat bounceWell, we're right on track…

Back on Dec 26th, in our Morning Report, when the market was collapsing, we began playing for a bounce.  At the time I said:

Each month the Government is closed knocks 2% off our GDP and the slowing economy will contract wages and Corporate Profits and, guess what?  That will make the deficit explode as it lowers the rate of tax collections.  That's why the market had such a harsh reaction to this shut-down but it's still been an over-reaction nonetheless and we are certainly now looking for at least a weak-bounce correction, which would be a 4% gain on the indexes from these levels.  Let's call it from the 20% correction lines:

  • Dow 27,000 to 21,600 is 5,400 points so 1,080-point bounces to 22,680 (weak) and 23,760 (strong) 
  • S&P 2,950 to 2,360 is 590 points so 120-point bounces to 2,480 (weak) and 2,600 (strong) 
  • Nasdaq 7,700 to 6,160 is 1,540 points so 300-point bounces to 6,460 (weak) and 6,760 (strong) 
  • NYSE 13,200 to 10,560 is 2,640 points so 528-point bounces to 11,058 (weak) and 11,586 (strong) 
  • Russell 1,750 to 1,400 is 350 points so 70-point bounces to 1,470 (weak) and 1,540 (strong)

Remember:  I can only tell you what is likely to happen and how to profit from it – the rest…
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Thursday Thoughts: Trade Progress Trumps Shutdown Impasse

Image result for trump pelosi candyWell candy didn't work.

Trump started his meeting with Pelosi and Schumer yesterday by handing out cofee and snacks (Butterfingers, M&Ms and Baby Ruths) as if they were there to trick or treat but when Pelosi refusted to accept the bribe in exchange for caving on Trump's wall demands – and I'm not kidding:  "A frustrated Mr. Trump put his hands in the air—two open palms on either side of his face—and said, “Bye-bye,” and left the room." 

All in all, the meeting lasted 20 minutes with most of it taken up by Trump trying to get Nancy to have a 500-calorie snack and Pence, who's not allowed to be alone in a room with a woman, could not understand why this one was talking in the first place when there was a perfectly good man around to make decisions.  Trump even wore one of his big, phallic ties and the President could not understand why the House Speaker was not overcome with a desire to please him.  Body language says it all in that photo – we're doomed!  

That makes today day 20 of the Government shut-down and it's only 2 days until we make the record for the longerst shut-down ever – so it would be silly to stop now, right?  Well, there's no danger of that after yesterday's debacle, which included this brief exchange, right before Trump stormed out of the room:

Mrs. Pelosi and Mr. Trump then argued over the White House’s justification for the border wall. Mrs. Pelosi said reducing drugs coming into the country would require additional port-of-entry infrastructure improvements. Mr. Trump said that human trafficking was also an issue, and painted a vivid picture of sexual abuse and human trafficking as women and children attempt to cross the border.

“Mr. President, as I said before, the plural of


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Walless Wednesday – Trump Whimps Out, Dems Stand Firm

President Trump aimed to create a sense of crisis with his national address, while Democrats also appealed to their base in their response. WSJâ??s Gerald F. Seib explains.Pretty, pretty please?  

Mommy and Daddy had to put up a unifed front last night and tried to explain to Donald, using very small words, why he couldn't have a great big wall to play with.  The wall would be "expensive and ineffective" Pelosi said.  “Democrats and the president both want stronger border security. However, we sharply disagree with the president about the most effective way to do it,” said Schumer.  Donald also said the Santa Mexicans were going to pay for his wall and that turned out not to be true and Mommy and Daddy said we simply can't afford a $30Bn wall this year ($5.7Bn is just the downpayment to get started). 

Not only that but, once you get the wall home, it's expensive to keep as you need 2,500 miles worth of guards and then there's the repair bills – which we don't pay on the other infrastructure we already bought.  It's like when you let a kid take care of a goldfish before trusting him with a puppy and President Trump has given us a very dead goldfish as far as infrastructure goes and now, rather than repair roads, bridges, damns or power-lines, Trump wants a new wall to play with but, as responsible parents, we already know it's only going to end up neglected like all his other toys. 

Of course, Trump's temper tantrum which is ruining the lives of 830,000 Federal Workers and the Millions of Americans who depend on their services, is not just about the wall.  “This president just used the backdrop of the Oval Office to manufacture a crisis, stoke fear, and divert attention from the turmoil in his administration,” Schumer said.  Democrats have urged President Trump and Congressional Republicans to support legislation that would reopen the government while they continue the debate over border security.  “President Trump must stop holding the American people hostage, must stop manufacturing a crisis, and must reopen the government,” Speaker Pelosi said.

This was the first speech of Trump's Presidency from the Oval Office and, though it started out sort of Presidential, it quickly veered back to the usual fearmongering and completely made-up…
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Terrific Tuesday – Trade Talks Tempt Traders

Image result for trump wall cartoonHere we go again.  

It's day 2 of 90-day trade negotiations but that doesn't stop the market from ignoring TERRIBLE Industrial Production numbers out of Germany which paints a very ugly picture for the Euro Zone and Samsung just beat Apple by a mile, saying their Q4 operating profits will decline 29% but those look great compared to LG, who are warning their profits can slip 80% for the quarter.  Q4 is, by the way, the biggest quarter of the year for these companies.  

Of course, these are not American companies and American traders are famous for their "not in my backyard" attitude about profit warnings (or human rights violations or disease or poverty or starvation…) so the Dow (/YM) Futures are up 200 points, regardless, and then we'll all be "shocked and surprised" when a US tech company warns that things are slowing.  At least the good news for Apple (AAPL) is that they aren't losing any market share – it's just a crap market at the moment!  

Trump has a TV event scheduled for 9pm this evening about "Border Security" and then Thursday he will also spreak live from the border and it's widely expected that he will bend (or break) the Constitution and declare a National Emergency in order to move funds and resources to build his wall, over the objections of Republican and Democratic Congresspeople.  Invoking "National Security" measures is what all dictators do when they wish to consolidate their power.  Before Hitler was Chancellor in 1933, Article 48 of the Weimar Constitution was invoked more than 100 times and when the Generals seized power in Argentina in 1976, they invoked Article 23 of Argentina's Constitution and then used it like a club whenever they needed to trample some human rights. 

Image result for trump emergency cartoonAfter a coup in 1973, the new Government in Chile declared a State of Emergency that lasted for 15 years and Myanmar declared one as recently as 2012, imposing emergency powers to segregate the Muslims leading to many "disappearances".  Make no mistake, there is no "National Emergency" here, Trump is declaring an emergency to punish another branch of the Government for…
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Monday Market Mania – Trade Talks and Shutdowns

Image result for no deal animated gifWell, we're still closed.

Today is, officially, the first day Government workers will actually not get paid.  Already we've seen TSA workers have sick-outs for protest and things are going to get much worse as Trump's Saturday and Sunday meetings with the new Congressional Leaders resulted in NO DEAL as Trump maintains his "wall or nothing" stance.  

Meanwhile, Trump has said he is going to declare a State of Emergency in order to fund the wall but he's already lost that court case by announcing that he's going to make up an emergency just to fund a wall – what an idiot!  I hope you enjoyed Friday's December Jobs number because, as of this morning, 420,000 people are working without pay and 380,000 people have been furloghed – a nice way of saying temporarily laid off.  

Trump has said he won’t sign any bill funding the government that doesn’t include $5.7Bn in border-wall funding that was part of a measure signed by the GOP-controlled House in December which THEY couldn't pass then, before Democrats took over the chamber. Two Democratic aides said Sunday that an afternoon meeting was delayed by 45 minutes because Republicans weren’t ready with documents to explain why that $5.7Bn amount was needed for the wall.  Keep in mind this is after two full years of sayinging they needed a wall.

The much bigger deal this week is the resumption of trade negotiations with China and we can expect a rumor-driven market until something official is announced, which could be a few MONTHS – if at all.  As you can see, Trump was tweeting out great progress on Dec 14th but that same day, as soon as China said they had no idea what he was talking about, the markets began their second 10% leg down – so be very careful trusting the President – not that you should need a warning about that by now….

We have 9 Fed speakers this week and the release of the last meeting's FOMC Minutes on Wednesday but not all that much data as the Government Shutdown is pushing back a lot of reports so we'll be flying fairly blind into earnings, which are…
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Non-Farm Friday – The Sum of All Fears

Could this be the last straw?

We're getting the Non-Farm Payroll Report at 8:30 and it's usually a market-mover but more so this week as it will confirm or deny a worsening economy.  At the moment, I've refrained from getting more bearish as I think the 20% correction is enough and that, though people are freaked out about Trade issues and Government Shutdowns – these are self-inflicted wounds that can be quickly reversed – so it doesn't play into our long-term investing outlook, which anticipated this 20% correction all summer long.  The only surprise was how long it took us to be right.  

Our long-term bullish premise is predicated on more jobs and higher wages driving forward a virtuous economic cycle that will bring about some inflation, but the good kind that is the result of rising wages, which makes fixed consumer debts like home and auto loans easier to pay down over time.  Remember the good old days when you were disappointed that you only got a 5% raise?  You have to be pretty old at this point to remember inflation being your friend – when we could buy a car or a home we couldn't really afford because we fully expected our salaries to double over the next 5 or so years in almost any job.  

The first Bush Banking Crisis of 1986 was, in large part caused by a slowdown in wage growth (thanks to Reaganomics, now known as Trump's Tax Plan) and the models used by the banks for lending and the assumptions our workers made for buying a home were not adjusted fast enough to allow for flat wages and flat home prices and people found they were in far over their heads on 8-14% morgages without enough equity to refinance – even as rates ticked lower.  That led to the failure of about 1/3 of all Savings and Loan Associations, which led to the rise of the mega-banks which took their place – only to have their own crisis as Bush II repeated the sins of his father. 

Image result for economic multiplierThough Trump is repeating those same economic mistakes, at least he hasn't done anything to stop the increases in minimum wages that…
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