Stock answer is we don’t know about next 6 months

How can the equity markets trade looking six months out — as is the traditional metric — when it doesn’t know what the next six minutes will bring?

The Dow Jones traded down 274 Thursday on, pick your poison:

  1. Terrorist attack in Barcelona,
  2. White House finance chief Gary Cohen’s departure.
  3. Algos in control since its August
  4. All of the above

It has to be near impossible to be able to formulate an earnings picture looking out the next quarter, when a 140-character tweet can throw all the analysis into the trash bin.

Here’s a analyst’s note on Friday morning, explaining very succinctly what he is up against when figuring direction of the market:

“In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,”
Deutsche Bank analyst Jim Reid.

So off of that note we haveĀ  stocks marginally down for the week. I say that’s not a bad performance even without mentioning the civil unrest in Virginia last weekend.

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July jobs report bigger than Mueller’s motions

Friday’s job number of 209K beat the Street’s 180K estimate with hourly earnings ticking up 0.3% as mid-year raises kick in.

Equity futures markets are up 60 points on Dow unchanged from prior, despite the news out of Washington of a special grand jury being impaneled.

The dollar also strengthen on the job news.

The fact that the markets shrugged off Special Counsel Robert Mueller’s actions, speaks more to the continued DC gridlock, which the equity markets see as a buying opportunity.


I would like to acknowledge the passing of a great newspaperman and researcher Jim Marrs.

Marrs was a prolific writer with 14 published tomes and his book, “Crossfire” was used by Oliver Stone for his film, “JFK”.

Marrs was a cub reporter in Dallas on the day of the assassination and worked tirelessly for many years talking to sources within the Dallas police department and Secret Service to construct an alternative narrative to the events on Nov. 22, 1963.

Marrs taught a course on the Kennedy assassination at the University of Texas at Arlington.

Marrs was 74 years old at the time of his death.

Dow 22K doing it old school

The few equity floor traders left at the NYSE — you know him from their standing around the kiosks in the live shots on the financial shows during the day — have their Dow 22K at the ready.

The recent moves from the FAANG stocks to the Dow 30 blue chips has to be based on valuations, since Facebook, Apple, Amazon, Netflix and Google have reached astoundingly high price/earnings ratios die to the crowded trade.

Smart money is moving into more traditional tangible manufacturing stocks to offset the surprises like Amazon’s recent reporting. CEO Jeff Bezos beat on the revenue, but tanked on the bottom line due to increased spending.

Just not enough discipline, when your P/E ratio is approaching 250 and the S&P 500 ratio is around 25.

While only Apple +28% and Microsoft +17% are in the Dow 30, Caterpillar and Boeing are having their day in the sun being up 23% and 56% this year respectfully.

So break out the party hats and streamers as the new bosses, same as the old bosses push their way back into the spotlight.

Equities are seeing a summer stock surge

I want to explain the markets in really simple language, since there are some very basic problems in the largest securities market in the world and the projections associated with what is going on.

Fed chair Janet Yellen is in a tough spot. Yellen & Co. wants to raise rates but the rate of inflation is not growing. The Fed’s tools for the economy are to control inflation from getting too high, by raising rates.

Late last week Yellen gave the markets all they need to know by intimating that a pause in rate rises is on the table after seeing prices stagnating and retail prices are falling fast.

On Monday morning the 30-year US bond is 2.9% yield and the 2-year US paper is 1.35%. The difference between the two rates is too tight for the 28 years of duration. That is called flattening of the yield curve. Bank stocks hate tightening since that squeezes the profits on loans.

When there is little inflation — like now — raising rates can cause deflation. Deflation or stagflation (a less sever form of deflation) is when prices fall because too few dollars chasing goods.

The Fed was said to be raising rates quicker recently in order to have the ability to lower rates later in the event of economic slowdown like a deflationary hiccup.

So what does the stock market see? A celebration.

As I have often said here, capital goes where it is treated best. So look for stock indices to set all-time highs on just about a daily basis, since little cash will go into debt with the diminished returns.

Another factor in the summer stock surge is equities are buoyed by low inflation. Shares always move higher in a low-inflation environment. So we have a perfect storm in the markets.

The left’s Russian Roulette is to keep Trump’s policy inside nesting dolls

The present day McCarthy hearings about Russian influence in the Trump administration has all the validity of the senator’s 1950’s witch hunt, it’s just flipped on its head.

While Senator Joseph McCarthy (WI-R) launched a crusade to root out fears of widespread Communist subversion during the beginning of the Cold War.

McCarthy charged that large numbers of Communists and Soviet spies and sympathizers had infiltrated the United States federal government and US society including Hollywood.

So now we have the flip side as Democrats are charging Russian influence under every blade of grass on the White House lawn. The fervor of McCarthy and his side-kick Roy Cohen saw “pinkos” conspiring to overthrow American values.

For me, this present day witch hunt is through the left-leaning media is not out of fear of undue influence of the Russian government’s infiltrating American society, it’s more about keeping the White House on the ropes over the issue to keep it from rolling back the Obama’s progressive movement over the previous eight years.

The amount of attention and resources put to the premise that President Trump or his surrogates conspired with Russia to somehow throw the election has been exhaustive without a charge leveled against anyone other than National Security Advisor Lieutenant General Michael Flynn misleading Vice President Mike PenceĀ about the nature of his communications with the US Russian ambassador and whether he received money from foreign governments without getting the required approval.

However, divided government with the possibility of nothing of any merit — such as tax cuts and infrastructure spending, which would benefit many Americans — happening markets are bound to move higher.