Tag Archives: Trump rally

Trump Dump Coming To The Stock Market

The stock market shot up like a Roman candle for idiotic reasons after the election.    The candle may have reached its apex when the Dow hit 19,999.67 last week.   As I stated in my Short Seller’s Journal, I was “stunned that bank traders were unable to push the index up to the holy grail number of 20,000.   Of course, in and of itself, the “Dow 20k” watch was moronic.  Thirty stocks do not an economic system make.  Sorry Fox, CNBC, Bloomberg, CNN etc.

I also stated in my Short Seller’s Journal, in the issue two weeks ago,  and long before Zerohedge posted the comment from some guy named DeMark who predicted the Dow would never hit 20k, that 20k might not happen.  In fact, I titled the issue, “Is Dow 20,000 Now Out Of Reach?”

The “Dow 20,000” financial media promotion has bordered on vulgar.  Fox Business (which I keep on mute at all times) kept a “Dow 20,000 watch” banner at the bottom of its broadcast during the entire trading day for the last 2 weeks of 2016.  It disappeared last week.  In the context of the entire stock  market and the U.S. economy, it’s meaningless for the Dow to hit 20k other than as a powerful propaganda tool.

The housing market is one of the most important segments of the economy.  The DJ Home Construction Index is down 9.7% today from its 52-week high in July.  Retail spending may be even more critical to generating GDP than housing.  The XRT retail ETF is down 9% from hits 52-week on December 8th.    This stock index has literally tanked during a period of time that is supposed to be the best seasonal period of the year for retail sales.  There’s a serious message there.   THAT’S where the rubber meets the road – not from meaningless platitudes and soundbytes from a President-elect.

Essentially Trump promised on election night to spend trillions and cut taxes deeply and to pay for those  based on borrowing trillions. These are  policy proposals that are destined to fail from the moment the words left Trump’s mouth.  But the stock market went nuts to the upside, culminating in what I would argue – based on using “apples to apples” accounting comparisons – the most overvalued U.S. stock market in history.   Perhaps in the modern era only the Weimar German and Zimbabwe stock markets were more overvalued.  Stay tuned because I am very confident that the Fed is not done printing trillions.

This is not the kind of stock chart in which I would want to be invested:

Yes of course this stock market could break up or down. But since Christmas, every attempted assault on 20k has been rejected. And the Dow opens higher every morning only to sell off every afternoon into the close. Monday was a perfect example.

Today (Tuesday, January 11) it looked the Dow was going to make another assault on 20k. But during Trump’s highly anticipated press conference, the Dow sold down hard from 19,970 to 19,840.  That is a preview of what is likely coming in the months ahead, as the U.S. economic fundamentals continue deteriorate, notwithstanding the barrage of economic fake news coming from the Government and certain industry pimp associations.

If you like the analysis laid out above, you can get similar commentary with even more in-depth analysis and research by subscribing to my Short Seller’s Journal.   I also present at least two short sell ideas along with ideas for using options.

I am a subscriber to both of your journals. I just want to say “WOW” to this post on your site. Thank you for all your work. As a financial professional of 28 years’ experience, I can tell you why there is no churn in your journal subscriptions. Your work is extremely sound and well done even in a massively
manipulated environment. – subscriber “Kevin”

Historic Market Blow-Up Is Brewing

I was chatting with a good friend who works at a pension fund. He said that pensions are historically overweighted in stocks right now. But it looks like the latest push higher in the stock market is coming from hedge funds, who apparently missed a large portion of the “Trump rally.”   We determined that the best reason to invest in stocks for both pension and hedge funds is “to avoid looking like an idiot.”

That’s it – that’s the “fundamental” justification for investing in stocks right now is because everyone else is and if your portfolio on Dec 31 is underweighted in stocks you’ll look like an idiot.

That stocks are more overvalued now than at any time in history except maybe 1999 is unequivocally undebatable.  However, if the GAAP accounting standards in force in 1999 were applied to current earnings, both the Dow and S&P 500 would be at record valuation levels.   I discuss this in more detail in the latest Short Seller’s Journal.

So, chasing stocks higher to avoid looking like a moron makes a lot of sense, right? Currently I can’t find evidence that the Fed is printing money to fuel this stock market so I have to believe that it has relaxed credit standards to enable banks, hedge funds and mutual funds (yes, many mutual funds now have the ability to tap credit lines) to borrow money with which to chase stocks.

Debt/credit behaves just like printed money until the debt has be repaid.  So creating credit is de facto printing.  But, what happens when debt defaults begin to pick up?  This is beginning to happen now in mortgage, auto and credit card debt.  Again, I provide proof of concept in the Short Seller’s Journal.

This is perhaps the most dangerous market – both stocks and bonds – in history.  It’s the largest money bubble in history that has been blown by the Fed, in conjunction with the ECB, BoE, BoJ and PBoC.   Silver Doctors/News Doctors invited me on to its Metals & Markets weekly podcast to discuss why 2017 could witness an historic market collapse:

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