The Market’s Conundrum: Batten Down The Hatches Or Rig For Smooth Sailing?

When it comes to the “markets” today, one outcome has been near guaranteed: Make any statement that implies even the most rudimentary, or elemental call for caution – and the “markets” are near guaranteed to vault ever higher.

This has been playing out not only for years, but the inherent state of calmness, along with its incessant push higher, is not only at never before seen in human history heights. But the calmness, and steady sailing inferred via those market waters to this destination is also – the calmest ever traveled in its history.

The issue with all of the above is that the term “markets” now require parenthesis or quotation marks. i.e., These aren’t your parents markets.

However, nobody wants to hear it, especially the main stream financial/business media et al. The higher it goes – the higher the hyperbole of why it should. The arguments for it have bordered on both convoluted assumptions, to just plain making stuff up to fit the narrative. It’s now gone far beyond reasoned, or reasonable assumptions, and moved into what can only be deemed as bat-sh_t-crazy status.

The arguments I’ve heard, more often than not, via the myriad of next-in-rotation fund managers trumpeting these latest moves fall into the latter camp. The issue at hand, in my opinion, is this: Everyone, and I do mean just that – everyone – seems to be regurgitating the same. i.e., Unemployment is at statistical full, Earnings are all beating and better than expected, blah, blah, blah, etc., etc., etc.

These arguments or evidentiary facts as portrayed via the many government reporting agencies, alongside with their ancillary brethren of sentiment indicators, coupled with the managed reduction of expectations for earnings reporting, are all skewed to appear prima facie “fantastic.”

The issue is, they are more specious than anything resembling a true indicator of economic health or activity. i.e., If you still believe that we are currently at “statistical full employment” with over 95+ million unemployed? I have some wonderful oceanfront property in Kentucky you can have for cheap. Yet, that’s just one example.

As I said prior, “No one wants to hear.” However, as one of my favorite comedians Joan Rivers used to say: “Can we talk?”

It doesn’t matter what the “markets” do from here in relation to what I may, or may not, correctly infer. What is important is whether or not you dear reader truly understand and not underestimate precisely where you, your business, and more are in relationship to it. Because I am going to make this statement, and I’m going to make it forthrightly:

If your working assumptions are coming from what you’re reading, hearing, or watching via the main stream financial media? I’m sorry, but you haven’t a clue. Again, sorry.

What’s transpiring currently that far too many don’t understand is this: Many are mimicking nothing more than the mindset and actions of an amateur casino patron who by happenstance placed a bet at a perceived “hot table” and immediately won. Then, without taking any of the table, let their bets ride, and ride, and ride, and ride continuing to roll those “profits” back into the next bet as the onlookers (financial media) scream and shout in unison how great of a “player” they are.

So far the “winning” has not only continued far longer than anyone dared believe, but the chips are stacking higher, and higher. The only thing rising as high – is one’s ego, for they’ve now become convinced they’re a casino and betting “aficionado”, as opposed to being the recipient of making a “lucky bet” when they first entered.

This is the analogy that fits most 401K holders today. i.e., Things like odds or such now mean nothing, as a matter of fact: the more you try to impart caution citing odds (or anything that refutes the status quo) – the less they want to hear you. The roar of the crowd and the height of their chips proves they now know everything there is to know.

And so far – that’s worked like a charm. But therein lies the rub. For just like gamblers who think their “roll” will never end. When it does. The results are never pretty.

Over the past week I had offered up some observations as it pertained to charts and my interpretations of them. One of the assumptions I mused was that the markets could be playing out what is known technically, as a “blow off top.”

I also mused that I found it interesting that looking at the NASDAQ 100™ in comparison to the other main indexes one could infer that it looked a little weaker as compared to the others, which I inferred as an even further sign that caution should be the default mindset. Then Amazon™, Alphabet™ (aka Google), and Twitter™ reported.

And with that, any and all calls for “caution” seemed to be met with a “market-middle-finger” as their respective stocks and relative indexes rocketed back into black-sky territory once again.

However, I feel this latest “rocket ride” isn’t a showing of strength as was portrayed across the financial echo chamber. But rather, nothing more than one last gasping short squeeze that will be short-lived. Here’s why…

Everyone was talking about how Twitter is now going to show all the nay-sayers wrong using their latest earnings beat as de facto proof. The problem with that is this: They beat earnings, but how they beat is, once again, the real question.

Case in point: Revenue exceeded expectations. e.g., $590 Million. However, revenue fell by 4% for the third straight quarter. And, ad revenue fell ever further, by some 8%. And yet, their DAU (daily active users) are said to have increased 14% YoY, the fourth consecutive quarter of double-digit increases.

The machines (along with the next-in-rotation fund manager cabal) ran with it.

But wait, just for a little more context: U.S. revenue (you know, the largest consumer market in the world to sell eyeballs to) decreased 11% YoY this Qtr. as compared to a 7% decline comparison the Qtr prior. e.g., It’s going in the wrong direction!

Here’s the problem with all the above…

Double digit increases in active users four quarters running: and revenue is down for almost just as many quarters concurrently? I thought “more eyeballs” meant more money (aka revenue) for both Twitter and its advertisers? Is this what “it’s different this time” now means? e.g., “Fewer ads, and even less revenue = more money?”

In my opinion: It’s no longer bordering, it’s now all well past the point of farcical.

But Google beat, as did Amazon. Yet, here we are again with those nagging questions such as “Did Amazon make money?” Along with: “Is Google just the final recipient in the ever shrinking ad revenue (or click baiting) business models?” It would seem Amazon, once again, had the headline earnings beat supplied by its web service, not its retail operation. (i.e., What else is new.)

And Google? Was its revenue beat helped, as I’ve stated ad nauseam, as the recipient of an underway consolidation away from all the other platforms (Hint: like Twitter and such) and just a last gasp at throwing at the “digital wall” what little remaining speculative digital ad-dollars remain?

It’s an open question with onerous consequences. (Especially if Google will now have to pay Apple™ even more for many of those clicks. e.g., Traffic acquisition costs aka TAC.)

And then comes this week with even more fan-fare too come, as in: We have both Apple, as well as Facebook™ to report. What the reporting will be from either is anyones guess, but guessing they will. As for myself? I have no idea. We’ll all just have to wait and see.

But that’s far from the only thing we’re going to get reported.

On Monday you have the political where not only could indictments be forth coming, but for whom and why is going to be all the rage and rhetoric.

Then, you’ll have the status of the so-called “tax cuts” making their way through the process that so far has more secrets being withheld from public scrutiny than the remaining JFK files. That, and how with the revelations of supposed forth coming indictments (or lack of others) and the unity it’ll now spread across capitol hill for members of both parties to work together to afford tax relief for the American people will be fascinating to see. Don’t you think?

On top of that, we’re suppose to learn who the President will appoint to head the Federal Reserve, and how the global currencies will react to it. (Hint: This is where the real action to watch for clues will be, in my opinion.)

Oh, yeah: Then China’s “markets” come back to play, after being on political vacation while they consolidated their Premier’s power, remember? All while mandating during this period (you know, as we were smooth sailing) any, and all “bad news” reporting had to wait till this week to be known. Either that, or heads would roll. Literally. (cough, Hang Seng Index, cough)

Did I mention we sent another (this being the third) carrier strike group to the Korean peninsula? You know, to play war games because it’s just big kids playing with big toys, right? Nothing to see here, I guess.

And just so I didn’t leave anything out: N. Korea’s population is currently practicing mass-evacuation drills as I type this.

Maybe the only true answer to my above headline is that coined by the famed, philosophical sage, Alfred E. Neuman

“What…Me Worry?”

© 2017 Mark St.Cyr