Addendum To: For Those That May…

After the close of today’s “markets” I decided to do one of those “pictures” so many ask me for as to show in chart and technical form what I’m watching, and what I referred to earlier today, so here it is. It’s of the S&P 500™ represented using 15 min bar/candles. I’ve notated it and it’s pretty self explanatory even for those that may not be all that “technically” astute. To wit:

(Chart Source)

What should jump out at you is the amount of opening gaps over this month. This is one of the usual features when volume is all but non-existent and the futures can be pushed either way in the overnight to help “nudge” as they say, a desired outcome. Hence, the “paper cup” designation.

Another striking detail (again, all conjecture) is when this phenom is usually present, the seemingly magnetized adherence to text book lines of support and resistance, along with Fibonacci measured metrics being hit and settling near the obvious big round numbers (e.g., 2900) seems to make things a little too obvious – because what usually happens next is, when the positioning of month’s end are through? All h#ll seems to break loose shortly thereafter.

Will this be the case? Remember: anyone who tells you they know for sure, my advice is to not just walk away, but run and fast, because no one does.

However, with that said, if we suddenly find ourselves within that circle in the lower right? That should provide the first true ‘Uh oh!” signal.

As always, we shall see.

© 2019 Mark St.Cyr

For Those That May Find It Interesting

I received a note from a colleague asking for my thoughts in relationship to what the “markets” are doing currently buttressed by my stated inclinations that a sell-off may be forth coming.

Here’s my reply…

Don’t read too much into the current gyrations both up or down during this very low volume week going into a month end, combined with a major holiday. This month, which is typically one of the lightest in terms of volume, is more at the whim-and-will of what traders call “the paper cup market.”

What this implies is just what the metaphor conjures. i.e., it doesn’t take much of a breeze (or a few strategic buys or sells) to move the “markets” toward a large target going into a month end close. This month appears to be 2900 for the S&P 500™. (“markets” love round numbers)

Where you really have to start paying attention to is what happens going into next month with both the positioning for a new month, while also calculating what they (i.e. Wall Street) believe the Fed will or won’t do at its meeting of this same month.

What you need to fully understand is the revelation that has now been made public via former Fed. president of N.Y. Bill Dudley is far from “yesterdays news.” It is the, and by that I mean just that the possible greatest PR blunder ever made by a central banker. And that’s not hyperbole.

However, what is now the thing that needs to be watched first is precisely how “Wall Street” (i.e., the markets) decides to interpret it. As I said prior: Does Wall Street still assume the “Powell Put” is active at these levels? Or, is the Fed inclined to watch the “markets” crash and burn for a while before making any other move? Mr. Dudley has now made this a needed calculation. And that changes everything. Let alone “Wall Street’s” propensity to test or force it.

There’s also another point to all this that I haven’t seen hypothesized anywhere, so I will. And it is this…

What if Mr. Dudley’s supposed PR faux pas was an intentionally planned release as to warn the so-called “friends in all the right places” as to get out as to: bank cash and sit on hands – then buy, buy, buy at much lower prices as they (the Fed) then ride in to rescue with a big ol’ helping of QE and sizable rate cut?

Think that through very carefully, because when it comes to those which reside at these levels, a little PR backlash and a contrived market sell-off that they believe has the ability to relieve them of any political foe, then reward (once again) their “friends of the Fed” on Wall Street. Do you really think that is something only “tin foiled hatters” would conceive, knowing what you do now about so many other things?

If you think I’m off base on this, or just trying to insert my argument of the Fed being political, may I remind you of what I wrote back when then Chair Janet Yellen was proposing for future Fed policy as it was all but assured Mrs. Clinton was going to win – and how both her (Mrs. Yellen’s) stance and proclamations flipped 180º when the results came in.

Below is a sampling of that article. To wit:

“Janet Has Spoken, Now What?” September 21, 2017

(Begin snippet)———————————————————————————-

And here’s the Fed. itself, again, to wit:

“Central banking is in a brave new world,” Atlanta Fed President Dennis Lockhart said in an interview on the sidelines of the conference.

While policymakers have maintained the Fed should eventually reduce its bond holdings, Lockhart said some officials were closer to accepting that they needed to learn to live with them.  “I suspect there are colleagues who are contemplating at least maybe a statically large balance sheet is just going to be a fact of life and be central to the toolkit,” he said.

So why is the above relevant? Fair point, so one more quote, again, from the aforementioned article. Ready?

“You are seeing an exploration of how are we going to operate in a quite different world than before the crisis,” Lockhart said.

And the relevancy for the above is? Da, da, da, daahhh…..: The election had yet to happen. (of course, in my humble opinion)

The above was the working assumption inferred, and perpetuated by Fed. watchers, as well as the Fed. itself all the way and up until the election results on November 8th. Need I remind you about Ms. Yellen herself in mid October stating what the economy may need is for the Fed. to run what is termed a “high pressure” policy?

For those who’ve forgotten, here’s the money quote. To wit:

The Federal Reserve may need to run a “high-pressure economy” to reverse damage from the 2008-2009 crisis that depressed output, sidelined workers, and risks becoming a permanent scar, Fed Chair Janet Yellen said on Friday in a broad review of where the recovery may still fall short.

Now, it’s a concerted gaggle of “Hawks’ Are Us” with 4 rate hikes, balance sheet reduction to proceed, and another hike signaled for December. Remember: It’s no longer a question of if, but now – it’s when, with dates, and amounts. And that’s what truly matters

(end)———————————————————————————————

I would also like to remind you the aforementioned Bill Dudley was a voting member of the very FOMC that went form “Doves on a wire” to “Hawks R Us” the moment Mr Trump was elected.

Do you think what he suggested openly this week wasn’t being discussed behind closed doors when he was actually a voting member?

Or, maybe this is a better question…

Do you need more tinfoil?

As always, we shall see.

© 2019 Mark St.Cyr

If The “Market” Tanks from Here…

In what has to be the most tone-deaf, as well as self-unaware moments that one could imagine to feel the need to “speak” one’s mind. This has to be it.

“What? The President just posted another Tweet?” you ask. No, for compared to the following, the comparison makes the presidential “tweeting” look down right perfectly toned for introspective, as well scholarly.

Think I’m off base? Spouting hyperbole of the first order? I wish I was, but I’ve been making this point now going on years where the “oh so-smart crowd” has poo-pooed it for just as long, if not longer.

“So what is it?” you ask, again. Fair enough, for it is this. To wit:

Via Bloomberg™ in an op-ed today…

I understand and support Fed officials’ desire to remain apolitical. But Trump’s ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.

There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020. 

[Note: added bold and italics are mine, MSC]

Ex-Fed President Bill Dudley: The Fed Shouldn’t Enable Trump

What this ex-Fed President of N.Y. (a recent retiree by the way) has done is not only confirm what I’ve been stating for years, but also, and probably even more important so at the moment: is to shout “FIRE!” in a crowded bull market.

The reasoning is simple:

You now have to question if the so-called “Fed Put” or Powell Put” is valid any longer?

Why? Easy…

For are they going to sit back and watch it all burn and fiddle away to bring about their intended election results for 2020?

Think I’m off-base? Then you need to re-read the above. And here’s another point:

“Wall Street” is going to make sure they are out far before anyone else if they view this as such.

Think about this very, very, very (did I say very?) carefully, for the implications go well beyond just these “markets.”

And yes, there’s even more to contemplate, such as the following. To wit:

The Federal Reserve will now come under far more pressure and calls that “they” are the root cause of anything to blame prior, since and going forward.

And not from just the President – but main-street et al.

Why? Again, easy or, simply put…

As retirement funds and 401K’s get decimated (if this comes to pass at all) the above op-ed, along with the tenor and tone from both the current Chair, as well as Yellen prior, will be the go-to evidence for laying blame.

Let alone where the pitchforks and torches may run towards.

Count on it.

© 2019 Mark St.Cyr

Free Trade: Guess Who’s Really Been Paying

On Friday the “markets” were suddenly hit by two revelations. The first was Fed Chair, Jerome Powell’s heavily anticipated, with bated breath Jackson Hole pontification, for a calmed sea approach as to signal ever-the-more “extraordinary measures” of central banker largess were at the ready.

What they received was more in-line with: at the moment “we’ll wait and see.”

The petulant child known as “markets” was not too happy, but yet, appeared to give Mr. Powell a bit of leeway as to finish his discussion and remarks before rendering its final verdict and tantrum. But that was not too pass…

Before Mr. Powell appeared to make his closing remarks (I’ll garner he was still probably taking questions from the requisite salivating gaggle of reporters) China made its own retaliatory tit-for-tat tariffs known, releasing its own $75Billion dollar tariff outline.

The timing in regards to Mr. Powell’s speech and the Chinese release told one all they needed to know about what really matters in this trade war. i.e., what is the Fed going to do.

I can only surmise the politburo had two responses at the ready, one: if they’re (The Fed) going to signal a big cut – we’ll devalue the Yuan overnight “bigly.” Or: If they (again, the Fed) show indecision or, more of a “wait and see,” we’ll just issue tit-for-tat type tariffs to signify a more subtle tone for escalation.

The latter had the complete opposite effect. i.e., enter the President…

The timing for a response via the President set itself up in a way that one had to wonder if this entire thing was actually a movie script. For the President left absolutely no questions about not only how he viewed the current Fed and its Chair – but that he was serious in how he going to both frame his argument and call the fight. To wit:

Before Powell’s speech…

After Mr. Powell’s “we’ll see” speech…

After China spoke as Mr. Powell was probably still speaking…

(Image Source for all three above)

Regardless of what one thinks, one thing is not up for discussion: He’s not going to mince words on how he views any and all parties in relationship to his trade stance. And that dear readers is something completely anathema to the calculations of any political appointee or politburo. i.e., it’s the issue that needs to be paid strict attention to for any insight.

If you view his (the President’s) response from a purely business stand-point for strategy and/or tactics – this does not shock or, surprise anyone. It’s actually par for the course in most daily business situations. Because, from a business standpoint: The response was pure blood-sport. And in business – all business is blood-sport. Period.

To view it only via the political?

It’s like bringing home a rescued fighting dog into a home filled with toy poodles and cats. i.e., you’re going to be surprised when you come home after your first long day at the office. But anyone who truly understands dogs will not.

And make no mistake about it – we are currently in a junk-yard dog-eat-dog steel-cage death-match when it comes to trade, with more than one foe that has to be addressed at any time. i.e., having the luxury of only having to take on one at a time is going to be just that – a luxury that’s all but impossible.

If you thought otherwise, then now is time to “get your mind right” as they say, because it’s going to get a whole lot worse before it gets better. But there’s a reason why this fight is needed. The reason?

Just look at the empty downtowns and once former self-reinforcing economies that were peppered across the entirety of the U.S. that are no longer here. Ever truly wonder why? I mean truly wonder. Here’s a hint…

Wall Street Globalization enabled via the political indemnification of outrageously one sided trade deals that allowed for the legal stripping of America’s manufacturing base under the guise of “free trade.”

It’s been nothing more than today’s global version of the political, financial and/or industrial “carpetbagger” on steroids. I also found it hysterically comical when watching, reading or listening to the somewhat unhinged responses being made via many of the so-called “smart-crowd” of Wall Street.

Ray Dalio even made his thoughts known expressing such wisdom as to inform those still watching CNBC™ the difference between negotiating with China’s “top down” system and the U.S.’s “bottom up.”

Maybe it’s just me, and I’m sure it is, but I think the street version of such “genius” is called the difference between a Communist regime – and a Capitalist one.

I use the term “street” because it appears something like that is no longer taught in schools. Or even considered on Wall Street any longer, which bears its own abhorrence.

Mr. Dalio has also been in front of as many cameras and microphones that’ll have him on lately to explain why “Now is the time to invest in China.” Maybe someone should say: Uh-oh, Ray. But I digress.

When it comes to farmers, workers, _________(fill in the blank) or better said, when it comes to Americans, they fully understand that there’s going to be pain, maybe a whole lot of it when it comes to renegotiating these trade imbalances. Both from a monetary standpoint, as well as a competitive one.

But they’ve been paying for these imbalances daily for decades and have had to live with the consequences as their standard of living has been lowered so third-world back water countries that don’t follow 1/10 of the environmental, safety and other concerns are allowed to ship competing products at fractions on the $dollar.

Think I’m off base? Think of it this way…

It has allowed people like Warren Buffett to play his ukulele to a sycophantic chorus of mainstream business/financial media outlets during his shareholder meetings – as he ships another American factory producing an iconic, once typical, American staple brand (Fruit of the Loom®) out of Kentucky to relocate in Mexico with no prior warning.

But hey, he’s jolly “Uncle Warren, right? Right?

But that is just one example in 2014 of the long, long list that has been ever-increasing for decades. Need I mention GE™? Well, since I just did…

Wasn’t Jeff Immelt just wonderful as a CEO? Or how’d he do with that whole “Jobs Czar” thingy? Not all that well, but hey, he must have his reasons right?

Listen, who can blame him for the aftermath that’s resulted since his tenure at GE. I mean, he was so busy, he didn’t even know there was a completely extra second corporate funded jet trailing his when traveling – for 16 years! You know, just “in case” he developed a flat tire I guess during a junket business development meeting.

Dear Jeff: How are those GE share prices holding on? Still flying like your planes? Sorry, too soon? If you would like to know, just call one of your many former employees, or current shareholders for clues. I’ll garner they’ll be happy to let you know. I’m just sure of it.

Listen: I’m fully confident that the American workforce and its entrepreneurs are not made up like the caricatures of doe-eyed next-in-rotation fund-manager set that’s paraded across mainstream media every-time there’s some form of sell-off in the markets.

We all know there’s going to be some real pain coming from all of this. Although I can only speak for myself, in discussions I’ve had with others, they are fully cognizant of the facts, and of the mindset – it’s needed, and badly. And more to the point: and now!

The American worker, entrepreneur and more can compete against anyone when the tables for that competition are set to a fair and equitable framework. Sometimes, just because of our founding principles (Which are: capitalistic, not: communistic. Regardless of what they preach and teach in schools today) we’ve overcame some consequential impediments.

But America is sick and tired, actually, more like completely fed-up and infuriatingly ticked-off on the current status quo that “Wall Street” along with the Fed and others has enabled to fester into this perverted spawn known as “globalism.” All at The U.S.’s expense.

I may speak for myself, but I know I’m not alone. We’re through with it, and we’re ready now, more than ever, to roll up our sleeves and get back to work doing it by ourselves if need be, or with others that want to trade fairly.

“Wall Street” and the “globalized” finance and political crowd are about to feel what mainstreet America has been feeling everyday for decades.

But as the old saying goes: Better to pull the band-aid off now, all at once. rather than live the daily cuts America’s downtowns and mainstreets have been living day after day for decades.

That price has already been paid.

© 2019 Mark St.Cyr

F.T.W.S.I.J.D.G.I.G.T.

(For those who say I just don’t get it…get this)

In October of 2012 I made the following commentary, which at the time, was seen as painting with far too broad of a brush.

Today? I would like to, once again, enter into evidence that I possibly understood far more than those that thought otherwise.

In regards to your “competition” and why “retirement” for fear of competing against the “younger crowd” isn’t going to be what it used to be, i.e., ageism is about to be spun on its proverbial head. I articulated the following. To wit:

We started becoming self-sufficient at about age 13. For those trying to put the age to a year. I was born in the early 1960’s. So that’s my time frame for this discussion.

When I was a kid we had very little. My father left and child support was something akin to unicorns. I had relatives that helped when possible, but basically money was tight.  So if I wanted something I had to work for it. The difference between then and today is this – I could. By the age of 12 or 13 a kid could find work one way or another. Today that world is as ancient or as mythical as Aesop’s fables.

People of my ilk worked a myriad of jobs growing up. One example not just in my town but nearly everywhere were local grocery stores of one size or another. You would go in and ask the owner if he had anything you could do. This usually came back with a yes. Then you would find yourself doing the most disgusting, gruesome cleaning of some corner or backroom that the owner just never had the time (or guts) to clean themselves. So if you wanted to make money, there you’d go.

Another great difference is this. When we were 16 or 17 most of us wanted nothing more than to be out of school and working so we could run our own lives. Every single person I knew wanted to get a job and move out on their own. Personally I was out of my mother’s home at 17. I was not an outlier. So were most of the people I grew up with.

The effect of starting so early for us was that by the age of 26 we were far away from anything that could ever be called a kid. Today’s generation looks upon their 20’s as a reason to still live at home, stay on mom & dad’s insurance, and continue going to school. The antitheses of everything we were just a short time ago.

However there’s also another side of all this that doesn’t get talked about: The knowing or learning just how hard some jobs were, and how difficult it was for the people who filled them. Many of us that worked in places whether they’d be factories or something else saw just what a real “hard days” work meant.

I remember when I was working in the mills pushing an 1100 pound rolling lunch wagon through the floors of the local textile mills. Right where people were working at their stations making shoes, clothes. leather, and more. You saw up close and personal what the term “work” meant. You also instinctively knew if you didn’t want that for yourself – you had better start getting on the ball with your own life because if you didn’t – life was going to be getting on with you.

So whom do you think will be more valuable in today’s turbulent workforce? The ones that went to work 10 years ago now toting a near decades worth of work experience? The healthier adults of this day and age with decades of real experience? Or a “kid” just out of school with some degree at 26 living at home with their parents?

From my Article: The Problem with Kids Today – They’re 26!

So what does this have to do with today? Great question, again, to wit:

Via the Washington Post™ Monday, Aug. 19, 2019

When Joann Alfonzo, a pediatrician in Freehold, N.J., walked into her office recently she mentally rolled her eyes when she saw her next patient: a 26-year-old car salesman in a suit and tie.

“That’s no longer a kid. That’s a man,” she recalls thinking.

Yet, Alfonzo wasn’t that surprised. In the past five years, she has seen the age of her patients rise, as more young adults remain at home and, thanks to the Affordable Care Act, on their parents’ health insurance until age 26.

“First it was 21, then 23 and now 26,” Alfonzo says. “A lot of them can’t afford to live on their own and get their own insurance, or even afford the co-pay. And if insurance is offered at work, there’s generally a cost share involved, if insurance is provided at all.”

The idea of young adults continuing to see their longtime pediatricians has been around for quite some time – it was a laugh line on “Friends” in its last TV season in 2004. Rachel takes her child to a pediatrician, she sees the child’s father, Ross, in the waiting room and realizes he’s still a patient.

But these days that’s pretty realistic, Alfonzo says. “We have people who have had children, and they still see us, so we’re seeing the parents and their children, concurrently,” she says.

Caren Chesler: “He’s 26 years old but still sees a pediatrician: Why some young adults don’t move on.”

And people still want to argue with me that today’s business environment is too competitive and only for the young.

Hogwash!

© 2019 Mark St.Cyr

Footnote: These “FTWSIJDGIGT” articles came into being when many of the topics I had opined on over the years were being openly criticized for “having no clue”. Yet, over the years, these insights came back around showing maybe I knew a little bit more than some were giving me credit for. It was my way of tongue-in-cheek as to not use the old “I told you so” analogy. I’m saying this purely for the benefit of those who may be new or reading here for the first time. I never wanted or want to seem like I’m doing the “Nah, nah, nah, nah, nah” type of response to my detractors. I’d rather let the chips fall – good or bad – and let readers decide the credibility of either side. Occasionally however, there are and have been times they do need to be pointed out, which is why these now have taken on a life of their own. (i.e., something of significance per se that may have a direct impact on one’s business etc., etc.) And readers, colleagues, and others have requested their continuance.

Eye Of The Financial Hurricane – Again!

One could start-off much the same as is if trying to channel Dickens’ historical opening “It was the best of times, it was the worst of times.” from “A Tale of Two Cities.” For depending on where you reside in the world of investing, things are either fantastic – or down-right earth shattering.

The latest example of this would be Uber™. i.e., Fantastic if you were a VC and got out at the IPO – earth shattering if it now resides in the “growth” side of your retirement fund. You know, “To stay ahead of inflation.” But I digress.

When it comes to the dichotomy of perceptions in regards to the “markets.” I have used the analogy regarding a hurricane so many times over the last decade, I’ve lost count.

The trouble with such analogies is much like the real phenom they represent, they can change or morph regarding their severity, for a plethora of reasons.

However, although there are many different aspects in trying to calculate both the “if” factor, along with the “where.” There is a very critical distinction that makes a very big difference when you know: you’re not quantifying or qualifying an event that may or may not occur. You’re trying to quantify or qualify the possibilities of the remaining storm you are currently in. Hence, the “hurricane” reference in the title.

For this is not about “what’s over the horizon.” This is now all about where we are in the already unfolding storm. i.e., it’s not coming – it’s already here.

So, in regards to where we might be, as in, position. I’m of the opinion, we are about 3/4’s through the “eye” of the “Autopilot” hurricane that made landfall in the latter half of 2018. Meaning: the most severe portion for unleashing financial mayhem is quickly approaching. i.e., it’s not a matter of if – but when. That’s the distinction with a difference.

With that said, there is another qualifier that needs to be pointed out: The second half of any hurricane can be both the most disruptive, as well as destructive, for a host of differing reasons. i.e., situational and/or psychological.

The reasoning?

Everyone thinks or believes the storm has passed. Hint: It hasn’t, just the leading edge.

I am of the opinion the latter part of 2018 was merely the leading edge of a much larger storm than any of the so-called cadre of “experts” paraded across the mainstream business/financial media ever understood, let alone, anticipated. Yet, they’re always on TV, so everyone assumes they must really be smart? Right? Right?! Sorry, again I digress.

I’ve used the analogy of a credit card to try and explain just what has been transpiring since Mr. Powell took the bag over as Chair in Jan of 2018. The process of QT (quantitative tightening) or “normalization” (e.g., reducing its balance sheet) as the Fed defines it, has more in common with the perilous condition known to many a consumer as “credit line reduction” than the so-called “smart crowd” understands.

Here’s a thumbnail sketch of this phenom using very generalized, rounded-off for example only metrics, for ease of demonstration…

Maxed out credit-line $10K. Min. payment due $1K, interest rate 0%. Let’s add that was an “introductory” rate to keep the example even more relevant.

If you make the $1K minimum payment, your balance is reduced to $9K (remember, no interest charge, so all of your payment goes against total balance) so, in-turn, you can theoretically go out and once again charge up to your credit-line. e.g., you can buy another $1K of what ever you like.

But here’s where everything changes…

If I begin a process of credit-line-reduction or QT for example, and reduce your credit-line from $10K to, oh let’s say, $9K – you have a very, very, very (did I say very?) big dilemma on your hands, especially if you wanted, or worse, needed to buy something on that card.

Why? Easy…

If you only have the $1K to make the minimum payment. Once you pay your card – you have no money and no credit available. e.g., Remember, you’re now at a $9K limit so your payment leaves you without money and buying power. But this is just the beginning, and far from the end.

You either have to do one of two things: Sell something (i.e., like a stock) you have a profit on to unlock that capital. Or, borrow elsewhere – if you can. Hint: you can’t, so go back to the former.

So, after you sell, let’s say you now have $2K in hand. What do you do?

Well, here’s what QT has been doing.

No longer do you have a $9K credit line, because now, just a month later, it’s $8K – and – that 0% “introductory” rate has ended. So, not only do you have a carry charge, but rather, all that “interest free” balance is now subject to your new and applied interest rate, dating back since it was acquired.

So now your new minimum payment is $1500. “But wait..there’s more!” as they say on late-night TV.

Not only do you not have that presumed $2K from your sale, it’s now more like $500 with your new adjusted payment. And what’s worse? Next month your carry cost (interest rate) will double again (think .5% to 1%) – and – your credit-line gets reduced not by $1K, but rather, on “autopilot” of $2K per month. i.e., Credit-line of just $6K with a minimum payment of $1500 going to $1750 and your credit line will probably be less than $3K in a few months time.

Do you see the issue? Hint: The Fed didn’t. And that’s why they’ve been in crisis mode ever since Janet Yellen proclaimed there wouldn’t be another financial crisis “in our lifetime.” Hint: It’s been Crises-R-Us ever since.

This is the equivalent of what’s been transpiring across the “markets.” And the Fed’s most recent “pause” and “cut” has been nothing more than the equivalent of another analogy. e.g., applying a band-aid when a tourniquet and transfusion was called for.

To prove my thesis, may I remind you that the Fed, once again, not only pushed back the timetable for its “autopilot” surety of conviction that QT would be the equivalent “of watching paint dry.” But ended it with immediacy two months prior to its already castrated schedule.

But the damage to the “bull” has already been done. And without a complete and utter reversal of policy, re-implementing QE (quantitative easing) quickly – and in size – it’s over. Period.

The Fed’s pause and reversal on rates has been nothing more than supplying “happy talk” and and implying “the worst is behind us” declarations.

To re-emphasize: All they’ve done is mislead people that should be fortifying their homes or, moving to higher or safer ground, the false illusion that there’s no need to be concerned.

After all, as the “happy talk” that’s been recirculating expresses, “Just look at that clear sky above!” You know, just like they said when the “markets” were back at record highs.

Yet, a little thing has happened since then, and it is this:

The first indications that the rear eye-wall was near made its presence known – and 3% was knocked out the “markets” before any “weatherman” could get out from under their screens and trample over their mother to get to the nearest microphone, camera or keyboard and profess: “Nothing to see here! Just another buy, buy, buy moment of opportunity.”

Yes, it has been the perfect opportunity to buy, buy, buy these last few months. The issue is, not in the “markets.” But rather…

In the stores and real marketplaces that sell such items as hammers, nails, screws, plywood, batteries and provisions.

For the worst is probably far from behind us, but rather –

It’s right in front of us.

© 2019 Mark St.Cyr

Not To Scare The Children, But…

I received a call from a colleague asking my thoughts on the nascent moves in the “markets.” Here’s the gist of what I said, for those that may want to know.

As you know I’ve been on record, I believe the entirety of the so-called “Trump bump” will probably be erased sometime this year. Everyone thought I was crazy when I first put that forward last year, then approx. 75% of it wiped clean in a matter of weeks until the “extraordinary measures” posture returned.

As I keep saying, the damage has already been done, and all that’s been happening is people, the “markets” what ever, have been hoping, praying and more that this “band aid” approach will work. I have remained, and still do, that it wouldn’t. And now it appears to be expressing itself.

From a technical view, what I find intriguing is when you view the S&P 500™ through a weekly chart, the trend-lines that are textbook type watch patterns line up eerily precise with the full 100% expression of wiping out the entirety of it (e.g., “Trump Bump”) to the level, day and year end time-frame.

It’s an amazing coincidence of congruence. Nevertheless, the patters are what they are, and when paired against the current back drop of political circumstances, as well as basic psychological behavior. I stand with my original call more than ever.

Below is a chart showing the above in visual form. To wit:

(Chart Source)

As always, we shall see.

© 2019 Mark St.Cyr

In Case You Haven’t Heard

You ever wonder why you don’t hear any follow-up on those “just a fantastic business model” of disruptive tech well after their IPO’s? You remember them don’t you? The ones that were the “hottest news” of the mainstream business/financial media’s investment advice.

Don’t worry, for if you don’t, here’s just two representatives. One is a bit over a year old, the other is a bit more recent.

Now before I show you their most recent “pictures.” What you need to remember is that these two representatives were all released and resided as public companies during a period where the “markets” have never been higher.

So with that said, let’s see how they’re aging, shall we?

First Dropbox™. To wit:

(Chart Source)

Last, but certainly not least, is the one IPO that was supposed to be “the” representative of all that was “disruptive tech” aka Uber™. Again, to wit:

(Chart Source)

Funny how these are no longer even considered “news worthy” via that same press, yes?

But what do I know.

© 2019 Mark St.Cyr

What Happens When The Buy-Back Music Stops?

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Chuck Prince, Citigroup™ CEO, 2007 interview with FT™ in Japan.

Would any next-in-rotation fund-manager care to explain what happened next? “Bueller?”

Let me continue with even more of what can only be described as, fall-down, laugh-out-loud material, that I’ve been watching professed across much of the mainstream business/financial media over the past few weeks.

It’s been so outrageously laughable – it’s down right scary.

Here’s a sample using a composite view of the myriad of next-in-rotation fund-mangers paraded across the mainstream business/financial media of late. For if I heard the following once, I heard it a thousand times. To wit:

Everyone was worried about earnings and that has been put to rest with __%(fill in percentage metric of choice or, just go bold as some did, stating “all”) beating expectations.

So all this worry about trade and more is just the wrong-again Bears, once again, trying to put fear into the marketplace.

They are wrong now, they were wrong in the past, and we think they’re wrong about the future.

We see this as another buying opportunity, with even higher highs going into the end of year, based on what we heard from earnings calls, along with the Fed now cutting rates.

There’s plenty of cash still on the sidelines. And the market reaction to buying this latest sell-off shows there’s still an appetite for equities. Not to mention, where else are they going to go? i.e., T.I.N.A. there is no alternative.

Here’s the dirty little secret to the above:

All that “buying” has been nothing more than all these companies beating EPS metrics (many on lower guided metrics) by borrowing and spending precious resources once used for such archaic ideas as R&D and more, only to buy back their shares to the tune of $100’s of Billions per quarter. Yes, per quarter.

2018 set a record at over $223 Billion in Q4 alone making 2018 a record year, shattering a prior record of a what now seems paltry in comparison of $589.1 Billion. But here’s the kicker…

In what year was that prior record set? Hint: See opening quote above.

Apple™ alone spent $74.2 Billion in 2018. It spent some $20+ Billion including dividends just this last quarter alone.

But wait…there’s more! As in, much more: In May they announced an additional, yes, that’s on top of all other allocations, an additional $100 Billion buy back allocation – and – increase its dividend by 16%.

So, I ask you dear reader: With out it, where would Apple-the-stock be trading, currently?

In May of 2014 I made the following observation that caused many a TV, next-in-rotation fund manager, to argue I had no idea of what I was talking about. To wit:

The call of the day: And with the potential move to buy Beats, Apple  could very well take the final step in its (d)evolution into Microsoft. That’s pretty much how Mark St. Cyr sees it. Of course, he’s not the only one piling on such a purchase. Music critic Bob Lefsetz calls Tim Cook a clueless operations guy. But St. Cyr takes it a step forward by comparing Apple to the lumbering software giant. In a “complete and utter cave-in to Wall Street,” Apple’s latest report wasn’t consumer-products based; rather, it was designed to play Wall Street’s game, he says.

“Dividends, debt, splits, and more,” he said. “I don’t think the iPhone has added as many new features at once as the new features released in Apple the stock.” That’s how Microsoft does it, said St. Cyr as he waxed on about the Apple you knew is no longer. “I hope I’m wrong, but the actions are beginning to not only speak for themselves — they’re screaming.”

Shawn Langlois, MarketWatch™ May 13, 2014

So let’s use the same media outlet, so those same “analysts” can’t accuse me (though they will anyway) of “cherry-picking” my numbers or sources, and see how that’s all working out, shall we? Again, to wit:

Apple’s evolution mirrors Microsoft’s in many ways. While many investors worry that Apple is losing its grip on innovation and growth, they are missing the broader story of this tech stock becoming a more mature company that may not move as fast but still has plenty left to offer.

Jeff Reeves, MarketWatch™ “Opinion: Apple is the new Microsoft…” June 4, 2018

So, some of you may be saying, “Yeah, so what?! Just look at these markets since!!” And that would be a fair point. But all I’ll say or do, once again, is to point out that was exactly the overwhelming premise of thought when Mr. Prince made his now infamous remark. i.e., just before it all went quiet.

Buy backs for 2018 came in at just under ($804) a $TRILLION Dollars. 2019 is already on pace to shatter that $Trillion Dollar threshold with 2019 comparable already up 18%.

However, let’s remember, this was all before China decided to unleash the “Currency Kraken.” Now, currencies are coming into play, and make no mistake about it: Tariff tit-for-tats are like playing with BB guns – currency wars are where the heavy artillery hang out, where unintended casualties and friendly fire mishaps happen on global scales, where no one is immune.

I’ll get back to the currency problem in a moment, but first this point needs to be emphasized: When you, a company, a market, a ______(fill in the blank) rely solely on the largess of what some central bank authority decides as some crutch to keep your “stock” value or bonus aloft. All you’ve done is sold your company’s prospects for continued success down the river. Period.

Think I’m off base? Fair point – than think about it this way…

It was only back in December when you would read or heard things like the following. To wit:

Boeing’s board voted Monday to raise its quarterly dividend 20 percent to $2.05 per share in 2019. Additionally, the Dow component’s board approved a $20 billion stock buyback plan, replacing its prior authorization.

CNBC: “Boeing raises its dividend 20%, boosts buyback plan to $20 billion, reaffirming its bullish outlook”

Then, to be polite, “when things hit the fan.” Suddenly all that great use of cash going into buy-backs rather, than R&D or safety research, training, et cetera, et cetera, suddenly doesn’t seem as such a smart call by the C-suite any longer. For just four months hence, as in April, that same company calling for even more spending on bonus compensation buy-backs, suspended them.

Now, one has to wonder, which thing is going to be the “thing” Boeing focuses on keeping aloft first: Boeing-the-stock? Or Boeing aircraft?

I’m sorry, and I know that seems crass. However, is it really when compared to how much Boeing has been spending on everything other (e.g., buy-backs) than its core product? Especially now in retrospect.

For is it not fair to say, at the least, to point out there appears to have been just a tad too much focus and willingness to allocate precious resources on its stock performance rather, than the core product? Again, I know how it sounds, but the questions of prudence still remain, regardless.

“Now what does this all have to do with currency?” you may be asking, as always, great questions, and it’s this…

Should for whatever reasons a true currency war erupt in earnest as is already appearing to be emanating from China, whether the politburo is outright responsible for it, or not, other nations central banks’ will need to sell anything and everything they can to help fund possible gyrations within their own currencies to help, or at least try, to stabilize their own.

To be clear: I am of the view they (China) are hopelessly lost in reaction mode, as in, it’s already out of their control.

That one situation alone portends a possible panic selling, at the worst time, for all those central banks which purchased equities solely with their “print buttons” prior. Why?

Because when you need money, fast – you sell what’s profitable first. And currency markets make equity markets look like child’s play.

“Any precedent?” you ask. Again, great questions. Let me try with this one…

Hint: Swiss National Bank, 2018 Market Rout. To wit:

(Source: ZeroHedge™: SNB unexpectedly sold US stocks in Q3, dumping over 1 million Apple shares)

“Why does the above matter?” you may be asking. Another, great question, and it is this…

The SNB is now one, if not the, largest sovereign hedge funds the world has ever known. And when the world of currencies panic? They panic run to the Swiss Franc. Which then can cause the Swiss to panic needing to sell anything and everything to help stabilize their currency which is no longer pegged. Not to mention try and “lock-in” any prior profits.

So now I’ll just end with me asking: What could possibly go wrong?

After all, isn’t this just another buying opportunity as all the talking-heads across the business/financial media are telling us?

“Bueller?” Anyone?

© 2019 Mark St.Cyr