The Lord Giveth… (QQQ,DIA,VOX,HYG,CBOE,KKR,FB)

The Lord Giveth… (QQQ,DIA,VOX,HYG,CBOE,KKR,FB)   It’s hard to find anything negative to say about a market that has been on an even-keeled, upward trajectory for the last eight years.   You can mock what underpins its strength, you can deride the foolishness of those who’ve made millions just buying and sitting put, and you can wail like a newborn over the fundamental and technical excesses that are sure (eventually) to rock the very foundations of the financial edifice and send the global economy off the edge of the planet. And eventually, we admit, you’ll be right.  The fun will come to an end.   But it’s far more likely to be a jagged up-and-down affair than the simple cliff-dive that most imagine.  We’re of the school that contends that a wild volatility will seize the market before the final top is in, sending it hithering and thithering in a manner that breaks every man Jack who has more than a few bucks invested in the equity amusement park of the next few years.   And a quick look at the charts of the major world indexes reveals that we might now be approaching our first fitful turn in that process….

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Growing Cold and Crowing Gold (GLD,HYG)

Growing Cold and Crowing Gold (GLD,HYG)   In the same way that the mind and body can become inured to a constant barrage of negative stimuli – a crucial survival mechanism, no doubt – it can also grow insensitive to the positive.   That’s right.   And you can see this in the widespread American penchant for more, better, juicier and sweeter tasting food, a phenomenon that even manifests itself in a television channel dedicated entirely to eating!  There, you’ll learn how to make food, how to serve it, what to spice and spike it with in order to maximize your taste pleasure, and all in the name of moving your tastebuds further out the plank of ‘extreme experience’.   Completely insane when you think of it.   And so it goes with all of life’s other ‘experiential’ aspects; people are ever pushing the edge of the envelope, from skydiving to white water rafting to bunjee jumping, meth experimentation and orgiastic Thai getaways.  The movement to experience more, better, thrilling… everything! has become an integral part of 21st century living. Sadly, the result, in the end, is actually a deadening of the senses.  One so beholden to experiencing the latest…

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High Yield Meat (HYG,SLV)

High Yield Meat (HYG,SLV)   Some assumptions are safer to make than others.   Until recently, for example, it was assumed that the financial markets would automatically be backstopped by the Federal Reserve and Treasury at the first sign of distress.  After all, we went through several rounds of Quantitative Easing, state-initiated bond purchases, government directed corporate bailouts and more over the last seven years, so why shouldn’t the process continue?   Why, indeed?   Well, it seems some at the Fed and in Washington now believe that the stimulus has to end.  With interest rates projected to bump higher several times in 2018 and the gradual reduction of the Fed’s balance sheet already commenced, all indications are militating against the type of intervention we’ve become accustomed to since the bull market began.   And the result is a market that’s showing increasing signs of worry that we’ve entered risky waters.   We, too, have begun to ask of late if the financial world has grown a wee too complacent, or if, in fact, the current worry will only serve as a distracting backdrop for further screaming gains into the New Year. And it led us to the following.  …

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“The Kids Are All Right” (XBI,HYG,DIA,PRI,PFE)

“The Kids Are All Right” (XBI,HYG,DIA,PRI,PFE)   It’s the end of the year, friends, time for stock taking, and boy-oh-boy have we got a surprising summing-up on offer.   Consider first that 2017 has been a year unlike any other in this generation in terms of natural disasters, politics, intrigue and war, never mind the markets.   Globally, we’ve never seen such equity success.  Have a look – Global equity markets have done the impossible, rising 13 months straight, in an unprecedented, non-stop ballistic climb toward the succubus nebula.   The What!?   That’s right.  From the media to the Oval Office to the New York Stock Exchange, it’s abundantly clear that we’re living through unprecedented times, and there’s very likely more to come in the year ahead.   Consider – nothing has been resolved in North Korea, nothing with Syria and the Middle East.  And financially, in all our thirty years investing experience we’ve yet to see a market levitate in the manner it has over the last several months – without the slightest pause to refresh.   Something Has to Give   It’s hard to figure which peg, if any, will fail first.  Or if something unseen will…

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Sell-Off Lurking (HYG,GLD)

Sell-Off Lurking (HYG,GLD)   Not long ago we wrote about a market indicator we developed and brought public in the late 1990’s; something we refer to as ‘volatility compression’.  We described it recently in a letter called Buy Everything Now!, so we won’t put you through the labor a second time, only to say that it’s worthwhile going back to re-familiarize yourself with the concept, because it’s once again popping red on our screens this week.   Don’t Touch my V-Spot!   Bottom line is this: the CBOE’s VIX indicator, a measure of implied volatility on 30 day SPX options, has now registered repeated multi-year lows over the last six week period.   Have a look – The actual compression levels (along with what’s shaping up today to be another vice-squish of a day) give us an unprecedented and clear ‘sell’ signal for the near term (10 days to six weeks out).  And while we would have jumped on this like a mad monkey on a dirty bird some years back, we’re a little more reserved these days.   The reason for our circumspection is a general unease that those numbers that have guided us in the past are still…

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New Leg Afoot (HYG,DIA,QQQ,SLV)

New Leg Afoot (HYG,DIA,QQQ,SLV)   When you start dreaming that you’re a close associate and friend of former presidents and various other statesmen it’s very likely something’s wrong.   Now, that’s not to say that all who mucky-muck about with the bigshots have mental problems; certainly not.  But we ham and eggers have to keep our feet on the ground.   After all, if we’ve never even met or seen these fellers in person, what could there possibly be to dream about?   It was with that in mind that we assured the Mrs. our next visit to Dr. Ludmilla would settle the matter; we’d tell her the whole story, purge ourselves of our nonsense and come away cleansed. Oh dear, Doctor, yes!  Yes, yes!  Flesh it.  Fleshitgrasp.   Ahem.   The point of the matter is that a fellow should never get too big for his britches.  He should know his place, more or less, if he wants to have a good, safe and meaningful life.  After all, the search for fame and glory nearly always ends – unfortunately – in either death or jail.   That’s what Dr. Ludmilla was trying to explain to me when I finished…

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Tortoise vs. Hare, Avionic Version (BA,NOC,HYG,BIDU,QQQ)

Tortoise vs. Hare, Avionic Version (BA,NOC,HYG,BIDU,QQQ)   Where in the world will it end?   General Jenny Tull, the first female, four-star officer in the U.S. armed services, yesterday announced procurements totaling $82 million for the purpose of ‘gender nullification initiatives’ and ‘tactical androgen support ops’. Although our efforts to contact the General’s office have yet to meet with a reply, our curiosity as to what those two items would look like in some of the Mrs.’ choicest lingerie have set our hearts absolutely a’flutter!   And further, we ask: is there a chance that Jenny Tull’s own tacticals have ever been manacled? Her cuticles ridiculed?  Or her clavicles or mandibles manhandled?   Haha!   Moreover, what, pray tell, turned the general into such an irascible Hannibal, so fanatically concerned with the exclusively bacchanal?   Call us puritanical, but when the goal of armies turns from killing the enemy into a vehicle for social engineering, all hope of victory is lost.   The Death of War   Thankfully, there are still those who believe that wars have to be won, and most of them walk the corridors of the corporate weapons industry.   We’ll return in a moment to discuss…

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Finding Greatness in Junk (HYG,AMZN,XRT)

Finding Greatness in Junk (HYG,AMZN,XRT)   You don’t find too many great men these days.  Our guess is that there were a lot more at one time.   That’s not to say that there aren’t a lot of rich men, or powerful or influential men.  There are plenty of those.  There are a great many intelligent men, too.  And a whole cadre of those who possess abundant stores of knowledge and know-how in this field or that…   But greatness?   To our mind, greatness doesn’t reside in amassing fortunes or achieving military victories in far-flung lands, or in getting re-elected for a thirty-third term.  There’s a great deal to be said, of course, for those who achieve these things.  One might point to their determination, their creativity or ability to think strategically.  And there’s a good deal to be said for honoring those who get the best out of themselves, or see the potential in others and help them to exploit it.   But greatness, to our mind, resides elsewhere.   True greatness is a function of wisdom, and wisdom is an ethical matter.   By ‘ethical’, we don’t mean well-behaved, though it’s nice to see that quality in…

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Dancing in Detroit (F,GM,HYG)

Dancing in Detroit (F,GM,HYG) What’s more American than a monster truck hoedown that pits a Ford F-150 against a Chevy Silverado.  (Apologies to Ram fans, of course.)   American carmakers are still a force to be reckoned with 100 years after Mr. Ford’s assembly line thrust Detroit into the center of the industrial world.   And though we may be at the dawning of the electric age for vehicles, Ford and GM still have market caps that come close to $50 billion.   Why?   Because they sell a whale of cars.   A look at the chart below offers an idea of the types of numbers on offer from both companies. A company that sells more than $150 billion in product is a force to be reckoned with, even if the stock is waggling and the competition looks slicker and sexier.   So which one is better?   The question often arises in our monthly, inner-sanctum bourbon and billiard gatherings – for which Normandy is gaining notoriety from the White House’s West Wing to the Financial District’s White Horse Tavern – ‘which is the better buy: Ford or GM’.   And we have an answer to the question.  …

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Junk Skew Calling! (HYG,DBC,STT,TROW)

Junk Skew Calling! (HYG,DBC,STT,TROW)   There’s a great deal to discuss on the macro/monetary level, but we’re going to divert our attention today to the other end of the spectrum and examine a few, key technical minutiae before offering you a trade.   So let’s begin with this.   There’s an old adage on Wall Street that states, quite simply, ‘the trend is your friend.’ That’s right.  Those who’ve played this game the longest will tell you that it’s all rather simple.  In a bull market, money is made by remaining long.  In a bear market, by staying short.   But there are numerous corollaries to what appears to be so axiomatic simple, including 1) correctly identifying the trend, both intermediate- and long-term, 2) staying on board through ‘noisy’ periods and short term pullbacks, and 3) knowing when and how to play more substantial reversals.   All of these issues are further predicated on your having a system of indicators in place that allow you to adequately identify all of the above so that you’re not caught off guard.  It also means you have a reliable safety net to support you if there’s a SNAFU in your system.   If…

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