Special Bulletin: November 13, 2019

Call us old fashioned, but…

Fresh all-time highs continue on the major indexes, but a crack may be emerging. The technical condition of the stock market remains sound and our Current Market Outlook is “Market in an Uptrend” with a “green” light. One of our “Core Four” internal indicators has turned red, while the other three remain green. A sloppy (even weak) Advance/Decline line along with a growing expansion in 52 week lows on the NYSE may be suggesting something.

Could it be that this market, better: the economy, is running on fumes? Or maybe we should say “smoke”. Please pardon us for being old fashioned but a market that is hitching its wagon to a star (now almost literally) and defining growth opportunities as vaping, recreational pot, sports betting, space tourism, fake meat, and pet insurance sounds at best like a falling star, and at worst… a death star.

Time was when growth was defined by discoveries in health care, innovations in computer technology, advancements in communications and military defense, or some hot new apparel item or national retail outlet to distribute it. Seems nowadays the stranger and more sensational it is, all the better, especially when it comes to the Wall Street hucksters. Heck they’re even selling us unicorns now! (I was always told those were make-believe.)

Now mind you, we’re not opposed to creative ideas and “new” technologies. We are no fuddy-duddies. Why we even wear Crocs shoes! But let’s face it, some of the brave new worlds that are being embraced by today’s “open-minded” generation (read: the Millennial’s) really lack any meat on the bone. Truth is they might rather it be plant on a bone.

Based on our long tenured market experience, a possible warning sign of a market on stilts can come from various directions. Most often euphoria is sited. Other times excesses in bad credit or a vengeful Fed adjusting its carburetor can choke the economy. Can near nonsense or wildly speculative notions presented as viable business plans hint at or suggest an economy is running out of steam and lacking real, practical and persistent business ventures? Do you remember Clara? Click here for “beef”.

Here is a list of a few of them. You be the judge. Ask yourself, will this enrich my life or my community as well as my portfolio? 

Vaping, E-cigs & Recreational Pot- A producer of e-cigs states on its website, “Our mission is to improve the lives of the world’s one billion adult smokers.” (What!?! Are you going to stop making them and go out of business? Wasn’t tobacco vilified and taboo under “O”? How is this new “smoke” in customer lungs different and OK now? And as for pot, don’t even get me started on the insanity of this so-called industry! Our legislators must be pretty “high” up to approve this as a permissible business.)

Sports Betting- Now you can bet on your favorite teams and athletes! (Wanna bet if this will help families put bread on their tables? Distracted young men do not make better husbands, fathers or employees. Not to mention the risk to the integrity of the games. Instead, invest your hard-earned $ in the market. The odds are better.)

Space Tourism- It’s out of this world! (More like we are out of our minds! Unless McDonalds is finally going to put a restaurant on the moon, why spend all that time and money on this project when there are so many infrastructure needs down here on earth? Seriously, the interstate is bad enough. Do I really need to strap myself into a gas can with wings?)

Fake Meat- One producers website asks, “Why do you need an animal to create meat?” (Because animal is meat! Our updated cliche: “One man’s burger is another man’s grain.” Definition from TheStreet.com: In a zero sum game, gains for one person causes losses for another person in an identical amount. The net change for everyone involved is zero and no wealth is created or destroyed during the transaction. The same dollars are spent on food, only the calories are less. The animal farmers loss is the ag farmers gain. But it is a win for my waistline, just not my taste-buds!)

Pet Insurance- One insurance co. states “fetching savings has never been easier”. (Now I love my dog and miss my cats, but…. really? Aren’t there more pressing needs in our lives that need our financial resources and attention? This idea will likely be buried like a bone during the throws of the next recession.)

Now, we do get it. We get it’s about profit. But that is our point. Is the opportunity for profit in traditional areas of our economy so lean now that we have evolved to this? Fortunately, we do have an ongoing 5G boom in the US. Additionally, an aging population has led to new medicines in the biotech space, and falling rates have caused a surge in re-fi’s in the mortgage sector. And investors have profited handsomely.

Businesses are always looking for new avenues, new markets to tap. What if we all had more customers (more demand for our products/services) without additional infrastructure expenses? Just more customers. Wouldn’t that be nice? Here’s a novel idea: what if we stopped aborting babies and let them grow up to be consumers? Do you think that would help Nike to “just do it”? We wholeheartedly agree with Cokes former motto to “…add life”.

With the above so called advancements in improving our quality of life being trumpeted as new major industries, maybe somebody should be watching the markets back door. Our suspicion is that a bigger picture slowdown may be in the offing. These things take time. Other signals must appear first, e.g. rising layoffs, a spike in credit spreads, emergence of a debt leverage crisis, or a surprise bankruptcy of a “major player”. For now the trend remains up based on the math of the market, but until that time, perhaps the wizard really is on Wall Street and he may just be saying… “pay no attention to the fundamentals behind these ideas.”

What should investors do now? Let your winners run but cut your losers short as you monitor your portfolio. Seek quality investments with rising relative strength. Remain focused on the major indexes and their 50 day moving averages and watch to see if the number of stocks hitting new 52 week lows continues to grow. Finally, ask yourself, is profit more important than purity or principle? Click here to learn about being “socially” responsible.

Have a Triumphant day! ®