The World has gone Mad:
I found a headline this week
that seemed so absurd: “The World Health
Organisation finds that: ‘Failure to find a sexual partner’ is now a
DISABILITY.” Until now, the failure
to achieve pregnancy after 12 months or more of regular unprotected sex - was
NOT considered to be a disability. “In a dramatic move, the World Health
Organization (WHO) will change the disability standard to include: a person who
is unable to find a suitable sexual partner or is lacking a sexual relationship
to have children.” The WHO says the change should give every
individual the right to reproduce.
http://www.express.co.uk/news/uk/723323/Sexual-partner-fertility-disability-World-Health-Organisation-IVF
And
then there is the by-line out of Niantic, Connecticut: “Students at Lillie B. Haynes Elementary School can Kiss Halloween
Goodbye. Principal DeLoreto canceled the school’s
annual Halloween traditions in a letter to parents because she contends some
students may feel excluded from the festivities, and adults may come dressed up
as something scary. We believe
school day activities must be inclusive for all students, and we must be
sensitive in regards to holidays and celebrations of religious, cultural or
secular nature. Please know classroom
celebrations will continue to take place however, they will be Fall themed, not
Halloween.”
And finally there’s the
all-to-real story that Chris wrote about:
-
A 120-year-old
company that once thrived, is now operating at 50%.
-
When times were
good, management and employees entered into a compensation and pension plan
that guaranteed everyone a base salary of $107,239, 10 weeks of paid vacation,
12 weeks of paid sick time, and generous health benefits.
-
But like so many
of our companies and government entities, they assumed that the good times
would last forever.
-
They also
counted on an 8% Return On Investment (ROI).
-
Unfortunately,
with interest rates pegged at ZERO for the last eight years – they find their
pension plan only 65% funded, and in need of $10.4M to meet current
obligations.
-
New management
estimates that (without changes) they will have to close their doors
permanently in 8 months – June of 2017.
-
The plan of
action is to find ways to increase revenues, and dramatically reduce expenses.
-
Revenues have
been declining for more than a decade, because their product is discretionary,
and they are being forced to compete against many newer and cheaper forms of
entertainment.
-
The company’s
largest expense is employee salaries and pensions, and implementing any
significant cuts would run head-long into the employee union and would probably
result in a strike.
-
The company is
the Pittsburgh Symphony Orchestra.
-
Stories like this are going to be
surfacing at an accelerating rate over the next several years due to our FED’s
zero interest rate policy (ZIRP).
-
Massive,
un-funded pension obligations are sitting out there unable to earn the required
returns in a ZIRP world.
-
These
obligations can only be met through drastic cuts, or increased taxes (in the
case of government obligations).
-
None of
this was ever mentioned by any of the Presidential candidates.
-
The Pittsburgh
Symphony musicians are being asked to take dramatic pay cuts, and to transition
their current defined benefit plan to a 401k.
-
They have
instead decided to strike.
Unfortunately for them (and
many others), there is no way to make the math work without substantial
concessions by them, and substantial interest rate moves by our FED.
The Market...
Below (courtesy of
Stockcharts.com) is a monthly chart of the DOW.
In the beginning of July,
the market rebounded from the Brexit sell off, and soared higher. It then moved sideways for a couple of
months. In the beginning of September, it
plunged down to a new support level, and has been trading sideways in a
narrower band. Long periods of sideways
action create market pressures, and just like a watch, a spring, or a rubber
band – at some point the pressure has to be released. The only real question is: will we breakout
or break down?
There is NO question about
the market being supported. The big
tails on the bottom of the candles denote areas where the market has faded
during the session, only to see ‘someone’ (in the 11th hour) come
and rescue the day. Last Friday (for
example) the DOW was down 112 points, feeling heavy and heading lower. But then in the last 30 minutes, buyers with
deep pockets came in and brought the market higher to end the day down a mere
16 points. We know that mutual and
equity funds have seen OUT-flows over the past 5 out of 6 weeks – so we know
the ‘smart money’ isn’t buying. That
only leaves our friends the Central Banksters.
While they don't appear willing to push us to new highs like they used
to, it is evident that they will keep the market from falling too far.
November and December are
typically strong months, but this time around we have an election – the likes
of which we've never seen. Most market
experts are looking for a fairly significant sell-off after the election (no
matter which candidate wins). But
honestly it could just come down to a decision by the:
-
ECB, whether
they continue QE past March of 2017,
-
Swiss National
Bank (wink-wink) whether they continue to invest in our stock market,
-
Bank of Japan,
whether they will further lower negative interest rates, or
-
Our FED, whether
they choose to increase interest rates in December.
Our Central Banksters have
proven that as long as they keep printing money, they can keep this market
running sideways. But it isn't all kittens and rainbows out there:
-
Bombardier will
cut 7,500 more jobs through 2018,
-
IBM had its 18th
consecutive quarterly revenue drop,
-
Ford plans on
shutting down 4 plants over next few weeks, including an F-150 plant,
-
The Empire
Manufacturing Report plunged another 6 points lower,
-
The CEO of CAT
is leaving after 45 consecutive months of falling sales, and
-
Julian Assange
had his internet capability cut ‘by the state’, and there are all sorts of
rumors that he has gone underground or has been killed.
However, the most disturbing
graph that I saw all week was the ‘Freight Index’ graph below. It failed to rise in September, and that move
is worrisome to me.
Donald Broughton (Managing
Director and Sr. Transportation Analyst for Avondale Partners) says: “September
data is once again signaling that overall shipment volumes and pricing
continued to be weak, with manufacturing, wholesale and retail continuing to
try and work down inventory." In
September, index measurements for freight shipments and expenditures fell 3.1%
and 3.8%, respectively – compared to a year ago. It was the 19th straight month of shipment
declines. Broughton said that continued
weakness in freight movements is being driven by the excess capacity in
trucking, rail, air freight, barge, ocean container and bulk. “We see
little reason to predict a change in course or any strength in any pricing
rates for most transportation methods going forward.” All this, is happening against a backdrop of
the U.S. economy in a state of transition. “After the explosion in
fracking activity from 2009 to 2014, we have been patiently waiting for the
consumer to take the baton of leadership in economic growth. But lower fuel prices have simply allowed
U.S. consumers to pay down debt and increase their savings rate. The consumer has not yet picked up where the
industrial economy left off.” Broughton
also sounded the alarm over our FED raising interest rates. “It will make an already strong U.S. dollar
even stronger, and that will hurt the overall economy and freight.
Historically, a strong dollar has produced a serious headwind for freight
volumes, first in our exports, and then in a reduction in domestic
manufacturing and assembly. Nothing in
the freight flow data suggests that another rate hike is warranted, or even
that the first hike in December of 2015 was necessary.”
Tips:
I think you buy a stock
when: 1) the stock has a nice technical pattern, 2) it has some ‘reason’ to
move higher (such as earnings), and 3) we are in a flat to rising market.
Lately my issue has been with the overall market. One day it’s up 100 points, and then it falls
back 200 points. We've only had ONE
instance of back to back ‘UP’ days this entire month. For the past several months the market has
been crawling sideways in a loosely defined range of 2120 to 2190.
In so far as how the
election could influence your investing, there are TWO elements that I believe
we are going to lose when ‘the machine’ takes office: 1) Our Right to Bear
Arms. Hillary will have to wait to
override the 2nd Amendment for a Supreme Court appointment – but I
think defensive weapons will be severely curtailed immediately. And 2) Our Freedom of Speech. Hillary and Obama have publicly stated that
alternative news outlets like Drudge or Alex Jones should NOT be allowed to
exist. “We are going to have to rebuild within this wild-wild-west-of-information
flow some sort of curating function," Obama said at an innovation
conference in Pittsburgh. Our ‘freedom’
to state any opinion and calmly disagree with someone else, along with
our ‘right’ to arm ourselves is fairly unique around the world. I’m seeing forces that want to bear down on
both of these issues. The investment
opportunity is in the firearms arena – where business is booming. I’ve been told that many is the day people
are lined up 2 and 3 deep at the counter in order to be waited on.
-
Think about:
Smith & Wesson (SWHC), Sturm – Ruger (RGR), and Vista Outdoors (VSTO) – to
take advantage of the run-up in firearms.
-
Look at: Diamond
Offshore Drilling (DO), Western Refining (WNR), and Chesapeake Energy (CHK) –
to take advantage of increased oil prices,
-
Watch: Morgan
Stanley (MS) – as bank earnings have been great, and
-
Facebook (FB)
has earnings coming up – so watch it for an earnings run.
What we don't have here is a
flat to rising trend market – so look at these and be careful out there.
To follow me on Twitter.com
and on StockTwits.com to get my
daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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