This Week in Barrons –
5-14-2017:
“The Art of the Meal”… by Donald Trump
Dear Mr. Trump:
On September 14th 2016, you said:
“I like fast food because at least I know what they’re putting in it.” On April 12th 2017, you said:
“When I was dining with Chinese President Xi Jinping, I authorized the Syrian
airstrike while they were serving the most beautiful piece of chocolate cake
that you’ve ever seen.” And on May 12th
2017, you stated: “My signing of this executive order scales back our
high-school’s meal nutritional requirements.”
Mr. Trump, not only are you overly fixated on food, but I’m with Mrs.
Obama on this one when she replied: “Mr. Trump, why don't you want our kids to
have good food at school? What is wrong
with you? Your executive order loosens
school meal standards that are aimed at combating childhood obesity. Why would anyone want their kids growing up
eating crap?"
Are you just trying to get back at the
Senate for making a joke of your latest healthcare bill? Are you afraid to concentrate on doing one
thing well – because it may define your presidency? Warren Buffet (at his annual stockholders
meeting) cited: “Our bloated health care system is the true barrier to
America's world competitiveness, and where we keep getting more out of whack
with the rest of the world. Medical
costs are the tapeworm of American economic competitiveness." Both Mr. Buffett and Mr. Charles Munger (his
business partner at Berkshire Hathaway) advocate a single-payer healthcare
system. Under this plan, the United
States would enact a universal type of coverage for all citizens with an
opt-out provision that would allow the wealthy to still get concierge
medicine. But instead of working toward
making one element great, you seem to be inflicted with ‘shiny object syndrome’
– where your latest ‘shiny object’ is X-FBI Director Comey. Be aware, the world is telling you that
healthcare is much more important.
Currently, health care costs are 17.1% of
G.D.P. – up from 13.1% as recent as 1995.
The health care percentage of G.D.P. in Germany is only 11.3%, in Japan
it’s 10.2%, in Great Britain it’s 9.1%, and in China it’s only 5.5%. That puts the United States at a material
disadvantage far beyond any tax code improvements. It harms American corporations specifically
because they bear such a large share of those costs. After all, corporations spend an average of
$12,591 per year for coverage of a family of four – up 54% since 2005.
As for the elephant in the room (your firing
of FBI Director Comey), I honestly was not as taken aback by your action as I
was by this week’s interview with Mr. James Clapper (the former director of
National Intelligence). Mr. Clapper, who
served both Democratic and Republican administrations, ended his prepared
remarks with a reminder of what the Russian investigation is really all about:
"The Russians used cyber operations against both political parties,
including hacking into servers used by the Democratic National Committee and
releasing stolen data to WikiLeaks and other media outlets. Russia also collected information on certain
Republican Party affiliated targets, but did not release any Republican related
data. The Intelligence Community Assessment
concluded 1st that President Putin both directed and influenced
these campaigns in order to erode the faith and confidence of the American
people in our presidential election process.
Secondly, President Putin did so to demean Secretary Clinton. Thirdly, he sought to advantage Mr.
Trump. These conclusions were reached
based on the richness of the information gathered and analyzed, and were
thoroughly vetted and approved by the directors of the three agencies and
myself." So, by firing Mr. Comey
you intensified the Russian investigation, and pushed back healthcare reform, tax
reform, and your infrastructure projects even further. I’m assuming that is what you intended?
Finally, on this Mother’s Day, please
remember to say ‘Thank You’ to your mother for all of her efforts. Being a ‘good mom’ is a phrase so embedded in
our everyday thinking that (in some ways) it has lost its meaning. We often use ‘good’ as a synonym for
competent. But a ‘good mom’ is far more
than a measure of her competence. It
also takes into account her humanity, her values, the qualities inherent in her
character and other intangible traits.
Mr. Trump, I’ve come to believe that individually pursuing goodness all
the while surrounding yourself with good people – is the only leadership
decision that really matters. When we ask ourselves why we admire leaders, the
answer is that they put other people first and understand and practice good
values. Good leaders are committed to
improving everyone around them, more than they are committed to improving
themselves. They feel a duty to serve
others by inspiring and shaping. To
quote Tom Peters: “Leaders don’t create followers, they create more
leaders.”
I see our values as our critical competitive
advantage moving forward. I was reminded
on Friday – at the passing of a dear friend – that the success portion of our
brains receives the highest level of stimulation when we willingly and actively
give to others. Mr. Trump, I would ask
you to consider elevating your giving abilities before the Senate begins
impeachment proceedings and I begin seeing signs (resembling the below) on
street corners all around the U.S.
The Market:
This week:
-
The PPI
(Producer Price Index) came in elevated at 1.9% per year. This heightened level of inflation will allow
the FED to increase rates in June.
-
The ECB and
Mario Draghi now own over 10.2% of all European corporate bonds.
-
The Bank of
Japan is now a top 10 shareholder in more than 90% of the companies within the
Nikkei 225 Stock average.
-
The Swiss
National Bank increased their U.S. stock allocation by 14%.
-
The Volatility
Index (VIX) crashed to a 9-handle this week.
It hit its lowest level (and highest level of investor complacency)
since February 2008.
-
Marc Faber said:
“Assuming Central Banks continue their
QE programs, one day the socialists will own everything. It's
almost the perfect crime. You print up
billions of Euro's or Franc's or Yen, trade them for corporate debt and stock,
and in the end, you own real businesses for NOTHING.”
This isn't a new concept. It was especially prevalent during the 1930's
– only then it was called counterfeiting.
It was illegal. You would print
bogus $10 bills that cost you a penny and then go out and buy goods from a
retailer. Unfortunately, our Central
Banksters have taken this to a whole new level by counterfeiting money – only this time buying the entire corporation. Central
Banksters are buying companies in the telecom, drug, and energy space. Basically, companies that you’d like to own
if you were ‘in charge’. And it is this Central Bank buying that is
pushing stocks higher. After all, baby
boomers are taking money out of the market, pension funds are maxed out, and
millennials don't have all that much to put in.
When does it stop? The ‘greater fool’ theory comes to mind. The greater fool theory states: “the price of an object is
determined not by its intrinsic value, but rather by irrational beliefs and
expectations of market participants. A
price can be justified by a rational buyer under the belief that another party
is willing to pay an even higher price.”
So, is the plan that our Central Banksters will just keep
printing money, buying stocks and bonds, sending markets higher until they own
significant percentages of the world's major businesses – and then they pull
the plug on everyone?
No matter how bullish you are, or how badly
you've been brainwashed into watching the market rise for the last 8 years –
there are times when the market struggles.
We are currently in one of those times. We are stuck just below
the all-time highs and having an issue getting past them. As said by Wolf Richter: “Over the past 10
weeks, five (FAANG) stocks in the S&P 500 Index have gained over $260B in
market value. They are: Facebook, Apple,
Amazon, Netflix, and Google. But what about the rest of the S&P 500?
On March 1, the index closed at 2,394, and last Friday it closed at
2,399. In those 10 weeks, it went
absolutely nowhere. Which means that the
remaining 495 (non-FAANG) stocks in the index LOST $260B in value.” So, we’re going nowhere fast, and trading volumes are horrible.
The technical patterns suggest that a lower
market is coming:
-
On the SPX
(S&P), the MACD indicator is about to go sub-zero (where the black line
crosses below the red line.)
-
On the XLF (the
financial sector ETF), it is still well below its 50-day moving average, with
the MACD indicator about to fade below zero.
-
The IWM (the
proxy for the Russell small-company index) is barely holding above its 50-day
moving average, and the MACD is already below 0.
-
The only
elements holding this market up are the FAANG stocks, the semiconductors, and
the Emerging Markets (EEM).
This is the type of set-up that has ruined
so many hedge funds over the past couple of years. The charts are set up
to run lower, we are heading into the summer doldrums, and the hedgies figure
that the market is primed for a correction – so they go short and buy put
options. Then (out of the blue), we get
some early morning, large futures buyer from an unnamed account and boom we
soar for 200 points. We are in that very
same situation again. We have a June
rate hike coming. Earnings season is
just about over. The GDP number is
guiding lower, and both financials and small caps are struggling. Everything says that it’s time for a
correction. But not so fast. If
the Central Banksters do not want us to go lower, then we'll either trade
sideways here for a couple months or they will simply push us higher.
Go to www.stockcharts.com and plug in the
symbol ‘SPX’. Since April 25th you will see a clear daily
bottom at the 2,381 level. As long as we
don't plunge through the 2,381 level – nothing will have changed. In fact, they could send us back to 2,399
again on the upside. So, under 2,380 –
look out below. And over 2380 – hunt for
longs.
Tips:
In terms of gold and silver, if you wish to
see the live time difference between what gold and silver sell for in the U.S.
(on our ‘crooked’ COMEX) versus over on the Shanghai metals exchange go to: http://didthesystemcollapse.com/. Right now, there is a $1.38 (8.4%) difference
on an ounce of silver.
To quote MC: “Like gold, Bitcoin
has become a store of value. It is the timing of transactions and
disagreements between developers that have crippled any real consensus. You can thank the Chinese (with their 8
cents/kwh electricity costs and their low gpu hardware costs) for rocketing
Bitcoin (and other crypto currencies) forward.
As nations continue to buy gold, Chinese demand is driving Bitcoin
higher given supply is known and the record keeping immutable.”
Above you see charts of both Apple (AAPL)
and Amazon (AMZN) – the two stocks (along with the Emerging Markets ETF = EEM)
that are holding this entire market place together. Unfortunately, with the S&Ps marking time
and the Russell 2000 Small Cap Index heading lower, you need to be cautious of
the NASDAQ’s upside potential vs its downside risk.
For the S&Ps (SPX), this coming week I’m
looking at an expected move of plus or minus $23 – giving us an S&P range
of between $2,368 and $2,414. Currently,
we are staying in that tight range, 85% of the time – while the other 15% of
the time we explode for 3X deviation moves.
Also, keep your eyes open this coming week for any wild reversals out of
Amazon (AMZN) and Apple (AAPL). When you
get advances that are this narrow in scope, any ‘profit-taking’ selling can
stimulate a lot more selling – causing a significant downside correction in the
NASDAQ itself.
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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