This Week in Barrons –
11-20-2016:
Thoughts:
Approximately one week ago
today, the world woke up to a Donald Trump victory. Since then, the world has changed in ways I
could have never imagined:
-
The stock market
(which was supposed to crash) put on a run not seen in a decade.
-
One phone call
between Trump and Putin has cut our Defcon Level back to the safest level there
is: 5.
-
Cities are
experiencing riots and violence not from ‘Right Wing’ extremists, but rather
the ‘Tolerant Left’.
-
And the main
stream media (armed with their 7% public approval rating) want to have
Facebook, Twitter and YouTube regulate and eliminate alternative news sites.
Factually, alternative news
sites breakdown into 2 categories: (a) those that are self-funded via
donations, memberships and paid advertising, and (b) and those that survive via
Google ad-words, Facebook and YouTube views.
Infowars.com (for example) is self-funded, sells products, has
advertisers that pay real money for ads, and would be difficult for any ‘band
of elitists’ to shut down. On the other
hand, there are hundreds of little guys out there just reporting on the truth
as they see it. It’s these little guys
that need YouTube, Twitter and Facebook to gather an audience, and get paid for
their information.
Interestingly, YouTube just
rolled out their ‘YouTube Heroes’ program. People that sign-up as YouTube Heroes are
given access to a special ‘Heroes Dashboard’.
YouTube then trains you on how to hunt, find, and ‘snitch’ on
‘offensive’ videos. The problem is: What
is offensive, and Who determines what is offensive? Could Hillary experiencing a meltdown be
offensive – certainly. Could Trump
preaching ‘Making America Great Again’ be offensive – absolutely. Unfortunately, snitches are going to dictate
what videos remain on YouTube and reap advertising dollars, and which ones do
not. Many of the little guys will be
forced to conform with YouTube’s ‘offensive’ definition, or go out of
business. The same is true with Google’s
‘fake news’ definition.
Mark Zuckerberg’s Facebook
is even worse as Mark personally has a track record of pulling the plug on
anything that doesn’t fit his personal agenda.
The Telegraph recently said: “Facebook and Google have pledged to ban
websites that peddle fake news after the world's two most popular websites were
accused of spreading false and incendiary articles about the US presidential
election. Facebook has added fake news
websites to its list of bannings.”
According to the Daily
Caller, Twitter: “Has initiated a major purge of prominent accounts
associated with the Alt-Right exactly a week after GOP President-elect Donald
Trump's stunning electoral victory.
Twitter went on to banish the accounts of over 2 dozen well known
alternative media members.”
So Facebook, Twitter,
Google, and YouTube have all taken it upon themselves to squash every ‘non-left
leaning’ website. And, there’s not a
darned thing any of us can do about it.
The beauty of digital media used to be that anyone could present their
views to anyone else that might take the time to read or listen to them. I guess that’s a thing of the past. Well, it’s time to dust off the old
short-wave radio.
The Market:
The instant Donald Trump was
declared the President elect; all heck broke loose in the markets. The U.S. dollar, stock market, commodities,
and yields shot straight up. But metals (that were predicted to do the
same), have fallen like a rock. A year
ago, I laid out a call option play (in the metals) that turned $19k into $244k
in 7 months. The rationale started with
a Hillary Clinton Presidency, and her insistence on a hot war with Russia. But Donald Trump’s election, optimism,
non-war, strong dollar, unprecedented debt levels, and unbridled inflation –
will add another 9 months to this trade.
Now that Ms. Janet Yellen has re-affirmed her decision to remain ‘on the
job’ until February 2018 – it seems that our FED is the only thing standing
between an economic meltdown and some form of normalcy. I continue to buy gold and silver because:
-
The
implementation of Donald’s plan comes with tremendous inflation – gold &
silver win.
-
Congress NOT
going along with Donald’s bazooka style of fiscal stimulus will cause a deflationary
disaster – gold & silver still win.
-
The FED
differing with The Donald will cause a recession – gold & silver win again.
However, trading gold and
silver will remain sloppy until after the December FED meeting. Inflation in the new year will allow the
metals to rebound.
Trump’s proposed
infrastructure plan has helped fuel expectations of higher demand for
industrial commodities such as copper and steel. His plan will require an entire nation to
‘double down’, and believe that adding trillions to our current debt load is
the right move. Trump’s call for hefty
tariffs on Chinese imports, and proposed sanctions due to currency manipulation
will lead to massive inflation – hurting oil consumption and potentially
triggering a recession. Trump’s demand
for U.S. energy independence is expected to lead to a climb in domestic oil
production (fracking) in a market that’s already oversupplied. The U.S.’s ability to export surplus oil, puts
a $50/barrel ceiling on oil prices. And
coupled with OPEC’s inability to curtail oil production, will cause oil to be
trapped in the $35 to $50/barrel range.
Goldman’s 2017 forecasts are
below:
Factually last week:
-
Retails sales
rose much higher than expected,
-
Housing starts
jumped (an impossible) 25%. We have NEVER seen a 25% increase in housing
starts.
-
Initial jobless
claims fell 8+%. We have NEVER seen that
large a decrease since 1970. How can
initial jobless claims be at 40 year lows when 96m people are NOT even in the
workforce?
-
The CPI (a
measure of inflation) rose more than expected,
-
Billions of
dollars left the equity markets again,
-
Our FED is on a
course to raise rates in December, but over in Europe, Draghi has said that he
sees “QE for years to come".
-
And the Saudis
and Chinese emerged as rabid sellers of U.S. Treasuries – reinforcing major
U.S. dollar strength and problems in all emerging markets.
Unfortunately, these numbers
do NOT ring of stability. For example,
as interest rates rise, housing prices will fall. Homes priced at $400k with a 3.5% mortgage,
are going to be re-priced at $325k with a 4.5% mortgage. And each time the U.S. dollar inches higher
on the world stage, it costs emerging countries more of their own currency to
service their debt – because their debt is priced in U.S. dollars.
But is the stock market
taking the proverbial ‘pause that refreshes’, or are we headed lower? Somehow over the past week: (a) Trump’s trade
policies went from being bad to perfect, (b) his idea of borrowing to build
infrastructure went from being horrific to ‘the golden road to glory’, and (c)
Instead of his cabinet appointments being beyond belief they went to beyond
reproach. If any of this bothers you –
you’re not alone.
November and December are
traditionally strong months for the stock market, and the S&P is just 9
points away from an all-time closing high.
This seems like a trophy that Obama and Trump need to share. On the other hand, the market is never a big
‘fan’ of the FED raising interest rates.
And despite all of the talk about ‘Making America Great Again’, there’s
no guarantee that Trump will even get half of what he wants. And then there's the idea that we've come too
far – too fast.
My sense is that they're
going to get their all-time highs, but that it won't last terribly long. If the December rate hike doesn't derail it,
all of the noise surrounding the inauguration will definitely put a damper on
things. After all, ‘the Left’ says that
they are going to bring a million people to ‘March on Washington’ and
disrupt things. If this were not ‘the
season’, I would be selling this market short in a heartbeat because of what
the credit markets are telling me. But
‘Tis the Season’ to be jolly – and to be careful.
Tips:
Because of Mexico being
‘beaten down’ as of late, some of you have asked me how to invest specifically
in Mexico.
-
The easiest way
is to buy the Mexican ETF = EWW. Or you could focus on traditionally
strong Mexican brands such as:
-
WMMVY =
Walmex (the Mexican division of Wal-Mart),
-
KOF = Coca-Cola
Femsa, and
-
BSMX = Banco
Santander because of its high-quality loan book, and solid growth in net interest
income.
Also, Warren Buffet just
announced his interest in the airline carrier market. To invest like Warren, you could look at
buying into the U.S Global Jets ETF = JETS that includes global airline
operators and manufacturers. JETS saw its
market value climb roughly 8.8% in the third quarter, and continues to be a lot
of investor’s top pick for 2017.
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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