$22 Trillion – From $21 Trillion Ten Months Ago

It boggles my mind how far in debt the US is. It is even more staggering to realize the downward spiral is accelerating. It doesn’t look like tax revenues will increase to reduce the deficit. I surely don’t see enough spending cuts to balance our national budget. Good grief … all the politicians talk about is “reducing the deficit”. That’s like you and me talking about spending $5000/month more than we make instead of $8000/month more than we make. We are still going further under water every month. No talk at all about actually having a positive cash flow as a country or paying everybody back.

Yikes.

Sooner or later there is likely to be a huge financial “reboot” for the US dollar. Probably sooner. I don’t know anyone who actually thinks we will pay our debts.

Manage your portfolio risk accordingly. Do not be a big bond holder.

Cheers.

The Jury is Still Out on Stocks

It looked like the Fed’s Policy reversal last week might push stocks over the hump (the “half-way” mark of the huge drop in Q4 2018). Stocks even edged up above the 50% mark. However, the last couple of days have seen a pullback to the vicinity of that half-way point. So, the jury is still out.

There are no changes to our allocations this week. Gold continues a quiet uptrend.

Have a great weekend.

Fed Boosts Everything, Especially Stocks!

Well the Fed announcement this afternoon has sparked a nice rally in stocks. To a lesser extent, bonds and gold are rallying.

What has traders excited is the Fed reversing its prior rhetoric about continuing rate hikes because the economy is so strong. Now, they are saying that they could raise or lower rates, depending on inflation and employment. President Trump has been loudly complaining about the Fed strategy for months and should be much happier with this announcement.

Let’s see if this boost is enough to push stocks above the “half-way” point where they have been hovering.

Cheers.

Happy Friday, January 25th

We are seeing a nice rally today in everything but bonds across our portfolios. Gold, silver and the miners are up from 1.3% to 3.7% today.

The S&P500 is up 0.9% at this writing, so the jury is still out on which way stocks will move (up or down) from this halfway point in the recovery since the day before Christmas. Volatility is beginning to subside. . . a good sign for stocks.

We invested 10% of our cash, now holding 40% cash in our diversified, non-speculative accounts.

Have a great weekend.

Friday Before Christmas Raises Questions

I’m not “into” politics, but I was disheartened by the resignation of our Secretary of Defense. The open acknowledgement of fundamental differences about US foreign policy creates great uncertainty around the world, in my view. That may very well benefit only those who wish our great nation ill.

The financial markets do not “like” uncertainty. Business leaders around the world are less prone to make big investments in the future when the political and regulatory environment seem unstable. No-one likes the idea that policies, tax rates, regulations or interest rates could take unexpected turns after they make a big bet on the future. So they don’t.

People are less likely to buy goods and services when they are uncertain about their jobs and future prospects. This uncertainty increases when big auto companies downsize and stop making certain products. This contraction in spending, this reduction in optimism, have self-reinforcing effects.

We seem to be at a turning point for our nation and for the world. This may just be another momentary blip in the markets like January of 2018 was. But it may be more.

Since we don’t predict the future in our methodology, we look at the behavior of different asset classes over recent months and respond accordingly. Gold has started an uptrend after a seven year bear market. All other major asset classes are trending down. It is time to be cautious.

Have a blessed Christmas and Happy New Year.

Dale

Two Steps Forward, Three Steps Back

At least that’s what it looks like on Monday, 11/19 at 11:30 Central Time. We had a nice rally last Thursday and Friday. Things were looking better going into the weekend. This morning, however, we are down 1.75% on the S&P-500, giving back all the gains from that rally, and then some. Ouch. For 2018, the S&P-500 is up less than 1% at this writing.

You may have noticed that I don’t try to explain the daily or weekly stock market behavior. That’s because, in the short term, markets move pretty randomly. The explanations you see on the news are usually pretty bogus. On any given day, I can give you three reasons why the market is falling . . . or three reasons why it is rising. That doesn’t mean I really know exactly what caused the movement on any given day. Very few people do, and they are probably not talking.

By now, though, enough things have happened that you should see the value in our methodology raising cash over the last two months. Predicting the future is a pretty sure way to lose your shirt. BUT, reducing portfolio risk when market risk increases does pay off in the long run. . . and that is our goal.

We are well positioned. No need for any action at this time.

Cheers,

Ugly Start to Friday

Wow! After yesterday’s bounce, many people were beginning to feel better after Wednesday’s huge down day. But at this writing, 9:51 AM Central, the S&P-500 is down about 2.4% from yesterday’s close. This is well below where we closed the day on Wednesday.

Once again, the miners, the metals (gold and silver) and bonds are up, mitigating the losses from stocks. Also, thankfully, we went into this situation with 43% cash for our clients with balanced portfolios.

The speculative clients have much higher allocations to gold, silver and the miners, so those accounts are doing well today… creeping closer and closer to turning positive. This is starting to look like a Bona fide crash to me.

Please be careful out there. US stocks are now solidly negative for 2018.

Dale

Stocks are Falling Tuesday Morning

Well, I wrote last week that I expected US stocks to test the lows from October 11, 2018 last Friday. My timing was off. This morning, Tuesday, 10/23/18, the S&P-500 is down 1.5% just after the open. International stocks are worse. This “breaks” below the lows from 10/11 and if the “test” is passed, stocks will pop above those lows today and, perhaps, bounce up for a week or so. On the other hand, if this “test” level fails to hold, sentiment could get ugly and lead to a stock market crash. It will be interesting to see.

Lo and behold, gold, US treasuries and the miners are rallying strongly. People who got frustrated with their diversified portfolios and envied those who were “all in” on stocks should be feeling a lot better this month. We are barely above water for 2018 in US stocks right now.

Exciting times are ahead for the next few months, I believe.

Cheers.

Will we Test Last Week’s Lows Tomorrow?

Last week, stocks had the really big down day we all heard about. This last Tuesday, we saw the S&P-500 stocks have a nice 1.6% rally. However, today, it looks like those gains are going away … at this writing (2 PM Central), the S&P-500 is down 1.3% or so.

I expect that we will retest last week’s lows tomorrow, unless there is a big rally in the last hour of trading today. Either way, we are content to hold 43% cash in our conservative asset allocations.

Take care to manage your risk.

Thanks.

Stocks Hit an Air Pocket on Wednesday!

Well, I wasn’t surprised that stocks were down yesterday after breaking below January 2018’s highs, BUT I was surprised at how big the drop was. I think the S&P-500 was down more than 4%, if my memory serves.

Increased volatility means greater risk to most investors, except those like Warren Buffet who bought so advantageously that they don’t really care. For our methodology, however, this will likely mean that we reduce our allocation to the S&P-500 early next week. Our methodology does not purport to predict the future; it allocates among asset classes based on recent market behavior.

Fortunately, we went into yesterday with 35% of our model in cash. Our  gold, miners, and US TIP’s were either up or flat on the day, so we were not badly hurt.

I’ll be very interested to see if stocks hold here while people sort things out, or continue the crash behavior that occurred yesterday.

Cheers.