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.

Two Steps Forward, One Step Back for Stocks

Well, one hour before the markets close on Monday, US stocks have given back most of Friday’s gains. So, the jury is still out on which way the markets will break from this “half-way point” in the market rebound.

Fortunately, our positions in Gold and the miners continue to climb, perhaps because of the economic uncertainty that prompted the Fed to recently announce they may not be so quick to reverse all the quantitative easing performed at the behest of Mr. Bernanke and Ms. Yellen.

Time will tell.

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.

Where do US stocks go from here?

We’ve had a really nice rally since the intermediate term bottom hit the day before Christmas 2018. Each time we’ve seen a morning drop in stocks, buyers have stepped in and almost always ended the day with overall gains. As of this writing on Tuesday, January 22, at 9:50 AM Central, the S&P500 index is down 1% and US Small Caps and the International Stocks are down more. We’ll see what happens.

The rally has regained about half of the big 20% drop from all-time highs last Fall, but our indicators do not show up-trends for any asset classes except gold. Accordingly, we are treating Gold as our least risky asset class … both in terms of weekly volatility and trend. Since our methodology is all about managing risk, the least risky asset class gets the highest percentage portfolio allocation.

We are at another potential turning point for US Stocks. If stocks continue rallying and enter an up-trend they will “earn” a higher allocation of our portfolios. The same goes for bonds. No changes for now.

Have a great week.

Yay! A rally to end the year!

Well, Mr. Mnuchin announced last weekend that he was calling the big banks last week to ask for their help in restoring confidence in the markets. Monday was terrible because everyone was on vacation. But, Shazam! The day after Christmas, we saw the biggest one day point gain in history!

Can you say “Plunge Protection Team”? The PPT is an old urban legend in finance that there is a secret group of financiers that, upon request, will step into the financial markets and act to stop a crash.

However, we see that this “secret” group really does exist! The day after markets officially enter bear market territory, they go up 5% in one day! I’m sure many breathed a sigh of relief.

There’s only one problem, though. If the selling continues, how many times will this group (if it exists) continue to step in and prop up the markets? Hmmm.

No actions are necessary in our portfolios. Gold and the gold miners continue their uptrend. We continue to hold a lot of cash.

Cheers, and Happy New Year!

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

Not Such a Good Week

As of this writing on Friday afternoon, the S&P-500 is down about 2% today, to wrap up a pretty bad week for stocks. Thankfully, gold, US Treasuries and the miners are doing well, offsetting our stock allocations.

After last week’s announcements about the Trade Truce, many people seemed to be jumping back in to stocks. Then came Tuesday’s big drop, followed by the market holiday, then Thursday’s big morning scare followed by a rally to close Thursday almost unchanged.

Lot’s of volatility. Volatility equals danger for your portfolio, in my view. So there is no reason for us to change our allocations at this time. We’ll keep holding lots of cash.

Have a great weekend!

So Much for the Trade Truce Stock Bump!

Over the weekend, the news hit the press of the “Ceasefire” in the US – China trade war. Stocks opened up 2.5% or so yesterday morning. As of this writing, Tuesday afternoon, the stock markets have already given all of those gains back.

Now, we must wait to see if the lift from the Fed’s statements last week that we are “close to neutral” on interest rates is lost as well.

Three things are reassuring for our clients:

  • US Treasuries are rallying,
  • Gold is rallying, and
  • We are holding more than 50% cash.

Cheers

The Fed Flips!

Yesterday Mr. Powell, the Fed leader, reversed his previous stance on the need to continue raising interest rates for a long time. Stocks, bonds, foreign currencies and precious metals soared on the news.

Our client portfolios did quite well, since all those asset classes appear in various client accounts.

Today gold is still going up along with bonds, while stocks are catching their breath. The more dovish the Fed gets, the more attractive gold gets, I believe.

Since gold and silver are at multi-decade inflation-adjusted lows and stocks are just 10% or so off all-time highs, it makes sense to over weight the former and underweight the latter. However, in our standard allocation, we do not anticipate the future. We simply allocate funds among the asset classes based on how they are behaving recently.

No action needed for now.

Cheers.

What Alan Greenspan said before he went over to The Dark Side!

Many thanks to Chuck Butler of The Daily Pfenning for sharing this Alan Greenspan quote from 1966.

“This is the shabby secret of the Welfare Statists’ tirades against Gold. Deficit Spending is simply a scheme for the confiscation of wealth… Gold stands in the way of this insidious process. It stands as a protector of property rights. If one can grasp this, one has no difficulty in understanding the statists’ antagonism toward the Gold Standard”… – Alan Greenspan from Gold & Economic Freedom 1966

Don’t kid yourself. The United States had a $100 Billion budget deficit (we spent more than we brought in) in October 2018, the first month of our new fiscal year. That deficit is GROWING EVERY MONTH, with no credible end in sight. Don’t forget the budget deficit projections do not include unfunded liabilities like Social Security and Medicare. Yikes!

Something has to give someday. When the debt destruction wildfire occurs (think California Camp Fire), it will likely happen suddenly and “burn up” savings held in cash and “safe” investments like bonds. The middle class and poor will probably suffer, but many of the wealthy will likely be burned as well.

Word to the wise!