About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Sunday, January 26, 2020

SPX -- Note

By the end of last week (Jan. 17) The SPX had become sharply overbought for the intermediate
       > High RSI and Money Flow, elevated MACD. The market was then over a 10% premium
          to its 40 wk. m/a.
      > Put to Call ratio had fallen to low levels, signaling excess of optimism (bottom panel of

When the SPX is this strongly overbought, history indicates only a 1 in 4 chance long side
players can make decent money over the next 6 - 12 months from the highs recorded.

With the new corona virus (which carries a pneumonia kicker that can be fatal) as backdrop,
edgy market players are using this new uncertainty to take profits after the recent strong leg up.
It is too early to tell the eventual economic damage from this accelerating disease.

Weekly SPX Chart 

Monday, January 06, 2020

SPX -- Notes

SPX is positive but is overbought, overvalued and hyper-extended long term.

Primary monetary liquidity measures positive and accelerating.
Earnings indicators -- Currently flat to down. Forward view suggests return of positive profits
at some point in 2020.
SPX earning power in 2020 estimated at $170.
Fair value for SPX now 2800.
SPX is currently about 16% above fair value.
P/E premium is at 2.6 multiples above fair value.
Current P/E of 19.1x reflects market player expectations of moderate profits growth coupled
with continuing easy money and low inflation.
Inflation pressure gauges have turned up but only slightly so.
Chart shows positive turn in important MACD longer range indicator (lower panel on chart).
SPX is at 8% + to 40 wk m/a. and is approaching heavy intermediate term overbought area.
Contrarian sentiment indicators (not shown) are just below too confident danger zones.
Both 2020 presidential race and renewed US / Iran conflict are in phases that are too early
for sensible market commentary and are still too much subject to conjecture.

SPX Weekly Chart

Wednesday, January 01, 2020

2020 -- Gateway To The Great Whatever

Four horsemen of the economic apocalypse are: high debt, deflation, default, depression. They
were on the far horizon as early as 1981. but easy money, with occasional large help from fiscal
policy, kept them at bay since then save for the major slip up in 2007-08. But, huge central bank
easing allowed the global economy to barely skirt a depression. Even then there were massive
defaults in short term credit which almost did us all in. Since then more debt has been piled on,
mainly at the long end.

So, the battle to keep the horsemen at bay is monetary and fiscal policy job #1. Bloated central
bank balance sheets have created enormous inflation potential viewed long term. But since
stringent monetary and fiscal policy needed to curb inflation might well set the horsemen free
to roam about the world, gov't policy may well remain on the easy side until inflation finally
accelerates significantly and tilts policy to tightening the reins no matter how gingerly.

So, as we enter the new decade, fending off deflation and default will be the governing worry.
With global output growth potential modest reflecting demographics and the very limited
sustainable spending power of the vast majority of the masses, gov't policies will have to
figure ways of managing the possibility of further asset inflation (stocks and bonds). On top of
this challenge, there may come a point when accomodative policies wind up having sharply
diminishing returns for growth. Hence, 'The Great Whatever.'