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 !!!

Monday, May 25, 2020

Economic / Markets Fundamentals

My primary liquidity indicators are strongly positive. This suggests that economic recovery is
not far off in time and it is supportive of the stock market. Based upon accelerating monetary
liquidity, a degree of economic recovery should begin before summer 2020 is over.

Presently, the US economy is still in a state of deep free fall with the indicators suggesting a
deeply distressed state.

With mounting sector wide defaults in prospect, further fiscal and monetary rescue efforts may
well be needed through 2020 to underwrite a very strong monetary liquidity trend and assure
the economy of a good shot at recovery.

Inflation vs. deflation measures remain in the deflation camp, but will switch over to inflationary
if recovery takes hold and strong inventory pipeline filling efforts materialize.

Eventual economic recovery will put downward pressure on Treas. and top quality bond prices
even if short rates continue at historically low levels.

Business profits measures are currently deep in the tank, but should improve as economic
recovery takes hold.

Covid-19 will remain a major wild card especially if economic reopening measures such as
social distancing and personal protection recommendations are flouted by a goodly number
of folks. With vaccines and therapeutic measures not ready tomorrow, the virus could make
a vigorous comeback and throw economic expansion possibilities into a cocked hat.

The US and other economies are going to need help from Lady Luck if slow, grinding recoveries
are to give way to strong and sustainable expansions

Consensus appears to favor SPX net per share rising from whatever depths to the $170. level
in 2021. That would put fair value at SPX 2800. Since we're already above that level, I view
the market as uninteresting except for the occasional long side trade should times come along
when obviously bubbly sentiment may falter.

SPX Daily

Saturday, May 16, 2020

Let Us Hope The Dumbfucks Do Not Prevail

The US economy could decline by 20+% from peak to trough through the late summer. Even with
an expected bounce back over the last five months of this year, there could be 25-30 million people
out of work on NewYears Day, 2021. SPX profits could be down from $155. a share to $100. by
the time the year closes out. A gradual re-opening of the economy featuring regulations on
social distancing and the maintenance of sanitary places of business may secure a modest rebound
in the economy right through 2021, even with successful vaccination and improved therapeutic
programs. a significant amount of dumb political leadership and reckless individual behavior
could set the US back periodically both in terms of the battle against the virus and in the economic
realm. I hope the clear right wing foolishness we are seeing, even though aided and abetted by
Trump, does not rise to a threatening level. The general public fears Covid-19 and will be cautious
as we proceed. If warm summer air slows Covid's progression temporarily, this summer, then I
hope folks do not let their guard down. The medical experts seem to agree it could come back
with a vengeance in late autumn and this means states have to ramp up testing and contact tracing
as much as they can.

I remain concerned about deflationary pressure and its effect on debt coverage capability across
sectors of the economy. With the recent large decline in resource capacity utilization, my deflation
pressure gauge has reached the low levels seen during the Great Depression. Possible wide scale
business defaults across the globe could lead to cascades of additional bankruptcies here and
there and keep the large gaps in capacity and elevated levels of unemployment large enough to
retard economic growth for years to come.

The SPX is now wildly overvalued on 2020 fundamentals and continues to discount a recovery
in earnings power that may not arrive until 2022 or thereafter without massive pro- growth
fiscal policies. Trump is so far out of his depth that should he win re-election this November,
and should the Senate stay in GOP hands, economic and social stability could well be

I have managed money for nearly a half century and have managed to maintain my cool through
all those years. As a New York guy, I know well how vicious this virus can be. So, I have plenty
of emotion now and can only hope folks come to treat Covid as the threat as it is.

With this rant out of the way, I plan to gather my wits again and face the future as it comes.
Watch over your selves and those who are near and dear.

Friday, May 08, 2020

Into The Valley We Go

Before the Covid-19 hit, I had fair value for the SPX at 2800 (16.5 x $170. SPX earning power).
I was a conservative fuddy-dud as the market traded above that level for much of last year, and it
surged early this year, topping out at a whopping overvalued level near 3400. We all know what
happened next. Now, economic downturn be damned, we have the SPX trading again above 2800!

The global economy has entered a deep downturn and unlike previous such instances there now is
heavy monetary and fiscal support in place to cushion the fall. Here in the US, the powerful rally
off the March low of 2200 reflects investor confidence that the economy will soon begin to
recover, especially since most states have begun processes to re-open local economies after weeks
of stay-at-home /social distancing requirements.

The re-opening processes do not comply with the guidance offered by the medical experts, and
with the virus case count still rising, the chance that the virus will infect perhaps many more
people here makes these ventures highly risky. Not only could virus case surges crash local health
systems, they could alarm enough people to force states to reconsider their choices and take
restrictive actions which could abort nascent local recoveries and create a national political crisis.
At the least, the SPX ought to pause here just to gauge whether this new nightmare could eventuate.

Polls show most people want to see the national economy re-open but also show substantial
apprehension about going out into it and risking their health and lives. Well, if there was ever a
time for Lady Luck to smile down on us, this is it.

The chart link below shows the SPX has reached a critical pass or fail spot (RSI %). The medium
term MACD is improving but still remains negative, and the longer run MACD continues
deeply negative, suggesting that the market's true longer view direction is, if not negative
yet to be decided in the weeks or months ahead. Finally, the SPX is approaching an important
test of its 40 wk. m/a.  SPX Weekly