By Elisea Frishberg
(WAR- Barometer-Investors “Willingness to Assume Risk’- where it is Now?).
Our intermediate term indicators that make up the Market X-ray allowed us to miss most losses in the market crashes of 2008 and 2000. These large scale corrections – referred to as a bear market – didn’t just happen suddenly.
For example, the crash in September of 2008 was preceded by rising supply or selling pressure and falling demand for stocks. This began, as it always does, with a steady rise in supply or selling pressure which began many months before the beginning of that bear market.
Our indicators show no such change now. Instead, we see some minor selling, which is, so far, more modest but reminiscent of the selling that accompanied the Brexit vote. News driven stories can upset impulsive or less experienced investors, but in each case, the selling comes just before a strong recovery, as it did in January of 2016 and similarly in August of 2015, when the Chinese currency story dominated headlines.
The purpose of our Market X-ray is to avoid bear markets, which are not just mood swings, but represent real economic declines which mean real declines in profits, and whose effects can last for several years.
Selling at the peaks of the news frenzy about the Chinese in 2015 and Brexit in 2016 meant missing the quick recovery and the continued bull market which still continues.
The companies and stocks we own are companies that are benefiting from the strengthening global economy, with rising manufacturing and services. Regardless of political headlines, banks are freer to lend money than they were when they were being so tightly regulated over the past 8 years. Businesses in general are operating in a more predictable and business-friendly environment, and nothing about that is changing with the current political headlines.
We are invested in businesses which cure disease, advance artificial intelligence and high speed computing, and produce advanced high-tech defense equipment for which demand is consistently rising.
The simple reality is that there is only so much valuable information to be derived from observing the daily news flow, and the value of extrapolating pictures of the past stock prices into the future is even more limited.
When we consider the day-to-day action of markets, we see it is mostly random noise, very little of which makes much difference over the long haul.
Indeed, the longer your timeline, the more even significant events look like just little squiggles. Consider such world-shaking events as the JFK assassination, the 1987 stock market crash, or the 9/11 terrorist attacks. On a long-term chart of the Standard & Poor’s 500 Index, they are reduced to static. Over the long haul of history, even monthly action starts to look like not very meaningful noise.
As of today, our indicators are showing none of the signs that have been present long before all 15 bear markets since World War 1.
The companies we own are based on unstoppable trends which are unaffected by the news upsetting the market today.
At the same time, we will continue the Macro-Trends that are already producing billionaires and multimillionaires, whether we choose to participate and profit from them or not.
• The rise and coming of age of the 78 million Shadow Baby-Boomers and their demands for everything it takes to make a new home and family, while they take over control of our society;
• The transformation and new tastes and needs of the 80 million strong generation of original Baby-Boomers. They demand access to the best genetic remedies science can produce, along with everything it takes to work, relax, and function as they experience age 70 becoming the new 50;
• The Americanization, industrialization and economic development of 2.5 billion people in Asia, Latin America, Eastern Europe and eventually Africa and their demand for everything we have that they don’t. This single movement is the biggest and most profitable business ever to take place on planet earth; and
• The transformation of the United States from a decaying, aging post-industrial relic to a new, gleaming, energy-rich, export-driven, world center for state-of-the-art automated, robotic industrial production and technological innovation.
In the meantime, the following policy changes are taking place, even without new legislation by Congress. Right now, our society, and therefore the world, is making a sharp turn in the direction of capitalism, productivity and huge profits for those who participate early!
1. Even without new corporate tax reform, our companies, for the first time in 8 years, are not worrying about new tax increases.
2. We are immediately doing away with debilitating EPA overreach, freeing our energy and mining industries to become much more productive.
3. We are already doing away with debilitating, unnecessary regulation of our banks, enabling them to start lending money to companies again.
4. We will immediately begin to strengthen our military, and claim our rightful and traditional position in the world, from updating and enhancing our very high end nuclear capabilities, to simply enlarging and equipping our conventional forces.
These trends are already having a positive effect on the profits of the companies we own, and nothing in the news is changing that.
We have some cash available, but are waiting for lower prices before we put the last of our assets to work. In the meantime, the improving business climate is having a very positive impact on the prices of our corporate bond holdings.
That is my story for now, and I am sticking to it. Tune in for the next thoughts about the market
As always, thank you for always listening to our wisdom and have a great day.
Perspective from the front lines,