There's a famous story about how Joe Kennedy (John F.’s father, who was ruthless and manipulative as he was wealthy) avoided the 1929 stock market crash. He said that when his shoeshine boy gave him some stock tips, he knew it was time to get out. I believe Joe had a bit more inside knowledge that instigated his timely exit before the greatest meltdown in stock market history. So, a question before us is, should we pay attention to what ‘certain’ investors or institutions do with their money? I will argue yes, but let’s come back to this in a bit.
I’m typing this blog after the market close on Friday with the Dow and S&P up fractionally and the NASDAQ off slightly. Wall Street not only had the entire day to chew on Hurricane Harvey news, but I will tell you that they had information much sooner than what you’ve been witnessing on the television Friday afternoon... and it didn’t spin the market into a sell-off. Why? We’ll get to that in a second, but let’s focus on Harvey for a moment.
Sorry, that decison has already been made for you.
I ended the last blog with the question: “Should you take a bite of Bitcoin?” To answer that, I believe it will be helpful to provide some context in several areas: Expensiveness, Long-term Viability and Better Mouse Trap.
The first vinyl music record was made in 1951 by inventor Ewing Dunbar Nunn. Dictaphone Corp introduced the first magnetic tape cassette in 1957 and the 8-Track cartridge, later replaced by the compact cassette carried us through to 1982 when the first Compact Disc became available. In 2001 Apple Inc. launched the iPod, moving us to digital and now we listen to our favorite songs via streaming Apple Music, Spotify, Pandora and Rhapsody.
So, in 50 years we’ve gone from listening to music on a 12-inch vinyl plate to all of our tunes being in the cloud. Why do we still walk around with dollar bills, ATM and credit cards?
I first recommended Bitcoin as a hedging investment in my January 2015 Position Paper. At that time it was priced at $288 and I suggested buying while under $350. Today it stands at $2,709. That’s an 841% return in 2 ½ years. Bet your kicking yourself now…
agen∙da: an underlying often ideological plan or program
I want to continue to build on the theme over the last several blogs with regard to understanding what’s going on in the bond market in relation to the stock market. The stock market is the tuxedo wearing, glamor star who upon walking in the room causes everyone’s head to turn. It did again this week…more records on the Dow, S&P 500 and NASDAQ.
Before jumping into this article, here’s a quick timeframe quiz. When was the first iPhone released? Answer = June 2007. 10 short years ago. Amazing right? Okay, we’ll come back to this later.
Since the Presidential election we’ve been witness to how much the word market confidence comes into play with the stock market. Trumponomics has driven Wall Street belief that real growth is on the way, undergirded by an actual increase in corporate revenue. Since 2014 corporations have created higher earnings more through financial engineering than an increase in income and that formula has reached its exhaustion. Time for the cash register to start ringing.
The S&P 500 is nearing 2400 (or surpassed it). This is, of course, record territory for this index. I always prefer to do my analysis of the equity markets with the S&P 500 because it is an index of the 500 largest corporations in the US by market capitalization. In comparison, the Dow Jones Industrial index is just 30 companies that are sized and weighted based on price, rather than market cap. The companies that comprise the S&P 500 account for about 80% of the overall market value of the entire US stock market. So, you can see why the S&P 500 Index is the preferred index for most economists, and myself as well. It provides a tangible, solid feel on how the stock market is performing.
Yes, I purposely used the ‘Tail’ spelling in the headline of this blog. For the reason seen in this graph.
A Four Decade Span of the 10-Year Treasury
The S&P 500 is down nearly 3% from its March 1st high, which has many investors concerned that this is the beginning of the markets early rejection of Trumponomics. I don’t believe that’s the case and I’ll explain the reasons. But, we are in for some further decline and I think it’s important to understand why.