It is summer slack season, with no FOMC meeting in August and so into the void go our friends in the mainstream media, with all sorts of noise to distract investors. Here's one that was anticipated...
From NFTRH 406 (July 31), after the July FOMC meeting in which they fretted about inflation not being high enough (ha ha ha):
"Yes yes, I know the Fed does not see enough inflation yet. And that is just the point. They told us last week that there is not enough inflation and damned if they are not going to keep trying to promote it. It is also worth considering that while they will probably send various expectations managers to their assigned microphones, there is no meeting in August and there is a lot of room for asset price appreciation between now and September 21, per their wishes I assume (by their policy inactions and their inflationary words).
What they didn't tell us is that they are not stupid (misguided in my opinion, but not stupid) and they know that something built on inflation (metaphor: a substance with opiate-like qualities) must have ongoing inflation (opiates) in order to keep the markets (metaphor: patient) stable. Withdrawal of these substances would mean a come-down and financial detox that would seem like hell on earth to those who think any of this is normal or organic in anyway (like a Keynesian intellectual, for instance).
The game of Whack-a-Mole is ongoing and institutionalized. It is an exciting time to be an investor a casino patron. But we need to be aware of things like the music stopping, how many chairs there are when the music stops and our own egos, bias and limitations."
Mr. Williams, from the article; if giving an interview directly to the Washington Post is not expectations management, I don't know what is...
"As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years," San Francisco Fed President John Williams told the Washington Post in an interview conducted this week.
Then over at MarketWatch, we find an MSM that has done a 180° turn on its tone from the Brexit hysteria.
Ever since flipping the bird at Brexit (covering shorts during the event, leaving me naked long) and especially when the market took out important upside parameters (when NFTRH went fully bullish, technically) we have had to deal with bearish writers citing backward looking Payrolls, GDP and other data in support of the bear case. In rebuttal, we have presented forward looking things like Semi Equipment and manufacturing costs and prices from ISM and NY Fed 'Empire' reports.
Now, after Payrolls has started to follow through on the early indicators and with the market at all time highs again, we get headlines like that of the above linked article. Have you seen the VIX or market sentiment indicators lately? The indicators are over bullish to an extreme, newsletter writers surveyed by Investors Intelligence are getting it on and touting the new bull trend with ever more vigor and the MSM is selling headlines. Perfect.
Indeed, this article's sub-head says "U.S. stocks party like it's 1999". Actually, the thesis comes from something or someone called 'Macro Analyst' blogging at SeekingAlpha. The media need juicy headlines after all, and there are plenty of analysts out there from whom to cherry pick.
Indeed the macro analyst cites two items we have been citing for months now; namely manufacturing firmness and over bearish sentiment. But dude, talk about a time delay! In the depths of Brexit, sentiment almost demanded a rally. Today? Quite the opposite. During the Brexit phase we noted that the Semiconductor Equipment cycle was turning up and that bode well for manufacturing in general and later, Payrolls. They turned up too. We have also been consistently noting strong market internals and recently, have had the 'Economic Surprise Index' catch up to our forward looking data.
But I see no use for articles touting the stock market rally today other than as click bait for unsophisticated investors (multitudes, I grant you) and other riffraff wanting to 'make coin' before it's too late. In 1999 they made coin... until they didn't.
Here is how NFTRH 407 viewed it on August 7...
"We noted the upward break of consolidation in an update on Friday. It is what it is. So how healthy is the bull market? Possibly as healthy as it was in 1998. We are well past the question of the '2011 comp', which after some serious whipsaw for a year or so finally proved out after SPX triggered the weekly moving averages back up.
A key stock market comp now becomes 1998 which was, after all, a suck in of epic proportions. How many bears died in how many battles along the road to the final destruction of the secular bull in 2000? By the analog, we are now in early 1999 and about a year away from a final top ← [insert here a warning about literal interpretation of analogs]. For safety's sake, we will manage this week to week, month to month. For now we are viewing it as an intermediate-term (about 6 months, post-Brexit) phase."
So okay, party like it's 1999 if you are the casino patron MarketWatch seems to think you are. But an alternative is to deal in reality and move forward with thankfulness, humility (in the face of a market that can undress you in a heartbeat) and hard work. I'll take plan B.
As is typical of when I write these MSM critiques, I start to wear down from the stupidity and this post is no different. I just don't have it in me to comment on MarketWatch's...
It's a short, dumb headline click bait thing. It's August slack season, after all.
The bottom line is that Market Sentiment is a big time driver. During Brexit people needed to get bullish. Subsequently, today they need to at least realize that the first mover advantage is gone and a bull today is bull in a massive herd. I am one of those, but I have a completely different feeling than I had a couple months ago. We have higher targets for US and global markets and indeed, the current sentiment backdrop is wildly unhealthy but need not be a stop sign... just as in 1999.
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