August 15, 2016

Analysts, Advisers, Economists, “Strategists” & Talking Head Nitwits

KEEP yapping, “SELL!”…

while STOCKS & THE ECONOMY JUST KEEP GETTING STRONGER

The Dow, S&P 500 and NASDAQ are all making new historical highs…AND I AM STILL JUST AS BULLISH AS I HAVE BEEEN FOR THE ENTIRETY OF THIS YEAR…I STILL BELIEVE THE ODDS ARE HIGH FOR THE DOW TO REACH 20,000 BEFORE WE GET TO 2017…I remain firm in my conviction that the US and world economies are in SOLID GROWTH stages…and that all the talk about too weak economies is just horse manure…As I keep saying, the roads are full, the malls are full, the airports are full, construction is ACCELERATING in both the residential and commercial sectors, vehicles sales are at record levels, unemployment is low, job growth is strong (PLEASE don’t buy the ludicrous “not the right jobs” argument I have heard for 25 years),  etc., etc,, etc…Open your eyes…THERE IS BRISK ACTIVITY EVERYWHERE…THE ECONOMY IS BUZZING…STOCKS ARE GOING HIGHER AND I WILL CONTINUE SCREAMING…THERE IS THEREFORE NO NEED FOR RATES TO “STAY LOW” ANY LONGER.

Fact: The Dow Jones started the year by trading lower for just 12 trading days…AND HAS BEEN TRADING HIGHER EVER SINCE…AND is now more than 3200 points above that low and making new all time highs... BUT…You’d never know it, and you’d probably have dumped everything you own long ago (in the hole) if you listened to all the bearish nonsense that has been spewed by the brokerage houses and financial media nitwits for the past 7 months…As evidence, and  this is overkill, but I really want to drive this point home…here below are SOME of the headlines (examples of their “genius” forecasting opinions) I’ve collected this year while the economy and the stock market have basically been only driving higher and higher…the point being, if you DO listen to those guys, if you DO think that they cumulatively actually understand ANYTHING about how the markets move, then you are totally ignoring the reality of how eternally wrong they pretty much ALWAYS are …

I would also note my long held observation that as long as there is notable evidence of doubt about a bull market…that is, as long as you can find plenty of top pickers, and expressions of “caution”, and forecasts of “the coming bear market”, that market is going to keep on going…and going…and going…In other words, Bull markets don’t end until EVERYBODY is convinced they are going higher…And this is NOT the case right now…and hasn’t been for 1000’s of points this year.

Beginning in early January and going forward in time…

If all that isn’t evidence that you are nuts to make your investing decisions based on what is presented in the media, I don’t know what ever would be…And along these same lines, I would point out that ALL of those absurd opinions also infer that “rates are gonna stay low”, or “even need to go lower”…which I classify as just more of the same media hogwash.

However, the reality is, 99% of investors DO make their decisions per what they see in the media…as it really is the only “source” they have…and based on this never ending onslaught of bearish economic “logic” you see above, THE PUBLIC HAS BEEN GETTING OUT OF THE STOCK MARKET FOR THE PAST 18 MONTHS…AND GENERALLY POURING INTO ALL SORTS OF FIXED INCOME MUTUAL FUNDS (BONDS) WHERE THEY EFFECTIVELY ARE EARNING NOTHING ON THEIR CAPITAL…

I would add that this is the same thing they did back in 2011-2012 (selling out), when the Dow traded between 11,000 and 13,000…before heading up to 17,000 (without them)…And I think that is exactly what is about to happen again… IT HAPPENS OVER AND OVER AND OVER…The Public is never really there when Stocks make their move…and this time around they are going to be missing the rally, while at the same time getting clobbered by the Bonds they have in a misguided (by the media) pursuit of “safety”.

On the chart following, I have noted the years in which the public were net sellers of Equity Mutual Funds...and it could not be more obvious how poor their cumulative timing has been...

And I would then point out that the past 18 months have seen them selling again...and at an especially HEAVY pace during the first half of 2016...So...What's next with the market now making new highs? My absolute guess is you'll see the public become net buyers  again…only at MUCH higher levels…with their buying being “inspired” by an avalanche of news that the economy is firing on all cylinders, as well as a NEW consensus sentiment in the media…maybe 1500-2000 points higher on the Dow…that, “Oh yeah! You gotta be in Stocks!”…which obviously has NOT been the prevailing view in the “genius” financial media for ALL of 2016.

 I CONTINUE TO RECOMMEND:

BE LONG STOCKS & SHORT TREASURY BONDS

…and SHORT EURODOLLARS

And yes, Short Treasury Bonds has been wearing me out…

But that does not mean it will be the case going forward.

Do note the size of all those sell offs…then understand that just a 15% downturn (26 points) would take Treasuries down to 150, which in itself would represent the potential for a sizeable multiple on put options (or a loss if Bonds DON’T go down)…But I absolutely believe we are going to see much more than that…

And you KNOW that the public, led by the supposed intelligence of the financial industry, NEVER  sees  what is about to crush them (really, how many times do you have to see it, whether it is in stocks, bonds, gold, crude oil, etc.?)…And I believe the next such public investor “massacre”  will be seeing all those funds they have in bonds (of any type) get clocked for 20-30%...again…while they watch stocks take off without them…

Here’s  what I think is a worthwhile perspective…Forget all the boogeyman gibberish about earnings, Brexit, China, productivity, etc and just focus on HOW the stock market CAN & DOES move…that just in the past 2 years there have been 3 bull moves of 2000-3000 points that only took a few months from start to finish…And then (forgetting all the media BS), ask yourself if 20,000…this year…does look like a distinct possibility.

AND IF SUCH A MOVE IS UNDERWAY…OR EVEN IF IT’S JUST TO 19,000+, I SAY THERE IS NO WAY BONDS ARE GOING TO KEEP HANGING UP HERE IN THE 170’S…NOT EVEN A CHANCE…NO WAY!

I  KNOW I have been on this for months…but that has nothing to do with what will happen for the rest of this year…I continue to see this as a monster trade…and if you think 150-155 looks like a stretch, do go back and  take another look at the long term Bond  chart above…A move to 150 would be nothing on that chart.

And Eurodollars will going down right along with (or leading) the Bonds…

In other words short term rates will be going higher as well…More and more, as Stocks and the Economy totally destroy the idea that the USA is “weak”, THERE IS NO WAY SHORT TERM RATES ARE GOING TO STAY AS LOW AS THEY ARE…AND I CONTINUE TO BUY PUTS IN THE JUNE, 2017 EURODOLLAR CONTRACT (again, this is NOT the Eurocurrency). AS I HAVE REPEATEDLY STATED, I THINK THIS IS EASILY ONE OF THE BEST RISK-REWARDS I HAVE EVER SEEN IN THIS BUSINESS…JUNE PUTS HAVE A TON OF TIME (ALMOST 11 MONTHS) AND WHAT I PERCEIVE AS BIG  LEVERAGE…

And here are the numbers…I just don’t think they get any better than this…

The long term look…how short term rates have moved in the past…

As can be noted below, there have basically been 5 rate increase campaigns by the Fed since 1983, with the smallest having been a 2% rise…I look at this 30 years of history, and in reality, can EASILY envision Eurodollars trading down to 97.00…So…to have a target at 98.00? Looks like nothing more than a small blip down to me…

 STILL BUYING WHEAT

I have seen this set up, literally, too many times to count...Where the Funds are heavily on one side of the market and the Commercials (with big orders on their books) are dead opposite them...And what you see below is just about as extreme as it ever gets...And just like the bond market, the fact I have been calling for a rally in Wheat for many months does NOT mean it can't start happening right now...Wheat made a low earlier this month that I believe has high odds of being THE low…AND I THEREFORE CONTINUE TO LOUDLY RECOMMEND BEING LONG HERE…AND I CONTINUE TO MAINTAIN (AND NOT JUST STUBBORNLY) THAT A $1.50-$2.00 RALLY FROM CURRENTL LEVELS WOULD BE EASY TO SEE…It’s just how this game works.

A little bit of telling it like it is…

Look…I have done this a long time…and over these past 36 years I  have had my share of  exhilarating triumphs and massively depressing disasters…and I have also easily “learned” various lessons many times over…And one of them is that the markets will sometimes just beat the SH*t out of you, pound you down until all you want to be is “OUT”…and then right when you least expect it (simply because you are totally demoralized, not because your opinion has changed), THE MARKET TAKES OFF pretty much just as you have been expecting…And guys, totally irrespective of anything else, that is kind of where I am now…I AM OBJECTIVELY CONVINCED THAT I “KNOW” WHAT IS COMING…IN RATES, AND IN WHEAT…BUT FOR THE MOST PART, THESE TRADES HAVE WORN ME…AND MY CLIENTS…DOWN TO NOTHING...Guys who were solidly IN the trades are now OUT…or with drastically reduced positions…And NOBODY really wants anything more to do with either Treasury Bonds or Wheat…AND I HAVE BEEN HERE BEFORE…where the combination of losing money AND plenty of media rhetoric still arguing against my opinion just makes it damn near impossible to sell anybodyon putting their cash on the table in these ideas…And THAT IS WHEN IT ALL STARTS. I’ve lived it too many times…and it’s truly amazing how it works…but when you get to the point where the thought of getting long or short a market scares the crap out of you…when you HATE the idea of actually risking your money…is EXACTLY when you are supposed to do so.

Call it a load of BS if you want…but I’ve been here…I’ve seen it too many times…

I LOVE SHORT BONDS, SHORT EURODOLLARS…AND LONG WHEAT.

Call me and get some…again.

Bill

866-578-1001

770-425-7241

All option prices in this newsletter include all fees and commissions.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Bonds, Eurodollars, Wheat