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The Facts and Figures that Tell the Story: Sunday, Dec. 27, 2020

The Facts and Figures that Tell the Story: Sunday, Dec. 27, 2020

By John R Guardiano on December 27, 2020

Nashville Bombing, ‘Defund the Police,’ COVID, Lockdowns, Taxes, Trump, Tom Brady, and the ‘Rigged’ 2020 Election

Nashville Bombing Shows Why It’s Probably Not a Good Idea to ‘Defund the Police’

CBS News—Nashville, Tennessee, resident Noelle Rasmussen: “We were all in bed. We have a four-year-old and a one-year old.

“It was about 5:50 in the morning [Christmas day]. We heard loud banging at the door, over and over and over again. So we went, sleepy in our pajamas to the door, and there was a policeman and a police woman telling us to evacuate immediately…

“We were confused, and we had a lot of presents set out for our kids to go see. And we were like, asking if there was any way we could stay, and they said, no, that there was a public threat…

“So we woke up our kids and put on shoes and jackets and left, and got in our car and drove away… And as we were driving away, I kept turning around to look…

“And I was looking at our stretch of buildings downtown and I saw it explode. I saw a huge explosion, a big orange fireball up in the air about twice as tall as our building. And I just said to my husband, ‘Oh my gosh! I think our building just exploded…’

“I was so grateful we left… I’m so glad we have our kids.

“And, above anything else, I am so glad for those officers who walked into a building that they knew was a dangerous spot to be and woke us up and got us out. I am so grateful…”

Why You Should Have Bought Stocks When the Market Tanked in March—and Why You Should Do So When It Tanks Again

The SPY (along with the overall stock market) has bounced back in dramatic and unstoppable fashion since its March 2020 bottom (source: CNBC).

CNBC: “The S&P 500 heads into the final week of the year with about a 15% gain for 2020, but from the March low the index is up about 65%. The bull market turned nine months old this past week.

“According to CFRA’s Stovall, that nine-month gain is more than twice the average nine-month gain of 32.2% for all bull markets since World War II. In the remaining course of the bull markets, their average compounded growth was just 20.3%, showing a slowdown in the rate of gains…”

Lockdowns Don’t Stop COVID, But They Do Screw the Poor and Disadvantaged

Stephen Moore, Fox News: “Liberals love to talk about following the science, but all evidence of the last nine months points to the scientific conclusion that lockdowns do not work to reduce deaths.

“Contact-tracing studies show that about half of those infected with the coronavirus got it despite staying at home. Only 2% of the transmission comes from restaurants, and almost none come from outdoor dining, which is now idiotically prohibited in California.

“The states that have not locked down their economy have lower death rates than New York and New Jersey.

“The unemployment rate for service workers in these states has skyrocketed to as high as 10%. In contrast, the red states, such as Utah and Florida, that are still open for business have unemployment rates for service workers as low as 4%…”

Low-Tax States Are Booming and Taking People and Businesses from High-Tax States

Scott Sumner, EconLib.Org: “In recent months, a number of important firms have announced they are relocating from California to Texas…

“The movement of these industries is toward three states—[Texas, Tennessee, and Florida]—that have one thing in common—no state income tax. And these are the only three states with no income tax in the southeastern quadrant of the US—say Texas to Florida and south of the Ohio River…

“A person would have to be pretty blind to ignore the migration of firms from places like New York, New Jersey, and California, to lower tax places…

“Interestingly, Washington State has no income tax, which is unique for a northern state with a big city…

“For the first time ever (AFAIK), California saw its population fall last year, and yet it has a delightful climate (even with the recent forest fires.)  High tax Hawaii also lost population.

“So while people are gradually moving to warmer locations, state tax policies explain why certain states attract a disproportionate share of the migrants.

“Indeed, last year more that half of the U.S. population growth occurred in just two states—Texas and Florida.  I believe that’s the first time that has ever happened.  Add in Tennessee and Washington and you are at nearly two-thirds of the nation’s population growth…”

Courts Universally Reject Trump’s Allegations that the Election Was ‘Rigged’ and ‘Stolen’

Business Insider: “The Trump campaign, Republican allies, and Trump himself have mounted at least 40 legal challenges since Election Day.

“They’ve won zero.

“The lawsuits argue that states and counties have violated election laws, playing into Trump’s political strategy to discredit the results of the 2020 election that President-elect Joe Biden won.

“Republicans have filed the lawsuits in local, state, and federal courts in Arizona, Georgia, Michigan, Nevada, and Pennsylvania—all states that Biden won. They have also filed direct appeals to the Supreme Court, all of which have also failed…”

Tom Brady: 43 Years Old and Still the Greatest

ESPN: “Brady put together the best first half of his career, completing 22 of 27 passes for 348 yards. He is the only player over the past 40 seasons with at least 240 passing yards and four TDs before halftime, according to Elias Sports Bureau. (Brady also threw for 345 yards and five TDs in the first half against the Titans in 2009)…”

Feature photo credit: The six police officers who ran to danger to save lives Christmas Day. Source the Metropolitan Nashville Police Department, courtesy of the New York Post.

Now That the Market Has Suffered an Historic Collapse, Should You Start Buying Stocks Again?

Now That the Market Has Suffered an Historic Collapse, Should You Start Buying Stocks Again?

By John R Guardiano on March 19, 2020

On Feb. 29, 2020, I argued that “the stock market correction was overdue irrespective of the coronavirus and is nothing to fear.” At the time, U.S. equities had lost more than $3.18 trillion in the worst weekly sell-off since the 2008 financial crisis.

“Should you divest yourself of all stocks and hide your money under the mattress until the panic subsides? No, of course not,” I wrote. “Stock market corrections occur with some regularity and are to be expected.”

Since then, of course, the market has continued to crater. Why? Because the U.S. economy is shutting down as a result of the coronavirus. Thus a healthy and inevitable market pullback has now been exacerbated in the extreme by a “black swan” event that traders did not foresee.

It happens, or at least it happened. The question now is: what should you do?

History Lesson. Well, first off, let’s learn from history, so that we don’t repeat the same mistake next time the market skyrockets. 

A sage bit of investing advice says: “Bulls make money; bears make money; but pigs get slaughtered.” For this reason, it is always a good idea to take some of money off of the table, or out of the market, after a big bull run.

We noted here at ResCon1 that, just before late Feb. sell-off,

the major stock indexes—the SPY, QQQ, and DIA, for instance—had all hit 52-week highs.

The market had been climbing higher and higher almost without interruption for some time. We were due for a pullback. It was inevitable.

For this reason, cashing in at least in part after the market indexes hit 52-week highs on the strength of a long and sustained bull run would have been the wise and prudent thing to do.

That’s Investing 101. But if you failed to do that, don’t fret or worry. You are where you are and time can heal all financial wounds.

In truth, it is exceedingly difficult to predict a market bottom. However, the market has dropped so far so fast that there is good reason to think we may have hit a bottom, if not the bottom. So now may be a good time to begin buying stocks again.

Investor Bill Miller, for instance, told CNBC that “this is an exceptional buying opportunity. 

“There have been four great buying opportunities in my adult lifetime,” he said.

“The first was in 1973 and ’74, the second was in 1982, the third was in 1987 and the fourth was in 2008 and 2009. And this is the fifth one.” 

Miller said these historic opportunities were mainly event-driven.

In 1973, there was the Yom Kippur War in the Middle East. A severe recession crashed the U.S. economy in 1982. There was a dramatic, albeit short-lived, stock market crash in 1987. And of course, in 2008 and 2009 there was the Great Recession.

“Those are the sorts of events that you see when markets are making historic lows. The news is just bleak all around,” Miller added. 

Miller, CNBC’s Maggie Fitzgerald reports, is

chairman and chief investment officer of Miller Value Partners… [He] beat the market for 15 straight years while working at Legg Mason…

[His] firm posted a return of 119.5% last year net of fees… Those gains more than made up for the firm’s 33.8% loss in 2018.”

Moreover, CNBC’s Brian Sullivan observes that, according to InsiderScore.com, corporate executives have “started  buying their own company’s stock either at, or nearly at, record levels.” Last week, for instance,

more than 1,300 top executives got into the market. Small caps, energy, financial company executives—they [all] had more buyers than at any time in their history, even more than at the depths of the [2008] financial crisis.

And insider buying across the entire market is getting close to that level as well. it is now at its highest level since November 2008…

InsiderScore.com notes that they’re not calling a market bottom. CEOs aren’t perfect market timers. But they do note CEO buying peaked in late 2008. Maybe a little good news on the market front.

Indeed, CNBC’s Jim Cramer thinks the doom and gloom about the U.S. economy and the markets is excessive and overwrought.

“Given the beating the market’s taken over the last couple of months, I think this it the wrong time to go full doom and gloom,” he said tonight on Mad Money.

I know the situation [with the U.S. economy] will get worse, probably a lot worse, before it gets better; but it will get better. And sometimes the stocks reflect that before we get to where it gets better.

We’re not some pitiless, helpless giant that’s powerless in the face of this pandemic…

The 1987 crash turned out to be a fabulous buying opportunity, not a selling opportunity. It could happen again.”

Williams Indicators. Cramer observes that, according to the legendary market technician, Larry Williams, the market has hit an extreme panic level. This is “the single most reliable indicator of a trend shift from bearish to bullish that there is.”

Cramer quotes Williams:

None of the tools of the trade that I have in my arsenal have done this good a job of calling major stock market lows. For almost 90 years we have seen bull markets begin at these times of extreme panic.

According to Williams, there have been 24 “extreme panic” signals in the last 87 years, and 18 of these 24 times the market has bottomed within three weeks. In 16 of these 24 times the market has bottomed within one week.

Cramer finds Williams’ analysis convincing and says that he likes these odds.

On the other hand, as Fast Money analyst Dan Nathan points out, there typically are “fierce bear market rallies off of lows.”

In 2001, he says, there were two 20 percent rallies that failed before we made new lows. In 2002 there was a failed 20 percent rally that gave way to a new low. And, in 2008, there was similar price action. 

“It took two years,” Nathan says, “for the market to bottom.”

Nathan acknowledges that this latest downturn is notable for its speed and velocity. Still, he says, it will take some time for the market to bottom.

So, if you’re buying now, understand that there likely will be lower lows, and be “comfortable with further losses,” he says.

The bottom line: know yourself. Know your appetite and tolerance for risk and act accordingly.

Realize that while no one can foresee the future, our investment decisions should, nonetheless, be guided by historical experience: because there are clear and discernible patterns that repeat themselves in the market each and every day, week, month, year, and decade.

Thus it is OK to take money out of the market when new highs are reached, and it is OK to reinvest when new lows are plumbed. It also is OK to make short-term trades rather than long-term investments.

You do not, after all, want to be the passive victim of financial conditions, market downturns, and “black swan” events.

Instead, you want to take (financial) advantage of market conditions and market-moving events, and now may be an especially good time to begin doing so.

Feature photo credit: Jim Cramer in Rocket News.

The Stock Market Correction Was Overdue Irrespective of the Coronavirus and Is Nothing to Fear

The Stock Market Correction Was Overdue Irrespective of the Coronavirus and Is Nothing to Fear

By John R Guardiano on February 28, 2020

Market corrections are regular and healthy occurrences, and the rebound to new highs may already be underway.

CNBC reports that U.S. equities markets lost more than $3.18 trillion this week as they suffered their worst weekly sell-off since the 2008 financial crisis. So, should you should divest yourself of all stocks and hide your money under the mattress until the panic subsides?

No, of course not. Stock market corrections occur with some regularity and are to be expected. They actually are healthy and beneficial because they help to check and rein in what Alan Greenspan famously called “irrational exuberance.”

Market corrections don’t mean the market is collapsing; they mean the market is consolidating and correcting equities valuations that got ahead of themselves and were artificially inflated by the bull run. This is a good thing because it sets the stage for further gains based on a more accurate assessment of market and corporate fundamentals.

Historical Context. “There have been 26 market corrections since World War II, with an average decline of 13.7% over an average of four months,” reports CNBC’s Thomas Franck. “Recoveries have taken four months on average,” and the upward trajectory of the market has remained intact.

There is “one big caveat”: if we fall into bear market territory, then “the losses stretch to 20 percent [and] there’s more pain ahead and a longer recovery time,” Franck notes.

But for a bear market to occur, we’d almost certainly have to suffer a recession, which is exceedingly unlikely, given the underlying strength of the U.S. economy and the U.S. consumer.

Right now, the equities markets are overreacting to fears of the coronavirus and how it might adversely affect Chinese economic growth and world economic growth more generally. CNBC’s Fred Imbert reports:

“What we’ve seen the last couple of days is pure liquidation,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory. “Investors are saying ‘get me out at any cost.’”

“The most important dynamic in the market is uncertainty,” Lerner added. “People are selling first and asking questions later.”

When traders and investors are selling first and asking questions later, that’s a surefire sign of an overreaction and an overshoot to the downside.

Moreover, just before this correction occurred, the major stock indexes—the SPY, QQQ, and DIA, for instance—had all hit 52-week highs. The market had been climbing higher and higher almost without interruption for some time. Thus we were due for a pullback. It was inevitable.

Inevitable Correction. The coronavirus, in fact, may have been the occasion or pretext for traders and investors to do that which they had been angling to do for weeks, but never did because of irrational exuberance and the fear of missing out on even greater highs. As Stephen Auth, CIO of Global Equities for Federated Hermes, told Fox Business:

This correction was overdue. We had a 17% run without a pullback. The last 16 times we’ve had something like that, we’ve had a 10% correction…

The coronavirus is a good excuse for one [a correction]. It is scary. We don’t know, really, how it’s going to play out. But at the end of the day, the global economy will bounce back from this. It’s at worse a short-term hit.

The “fact is,” writes Luke Burgess at Energy and Capital, “last week the Dow was trading 11% over it’s 200-day moving average. So, again, a market correction was inevitable with or without coronavirus.”

And a rebound off of our current lows is just as inevitable, and sooner than you might think.

In the three weeks before Christmas 2018, for instance, “so-called ‘U.S. equity style boxes’ made popular by Morningstar all fell by between 15-19 percent,” writes Rob Isbitts in Forbes. Lower-volatility stocks, meanwhile, suffered declines of 10-20 percent, he adds.

“The impact was so severe across the board, it wiped out all, nearly all, or more than all the gains of the prior year and a half in all nine [major] stock market segments…” Yet, “the stock market rebounded quickly after Christmas [2018], and that rally has stretched into the start of 2019,” Isbitts explains.

In fact, the rally extended throughout 2019 and into 2020 almost without interruption, as Annekan Tappe observed in a Dec.29, 2019, year-end analysis of the equities markets for CNN Business.

US stocks had a fantastic year in 2019, with all three major indexes climbing more than 20 percent. But that performance came at the price of volatility and uncertainty.

Last year ended on a sour note, with the worst December since the Great Recession leading to the first annual stock market losses in three years. This year was a rebound—and then some—but it wasn’t easy.

Trade and the Fed, the two big themes of 2019, pushed and pulled on equities. The Fed won out, and stocks soared. Investors got quite a bit of whiplash along the way.

The whiplash continues; but so, too, do the market’s gains. Stay invested and prepare for the next leg-up: because, as sure as the sun rises, it’s coming—in spite of the coronavirus.

Feature photo credit: Investor Junkie.

The Media and the Politicians Color and Distort the Coronavirus and Stock Market Plunge

The Media and the Politicians Color and Distort the Coronavirus and Stock Market Plunge

By John R Guardiano on February 27, 2020

Two big and dramatic developments, the coronavirus and stock market plunge, are dominating the news. To understand these events and their true significance, you need to understand the political and journalistic prisms through which these events are being reported and assessed.

First, the media have a professional interest in hyping the threat from the coronavirus and exaggerating the dangers from the stock market plunge. Doing so draws in readership and viewership.

Staid and boring news, after all. doesn’t sell; dramatic and consequential news does. This doesn’t mean the coronavirus and stock market plunge aren’t significant events; they obviously are. But it does mean that they need to be put into perspective and viewed in historical context.

Second, we live in hyper-polarized times, politically, and are in the midst of a fiercely contested presidential election, with one-third of the Senate and all of the House of Representatives up for reelection.

This means that political candidates running and on the ballot have every incentive to seize upon whatever bad news they can to try and score political points against their opponents.

Thus much of the alarmist commentary that we’re hearing about the coronavirus and stock market plunge is attributable to politicians trying to win votes and media outlets trying to draw in readers and viewers.

That many journalists and media outlets are politically partisan and unabashedly anti-Trump further compounds this problem.

So, consider the source of your news and take in information with a skeptical eye. Things probably aren’t as bad as they seem. As Ecclesiastes 1:9 puts it, there is nothing new under the sun and we’ve most likely been here before. Do your own fair-minded reporting and analysis.

We’ll have more to say about the coronavirus and the stock market plunge. For now, it’s important to understand the interests and incentives of those who are reporting on these developments (the media), as well as those who are helping to drive media coverage (the politicians): because as Agent Scully put it in the X-Files: “The truth is out there. But so are lies.”

Feature photo credit: Medium.

In the 2020 Election, It’s Not the Economy, Stupid, But Maybe It Should Be

In the 2020 Election, It’s Not the Economy, Stupid, But Maybe It Should Be

By John R Guardiano on February 6, 2020

James Carville, the colorful Democratic political strategist who helped mastermind Bill Clinton’s 1992 win, famously said, “It’s the economy, stupid!”

The notion that American presidents are reelected or thrown out of office based on the nation’s economic performance has since become conventional wisdom. Yet, that maxim doesn’t seem to apply this year because of all the political drama, Sturm und Drang, that surrounds President Trump.

Impeachment is the latest drama, but there have been many others—Charlottesville, the Mueller investigation, the crisis at the border, the Kavanaugh Supreme Court nomination, the government shutdown, Khashoggi, Syria, Ukrainian aid, et al.

Some of these crises, like the Kavanaugh Supreme Court nomination, are beyond Trump’s control and must be laid squarely at the feet of his political opponents, who are determined to stop the GOP’s policy agenda, either by hook or by crook.

To the diehard partisans of the left, it doesn’t matter who is president. They would fight to the political death against any Republican President, be he Trump, Bush, Romney, or Mother Theresa.

But it’s also true that Trump has been his own worst enemy; and that his utterly undisciplined, shoot-from-the-hip nature has seriously exacerbated his political problems and created crises that need not have occurred.

Charlottesville, for instance, was a completely self-inflicted wound that could have been avoided entirely had Trump simply chosen his words more carefully and been more disciplined when responding to reporters’ questions.

This is why, despite relative peace and prosperity, Trump has been unable to achieve a 50-percent job-approval rating.

So it was good to see the president use his State of the Union Address to deliver a clear, coherent, and compelling message of American renewal led by a strong and resilient U.S. economy that is very much the envy of the world.

Trump called it “the great American comeback… The years of economic decay,” he declared, are over.

From the instant I took office, I moved rapidly to revive the U.S. economy—slashing a record number of job-killing regulations, enacting historic and record-setting tax cuts, and fighting for fair and reciprocal trade agreements.

Our agenda is relentlessly pro-worker, pro-family, pro-growth, and, most of all, pro-American…

Since my election, we have created seven million new jobs—five million more than government experts projected during the previous administration. The unemployment rate is the lowest in over half a century…

The unemployment rate for African-Americans, Hispanic Americans and Asian-Americans has reached the lowest levels in history… The unemployment rate for women reached the lowest level in almost 70 years…

Real median household income is now at the highest level ever recorded…

U.S. stock markets have soared 70 percent, adding more than $12 trillion to our nation’s wealth, transcending anything anyone believed was possible. This is a record. It is something that every country in the world looks up to and admires.

Consumer confidence has reached new highs. Millions of Americans with 401(k)s and pensions are doing far better than they have ever done before, with increases of 60, 70, 80, 90 and 100 percent…

Critics will carp that Trump inherited a growing economy, and this is in part true. But it’s also true that wages were stagnant and the economy was slowing. Trump has reversed that, and the U.S. economy has performed far better than the critics predicted when Trump took office.

Indeed, three years ago we were warned that the sky would fall. Today, by contrast, it seems as if the sky’s the limit. 

“In just three short years,” Trump boasted, “we have shattered the mentality of American decline. We have rejected the downsizing of America’s destiny… and we are never, ever going back.”

The 2020 election doesn’t seem to be about the economy, but maybe it should be. America could be doing a lot worse than it is now, and the choice in policy direction—more or less government, higher or lower taxes, a bigger or smaller private sector—could not be more stark, and certainly not more economically consequential.

Feature photo credit: Getty Images via the New York Post.