“The market can do ANYTHING.” — Jesse Livermore
“It was the worst of times…and the best of times.” — Charles Dickens
In my entire 40-year career on Wall Street, I’ve never seen anything like it.
On Monday’s shortened Christmas Eve session, we witnessed the worst down market in history. The Dow fell more than 600 points to make for a pretty bleak Christmas.
Then the day after Christmas, we enjoyed the best Boxing Day ever on Wall Street, when the Dow climbed more than 1,000 points.
Jesse Livermore said it best, “The market can do ANYTHING.” And it did!
I’m sure President Trump will take full credit, as he encouraged his followers to be bargain hunters.
I surveyed several veteran investors who are friends of mine, and they all said the same thing — this is one crazy market, and it’s far from over.
The question is, will the turnaround last? Fed Chairman Jerome Powell and President Donald Trump have proven to be Scrooges who stole our Christmas joy and maybe even a prosperous New Year.
When the Fed was cutting rates and President Trump was cutting taxes, the market moved to new highs and extended the bull market beyond 10 years. I called it “The Mother of All Bull Markets.”
Now it looks like the longest bull market in history is in jeopardy; the tailwinds now have become the headwinds in the face of higher interest rates, gridlock in Washington and Treasury Secretary Steve Mnuchin’s call to convene a “Plunge Protection Team” of bankers, the Fed and the Securities and Exchange Commission to calm panicky investors. Talk about a PR blunder.
The Fed announced last week that it was raising short-term rates to 2.5%, and the money supply (M2) is now growing at 4%, its lowest rate in six years. The central bankers’ attitude is, “damn the torpedoes, full speed ahead”, even if it means a negative yield curve and a potential recession down the road.
Their mandate is to “foster maximum employment and price stability.” We are enjoying low unemployment, but that ignores a downward trend in the labor employment rate. And I hardly call 2%-3% consumer price inflation “stable.”
Former Fed Chairman Paul Volcker rightly rejects the current Fed’s inflation targeting goal and the “puzzling” Keynesian rationale that “a little inflation is a good thing.” In his latest book, “Keeping at It: The Question for Sound Money and Good Government,” he recounts that “In the United States, we have had decades of good growth without inflation,” such as the 1950s and early 1960s and again in the 1990s and early 2000s.
Certainly, the prices on the stock exchanges are anything but stable!
President Trump’s “America First” policies also are having a negative effect on the economy and the markets. The trade war with China and the rest of the world is costing us billions.
And I can think of a lot of reasons to shut down the federal government, but building an expensive wall isn’t one of them (illegal immigration has been down 82% since 2000).
Defense Secretary James Mattis resigned after Trump’s sudden decision to withdraw all troops from Syria. The merry-go-round of personnel changes continues at the White House and does not inspire confidence on Wall Street.
Update on Our Portfolio
We all knew a correction in the market was coming, but we didn’t know when. If the bear market continues, we need to be careful how we play it. As Steve Forbes said at FreedomFest several years ago, “Everyone is a discipline, long-term investor… until the market goes down.” And Dick Russell often said, “In a bear market, the winner is he who loses the least.”
We have survived many bear markets and panic selling in the past, and this one too will pass. Fortunately, the economy is in good shape this time around, so I don’t think the bear market will last long. All we need is a little sanity in Washington.
There’s no question that investors are nervous. Even the computer trading systems, which make up an estimated 80% of all trades, are fickle, and can turn on a dime.
My strategy right now is to use protective stops on pure growth stocks and funds that pay little or no dividends and look for opportunities to buy our high-dividend stocks at a discount.
Once order is restored in Washington and Wall Street, the markets will come roaring back (like they did yesterday). I personally would take this “oversold” opportunity to find bargains in our quality companies that pay steady and rising dividends. The S&P 500 is relatively cheap now, and currently selling at a little over 13 times estimated earnings for this year.
Speaking of Our Portfolios and the Markets Roaring Back…
I just wrapped up my quarterly subscriber conference call (in what may be a record turnout for subscribers). In case you weren’t able to make the conference call, I discussed the possibility of missing out on some of the quick-hitting gains a market rebound is certain to deliver. To that end, I wanted to make you aware of a special offer… one that’s closing down just a few days from now. For more details — including how you may be eligible for a sizable refund — call the Director of Skousen Trading Services Grant Linhares at 1-844-419-4548.
‘The Wild West on Wall Street’
Our theme is perfect for next year’s big show in Vegas: “The Wild West.” Volatility, uncertainty and chaos are all too common in today’s financial markets under the Trump era. You can make a killing or be killed.
We are putting together a special three-day financial conference at FreedomFest called “The Wild West on Wall Street,” with experts on how to arm yourself with the protection you need during these dangerous times. Leading the posse will be none other than Kevin O’Leary of Shark Tank fame, who regularly offers sound financial advice on CNBC.
Here is our 3-minute video announcement about next year’s “Wild West” show (you’ll find it quite entertaining, especially at the end): https://vimeo.com/277897113.
To watch it, use the password: eastwood.
One of our speakers, historian Mark Lee Gardner, is the author of the cover story in National Geographic this month: “Jesse James: Rise of an American Outlaw.” He and his partner, Rex Rideout, will speak and perform at FreedomFest on the topic, “Robbers, Rustlers and Rogues: Wild West Outlaws in Story and Song.” Not to be missed!
During the holidays, talk to your family and friends about coming to FreedomFest, July 17-20, 2019, at the Paris Resort, Las Vegas. Relive the Wild West at FreedomFest! We even have a square dance planned.
Sign up now and take advantage of the “super early bird” discount, which ends Feb. 1. Save $250 off the retail price of $795 per person. You pay only $445 per person, and $300 per additional guest! Call 1-855-850-3733, or go online at www.freedomfest.com.
Good investing, AEIOU,
Last call for Cuban cruise, November 8-16, 2019: Over 80 people are joining us for this unique tour of Communist Cuba. Only a half dozen cabins are left, and any unsold cabins must be returned to Oceania on Dec. 31 (the rest of the ship is sold out).
Cuba is hot as a destination! All cabins aboard the five-star Oceania Insignia for our November 9-16, 2019, cruise (next year) have sold out EXCEPT ours. And we have to turn back any cabins not sold by the end of December. I urge you to sign up now before it’s too late. This week-long trip to Cuba is special — we will be given a private tour in Havana by a free-market economist who actually lives in Cuba and will show us parts of “communist-controlled” Havana that no one else sees. This cruise is not to be missed!
Greg Galloway and I will be speaking on investing. Dave Phillips, president of Estate Planning Specialists, will be talking about estate planning in response to the Trump tax cuts. I also will be giving a talk on the important economic and cultural differences between Latin America and North America.
Plus, my wife Jo Ann, an English professor, will speak on Ernest Hemingway and Cuba. This will be a small private conference with ample opportunity to interact with the speakers and attendees. We’ve already sold over 20 cabins.
Please call Nicole at the MoneyShow (which is organizing the cruise), toll-free at 1-844-225-5838 for a free color brochure, which you can also access here as a PDF. Make your deposit NOW. Cabins are available as low as $2,399 per person/double occupancy, and the price includes airfare from getaway cities, free Wi-Fi and even a $400 shipboard credit. But you must act NOW if you want to join us.
Save $250 on Super Early Bird Discount
Giddy Up! The “Wild West” Show at FreedomFest is Now Posted: I’m happy to announce that our big showdown is shaping up nicely. For a list of keynote and celebrity speakers, topics and events (including a square dance and Libertarian Duel in the Vegas Sun), check out our updated website, www.freedomfest.com.
The Super Early Bird discount for FreedomFest is going on now through Feb. 1. Talk it up with your friends and family during the holidays. The dates are July 17-20, 2019, at the Paris Resort, Las Vegas. By signing up before Feb. 1, you save $250 off the retail price of $695 per person. You pay only $445 per person, and an additional $300 per guest. Act now, the discount ends on Feb. 1.
You Blew It!
Disney Movie Makes Banker into a Villain
I took my family and grandchildren this week to see the latest Disney film, “Mary Poppins Returns.” The acting and scenery are authentic, but sadly puts bankers and the banking industry in a negative light.
In the film, the bank president is a villain who somehow acts as if foreclosing on properties during the Great Depression is a money maker for the bank, and he does everything he can to foreclose on his own employee’s house. Incredible and disappointing.
In truth, banks foreclose on a property as a last resort, and normally only to minimize losses, rather than actually make a profit. During the Great Depression, the value of almost all houses was less than the mortgage, so the bank was in a losing position.
Management at a financial institution would love it if a homeowner continued to make the mortgage. In the movie, the homeowner (whose name is ironically “Banks”) offers to keep paying the mortgage but the lawyers for the bank refuse! They insist on foreclosing. The behavior of the bank president and the attorneys is so wrong headed, it’s ridiculous.
It is a terrible plot and another sad example of Hollywood’s anti-capitalist mentality, “biting the hand that feeds you.” It is especially sad that the film maker is Disney. The late, great Walt Disney must be rolling over in his grave.