Powell Read My Blog?
The Stay Invested portfolio was UP today: $948.91 (+0.93%)
Overall GAIN/LOSS YTD: -$429.75
Our benchmark index, the S&P 500 is DOWN Year-To-Date +1.00%
“I believe in intuitions and inspirations...I sometimes FEEL that I am right.
I do not KNOW that I am.” ― Albert Einstein
Powell Read my Blog?
Yesterday I wrote that FDA Chairman Jerome Powell is tone deaf to the economy and the markets. Hey Clay, "Powell must have read your blog and put new batteries in his hearing aides". Funny but it looks like the Fed blinked and decided that maybe they should take a look at what the markets were saying about the real economy.
Today Powell, Yellen and Bernanke in a joint interview installed a PUT, 'The Powell Put', under the market by taking away 'some' of the fears of what the Fed might do in the future by better communicating how their actions are not on 'auto-pilot' but are highly flexible and responsive to the markets. Most important, Powell said, "The markets are ahead of the data". Wow, that's a position change, and one that the markets took to heart with the DOW up +746.94 at the close. The other important comment was that Powell said the balance sheet reduction isn't on auto-pilot and that they can an will make adjustments as needed.
While I thoroughly enjoy days like this, I'm not changing my position on the market, this is exactly the type of behavior we see in a bear market. I think we'd all be wise to be prepared for the lows to get tested again.
Lets Be Less Certain
Many of the problems investors have are related to trying to predict the future. The stock market is after all a machine for discounting future values. With so many variables in play, a company can produce quarterly numbers that are significantly higher or lower than analysts predict. In fact the results a company reports may be perfectly rational and make for a positive investment case; but if the numbers don't meet or exceed the analysts projections, the stock is sold off mercilessly. Why? Why do we believe the analyst view of the future more than our own ability to read the data?
Jim Grant of Grant's Interest Rate Observer was on CNBC this morning. Jim made a important point that we all have a tendency to think too highly of our own ability to predict the future. In the current economic environment this is especially true. Basically Jim was saying that we know more about financial systems than at any other time in history, it's hard to find anything new out there. But we are in the midst of an experiment that has no precedence in financial history. Jim was referring to the Fed's balance sheet reduction program in conjunction with low rates, the feds dual mandate and government stimulus at the tail end of the economic cycle. At one point in the current cycle, Jim states that, "Interest rates at one point were lower than in the past 400-500 years...our entire economic system is setup and designed to run on low rates...returning to a inflation rate of 4% could have significant impacts". Taken a step further we can look at the negative rates in several countries and not find another time in history when a government bond paid negative rates. Yep, I would have to agree with Jim, however getting back to higher rates of inflation, anything above 2%, is proving very difficult.
Compare your own ability to predict the future (markets, rates, the fed, Trumps next tweet) to this system. The National Weather services takes and measures about 76 Billion meteorological events each year, and often misses a storm. The human brain makes about 12.7 Million conscious decisions a year, a mere fraction of the NWS observations, yet we act with complete certainty on things for which we have only marginal data.
"the future is not the Federal Reserves or humanities best subject".
― Jim Grant
Yesterday we put some money to work by nibbling at a few of the names in the Bull Pen. At one point today the portfolio was up about 1% and closed the day up +0.93%. We can just as easily be down twice as much tomorrow. Volatility will continue for some time.
I like everything in one place and everything in its place. In an effort to make this site more useful for everyone I've added some new features. If you go to the Portfolio page you'll see that the portfolio is now live. No longer will I have to update a spreadsheet manually, you can now see every security updating live throughout the trading day.
I've also added a page I call The Dashboard. On this page I've added tools that provide a broad view to the market indices, the economic calendar and the days most Active, Gainers, Losers.
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Keep Me Honest
S&P 500 declines to 2,350 or more (1-3-2019)
Healthcare and Biotech sectors outperform (1-3-2019)
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.