Thursday, April 13, 2017

Stable equity market not convincing

The four market days of this week were ones of minor leakage in the U.S. equity averages.  Given the gains over the last five months they were not significant, but there are concerns that they could be a harbinger of what is coming.  Why is that?

Some major banks reported today and on balance there results were fine.  Wells Fargo was a laggard but that was expected by anyone who was not a securities analyst.  Costs associated with going through the mess that they created with their customers are substantial and that will be a drain for the remainder of 2017 at a minimum.  That will be priced into the stock soon and from an investment perspective will not material going forward.  What was not forthcoming from the various bank's managements was any substantial expectations for growth near term.  They are smart people for the most part, and with a President as quixotic and uninformed as Trump they clearly could not make any predictions with confidence.

Yesterday Trump told one of his chronic meetings in which he drags CEO's to his offices to coax their camaraderie with his mendacity, Trump told the participants that bankers should not worry about Dodd Frank as all regulations will be eliminated, and replaced by "something else".  That was followed be his usual fifth grade series of positive adjectives.

Whether health care law, immigration, tax reform, NAFTA, and foreign policy in general he unabashedly lets us know that he knows next to nothing.  He is a minute to minute man, no sixty minutes.  Why would the stock market take comfort in this?

The risk/reward in U.S. equities is now off  kilter.  The upside is limited and downside with Trump "leadership" is not.  The market is, in general, afraid to turn to a correction, afraid to miss the next move up which would be possible under normal circumstances due to earnings stability, growth in tech and finance, and the unbridled innovation in the engineering and science centers of the world. Yet the weight of Trump and the manipulators, incompetents, anti-science nitwits, and syncophants that he has appointed is huge.  To slightly modify that, some, though too few, of his appointees are intelligent people and may be beginning to gain some ground.

Still, here it seems that there will inevitably an event that will send the market into a serious tumble, something that will not be the "range bound" scenario droned on about on CNBC.  At some point Trump's no nothing reassurances will be dismissed for what they are, pure day to day bull.

Here new investments have been minimal with the exception of a bump in the existing GLD position today.  So called "geopolitical worries" are troubling.  See Trump above.  Otherwise it is steady sailing with the prospect of rough seas ahead.  Given my background which is decidedly not sailing, maybe it should be said that I am up two games in the third set but my first serve is gone and my game has become chipping backhands.


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