Dow 22,000!–The Brave New Market

You may have noticed recently a total absence of kortsession posts. The reasons are twofold: one, it is hard to argue after the run we’ve had that a correction or even a cyclical bear market market might not be in the offing (it’s even got me doubting after years of bullish thought process on this site), and two, the general media and their pundit minions have not come up with any new outlandish or compelling reasons to scare the investing public. The latter is what kortsessions.com has been railing against for the past four and a half years. Yes, they continue to make their case for lower prices as the major market indices continue their almost-daily, low volatility (almost boring) climb to new all-time highs. There’s just not that much to talk about, save a really great quarterly earnings season and an economy that just won’t stop growing (even if it was only at a paltry 2.6% clip in the 2nd Quarter). Even with the war of words between Kim Jong Un and President Trump – despite the incredible sturm und drang the Dow Jones Industrial average is down only 1.5% from its record (Wednesday 8/8) intraday high of 22,179. There seems to be little fear (a bad sign) and absolutely none of the euphoria that one would associate with a major market top … the brave new market!

 

Maybe all the players (including the computers) are battle-hardened

They’ve seen this all before, many times over the past 30 years (including the 2008 melt-down), and they will not be panicked out of their stocks. The one thing that they have not seen before is a president like Donald J. Trump. Of course there are reasons why Mr. Trump has been a plus for stocks. His cardinal accomplishment (maybe) is that with the stroke of a pen he swept away decades worth of regulations, some that were indeed useless and, maybe, some that were very much in the public’s best interest. Either way, heavy regulatory costs, whether for the right or wrong reasons, have been shed.

Also. on the plus side of the ledger, Donald J. Trump has provided us with 6 month worth of legislative gridlock, which some may view as a positive because when Congress is handcuffed it cannot enact legislation that may roil the economy … they can’t hurt us. The market and business has a certainty over the rules as they are now and have been over the past few years – a template  … “no boom, no bust” (Scott Grannis via Fear and Greed Trader) — Goldilocks!

Then there is the “Crazy factor”

The market seems to have gotten comfortable withe the fact that our president will say crazy things (at least in the context of what other U.S. presidents might have said, written or tweeted in the past). The market and its participants seem to be comfortable with this for the most part because the president has also been known to bluff in the past and he has also been known as a man not likely to keep his word about most things … not a desirable trait in anyone, especially a president.

As it pertains to the current war of words between the seemingly unhinged supreme leader of North Korea and our president, maybe the “crazy” is working (regardless of the wisdom or acceptability of this tactic). According to a recent article in the Washington Post a Chinese state-owned media source (The Global Times) editorialized that China should let North Korea take the full brunt of U.S. military fury if the North Koreans land their missiles anywhere near a U.S. Territory (Beijing warns Pyongyang: You are on your own if you go after the United States) … pretty stunning, even it is not the official state mouthpiece of the Chinese Communist Party.

It’s one of those “Dirty Harry” moments, where Clint Eastwood as SFPD detective, Harry Callahan (a.k.a. the President) says, “go ahead, make my day.” The Washington Post article was published about two hours before Friday’s close.

Another hidden benefit of the perception of “crazy,” for those of you trying to determine whether or not I’ve lost my mind finding positives in the current geopolitical conflict, is the fact that it drives skittish money into so-called safe-haven investments like our 10-year Treasury note. Last week the yield on the 10-year dropped from 2.28% down to 2.18% … again keeping competition for equities from fixed income securities very low (the S&P 500 yields 2%), while at the same time keeping a lid on business debt financing costs. For those of you shaking your head at the current levitation of stock prices maybe this attempt at reason may provide some slight explanation.

Lest I give the wrong impression:

My preference is for sanity, diplomacy, morality and integrity in our national and global dealings. I do not intend with this post to be an advocate for the current administration’s policies regardless of the market’s response.

FINALLY, THIS REALLY IS NOT A BRAVE NEW MARKET. IT IS JUST DOING WHAT MARKETS FROM TIME IMMEMORIAL HAVE DONE — CONFOUND THE MOST PEOPLE, MOST OF THE TIME!

What’s your take?

The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities.  I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions.  These are not meant to be construed as recommendations to BUY or SELL.  All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.