
What I try to do in kortsessions.com is act as a counter to a continuous stream of what I believe to be mis-information and bad advice emanating from the media … not just the financial media, but all media. I believe we have seen a pronounced and somewhat concerning change in that information flow as it pertains to the economy and the stock market. We have made the transition from an on-balance cautionary/negative approach to an upbeat and optimistic view on both. This is happening now, even though both the market and economy have been in a solid marches higher since 2009. The S&P 500 recorded its first record new all-time high of this run after it broke out decisively above 1550 in 2013, closing out October 2016 at 2198 (before a Trump (BT) administration was even a glimmer in investors’ though processes). We had nearly tripled off the low and yet the media theme was all about caution and preserving capital.
“This Market, don’t get it!” (May 10, 2013 – Session 32)
In ” … , I don’t get it!” I made the point,
I think this has become a common refrain in the Wall Street community, the financial media and punditry corps. They continue to puzzle about the S&P and Dow breakouts to new all-time highs. How can this be with such high unemployment, weak jobs growth and a generally sluggish economic backdrop? Well, that is the way great markets generally begin, with people arguing forcefully against their right to exist. You may read the entire post in the link above. This is a great refresher on what was worrying the media back then and what was to continue to worry the media and punditry. Also, we compared the 2013 breakout to the breakout that occurred in 1982 … it’s worth a look.
Fast Forward — January 13, 2017
What had changed? Even in early 2017, post Trump (PT) election, the verbiage from the wise men and women of investing had not changed very much (“Are we the iceberg or the Titanic?”
The worries hadn’t changed, neither had the sage cautionary advice
It’s mid-year 2016. Mohamed El-Erian, Chief Economic Advisor at Allianz is quoted in a kortsession.com post, “El-Erian’s Warning to The World.” (May 12,2016) BTW El-Erian had been cautious for the five years I’ve been posting on kortsessions.com.
My lead was as follows:
“Mohamed El-Erian, Allianz’s Chief Economic Advisor, thinks that most investors, institutions and retail, are operating under the assumption that there will be no more Fed Fund rate increases this year.
His take is that there are likely to be two more in calendar 2016. OMG! Of course, my reaction is, who cares?”
Here’s the latest (January 2017), “El-Erian: It’s time to reduce risk, …” (just like it was time to reduce 3 1/2 years ago). Oh well, maybe like a stopped clock he will be right this time. Oh yes, please listen to the questions in the interview. These people (CNBC staffers) know his track record, yet they ask El-Erian questions as though he might actually have the right answers. Clearly, January 11, 2017 was not an Ideal time to reduce risk. Neither were El-Erians earlier pronouncements.
What’s Changed?
For one thing, rising interest rates no longer seem to be the negative flash point that they were for El-Erian and others who have obsessed about them over the past five years. There are some out there calling for potentially four bumps in the Fed funds rate in the next 12 months. I guess it’s possible. The economy is strong and with the tax cut and world-wide economic recovery it certainly could be in the cards. What has change is that the strong economy seems to trump higher rates. This is new. Nobody is obsessing about the Fed and Fed policy after years of worry about the Fed with higher rates throwing us into recession.
Also Where are the bears? Where are the cautionary notes? They are tougher to find than hen’s teeth in the videos below:
https://www.cnbc.com/video/2018/01/26/cnbc-markets-now-january-26-2018.html
https://www.cnbc.com/video/2018/01/26/the-sp-just-did-something-it-hasnt-done-since-1955.html
Finally, I submit the following video interview of J. P. Morgan Asset Management CEO, Mary Callahan Erdoes;
“UNQUESTIONABLY ‘BULLISH ON EVERY FRONT’ AT DAVOS“

MS. Erdoes is an unrepentant bull and indicates that the mood at Davos is optimistic for the first time in ten years. Now everyone is beginning to ask the question, “what could go wrong?” — apparently there are no visible negatives. Of course, her sentiment is the apparent negative. Check out the video.
The point I try to make is that we have been here before and the reaction is always the same…dire skepticism displaced by strong optimism. Past performance is no guarantee of future results, but I believe that we can learn from history. When most people could understand why you should own stocks (a la 2000), you probably should see their enthusiasm as a good reason to hit the exits. In the recent past as most people and the media couldn’t see why you should be involved in the market, it was probably okay to be involved. As Mr. Buffett says, “You should be greedy when others are fearful, and fearful when others are greedy.” (kortsession 32)
Where do we go from here?
Nowhere … do nothing. Although Ms. Erdoes is a bull, most people (including the pros) are nowhere near her level of enthusiasm for stocks. I believe it will take time, maybe years of good performance to get them there (still too many scars from 2008/2009). A sharp correction from current levels would have an amazing cooling effect on most. But, frankly, I cannot predict the market. I do not now how quickly we could move up from here, or if speculative silliness might erupt tomorrow. These articles and videos represent a start of a new phase where we begin to accentuate the positive and this positivity has to mature into a committed love for stocks before we have a secular bull market top.
Stay Tuned!
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.
Let me start by thanking you again for your insight. You put a lot into this and it shows. You always include facts, quotes and historical context in your posts, but this last one was a bit confusing for me. Admittedly, this may be because I read it the first time on my phone.
I read each post with great interest because I keep wondering when (or if) you will become more bearish in your outlook. Reading this a second time on a larger screen made it easier to follow and conclude that you are still among the cautious bulls. This post might have been easier to follow if some of the links, quotes, and supporting information was moved to footnotes or postscripts.
Just my two cents.
Bill
Bill, Thank you for your readership and thank you for your suggestion. Regarding footnoting, I always think it is tougher to scroll down to footnotes than tapping on a link embedded in the text. It’s possible the problem I created this time was having links embedded in the headlines.
As to me being a “cautious bull,”I still believe that we are in a secular bull market and that secular bulls usually end in excessive speculation and euphoria. We are not there by any stretch of the imagination. This does not preclude sharp setbacks or even a cyclical bear market. The point I try to make in this post is that we have turned the corner from constant fear and caution, regardless of how good the news was, to a market that believes good news is good news and reacts in a favorable way to that news. I still think we have much further to go before this market flames out.
Again, thanks so much for being one of the early adopters of kortsessions.com.
Bill