[ASAP]

Again... the basic fundamentals are simply not strong... forget the curve for one second.

Everyone reread my first post, its factual.

[WestRace]

A few observations from recent market activities ...

AAPL seems to be facing some headwinds ... growth seems to be the question. Investors still have not seen where the growth will come from.

The market is so sensitive to headlines ... especially on the down side - a classic sign of a bear market.

Stock prices are still expensive even with recent sell off.

I think the market has priced in a slow down but not a recession, which means if there is a real recession, there will be more downside.

[stbm5]

side note: people here seem pretty dismissive of amazon. amazon isn't just a retailer and valuation reflects room to grow into banking, media, delivery/transportation, cloud services and more. for instance, its anticipated that amazon delivery will take 25% of delivery market from ups/fedex...

[WestRace]

Originally Posted by stbm5

side note: people here seem pretty dismissive of amazon. amazon isn't just a retailer and valuation reflects room to grow into banking, media, delivery/transportation, cloud services and more. for instance, its anticipated that amazon delivery will take 25% of delivery market from ups/fedex...

Are you buying amazon?

The question is if they will be facing competitors? Target and Walmart are taking some shares from online purchasing. Their bottom line could take a hit with investment in their new cargo delivery unless they can make it more efficient vs. ups/fedex.

[2000cs]

Originally Posted by WestRace

Are you buying amazon?

The question is if they will be facing competitors? Target and Walmart are taking some shares from online purchasing. Their bottom line could take a hit with investment in their new cargo delivery unless they can make it more efficient vs. ups/fedex.

I agree with you on this, but at the same time would note that all three are taking share from bricks and mortar. It isn’t clear to me that Target and WalMart stores are going to suffer for several years, but it is clear that Best Buy, Lowes, Home Depot and many others will. Lowes and HD are badly uncompetitive with Amazon on the small stuff now so unless you need it TODAY they are only viable for plywood and other large stuff. Even that advantage will erode (I was just pricing a long extension ladder; cheaper on AMZN and they’ll deliver it - I don’t have a vehicle that can carry it myself). Also on my list of failing retailers are basically any place guys shop except maybe specialty suit shops and some auto parts stores (especially those that support independent mechanic shops).

Grocery is another very interesting category with a lot of change. More non-food items in store, pharmacy and one here has a gym. Curbside pickup and delivery (InstaCart) can potentially make the grocery store into a liquor/convenience mart with the delivery handled from a much more efficient warehouse operation.

We’ve only begun to see the changes to retail brought about by AMZN and its near competitors.

[2000cs]

To complete the thought: all that efficiency and productivity supports lower prices, but it also means fewer jobs, especially locally. Put in autonomous delivery and we’ve got a potential employment problem, especially at the lowest wage tiers, brewing.

I don’t think the yield curve inversion is very meaningful for now, but it is a signal to watch. There are plenty of signals starting to emerge, the question is can we grow fast enough in other sectors/ways to compensate, and is labor sufficiently mobile (skill and geography) to adapt without an economic disruption (recession).

[BM dnobagaV]

Originally Posted by WestRace

A few observations from recent market activities ...

AAPL seems to be facing some headwinds ... growth seems to be the question. Investors still have not seen where the growth will come from.

The market is so sensitive to headlines ... especially on the down side - a classic sign of a bear market.

Stock prices are still expensive even with recent sell off.

I think the market has priced in a slow down but not a recession, which means if there is a real recession, there will be more downside.

The "growth" will come from charging $1,200 for the next iPhone.

[WestRace]

Another reason that it would be hard for the market to go higher is that as soon as there is some steam on the rally, the FED will talk of rate hikes so there is that FED inertia that the market will have to overcome even if there is no recession.
Powell seems more hawkish than the last chairman so I don't think he will be swayed by the market as much as before.

As for amazon, too much speculation seems to be already built into the stock. It's PE is 100 so it's hard to see how much growth can justify that type of valuation. Here's in Socal, we have Ralph and Albertson grocery delivery as well so amazon growth will be tempered by the traditional business.

The general mentality on the street still appears optimistic. People are still waiting for the bottom as if it is some vacation destination but usually if there is indeed a real market downturn, the bottom is more like a trip to hell.

[WestRace]

So here is the question: why are the banks so down? Do we have another Lehman Brothers like scenario (well may be Lehman Brothers light)? Although I don't see any equivalent in the 2008 crash, there have to be some issues for concern otherwise the bank stocks shouldn't be this much down. By the way, the 2008 crash was not caused by the recession in the subsequent two quarters, but because of the fear that the entire banking system might collapse.

Although I don't see systematic risk like 2008, here are some of the possibilities:
1. There won't be any QE to the rescue. I don't think the American people have any patience for that any more.
2. The FED will not lower rate even if we go into a recession since the rate is already too low and again people probably can't stomach another 0%. At some point, people with fix income will make noise.
3. Small cap corporate debt. The Russel 2000 has been under performing vs. the SP, DOW and Nasdaq. There have been some talks of these companies being overly leveraged and if there is a shock in the market, they won't be able to service their debts so either they go bankrupt or have to lay off a lot of people. The big cap companies may be able to weather the down turn but not the small ones. And since the banks themselves have been leveraged, it's the domino affect that will unwind into a crash.
4. Exposure to European debts and the Italy budget issue.
5. Back in 2008, investment banks were allowed to leverage up to 30:1, and although post 2008 regulations may not allow them to leverage that much, something tells me they somehow found a way to do it.
6. With interest going up so housing has peaked. Not only that if housing were to go up any higher, nobody can afford the house any more ... like 2007 that is we start to flipping house again.

[2000cs]

Originally Posted by WestRace

So here is the question: why are the banks so down? Do we have another Lehman Brothers like scenario (well may be Lehman Brothers light)? Although I don't see any equivalent in the 2008 crash, there have to be some issues for concern otherwise the bank stocks shouldn't be this much down. By the way, the 2008 crash was not caused by the recession in the subsequent two quarters, but because of the fear that the entire banking system might collapse.

Although I don't see systematic risk like 2008, here are some of the possibilities:
1. There won't be any QE to the rescue. I don't think the American people have any patience for that any more.
2. The FED will not lower rate even if we go into a recession since the rate is already too low and again people probably can't stomach another 0%. At some point, people with fix income will make noise.
3. Small cap corporate debt. The Russel 2000 has been under performing vs. the SP, DOW and Nasdaq. There have been some talks of these companies being overly leveraged and if there is a shock in the market, they won't be able to service their debts so either they go bankrupt or have to lay off a lot of people. The big cap companies may be able to weather the down turn but not the small ones. And since the banks themselves have been leveraged, it's the domino affect that will unwind into a crash.
4. Exposure to European debts and the Italy budget issue.
5. Back in 2008, investment banks were allowed to leverage up to 30:1, and although post 2008 regulations may not allow them to leverage that much, something tells me they somehow found a way to do it.
6. With interest going up so housing has peaked. Not only that if housing were to go up any higher, nobody can afford the house any more ... like 2007 that is we start to flipping house again.

No margin in a flat yield curve. Banks tend to borrow short and lend long. There is no spread there so they have to make it on the credit spread - which is especially hard for those with worse credit ratings than their customers.

[WestRace]

The question to ask: why do you have 3.7% unemployment but the market is acting as if the economy is about to turn sour?

My guess is although numerically the unemployment number is low, a lot of that is in the "gig economy" which means it does not pay very much and they can come and go just like that. So the real unemployment rate for based on the typical traditional jobs is probably higher than 3.7%.

[ASAP]

Originally Posted by WestRace

The question to ask: why do you have 3.7% unemployment but the market is acting as if the economy is about to turn sour?

My guess is although numerically the unemployment number is low, a lot of that is in the "gig economy" which means it does not pay very much and they can come and go just like that. So the real unemployment rate for based on the typical traditional jobs is probably higher than 3.7%.

I think that's absolutely right... and remember the wage growth isn't real... i mean if you worked at startbucks and made 8 an hour and now u make 9... then yeah, that would be 13% WAGE GROWTH... u get the point

[WestRace]

Originally Posted by ASAP

u get the point

yup, unreal.

[insanecoder]

speaking of these megalithic companies nowadays
you know back in the day..
our government actually tried to break up monopolies
remember those days?
instead of taking bribes from them to vote their bidding?

[WestRace]

Originally Posted by insanecoder

speaking of these megalithic companies nowadays
you know back in the day..
our government actually tried to break up monopolies
remember those days?
instead of taking bribes from them to vote their bidding?

I think part of that has to do with national securities. It's not perfect but it is what it is.

[BM dnobagaV]

Originally Posted by ASAP

I think that's absolutely right... and remember the wage growth isn't real... i mean if you worked at startbucks and made 8 an hour and now u make 9... then yeah, that would be 13% WAGE GROWTH... u get the point

Well, I assume the rebuttal would be that wage growth is not proportional for the lower populace class to the % it sees at the top for higher earners or by comparison to ever-increasing profits by corporations.

A rudimentary example would be teachers going on strike for not receiving a wage hike (they look for ~5% increase) in xx number of years. Meanwhile, administrators have hiked their wages 15%+ in that timeframe.

[WestRace]

https://www.marketwatch.com/story/st...ime-2018-12-14

Instead of talking about doom and gloom, can anyone think of something that can make this market go higher? It's the things that nobody sees coming that crashes the market, and likewise, it's the unexpected things that make the market go higher. Maybe the FED comes out and say no more rake hikes until 2019 or something like that, but still if there is something systemic, it won't be enough. But it will be a double edge sword because if the FED pauses, investors might feel there may be something wrong and sell even more.

Most people are still talking about trade war and FED rate hikes. I still don't think the recent selloffs were because of trade war or rate hikes. It has to be something else ... something much bigger. Trade war and rate hikes are too predictable to cause the selloffs. It has to be something that is systemic although may not be as big as 2008, still big enough for concern. There have been some talk of the corporate debts that may affect the banks in a big way. I don't know. If I knew I wouldn't be here :-).

Last Friday selloff was the first time I saw some concerns ... probably not fear yet but definitely concerns.

[2000cs]

Originally Posted by WestRace

https://www.marketwatch.com/story/st...ime-2018-12-14

Instead of talking about doom and gloom, can anyone think of something that can make this market go higher? It's the things that nobody sees coming that crashes the market, and likewise, it's the unexpected things that make the market go higher. Maybe the FED comes out and say no more rake hikes until 2019 or something like that, but still if there is something systemic, it won't be enough. But it will be a double edge sword because if the FED pauses, investors might feel there may be something wrong and sell even more.

Most people are still talking about trade war and FED rate hikes. I still don't think the recent selloffs were because of trade war or rate hikes. It has to be something else ... something much bigger. Trade war and rate hikes are too predictable to cause the selloffs. It has to be something that is systemic although may not be as big as 2008, still big enough for concern. There have been some talk of the corporate debts that may affect the banks in a big way. I don't know. If I knew I wouldn't be here :-).

Last Friday selloff was the first time I saw some concerns ... probably not fear yet but definitely concerns.

The market is very skittish and newsy right now, so I think trade issues (the arrest), the jobs report, the Trump stuff and all the rest has an impact. None of that sustains, but it cumulates. Add in GE and Apple woes, and you have some more fundamental worries. IMO the big headwind is the Dems taking the house. That probably stalls any further pro-business and Pro-market legislation, and the potential for Dem actions in 2020 that it portends may mean all of the Trump Bump is temporary.

We will know in a few days about the Fed, but I think an increase will be seen as choking the economy when it is already weakening, and a pause will be seen as acknowledgement that the economy is weak. The increase is baked into the market, a pause is not, so a pause will be worse for the market this week. IMO

[WestRace]

That probably stalls any further pro-business and Pro-market legislation, and the potential for Dem actions in 2020 that it portends may mean all of the Trump Bump is temporary.

Regardless of how the market reacts, I actually don't think those recent legislative activities regarding stimulus were not really good for the economy. It may have provided a short sugar high but in the long run, it may prove to be counter productive.

[WestRace]

https://finance.yahoo.com/news/landi...-business.html

For whatever reasons, every landing has not been soft. I've read from a book awhile back when it was trying to define what is "liquidity". Usually the more liquidity you have in the system, the more likely the stock market would go up.

You would think the answer was something that has to do with cash or something academic. But the answer from the book was "liquidity is confidence" or you could say "liquidity is human emotion". Human emotion is something that can be turned on or off just like a switch. So maybe that's why it's hard to have a soft landing. You can't really engineer "human emotion".

[WestRace]

Here's my prediction: If the FED raises tomorrow even with dovish tone, and if the market does not rally from there, I think the bulls are done.

Fedex guidance may be the headline that does it.

[WestRace]

So what could be causing the selloffs lately?

1. The economy about to fall off the clip. Not likely.
2. FED rate hikes. I don't think so. .25 here and there is too little.
3. Trade. Assuming worst case, 10% to 25% of 200bl. That's not enough to break the economy.
4. It seems like the market is afraid of something. I think the lack of
clarity and uncertainty may be causing all the volatility.

Looking when to buy FB.

The yield curves below look too eerily similar to 2007.