Market Scenarios {An Update}.

Back in February we posted four possible market scenarios.  Here's links to all four:

The Bearish Scenario.

The Bullish possibility.

The two scenarios where we basically trade sideways.

Markets have now traded higher then the prices we illustrated in the charts of those scenarios.  They've now for the most part wiped out their losses from the winter decline.  However, we could still see any of these scenarios we illustrated back then pan out over the rest of the year.   On Monday, in conjunction with the new month, I'll publish a bigger picture view of the S&P 500.  That will give you a better idea on just how far we've come in the past few months.  I'll publish a few more charts of interest next week just to show folks where things currently stand.

And speaking of May, we're going to now enter our "Summer Months" schedule regarding posting.  From now till sometime after Labor Day we'll not write on Friday's unless something comes over the transom.  It's our way of recharging the batteries a bit.

See you next week.

*Long ETFs related to the S&P 500 in client and personal accounts.  Please note that positions can change at anytime without notice here on this blog.

I Don't Know {Neither Does Anybody Else}

Here is a small list of things that I currently don't know or can't emphatically answer.

I don't know if the stock market is expensive.  Right now its valuation is rich when measured against many traditional methods.

I don't know if the stock market is cheap or fairly valued.  There is an argument to be made that stock valuations don't look so expensive if corporate earnings have stopped declining and if interest rates remain low.

I don't know the current state of the economy.  It is obviously not growing as fast as we've seen after other post World War II recessions, but we have been growing since 2009.  That has been the theory behind all of the "Things Are Getting Better" posts I've put up here over the years.  

In regards to the economy, my theory is that economic growth is better than we see because we don't have good ways to capture all that's going on in today 's economic landscape.  I of course don't know if I'm right about that.

I don't know whether oil should trade to $15 dollars a barrel or $60.

That's a lot of things that I don't have an answer to in a business where I get paid to manage people's money.  So let me now tell you what I do know.

Nobody else knows the answers to any of the questions I posed above because nobody knows what the future will bring.  The folks that emphatically tell you they know on television are mostly "Show Men".  They are there to provide entertainment.  Those that think they know for sure what's going to happen tomorrow or six months from now are either trying to deceive us or deceiving themselves.  

When it comes to the markets there is a debate on whether stocks are expensive or cheap.  There is always that debate.  It is as pointless to discuss as speculating on intelligent life on other planets.  Nobody knows the answer.  You can outright guess or use probability.  We prefer probability.  Here's the current facts.  

Stocks are expensive on current valuation measures.  However, they may not be quite as expensive if earnings start to accelerate in the coming quarters.  Also we are in uncharted waters regarding interest rates.  Currently even at these higher valuation levels, stocks may be more attractive than bonds.  The dividend yield on the S&P 500 is higher than the 10 year US government bond.  

We have pegged our current Cone of Probability for a range on the S&P 500 between 1,700 and 2,150 for this year.   We use this as a basis for our analysis and there's no law that says this range is valid for the rest of the year.  For all we know stocks could explode much higher or some event could trigger a sell off that takes us below our probability ranges.  But if we assume that stocks will trade somewhere around these levels then based on current S&P prices there's the potential for about 3% upside and over 20% downside.   That is not great risk/reward.  Contrast this with the market's trough back in February when stocks showed downside range potential of 8% and upside possibility of nearly 20%.

We are beginning the seasonal period of the year when stocks have traditionally had lower returns.  We've discussed this many times in the past and it is enough of a statistically proven concept for us to say there is a higher probability that stocks will struggle between now and sometime in the fall.   Of course, this could be the year that proves to be the exception.  It could be that stocks ignore past history this summer and explode higher.  That I think would cause a lot of pain and consternation amongst the professional investor class.  Even though this could occur,  an explosive move higher is likely a lower probability event based on past history.  As a side-bar it seems most major international and domestic crises have their origins in this same seasonal period.  Unexpected events have a way of cropping up and have many times spawned market declines during this period.

Presidential election cycles produce uncertainty and that's something investors hate.  It is a higher probability event that volatility will expand in the coming months.  

Markets are overbought in all of the time frames we measure.  This status can continue for some period of time, especially in more speculative environments, but it is a higher probability event that markets struggle when they are overbought like they are now.

Market volume and investor interest wains over the summer months.  This can impact market liquidity also leading to a higher probability of expanded volatility.

So what should investors do?  I can't answer that individually as I don't for sure know what stocks will do in the coming months.  I can give you the probabilities but I have no answers.  I also don't know specific risk reward profiles.  In general though this is what we do for our clients and this is what I'd suggest doing.

1.  Know what you own and why you own it.  Check to see if you're comfortable with your portfolio's asset allocation.

2.  Know your investment time horizon.  Think about portfolio and market allocations differently if you are one or two years away from a major event like paying for college or retirement than if you have a 10 or 15 year time horizon.

3.  Look yourself in the mirror and ask this question.  What's going to bother me the most.  What will keep me up at night?  A'm I comfortable watching the markets grind lower and perhaps seeing double -digit losses in my portfolio sometime this year.   Or will it bother me more to raise cash and see the market move higher.  Nobody can answer this but yourself.

4.  De-risk your portfolio.  Get it to a place where you're comfortable with your investments.  Our primary method for de-risking is to raise cash.  Cash may not pay much right now but sometimes earning next to nothing beats losing money.  While not at what I consider excessive levels, I currently have higher cash levels in most client accounts than perhaps what is the industry average.  My cash levels are such that I believe my clients will still participate in much of the market's advance should stocks continue moving higher.  The cash levels should also help cushion a market decline and give us the opportunity to find value should a market correction occur.  That's something I'm comfortable with as are I believe my clients.  It is often easier to make up opportunity than losses.  

*Long ETFs related to the S&P 500 in client and personal accounts.  Please note that positions can change at anytime without notice here on this blog.

Push Back

I don't allow comments on this blog.  Never have and probably never will.  The main reason is that I write solely for my clients and friends of the firm.  I write for people who want to know what I think about the investment matrix.  I'm not here to be a platform for other folk's agendas.  Never-the-less if folks want to find me they can and all I can say is "wow"!  My column on my belief that Mrs. Clinton will be the next President has probably the most push back to anything I've ever written.  Several people wanted to engage in some sort of political dust-up over this.  I was amazed at that but this isn't the first time I've experienced this sort of thing this year.  Not to long ago I was at a party where I was asked by a woman who I thought was going to be  the next President.  I said {for many of the same reasons that I listed here on Friday} that probability suggests Mrs. Clinton will win.  This was pleasing to her but then she spent the next ten minutes trying to goad me into a political fight regarding feminism, white privilege etc.  I'm sure I disappointed her because I wasn't going to go there.

Like everybody else I have opinions on matters political and the like.  I do not express them here because I don't believe they add to the investment process.  My clients pay me for my investment ideas not my political ones.  Never-the-less there are times when politics and investments intersect.  Presidential elections are one of these times.  Like many Americans I am very disappointed with the discourse of the present campaign and I'm not overly fond of any of the candidates left standing.  Regardless of what I think though somebody will replace President Obama next January and it's therefore useful to try and game out the system in order to get some idea of who that person will be.  

When talking about things like this, particularly when giving out news that some folks might not like, I start out by saying something to the effect that if I have a pen in my hand and let it go it is going to fall to the ground.  I might prefer if I let that pen go that it floats right next to my arm at the ready for me to reach out and grab it for use.  Reality, however, tells us that in its natural state nothing repeals the law of gravity.  Reality may not be what people want to hear but it is what it is.

Since we cannot know the future we must deal in probabilities as this sort of analysis gives us the best opportunity to perhaps discern what reality will look like at some future time.  When I say that there is an extremely high probability that Mrs. Clinton will become President, I say that without comment on what I think should that occur.  My opinions on this don't matter to the investment process.  Why I care in regards to investments is that Presidents have a huge inpact on the economy and the economy ultimately drives the stock market.

What I care about most right now in the next President is that he or she searches for ways to open up the economic throttle.  If that happens then a lot of our problems become moot and the social issues  that folks seem to enjoy fighting over can then perhaps become a bit less divisive.  In that regard, I don't have to like the next President and I don't care if it's its a he or a she.  Heck, if the next President can develops economic policies that lead to good paying jobs then the next President can be a four armed purple martian as far as I'm concerned.

Back Wednesday.

The Long View {An Introduction & Hillary Clinton}

Today we're going to introduce a new section of the blog that I'm going to call "The Long View".  In these posts we're going to briefly point out some longer term trends, themes and breakthroughs that may be drivers of the economy longer term.  The economic impact and repercussions of these longer term changes may be direct or subtle.  These trends may also not have current implications for stocks.  That is, the long view will unlikely make you money today.  But the cumulative impact of each of these will form the foundation of the new economy, for better or worse, over the coming decade.  So let's get to it.

Today we'll begin with the political observation that the probabilities have become much more likely that Hillary Clinton will be the next President of the United States.  This is not meant to be a political call, but simply a recognition of the processes that elect our President.  Those forces are rapidly coalescing around her to the point now that the odds of any of the two most likely Republican candidates, Donald Trump or Sen. Ted Cruz beating her in a general election are extremely small.  We elect Presidents via a process known as the Electoral College.  I'm assuming if you are reading this you know how that process works and I'm not going to take up the space explaining it here.  Below I've reprinted a New York Times map of the 2012 election results showing how both candidates did in the Electoral College.  President Obama handily won with 332 electoral votes over Mitt Romney.  These results are virtually identical to the 2008 race when President Obama won 365 electoral votes.  The 2012 changes were Indiana and North Carolina voted Republican which is closer to how they've historically voted in past presidential races.

It takes 270 electoral votes to become President.  For either of the two front running Republican candidates to beat Mrs. Clinton you would need some of these states that voted for President Obama to switch.  I look to the map and see only a few possibilities.  New York might vote for Trump and a Republican candidate would have an outside shot of putting Florida, Ohio and Colorado back in the GOP tent.  Currently Mrs. Clinton leads in polls in all of these battleground states.   A Republican candidate needs all of these battleground states to win assuming the GOP can hold onto all of the states its candidate won in 2012.  Florida may be a tougher win for the GOP now due to both Trump and Cruz's stands on immigration while a state like Arizona could potentially swing Democratic on this issue.

There are things that could change this analysis:

1.  Mrs. Clinton could face larger legal issues stemming from the use of a private server while she was Secretary of State.

2.  She could have an unexpected health issue.  She is I believe over 70.

3.  There could be a major stumble or scandal surrounding her campaign.  An unexpected development where she behaves poorly could cause the public to question her again.  She already has very high negative ratings in the polls.  The issue for the GOP is that their two front runners right now have worse negatives than Mrs. Clinton.

4.  The Republicans could come out of their convention having somehow nominated a moderate like John Kasich who would be more competitive in a general election campaign.

5.  Against all expectations, front runners Trump and Cruz are somehow able to pivot towards the center in a general election campaign.

Failing any of these, then Mrs. Clinton's odds of becoming President are already high and may continue to grow in the coming months.  If she wins then her Administration will likely continue many of the same policies enacted by the Obama Administration.  Wall Street may have already figured this out.  This could be one of the reasons stocks have rallied since February.  While it is always dangerous to look for cause and effect in the markets, I will point out that the current rally largely coincides with the period when Mrs. Clinton took control of the Democratic primary process over Sen. Sanders and has all but assured herself of the Democratic nomination this summer in Philadelphia.

Back Monday.

Chart Talk {04.20.16}

Chart is from Tradingview.com.

One interesting note when looking at this chart.  If you had bought the S&P 500 back in early December, 2015 you would be slightly above water on the trade.  You would have endured two downdrafts of roughly 10% during the period.  However, you would have also collected $6.39 in dividends since your purchase.  The dividends are indicated by the circled "D"   on the chart.  If you go to Tradingview.com and punch in SPY you can hover over that "D" and see the date and the amount of each payment.  The annualized yield is just slightly over 2%. The current yield on a one year US treasury is 49 basis points or 0.49%.  The 10 year US is 1.77%.  If you can stomach the volatility in markets and understand that at some point corrections in stocks occur, you can currently receive a better yield in the S&P 500 than you can from US government bonds.  I stress yield here because I'm focusing solely on the yield, not price appreciation or total return.  I also will point out that the actual dollar gains from that yield can be lowered or wiped out when stocks correct.  However in the case of this current market phase, where we've basically gone nowhere since December of 2015, you've literally been paid to wait by owning SPY.

*Long ETFs related to the S&P 500 in client and personal accounts.  Please note that positions can change at any time without notice.

Thoughts {04.19.16}

Stocks have started the day slightly higher.  Right now the markets have advanced nearly 16% since their lows back in February.  Investors search for a reason.  One could throw out all sorts of theories.  If I had to take a stab as to why we've been moving higher I'd cite the following:  

Market's became too negative versus actual economic activity.  Look it's no secret the US economy isn't growing like Topsy but it is growing.  Our real growth rate is likely higher than what we see because I'm convinced we don't have the tools to accurately measure the modern economy.   I've discussed this before but to use as an example, I'm not sure we know how to measure the cumulative effect of the woman, be it a house wife or somebody who's in the work force, that at night sits in front of her TV knitting or making jewelry which she then sells on Etsy.  I personally know two people who do just what I've described.  Their profits may be modest but the cumulative effect of this must run into the millions of dollars.  

Earnings estimates have rolled out now to the 2nd quarter of 2016 and for the first time in about a year we're seeing rising earnings estimates out in that period.  The gains are modest but they are gains.  It doesn't make the markets PE shrink much right now but the correlation between rising stock prices and rising earnings is an historically proven event and that has undoubtedly helped at least with market sentiment.

Rising oil prices.

Accommodative Federal Reserve.

Or it could be something we don't know about.  What is for sure is that just when markets looked like they had given up the ghost last winter, they turned the other way.  Now with stocks having erased all of their early 2016 losses what will the markets do?  Nobody knows for sure.  Even all of the glib voices you hear on TV or radio {and there are more of them now with stocks in the green} don't have an answer to this.  For all of the reasons I've given why maybe the markets have gone up, I could throw out a statistic that says they should be going down.  At some point those statistics will matter.  Right now it seems they do not. 

The route we choose when managing client's assets is a probabilistic and systemic assessment of our indicators.  We let them be our guide.  It is not a perfect system because there are no perfect ways to look into the future, but they have served us well in the past and we trust them as we sail each day into uncharted waters.

*Etsy is likely a portfolio holding of certain ETFs we own in client and personal accounts.  We do not follow Etsy's stock and have no opinion of the company or idea of what its stock might do.  Positions can change at any time without notice.

Tax Day

So today is when everybody has to file their 2016 tax returns.  You received a break this year due to a holiday in Washington DC.   Usually today you can read articles that talk about how much you pay in taxes, who doesn't pay taxes and what day of the year you finally finish paying off the Government and start working for yourself.  Then there's all the articles on how bad the Federal debt has become.  I found one person's take on how the Federal Debt actually isn't as bad as it appears.  So go read "America Isn't Going Broke".  I'll deal with everybody's last minute tax issues today, including my own.

Back tomorrow.

Thoughts {04.13.16}

A lot of handwringing today about a miss in retail sales.  US retail sales were down 0.3% in March vs. an expectation of a 0.1% increase.  There may be something to a slowing consumer here but I also think consumers are spending money in a different manner than they did 5 to 10 years ago.  See what I wrote about this last May.

We wrote about oil back in February when the sentiment was extremely negative.  Check out what it's done since then and check out what happened to energy stocks* yesterday.  May talk more about this next week.   

The rest of this post has little to do with the markets so if that's all your interested in then you can stop now.

There's a group that wants to send thousands of tiny starships to Alpha Centauri, our nearest star group {I say star group versus star system because the Alpha Centauri system has three stars}.  Their idea is probably far fetched and you can read about it here.  Whether it happens or not, the reason I bring this up is that this is illustrative of our modern world.  These gentlemen claim they can send these tiny probes to Alpha Centauri system on a journey that would take about 20 years.  It wasn't that long ago that scientist assured us that something like this was impossible, that it would take at least 100 years to travel to this system using conventional systems.  Instead we have the technology and the advances that let us think outside of the box.  Today in many disciplines and industry we now talk about the impossible being possible.  Again a subject for another day. 

The Stanley Cup playoffs begin tonight and the Chicago Blackhawks begin their defense of the cup at the St. Louis Blues.  These two teams are arch rivals and so for that I'm coining a new phrase.  I say it's new because I did a cursory review on the internet and found nothing.  Since it is a compound word and represents a concept, it will be in german.  I hope my german is correct!   The new term is "mannschafthass", or team hatred.  I use it for when you hate the opposing team so much that the thought of losing to them in a sporting event is almost unbearable.  Sort of like what this Kentucky fan must have been feeling when she realized her team was going to lose to Indiana in the most recent NCAA college basketball tournament.  

Not trying to make fun of her because we've all been there.  If you follow sports then you've experienced having to endure the unbearable, watching your favorite team lose to the somebody you just can't stand.  Ohio State-Michigan in football and Red Sox-Yankees are some of the best examples of "mannschafthass".  Blues-Blackhawks may not be in that league but it's pretty close.

I have meetings all day tomorrow and may have to deal with client tax issues on Friday.  I'm therefore  going to clear the deck for any last minute problems clients might have.  No posts tomorrow and maybe not Friday.  Back for sure Monday. 

*Long energy ETFs in client and personal accounts.  Positions can change at any time.  There is a possibility we have been or will be buyers of energy in the near future.  This last sentence is for disclosure purposes only and should not be taken as a recommendation for individual readers to act on this piece of information or any other information disseminated on this blog.  You should never purchase or sell any security based on what you read here without doing research on your own or discussing such with your own investment advisor.  Better yet, you can hire us!

Thoughts {04.12.16}

So I wanted to put up an hourly chart of the S&P 500* today that would have shown a disturbing pattern that has recently emerged.  Market has started showing a pattern of being up early and then selling off as the day progresses.  Yesterday opened up about 3/4 of a percent and then proceeded to sell off.  Same pattern persisted on Friday.  This may be nothing, just a part of the crazy randomness we've seen on a daily basis over the past 18 months.  Yet it is also a sign of distribution-that is when sellers lean heavily into an up market in order to book profits.  Will have to watch and see if this pattern continues.

The International Monetary Fund cuts global growth forecasts again.  IMF thinks global growth will now be 3.4% this year (down from 3.6%}.  I'll take the under on that.  In fact I'll bet true global growth in 2016 will be less than 2%.   

You have three extra days this year to file your taxes.  {Thank Washington DC-the city itself not the Federal Government.}  You can also now pay your taxes at select 7-eleven stores.  Your Federal Government working for you!

*Long ETFs related to the S&P 500 in client and personal accounts although positions can change at any time. 

Thoughts {04.11.16}

Stocks look to shake off last weeks lethargy as futures rise modestly at the open.  Markets still overbought by our work.

Is it just me or is anybody else amazed with how much time I have to spend  just dealing with all the little quirks and unexpected developments seem to constantly arise with technology.   I tried to do an upgrade to my cellphone over the weekend with AT&T* that entailed me spending more than 30 minutes on a Saturday afternoon with a customer service representative.  At least she admitted the issue wasn't my fault and worked diligently to resolve the issue which is more than I can say for Comcast from a couple of weeks ago. At least there was somebody to talk to over at AT&T.  There was nobody to talk to when I upgraded my iPad Sunday to Apple's IOS 9.3.  That was another 45 minutes during of trying to figure out online what had gone wrong.  Look, I think a lot of this new technology is wonderful but I sometimes miss the simplicity of the old days when for example the remote on your TV turned it on and changed the channels.  At least it rained here in Chicago over the weekend.

In that line of thinking, I'd also wish all the cable companies and cellphone companies would quit calling me.  These guys are constantly trying to sell me products for my TV and internet that I will never use.  Heck on my TV I already can see over 500 channels and I probably maybe in the course of a year watch maybe 30 of them.

Go read Cullen Roche's article, "Is Your Advisor a Fiduciary?"  Key takeaway:

"In my opinion, a financial adviser or portfolio manager should look less like a car salesman and more like a personal trainer/shopper. A car salesman sells you whatever is on his lot, preferably the most expensive car. A good personal trainer/shopper constructs a personal plan for you and goes out and buys the products that will help you meet those goals. They don’t just go out and sell you the product that earns them the most money.  They are experts in understanding what products will serve you best and constructing/maintaining the plan that will serve your best interest in the long-term."

First quarter earnings season begins this week.  Investors already know the quarter was week and corporate America doesn't have last winter's rotten weather to use as an excuse.  The good news for the markets is that news seems to have already been discounted and voices are out there saying that Q1 2016 may be the trough in earnings.  Will have to see what the real world says about that and hear in aggregate what forward guidance sounds like before I'll be convinced we're at the end of this soft spot.

Back tomorrow.

*ATT, Comcast  and Apple are components of various ETFs that we own for clients and in personal accounts.  Positions can change without notice here on this blog.  Nothing in this post should be construed as a recommendation of any kind regarding these securities.

Things To Read Today

Go read these two articles from Zero Hedge.  

Millionaires Are Fleeing Chicago in Record Numbers.- As long as our present political leadership here is neutered then things will continue to get worse.   The best thing that could happen to Chicago would be if Mrs. Clinton becomes President.  Then we would likely lose our mayor to the new Administration, probably Ambassador to Israel.  I will talk more at some point about Chicago and our problems in a future post.

Active Managers Just Had Their Worst Quarter in 18 Years.  Most of the time pundits point to the underperformance at mutual funds as being solely because of their costs and fees but there's more to it than that.  Again that's a subject for another post if folks are interested but the article above does a good job explaining what's been going on recently in the institutional world.

More next week.  At some point I want to talk about the Conflict of Interest Rules that the Department of Labor passed out yesterday regarding retirement accounts.  Want to sit back over the weekend and digest what it all means before I do.    In the meantime you can read about this{Conflict of Interest Rule Could Save Americans Billions in Retirement.} over at Bloomberg.

Back Monday.

Chart Talk {04.06.16}

A chart of the S&P 500 ETF, SPY.   Chart comes to you from TradingView.com.  I've used numbers on this baby so as to hopefully not make it so busy and confusing.  You can click on the chart to make it larger if you want.

1.  Downward sloping trendline from the highs last may.  Bulls want to see this line taken out.  Ideally that would come on heavy volume and solid price movement.  Bears will point out that we've done nothing but come close to this resistance and to them it looks after the past few days as if price is starting to roll over.  

2.   Highlights that region of resistance we've talked about for months now.

3.   The red line shows a longer term trendline that dates back to the 2009 lows.  We briefly penetrated that line time back in the winter.  That was the first time that occurred since 2009.  From there we've decisively rallied. {See 4. } That trendline  {red} will at some point intersect with the other line {green} we showed in point 1 unless one or the other is decisively taken out prior to that event.  At some point the market runs out of room and one of these trends will be proven right.   

4.  Roughly 13% rally from the lows to yesterday's close.

5.  Shows markets are on a longer term and intermediate basis overbought by our work.

*Long ETFs  related to the S&P 500 in client and personal accounts.  Positions can change at any time without notice.

Cemetery Tour!

You can probably do cemetery tours in other cities, especially those where famous people are buried, but I don't think I've seen anything like the celebration of and the cult of death that you see in New Orleans.  Here's a few of the promised photos { some edited by me when I returned home}.  Folks can use these if they want {not sure they're that good} as long as they don't try to sell them.  These are from Lafayette Cemetery Number 1 in the Garden District of New Orleans.

Back tomorrow talking about the investment world.

They're Playing Baseball Today!

Winter was just long and dreadful up here in the north but today {or here last tonight if you are Cubs  fan} they're playing baseball again.  Life is good!

"The one constant through all the years Ray has been baseball. America has rolled by like an army of steamrollers. It's been erased like a blackboard, rebuilt and erased again, but baseball has marked the time. This field, this game is a part of our past Ray. It reminds us of all once was good and could be again."-James Earl Jones as Terence Mann in "Field of Dreams."

New Orleans and Different Perspectives

I return from my spring vacation a bit rested and with a few new perspectives on the world.  We went to New Orleans, a city that I visited when I was ten but of which I remembered little.  I also passed through on a mission trip back after Katrina and I can say that at least externally the city has recovered.  I'm not smart enough to know whether all of the other wounds have healed.    In terms of new perspectives, here are a few that I took away from being there.  

We tend to view New Orleans as a southern city and one who's star has been eclipsed by other cities in Dixie.  On more than one occasion I was told down there that New Orleans is perhaps better viewed as the northern most city in the Caribbean basin.  When seen that way a lot of the city's history, beliefs and views of the world make more sense to a northern and  mid-west yankee like me.  The folks in New Orleans are obviously Americans but I think they have much more situational awareness of what goes on in the countries around us than perhaps the rest of us.  New Orleans is home to one of the largest ports in the US so much of their economic livelihood depends on the basin, whether that be for trade, navigation or oil exploration.  Their lives also depend on it because that's where much of the bad weather comes from.

They also have a different perspective on death.  It's much more out in the open down there than anyplace else in the United States.  Tomorrow I'll post some photos I took on one of New Orleans' famed cemetery tours.  

They also have a different view on who's to blame for the debacle that was the aftermath of Hurricane Katrina.  The people I talked to about this down there place almost all of the blame for the poor response after the storm and after the levies broke on the slow, chaotic pace of FEMA and the Federal Government.  Press reports at the time from the north did not mitigate that aspect but also focused on, as they painted it, the almost incompetent response by local officials as Katrina approached and in the early hours after the storm passed.  That view is not the view of the folks I talked to down there.

I bring all this up because we all have different views of the world and that will affect our perspectives on things.  Somewhere in all those perspectives lies the truth.  The investor class came into 2016 perhaps as bearish as I remember seeing it in several years.  This perspective was rewarded with about a 10% decline from December to mid-February.  Parts of the investor class was and remains more bearish than the markets, which rebounded since then to wipe out all those gains.  What happened?  Likely reality.  The world was not as rosy and growth not as strong as investors thought back in the fall, but it also has turned out not to be as bad as the doomsayers predicted.  Now it seems as if sentiment is changing much more for the positive. Some of those folks that were so negative six weeks ago have given up that view.  I would remind all that markets are overbought and while we have seen a nice rally off the lows, we are more or less break-even for the year, have traded back to that level of peak resistance we've repeatedly pointed to in our chart work and have now spent over 16 months trading in place.  That doesn't mean that I necessarily think the markets are now headed back down.  I don't know.  I just think that one needs to be a bit more jaundiced in one's outlook when the perspectives of investors are as blasé and optimistic as we've seemed to become recently.  

Go to New Orleans.  If for nothing else go for the food.  Don't be surprised if you come back with a few new perspectives yourself.