Breaking Up (with your stock) Is Hard To Do

Don't take your love away from me
Don't you leave my heart in misery
If you sell then I'll be blue
'Cause breaking up his hard to do

Two years ago I bought this great stock because I thought it was an outstanding investment at a fantastic bargain price.  But now it is a terrible stock and is down 22%. 

So it looks like I was wrrr … 

I was wroooo…. 

I was wrong. 

And here lies a serious problem for large investors and small investors alike.  When it comes to investing money, we all become like Arthur Fonzarelli (the Fonz), we hate to admit we are wrong.  This denial causes us to hang on to “bad” stocks for way too long. 

Psychologists tell us that it causes great emotional distress to admit that we have made an investment mistake.  Investing mistakes are more agonizing because the loss is financial and quantifiable.  This tendency is much more prevalent in men than women due to the “male ego” effect.  Women dump losers more quickly (just like in single bars) and this is why women investors (both professional and individual) tend to outperform men in studies evaluating gender and investing. 

 

To admit you made a mistake, you must try to resolve the fact that out of the thousands of stocks, mutual funds, EFTs and commodities available, you actually made the conscience decision to buy this one.  And boy did you screw up this time! 

But you couldn’t really be that stupid, could you?  So you begin to lie to yourself.  It really isn’t a bad stock, it’s just that some bad things have happened to it.  Good things are going to happen soon.  If I just wait, the stock will recover and will even make money just like I expected.  Then I won’t be stupid, no I will be an investing genius, just like Warren Buffet. Oh yeah!   

But it doesn’t usually work that way.  Typically the stock continues to slide until it hits a bottom and then stays down there for a long time.  You hope it comes back, but this hope is not based on reality. Sadly, the Easter Bunny never shows up with any “recovery” candy. 

I am writing this because I just sold off one of my losers.  About two years ago I bought this highly-recommended, popular, utility stock.  It offered solid growth potential with a great dividend.  I got it at a “bargain” because some temporary factors had knocked down the price.  The stock was so good that I bought more than usual (I now have a personal limit on how much I invest in any one stock). 

Initially the stock performed as I expected.  The price went up and I almost bought more when it bounced back a little.  But then the economy slowed and demand for electricity waned.  Natural gas prices dropped which made this particular utility’s cost of production less competitive.  Finally, some  negative internal information about the company leaked out which involved politics.  Of course this bad publicity received much attention in the middle of an election campaign. 

Then stock of course began to slide.  It never dropped much at one time.  But the negative pressures listed above resulted in a slow leak over time.  Of course I told myself that this was just temporary, that the slide was illogical and would stop very soon.  And the dividend, the dividend was still strong so I could afford to wait for the stock to return to profitability. Then the viability of the dividend came under question due to the weaker company balance sheet.  And then I asked myself why major investors weren’t buying large chunks of the stock considering the dividend was even better due to the lower price?

Remember when you held me tight
And you kissed me all through the night
Think of all that we've been through
Breaking Up Is Hard To Do 

So I sold the stock.  And even though I believe everything I have written in the post, it still hurt to sell the stock.  It still was distressing to admit I had made this mistake.  The brain says “yes”, but the heart still says no.  But if you are going to become a good investor, you got to know when to “fold ‘em.

Breaking up with your stock is indeed, hard to do: 

Investario: I’m sorry Stockeeta.  It’s over between us, I’m leaving you. 

Stockeeta:  Please, no.  I know my returns are down, but it’s just a cycle I’m going through.  I’ll change and you will be happy with me once more. 

Investario: Look Stockeeta, I was first attracted to you by your high yields, but your returns are sagging and there are other choices available with very attractive profits. 

Stockeeta: But the dividends! I have always provided you with very satisfying dividends!  

Investario: Yes, but word on the street is that your dividends will be much less satisfying in the future. I’m sorry, this is goodbye. 

I beg of you, don't say goodbye
Can't we give our love another try
Come on baby, let's start a new
'Cause breaking up is hard to do

Train Wrecks and Washing Off the Slime

You say "Goodbye" (or in my case, “Bye, Bye”) and I say "Hello, hello, hello".
I don't know why you say "Goodbye", I say "Hello, hello, hello".
I don't know why you say goodbye, I say hello

(Since we started with the Beatles, an alternative song could have been “Help” and some people would have even gone with “Back In the U.S.S.R”!)

Well, Hello Mr. President

American has spoken and apparently we are satisfied with economic growth of less than 2% percent.  The good news is that at some point we will exceed expectations, the bad news is the bar has been lowered.

This blog has gotten more political than I want it to be this year, but this was the result of having a presidential election during difficult economic times between two candidates with starkly different economic philosophies.  With that said, here are my final economic/political observations for this cycle:

Economic Growth: Just because Mitt Romney had a five-step plan, it wasn’t guaranteed to work and would have taken some time to implement.  In addition, his tax plan sounded like something designed to get votes instead of solid tax reform.  If President Obama (it hurt some to type that) leaves the economy alone and does not clamp down on the domestic energy boom, there is hope for an eventual stronger recovery.  The U.S. economy has a tremendous ability to heal itself.  Once the “Fiscal Cliff” gets resolved I expect GDP to make it over 2% (woo, woo).

Job Growth:  Romney planned to “create” 12 million jobs in four years.  However presidents can’t actually create jobs, they can only create an environment that is conducive for job growth.  Unfortunately President Obama (ouch again), had problems grasping this concept in his first term, let’s hope for a change in term two.   Even if job growth remains at its current slow rate for the next four years, the economy would still add around 8 million jobs.  This is “only” 4 million less than Romney’s plan, which is still significant if you are currently looking for work.  However, job growth should start to increase (again through self-healing) soon and continue to grow over the next few years.  I would not be surprised if the economy adds the 12 million jobs (without Mitt’s help) over the next four years.

Obamacare:  This is a huge mess.  The system was destined to fail because it costs too much and couldn’t be paid for (without huge additional tax increases).  But now we learn that while many were crying over the Supreme Court ruling on the individual mandate, the court also ruled that states do not have to implement the expansion of Medicaid provision.  The states also can opt out of creating the insurance exchanges.  The federal government is then supposed to set up the exchanges, but there is no money allocated to do this. 

In addition, the economic law of unintended consequences is starting to kick in big time.  Restaurants, hotels and other industries that use many part-time workers plan to cut workers hours to avoid the added cost of Obamacare.  It is also expected that small businesses will stop growing when they reach 49 workers to prevent paying higher healthcare costs.  Businesses (and individuals) will continue to make decisions that circumvent provisions of the law to save money.

Unfortunately, this is a train wreck that we get to watch from inside the train.

Rejecting a Business Mogul as President:  In June I wrote two posts advocating electing a business person as president.  While I still believe we needed someone who understands business running the economy, a business mogul has liabilities as a candidate.  Americans want their president to have core convictions, even if they don’t agree with all of them.

A business mogul only has one core conviction: What makes me money? It is what makes the tycoon successful and requires that he changes direction as conditions change.  Romney tried to use this strategy for political success but in politics this is labeled “flip-flopping”.

President Obama displayed more core values than Romney and core convictions beat no convictions every time.  Sometimes an election comes down to the question of “Who will screw me less?” and many voters decided they couldn’t trust the rich guy.

An Apology:  I apologize to any of my readers who may have been offended by anything that I wrote over the last few months that they perceived as too politically biased. I promise that I will not write anything politically oriented ever again, unless of course somebody does something economically stupid. 

Excuse me, I am now going to take a shower and wash off all this slime.

 

Will The Economy Ever Get Back In Sync?

I'm doin' this tonight,
You're probably gonna start a fight.
I know this can't be right.
Hey baby come on,

We start off with a little ‘NSYNC because this economy is so out of sync.

In June several key economic indicators were ‘flashing red” and I wrote that I thought the economy was entering into a new recession. Fortunately, this forecast was wrong.   I still believe the economy may have stopped growing for a few weeks around the end of June, but instead of continuing to drop it bounced back to grow weakly in Q3.

Typically when the economy drops to 0% or negative growth, it continues to fall into a recession.  This is why the ERCI (Economic Research Cycle Institute) model has predicted two recessions in the last year that have not happened.  Their model assumes that once the economy stops growing, it continues to fall. However as the economy bounces softly on the bottom of this cycle, this is not happening under current conditions.  Fortunately there is not enough downward pressure to push the economy through the floor, so we are in a holding pattern.

The usually accurate, predictive, economic indicators continue to malfunction.  This is a result of the economy being “out of sync”.  Usually the housing market is a leading driver of the overall economy. However, the housing market crashed much harder than almost all other industries as a result of the Great Recession.  The rest of the economy has been slowly recovering for over two years, but the housing market recovery is less than 8 months old.  Now just as the housing market is picking up steam, the rest of the economy is losing momentum.  This results in the economy bouncing between 0% and 1.7% GDP (I’ll address the most recent GDP report later).

This is the Ying-Yang economy.  We are floating on the ocean, bobbing up and down.  Never sinking, but not really going anywhere either. If this economy was a country, it would be Malaisia.  Just look at the recent data:

Retail Sales – Dipped earlier in the year, but were up 1.1% in September

Industrial Production – Down 1.4% in August, up 0.4% in September

Index of Leading Economic Indicators – Down 0.4% in August, up 0.6% in September

Chicago Fed National Activity Index – Down in August, up in September

Los Angeles Port Activity – Inbound up 3%, Outbound down 2% (latest monthly data). Traffic has basically flat lined for the last several months.

Bank Lending – Very flat for the last several months

Job Growth – July = 181,000. August = 142,000. September = 114,000. Weak and flat.

Inventories – Have outpaced sales, which means manufacturing and freight markets have pulled back

Many Other Industries and Indicators – Are showing a flat pattern with small bounces up and down

What’s Next?

The first Q3 GDP report had the economy growing at 2.0%.  However increased government spending was responsible for a whopping 0.7% of the 2.0%.  Why the government would spend so much money in the quarter before a presidential election, I’ll never know.  It appears that they may have spent the entire military budget in Q3.  This means the Pentagon won’t have any money to buy even toilet paper the rest of the year. But this is the military, so they know how to get out of sticky situations.

I would also bet the farm on the 2.0% number being revised downward  after the election. My guess is the final Q3 number will be no higher than1.8%, which means after factoring out the government spending boost, the “real” growth may have been around 1.1%.

My panel of economic experts forecasts the following GDP growth rates: Q4 = 1.4%, Q1-2013 = 1.5%, Q2 = 1.9%, Q3 = 2.2%.  The good news is the growth increases every quarter.  Of course the bad news is the increases are so small that you have to work your way up to 2.2% growth.  The panel’s forecasts have been very accurate this year so I think this is consistent with this “bobber” economy.  Unfortunately these GDP rates historically have not resulted in a lower unemployment rate.

My guess is the panel’s forecast assumes no change in economic leadership.  So if you keep doing what you’re doing, you’ll keep getting what you’re getting.  But maybe it won’t turn out that way.  The economy is out of sync, but you will know a change is coming if on the morning of November 7 you hear us getting back ‘NSYNC.  

They want better GDP!

I know that I can't take no more
It ain't no lie,
I wanna see you out that door
Baby, bye, bye, bye...
Bye Bye 

We’re Shakin’ Cause The Economy’s Not Bakin’

Good evening, this is Eugene Roush reporting from the World Economic Speedway.  There is much excitement here because in just a few weeks we will find out if there will be a new driver of the U.S.A. car or if people will decide to stick with the current operator.  I am joined today by renowned NASCAR driver Ricky Bobby of Talladega Nights fame.

Eugene: First we are going to talk to current driver Bearleft Orama.  Bearleft, how do you think you have performed as a driver the last four years?

Bearleft: I have driven the car just great.  I’ve put my foot on the accelerator and kept the car on the right course.  I am an excellent driver and absolutely deserve to continue driving for the next four years.

Ricky Bobby: How fast you driving this thing?

Bearleft: I’m doing around a 1.3 GDP.

Ricky Bobby: 1.3! I can go faster than 1.3 riding naked on a tricycle!

Eugene: Now don’t exaggerate

Ricky Bobby:  No really, I have.  Want to see the photos?

Eugene: No! -- Bearleft, why are you going so slowly?

Bearleft: The previous operator of the car ran it into the ditch and caused considerable damage.  Me and my team had to repair it and now this is all the faster it will go.

Ricky Bobby: That sounds like you are making some wimpy excuses.  Are you sure that’s all the faster it will go?

Bearleft: Look, I’m trying really hard and I care deeply about going faster.  I know I’m not driving as fast as the Chinese car, but just give me more time and I know I will drive much faster.

Ricky Bobby: Trailing the Chinese? That’s disgraceful. – Look dude, if you ain’t first, you’re last!

Bearleft: Let me be clear: I am a great driver.  If you don’t believe me, just ask me or anyone on my team. I’m the best there is, plain and simple.  When I wake up in the morning, I whiz excellence.

Ricky Bobby: Hey, that’s my line! (Actual line from the movie: I p*** excellence.)

Bearleft: Not anymore. I’m the king of this track!

Eugene: Now let’s talk to the man challenging Bearleft for the opportunity to drive the U.S.A car for the next four years, Richie Richney.

Ricky Bobby: Those are interesting drivin’ gloves you got there.

Richie:  Oh these aren’t driving gloves; these are my silk driving mittens. They’re from France!

Eugene: Are you sure the people will accept a driver wearing such expensive “mittens”?

Richie:  Why not?  Underneath the mittens, my hands are human, just like theirs, although with a much better manicure.

Eugene: Do you think you can drive the U.S.A. car faster than 1.3 GDP?

Richie:  Are you serious? My grandmother could go faster than 1.3 GDP. In fact all 12 of my grandmothers could drive faster than that!

Ricky Bobby: You got 12 grandmothers? How is that possible? Your grandfather must have been a real tomcat!

Eugene: Why do you believe you would be a better driver than Bearleft Orama?

Richie: I’ve had lots of experience driving smaller cars on other tracks.  I drove the Bain car and had it zooming really fast.  I drove the Olympic car to victory and I once drove the Massachusetts car on the American circuit.

Eugene: How are you going to get the car to go faster?

Richie:  I plan to put high octane fuel in the tank and to take off all the restructure plates.

Eugene: Can you give us more details?

Richie: Uh, no I can’t.

Eugene: How about you Bearleft, what is your plan?

Bearleft: Plan? I don’t really need a plan.  Remember, I whiz excellence.  Just watch me!

Richie: Oh yeah?  I can whiz excellence too! Only faster!

Eugene: Run Ricky Bobby! It’s turned into a giant whizzing contest!

Ricky Bobby: Shake and Bake! I just wish I would have brought my rain coat!

Eugene: Ricky Bobby, what happens if neither Bearleft Orama or Richie Richney can drive the U.S.A. car any faster?

Ricky Bobby: Then it’s time to pray to that little baby, in that little manger…… 

Shocking News About The Volt

Three years ago “American” cars held a 100% market share of my garage.  We favored domestic automobiles due to our “blue-collar” roots.  My father-in-law was a municipal union worker for many years.  I was raised exclusively on United Autoworker Worker wages.  My father was not an autoworker, but worked in a factory represented by the UAW.  This heritage had always influenced our car buying decisions.

But now things have changed.  American cars now hold a paltry 25% market share of my household.  First, my daughter got a used Kia.  Strangely enough, my father-in law (a Korean War veteran) became a strong admirer of Kia cars before his death.

Next, my other daughter chose a Hyundai Elantra for her college graduation gift.  Her other options were a Mazda and a Nissan.  She refused to test drive a Chevy.  I would have forced her to test drive a Ford, but they are not part of our supplier discount program.  Her Elantra was an award-winning model and my daughter is very pleased with the car.

Then my wife bought a Mazda 3 (another award winner) this year.  My wife was very brand loyal to the Saturn brand.  Three years ago we owned three Saturns, and she certainly would have bought another if General Motors had not discontinued the line.  She loves her new Mazda.  My Saturn Aura, one of the best cars GM has ever made, is the last Yankee standing.

The Last "Yankee" Standing

And just as America cars lost market share in my driveway, they also lost share of the total market.  The value and quality of cars started to decline years ago and foreign competition has continued to improve, especially the Korean companies.

American cars are providing less value because they cost more money to produce.  This is the result of paying generous union wage and benefits even in the face of increased competition and foreign companies opening factories in the U.S.  The American companies are also saddled with large pension benefits and retiree medical expenses.  In addition, I believe the lack of competitive advantage has led to complacency in new product design, quality standards and creativity.

General Motors and Chrysler were already in a swirling downward cesspool when the Great Recession hit and threatened to flush the companies away.  Typically, the companies would have gone through a structured bankruptcy.  The purpose of the process is to restructure the resources and debt of the troubled company so it is able to continue operations in a reduced, profitable, condition.  This is very beneficial since it preserves investor, creditor, and employee value.

But there was no structured bankruptcy this time. There was a government bailout with partial government ownership.  Recently several commentators have referred to the bailout in very positive terms.  This is so wrong! A bailout is a very negative thing. It means you have failed so miserably that there is no way you can climb out of the mess by yourself.  It should be a very shameful, embarrassing, occurrence.  

A big government bailout has winners and losers and the government gets to select who the winners are.  It can be argued that the government did not bail out the car companies, but bailed out the UAW.  It some cases union pensions were preserved over salaried pensions and union wages won out over preferred stock holders.

And while a bankruptcy forces a company to correct its bad practices so that it can regain profitability, a bailout doesn’t have to do this.  The government initiated some peripheral changes, but did not address the big issue: GM union wages and benefits are still significantly higher than the competition.  Because the root cause of GM’s problems were not addressed, I expect the U.S. operations (they are doing well in China) to “fail” again in the future.

In a free market economy the government should never own any part of a company.  This is what communists do.  Unfortunately governments do not understand business, but they sure do understand politics.  A good example of this is the Chevy Volt.  It has been reported that a Volt costs $80,000 to produce.  The asking price was $40,000, but there were few buyers so they had to drop the price to $30,000.

The Volt: Shocking "Profitability"

The manufacturing costs will fall as volume rises, but how long will it take for the Volt to be profitable?  And this is a “high-tech” product which means new technology will make the Volt obsolete in a shorter time.  Producing a product for $80,000 and selling it for $30,000 is a business model only the government, and the Underpants Gnomes from South Park, can buy into.  It does produce many “green jobs” however, you happen to be paying for the bailout with your green.

It is also rumored that the recent increase in Volt sales is not just due to the price cut, but has to do with the government buying many Volts for its own use.  Boosting Volt sales before the November election may be very bad business, but it is very good politics. 

Avoiding the Portfolio of Doom

Last time I compared the current investing environment to an Indiana Jones movie.  So what can the average investor do to prevent his holdings from becoming the “Portfolio of Doom”? 

You must cross the high, rickety, bridge to the acceptable rate of return on the other side, without plunging into the crocodile pit below.  Here is some advice on how to do this. I am not a financial professional, however I do manage the GeoDon Fund, a portfolio of stocks and bonds that was originally put together by my grandfather George over 50 years ago.  The GeoDon is up 11.1% YTD vs. 15.4% for the S&P 500.  Not too shabby for a conservative rated fund.

Diversify and Then Diversify Even More

Diversification is needed by the average investor to prevent you from making big mistakes and to spread out your risk.  Because the current environment is so risky, you should diversify even more than normal.  For stock and bond people, this means putting $5000 into two stocks or bonds instead of $10,000 into one.   I know that this increases your investment costs, but paying extra commission reduces your risk is and this makes it worth it right now.

For mutual fund investors, if you are in three mutual funds in your 401-K (the minimum I recommend), consider now spreading your money into two or three more.  Just make sure the additional funds are solid ones.  Look at the five-year history and be aware of how they performed in the worst year because things could get nasty again.

Gold and Silver

Gold should be considered strictly a defensive action and this can be a valid strategy for some people.  Do not consider it a value generating investment.  If you lose money, you received a benefit from hedging against disaster.  If you make money, consider it insurance that paid a dividend.  To rely on it as an investment is the same as an NFL team expecting their defense to score enough points to win the game.   Also, it has been reported that Russia is hoarding gold.  This is driving up the current price, but if Russia decides to unload its holdings in the future, the small investor could get stuck.

Silver is like a gorgeous woman that flirts with you, deceives you, seduces you and causes you to fall deeply in love with her.  It is a sultry, steamy, romance until she crushes your spirit and leaves you poor and brokenhearted.  All the good things the commercials say about silver is true, but don’t be sucked in.  The silver market has a history of suddenly imploding for no reason at all.  A careful investor should avoid the “Silver Mines” when climbing through this wilderness.  And copper presents some danger also.  China has been stockpiling copper, so it could be overpriced and the risk of a future sell-off exists.

Opportunities

People always say “I wish I would have got in at the bottom of that one”.  Well there are two sectors that are very close to the bottom that offer a potential big upside:

Water

Demand for clean water is expected to greatly increase in the future.  Companies that purify, transport and provide this water are still very cheap compared to their potential growth.   You can do the research to determine which are best.  I am planning to add a water company (or ETF) to my portfolio in the near future.

Uranium

Uranium prices are still very low.  China, India and Turkey are expected to build many nuclear power plants in the near future.  In addition, even Japan is expected to replace its old, damaged, nuclear power plants with new plants featuring the latest in safety technology.  Next year, demand is expected to rise while supply, due to some unusual circumstances, is expected to temporarily fall.  This creates a potential for a big price spike.
 

Of course investing in uranium companies is very risky.  But the downside is limited because uranium prices are already depressed and should not go much lower.  I do have some money invested in two uranium companies.  Please do your own research to determine what you may want to do here.

Looking Under the Rocks

This tricky investment environment makes it necessary to look for opportunities in unusual places.  The quest to find good investment takes some creativity.  I have used my new “hyper-diversification” strategy to make small investments in two riskier companies, but there are logical reasons for both.

Can he be trusted with your money?

I invested a small amount of money in the Bank of Scotland.  The bank suffered during the European financial crush, but has made an impressive comeback.  I figure that the Scots are so tight with their money (I am allowed to say this because I am part Scottish) that after almost losing it once, they won’t risk letting it happen again.

I also invested a little cash in a Spanish electric utility.  Again this may look very risky, but it really isn’t.  If things totally collapse in Spain, the very last thing to shut down before all the lights go out would be, well, the electric company.  Until then, the stock is up 47% in two months and I can still sleep well at night.  Invest wisely my friends.

The Sound of Silence

It’s quiet, real quiet, too quiet.  The stock market is quiet, the economy quiet. It’s so quiet, it’s downright eerie.  And just like an Indiana Jones movie, you know when it gets this quiet that something very terrible or very good is just about to happen.  And while this makes for a great movie, it makes things very nervous for investors right now.

Investor “Wall Street” Jones is searching for high returns with low risk, which is now as difficult to find as the lost ark.  Jones survived being crushed by the giant rolling debt crisis in 2008, but now is trying to navigate a financial jungle filled with junk bonds, commodities and Chinese, Greek and Spanish obstacles. He must walk across a very unstable bridge that is built with Euros.  A few years ago the bridge was rock solid, but now the bridge is so rickety that it could suddenly collapse and send Jones plummeting to financial ruin.  He is trying to avoid building the “Portfolio of Doom”.

Jones is very concerning about the lack of activity as he navigates through this jungle.  He then reaches a clearing and realizes why things are so quiet.  All the creatures in the jungle are assembled watching two knights engaged in a brutal jousting match.  The winner will be deemed worthy to fight the nasty, fire-breathing, dragon that goes by the name of “Bad Economy”.

"Bad Economy"

One knight, Sir Barack, has been fighting the dragon for over three years.  The dragon has been winning this battle and in fact Sir Barack’s pants are currently on fire.  But Sir Barack believes he can slay the dragon if he is just given more time.  The other knight, Sir Mitt, believes the dragon should have been slain by now and thinks Sir Barack’s lance is flaccid and incapable of defeating the dragon.  Sir Mitt believes he is rather good with a lance since he has experience slaying smaller monsters.  The jungle is expected to be rather still until one knight is victorious and the battle with “Bad Economy” resumes. 

Quiet Until November?

This election is so pivotal and the difference in choices (and economic direction) is so great, that it seems like the stock market and maybe even the economy (lack of activity due to uncertainty) have ground to a halt.

In a normal presidential reelection year, the incumbent takes significant actions to stimulate the economy and thus improve his election chances.  Congress usually supports these actions because most of them are up for reelection also.  These actions usually work but can be harmful for the economy in the long-term.  However, an incumbent president doesn’t really care.  If he wins, he just thinks “Hey I’m in for four more years, suckers!”  If he loses, he just says to the winner “Good luck dealing with that mess sucker!”

But this year has been very different.  There have been no big economic stimulants and economic growth has been anemic.  Possible reasons for this are:

A.   The economic is so weak that it can’t be stimulated much

B.   The administration has already fired all the stimulus bullets in its economic pistol and so it has nothing left to try 

C.   The administration is so inept that it has no idea what to do (the Republican favorite) 

D.   The administration has all these great ideas (that for some reason were not tried before) but the stupid Republicans in the House of Representative are obstructionists and won’t agree to anything (the Democratic favorite) 

I’m hoping the answer is B, but I fear it could be A or C. (you can vote by commenting after this post)

 

Do Not Believe the Election Year Models

You may read articles about what the stock market does in certain months of an election year and for that matter what will happen after the election.  As I have said several times this year: the traditional economic models and indicators are broken.  This is a strange and unique situation so do not invest based on these historic-based models. 

Something Big is Going to Happen Soon

But things are too quiet.  Something big has to happen before the end of the year, unfortunately in this crazy situation it could be a spike up or a crash down.  If I had to bet, I would bet for a drop.  In May, I forecasted an S&P 500 Index low of 1245 this year before a recovery.  I expected the drop to have started already so I am much less confident of that forecast now.  But it remains quiet, much too quiet.  So put on your Indiana Jones hat, keep your head low, and beware of the snakes that can poison your portfolio.