September 26, 2018

Global Market Comments
September 26, 2018
Fiat Lux


Featured Trade:
(GM), (F), (TSLA), (GOOGL), (AAPL)

September 4, 2018

Global Market Comments
September 4, 2018
Fiat Lux

Featured Trade:
(MSFT), (VXX), (TLT), (AAPL), (KO), (GM), (F)

August 23, 2018

Global Market Comments
August 23, 2018
Fiat Lux

Featured Trade:
(X), (IBM), (GM), (MSFT), (INTC), (DELL),


Why the Dow is Going to 120,000

For years, I have been predicting that a new Golden Age was setting up for America, a repeat of the Roaring Twenties. The response I received was that I was a permabull, a nut job, or a conman simply trying to sell more newsletters.

Now some strategists are finally starting to agree with me. They too are recognizing that a ganging up of three generations of investment preferences will combine to drive markets higher during the 2020s, much higher.

How high are we talking? How about a Dow Average of 120,000 by 2030, up another 465% from here? That is a 20-fold gain from the March 2009 bottom.

It’s all about demographics, which are creating an epic structural shortage of stocks. I’m talking about the 80 million Baby Boomers, 65 million from Generation X, and now 85 million Millennials. Add the three generations together and you end up with a staggering 230 million investors chasing stocks, the most in history, perhaps by a factor of two.

Oh, and by the way, the number of shares out there to buy is actually shrinking, thanks to a record $1 trillion in corporate stock buybacks.

I’m not talking pie in the sky stuff here. Such ballistic moves have happened many times in history. And I am not talking about the 17th century tulip bubble. They have happened in my lifetime. From August 1982 until April 2000 the Dow Average rose, you guessed it, exactly 20 times, from 600 to 12,000, when the Dotcom bubble popped.

What have the Millennials been buying? I know many, like my kids, their friends, and the many new Millennials who have recently been subscribing to the Diary of a Mad Hedge Fund Trader. Yes, it seems you can learn new tricks from an old dog. But they are a different kind of investor.

Like all of us, they buy companies they know, work for, and are comfortable with. During my Dad’s generation that meant loading your portfolio with U.S. Steel (X), IBM (IBM), and General Motors (GM).

For my generation that meant buying Microsoft (MSFT), Intel (INTC), and Dell Computer (DELL).

For Millennials that means focusing on Netflix (NFLX), Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL).

That’s why these four stocks account for some 40% of this year’s 7% gain. Oh yes, and they bought a few Bitcoin along the way too, to their eternal grief.

There is one catch to this hyper-bullish scenario. Somewhere on the way to the next market apex at Dow 120,000 in 2030 we need to squeeze in a recession. That is increasingly becoming a topic of market discussion.

The consensus now is that an impending inverted yield curve will force a recession sometime between August 2019 to August 2020. Throwing fat on the fire will be a one-time only tax break and deficit spending that burns out sometime in 2019. These will be a major factor in U.S. corporate earnings growth dramatically slowing down from 26% today to 5% next year.

Bear markets in stocks historically precede recessions by an average of seven months so that puts the next peak in top prices taking place between February 2019 to February 2020.

When I get a better read on precise dates and market levels, you’ll be the first to know.

To read my full research piece on the topic please click here to read “Get Ready for the Coming Golden Age.” 



Dow 1982-2000 Up 20 Times in 18 Years



Dow 2009-Today Up 4.3 Times in 9 Years So Far


August 10, 2018

Global Market Comments
August 10, 2018
Fiat Lux

Featured Trade:
(SPY), (TBT), (PIN), (ISRG), (EDIT), (MU), (LRCX), (NVDA),
(FXE), (FXA), (FXY), (BOTZ), (VALE), (TSLA), (AMZN),
(GM), (F), (TSLA), (GOOG), (AAPL)

June 20, 2018

Global Market Comments
June 20, 2018
Fiat Lux

Featured Trade:
(GM), (AAPL), (SOYB), (WEAT), (CORN)

May 31, 2018

Global Market Comments
May 31, 2018
Fiat Lux

Featured Trade:
(GM), (TM), (F), (HMC), (TSLA) (NSANY),

March 23, 2018

Global Market Comments
March 23, 2018
Fiat Lux

Featured Trade:
(TLT), (TBT), (SOYB), (BA), (GM)

My Personal Leading Economic Indicator

There is no limit to my desire to get an early and accurate read on the US economy, which at the end of the day is what dictates the future of all of our investments.

Honda (HMC) and Nissan (NSANY) import millions of cars each year through their Benicia, California facilities, where they are loaded on to hundreds of rail cars for shipment to points inland as far as Chicago.

In 2009, when the US car market shrank to an annualized 8.5 million units, I flew over the site and it was choked with thousands of cars parked bumper to bumper, rusting in the blazing sun, bereft of buyers.

Then, ?cash for clunkers? hit (remember that?). The lots were emptied in a matter of weeks, with mile long trains lumbering inland, only stopping to add extra engines to get over the Sierras at Donner Pass. The stock market took off like a rocket, with the auto companies leading.

I flew over the site last weekend, and guess what? The lots are full again. During the most recent quarter, demand for new cars raced up to an annual 17 million car rate. Japanese cars are selling so fast in the US that they can?t load them on to trains fast enough.

It is all further evidence that my bullish view on the US economy is correct, that multiple crisis overseas are meaningless, and that the stock market is going to add another 5-10% by the end of the year. The auto industry should lead, especially General Motors (GM) and Ford (F).

As for Tesla (TSLA), better to buy the car than the stock.

Sorry the photo is a little crooked, but it's tough holding a camera in one hand and a plane's stick with the other, while flying through the turbulence of the San Francisco Bay's Carquinez Straight.

Air traffic control at nearby Travis Air Force base usually has a heart attack when I conduct my research in this way, with a few joyriding C-130?s having more than one near miss.


Honda Car Lot

TeslaTesla: Better to Buy the Car than the Stock

Onshoring Takes another Great Leap Forward

Have you tried to hire a sewing machine operator lately?

I haven?t, but I have friends running major apparel companies who have (guess where I get all those tight fitting jeans?).

Guess what? There aren?t any to be had.

Since, 1990, some 77% of the American textiles workforce has been lost, when China joined the world economy in force, and the offshoring trend took flight.

Now that manufacturing is at last coming home, the race is on to find the workers to man it. Welcome to onshoring 2.0.

The development has been prompted by several seemingly unrelated events. There is an ongoing backlash to several disasters at garment makers in Bangladesh, the current low cost producer, which have killed thousands.

Today?s young consumers want to look cool, but have a clean conscience as well. That doesn?t happen when your threads are sewn together by child slave laborers working for $1 a day.

Several firms are now tapping into the high-end market where the well off are willingly paying top dollar for a well-made ?Made in America? label.

Look no further than?7 For All Mankind, which is offering just such a product at a discount to all recent buyers of the Tesla Model S-1 (TSLA), that other great all American manufacturer (click here for their website).

As a result, wages for cut and sew jobs are now among the fastest growing in the country, up 13.2% in real terms since 2007, versus a paltry 1.4% for industry as a whole.

Apparel industry recruiters are plastering high schools and church communities with flyers in their desperate quest for new workers. They advertise in languages with high proportions of blue-collar workers, like Spanish, Somali, and Hmong.

New immigrants are particularly being targeted. And yes, they are resorting to the technology that originally hollowed out their industry, creating websites to suck in new applicants.

Chinese workers now earn $3 an hour versus $9 plus benefits at the lowest paying US factories. But the extra cost is more than made up for by savings in transportation and logistics, and the rapid time to market.

That is a crucial advantage in today?s fast paced, high turnover fashion world. Some companies are even returning to the hiring practices of the past, offering free training programs and paid internships.

By now, we have all become experts in offshoring, the practice whereby American companies relocate manufacturing jobs overseas to take advantage of low wages, missing unions, the lack of regulation, and the paucity of environmental controls.

The strategy has been by far the largest source of new profits enjoyed by big companies for the past two decades. It has also been blamed for losses of US jobs, with some estimates reaching as high as 25 million.

When offshoring first started 50 years ago, it was a total no brainer.? Wages were sometimes 95% cheaper than those at home. The cost savings were so great that you could amortize your total capital costs in as little as two years.

So American electronics makers began flying overseas to Singapore, Thailand, Hong Kong, Taiwan, South Korea, and the Philippines. After the US normalized relations with China in 1978, the action moved there and found that labor was even cheaper.

Then, a funny thing happened. After 30 years of falling real American wages and soaring Chinese wages, offshoring isn?t such a great deal anymore. The average Chinese laborer earned $100 a year in 1977.

Today, it is $6,000 and $24,000 for trained technicians, with total compensation rising 20% a year. At this rate, US and Chinese wages will reach parity in about 10 years.

But wages won?t have to reach parity for onshoring to accelerate in a meaningful way. Investing in China is still not without risks. Managing a global supply chain is no piece of cake on a good day. Asian countries still lack much of the infrastructure that we take for granted here.

Natural disasters like earthquakes, fires and tidal waves can have a hugely disruptive impact on a manufacturing system that is in effect a finely tuned, incredibly complex watch.

There are also far larger political risks keeping a chunk of our manufacturing base in the Middle Kingdom than most Americans realize. With the US fleet and the Chinese military playing an endless game of chicken off the coast, we are one mid air collision away from a major diplomatic incident.

Protectionism constantly threatens to boil over in the US, whether it is over the dumping of chicken feet, tires, or the latest, solar cells.

This is what the visit to the Foxcon factory by Apple?s CEO, Tim Cook, was all about. Be nice to the workers there, let them work only 8 hours a day instead of 16, let them unionize, and guess what?

Work will come back to the US all the faster. The Chinese press was ripe with speculation that Apple induced reforms might spread to the rest of the country like wildfire.

Former General Motors (GM) CEO, Dan Akerson, told me his company was reconsidering its global production strategy in the wake of the Thai floods.

Which car company was most impacted by the Japanese tsunami? General Motors, which obtained a large portion of its transmissions there.

The impact of a real onshoring move on the US economy would be huge. Some economists estimate that as many as 10%-30% of the jobs lost to offshoring could return. At the high end, this could amount to 8 million jobs. That would cut our unemployment rate down by half, at least.

It would add $20-60 billion in GDP per year, or up to 0.4% in economic growth per year. It would also lead to a much stronger dollar, rising stocks, and lower bond prices. Is this what the stock market is trying to tell us by failing to have any meaningful correction for the past 2 ? years?

Who would be the biggest beneficiaries of an onshoring trend? Si! Ole! Mexico (UMX) (EWW), which took the biggest hit when China started soaking up all the low waged jobs in the world.

After that, the industrial Midwest has to figure pretty large, especially gutted Michigan. With real estate prices there under their 1992 lows, if there is a market at all, you know that doing business there costs a fraction of what it did 20 years ago.



Man Fixing MachineSo How Does This Thing Work?