This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN NFLX
Stocks continue to be in flux, and at least for today the bears continue to roar, and perhaps I was too quick and confident in my thoughts the bears had died a horrible death. The price action was rather convincing yesterday and had me believing that the worse may have been behind us. The markets had a different view in mind.
The Fed continues to soften its stance regarding interest rate policy. Today it was Jim Bullard of the St. Louis Fed that noted that perhaps it was better to delay a December rate hike. The outlook for no rate hikes in 2019 continues to strengthen.
If the market continues to fall by the end of the month, we could be talking about rate cuts or even QE! I’m half joking. But think about, it was October 3 that we were still far from neutral. It was just two weeks ago we were close to neutral. Yesterday we were at one an done, and now we are talking about no hikes at all.
The S&P 500 has now given back all of its gains and is currently in the process of testing its lows from yesterday around 2,630. Admittedly, not a great sign especially on a Friday.
The same holds for the NASDAQ with a retest of the lows from yesterday.
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All the positive signs that were seen in the rebound of the FANG stock’s has also melted today.
Netflix is no different today.
AMD which had looked it may be ready to turn higher earlier this week as totally melted.
Nvidia looks like it on its ways back to its lows.
Even Intel which has made so much positive progress cannot hold on to its momentum.
Even Broadcom which reported strong results could not hold its gains.
Whatever forward progress the market made yesterday was just literally undone.
I’m sure my fan base will be quick to point out how right they were, and how wrong I was But one should always remember that since the start the stock market has always been in a bull market. Since the moment the Dow Jones Industrial Average was created it has risen, the US economy has grown, and we have all prospered.
To this point, the only signs that we can confirm are that the economy is moderating. Not that is going into recession but that it is moderating.
The yield curve isn’t inverting because of an oncoming reciession; it is because German 10-year Bunds have a yield of 25 basis points, British 10-year yield trade at 1.15%, JGB 10-year bonds trade at 0.06%! Even Italian 10-year bonds trade at 3.10%. I mean would you rather own a 10-year US bond at 2.9% or an Italian Bond at 3.1%? The global interest environment is low, and buyers around the world would rather buy our bonds every day of the week!.
The yield curve is inverting because of the mechanics of a Fed that is raising rates and is like a fish swimming upstream. They are fighting an nearly entire developed world that is in a low-interest rate environment. What did they think would happen! Of course, the yield curve would invert. I have been writing about being bearish on the banks for this reason since March!
Perhap’s next week will be better. I have had enough for the week.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results