Where did that global synchronous economic recovery go? You know, the one strategists were gushing about as the foundation for the bull market in stocks?
Last week we saw ISM, Pending Home Sales, Capital Goods Orders, Chicago PMI, and Prices Paid all disappoint. And Europe just posted a dismal Q1 GDP of only +0.4%.
What is becoming painfully obvious is that the enormous tax breaks given the corporations to expand capital investment and create jobs is having the opposite effect.
Instead companies are accelerating the adoption of tax subsidized robots to replace workers, destroying jobs in the process, but boosting profits.
That was clear as day with the April Nonfarm Payroll Report, which came in at a weak 164,000. With all the hyper stimulus the economy is now getting, it should be over 400,000 a month.
The boost has yet to show up in Average Hourly Earnings which were up a miniscule 0.1%, or a 2.6% YOY rate. No wage hikes here.
The headline Unemployment Rate fell to 3.9%, which will be close to a cycle low. The boarder U-6 "discouraged worker" unemployment rate fell to 7.8%, a 17-year low.
Professional and Business Services gained 54,000 jobs, Manufacturing 24,000, and Health Care 24,000.
Peak earnings? Really?
Maybe for old line industrial companies like US Steel (X) and Caterpillar (CAT) which got a big, one time only shot in the arms in January from the tax bill, and then no more.
Technology companies are still powering on, full speed ahead damn the torpedoes on both earnings and announced share buy backs.
With the Trump team in Beijing this week trying to cut a deal with an incredibly weak hand, we have another big dark cloud hanging over the market.
Gee, do you think the Chinese read the New York Times too and are also aware of the president's weak poll numbers, a Mueller investigation that is closing in for the kill, and desperation to get anything done on the international front?
With corporate stock buy backs expected to leap from $500 billion to a record $800 billion this year, companies have become the sole net buyers supporting the stock market.
It's all starting to sound like a Ponzi scheme.
The great irony here is that consumer staples (XLP), long considered "safety stocks" because of their high dividend yields, have been the worst performers of 2018. When your aggressive stocks do poorly but your safe stocks do worse, you have to worry.
I have never been one to argue with Oracle of Omaha Warren Buffet. The founding subscriber to the Diary of a Mad Hedge Fund Trader has been a follower of many of my Trade Alerts, including for Bank of America (BAC), Burlington Northern (he bought the whole company), and American Express (AXP). But I could never get him into technology stocks.
Now, at last, you can add Apple (AAPL) to that list.
You know all of those panicky investors unloading Apple stock just over $150 a few months ago, apparently believing that the company's product cycle and innovation were at an end? That was Warren doing the buying.
Too bad I couldn't get him interested in the stock when Steve Jobs was still alive. Since then, the share price has risen by 400%. Knowing Steve as I did, maybe that was the reason he stayed away.
Still, I tried.
Looking at Apple's earnings this week, it's better late than never.
Buffet now owns a staggering 240 million shares of Apple worth $44 billion. It is his largest position, and Buffet is also now the largest shareholder in Apple. Remember, when you sell the shares of Apple, you now have both Buffet and Apple itself competing to buy the shares from you.
It's not a trade I would recommend.
I spent a rare week on the sidelines with the Mad Hedge Trade Alert Service, preferring to preserve my performance at an all-time high.
I decided to let the next false breakdown of the 200-day moving average take place without me. To mix a few metaphors, when the sun, moon, and stars line up once again I'll go pedal to the metal once again.
Remember, it's "Sell in May, and go away," except that this year May happened in January.
Now that the financial and technology Q1 earnings reports are out, the rest from here are going to be pretty boring.
On Monday, May 7 at 3:00 PM we get April Consumer Credit.
On Tuesday, May 8 at 9:45 AM EST, we receive the April NFIB Small Business Optimism Index, which has been red hot as of late. Disney (DIS) and China's JD.com (JD) reports.
On Wednesday, May 9, at 8:30 AM, the April Producer Price Index, and important read on inflation.
Thursday, May 10, leads with the Weekly Jobless Claims at 8:30 AM EST, which saw an of 2,000 last week from the 43-year low. At the same time, the all-important Consumer Price Index is released, the most crucial indication of price inflation. NVIDIA (NVDA) and Dropbox (DBX) report earnings.
On Friday, May 11 at 10:00 AM EST we get April Consumer Sentiment.
We wrap up with the Baker-Hughes Rig Count at 1:00 PM EST. Alibaba (BABA) reports.
As for me, I'll be playing around with my new Samsung 75-inch curved QLED quantum TV. I just bought it half price on Amazon (AMZN) half price with free delivery.
And you know what? Just to mess with me, Amazon offered me the set $500 cheaper after I bought. Jeff, you're so cruel.
Good Luck and Good Trading.
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I Think I See Disney?s Earnings Coming