Global Market Comments
February 6, 2025
Fiat Lux
SPECIAL EARLY RETIREMENT ISSUE
Featured Trade:
(HOW TO JOIN THE EARLY RETIREMENT STAMPEDE)
There is a new social movement taking place which you probably haven’t heard about.
Increasing numbers of people, especially Millennials, are engineering their personal finances to make early retirement possible. I’m not talking about hanging it up at 60, 55, or even 50. I’m talking extreme early retirement, like 45, 40, or even 30!
I stumbled across a free app the other day at NerdWallet, and started playing around with a compound interest calculator to see just how much you had to save on a monthly basis to make such incredible early retirements possible. What I discovered was amazing. To check it out, please click here.
And here is the big revelation. Assuming that you started saving at the age of 20, you only need to bank $2,150 a month to reach $1 million in retirement savings by the age of 40. If you earn the country’s average wage of $60,000 a year, and you’re paying $1,000 a month in taxes, that means you only have $1,850 a month left to handle housing, health care, education, transportation, and food.
The key to becoming a savings hog is to get off the consumer spending treadmill we have all been trained to plod since birth. You don’t have to endlessly upgrade to ever larger McMansions, especially now that the SALT deductions are gone.
You don’t have to buy a new $50,000 car every three years either. Just buy a junk heap for $5,000 and run it forever. It’s amazing how much gas, insurance, maintenance, and interest payments can add up. I recommend a Toyota Corolla. They last forever.
And what is the most expensive luxury of all? Kids. Raising a child today costs a minimum of $250,000, and that assumes they don’t go to an Ivy League college. I know because I have five. A lot of Millennials are downsizing to one child, or none at all, and putting that quarter million towards their early retirement fund.
If you live here in the San Francisco Bay Area, this would mean living in a cardboard box under a freeway overpass. However, an increasing number of Millennials are engaging in what I call “income/expense” arbitrage.
Earn your income in an expensive city, like San Francisco, San Jose, or New York, but live in a cheap place like Reno, NV, Charlotte, NC, or Cedar Rapids IA. In that case, banking your $2,150 a month is a piece of cake.
Those who work online, about 25% of the Bay Area population now, have a particular advantage here. With a decent broadband connection, you can work anywhere.
Companies are going out of their way to facilitate this trend, requiring office attendance only from Tuesday to Thursday and permitting telecommuting on Monday and Friday. That enables distant, even interstate commutes. I have a Bay Area dentist who commutes from Santa Barbara 300 miles away every week on this schedule.
You can even do this at an international level. A couple can live like a king in Budapest, Hungary, or Quito, Ecuador for $1,000 a month, and in a beachfront home in Albania for $500. With that kind of overhead early retirement becomes a realistic short-term objective.
Once you retire you will have to live on $60,000 a year, or $5,000 a month, eminently doable in most of the country, not including your social security payments or taxes. And with national health care in the US likely over the next 20 years, health care costs are about to fall dramatically.
Provided you don’t pursue expensive hobbies like my retired friends, such as collecting vintage cars, racing horses, joining expensive golf clubs, or flying around in private jets, you should be able to live within these modest means.
How about camping? That is almost free!
Of course, you can’t live on the coasts for $60,000 a year. But you can do so easily in the heartland. That explains why California and New York home prices have been dead in the water for the last two years, while the Midwest is seeing a renaissance in regional home prices at one-third the cost.
You don’t have to completely retire either. Instead, you could abandon the pressure cooker that is high-tech today and downgrade to a small business, open a restaurant, or turn a hobby into a full-time job. A laid-off FedEx worker I met became a fly-fishing guide and helped me catch that 24-inch trout in Nevada.
It goes without saying that if this trend continues, there are major consequences for the economy, markets, and society that boggle the mind. Greatly higher savings rates will drive prices up and yields down on all investments.
The US birthrate is already well below the replacement rate at 2.1 per couple. Drive it lower and we could get trapped in the Japanese quicksand of an ever-shrinking population. That means fewer consumers and economic stagnation. Reducing working lives from 47 to only 20 years will inevitably create worker shortages, driving up wages and inflation.
There are a few problems with the ultra-early retirement strategy. The 6% return available today with relatively low-risk investments may not be available in a year or two. That would be the result of global quantitative easing that is taking interest rates down to zero everywhere.
This is crushing the investment returns for new retirees. As a result, instead of needing $1 million to generate a $60,000 annual income, you might need $2 million or more. I have been watching this happen to retirees in Japan for nearly 30 years, where interest rates have been near zero since the 1990s.
How much do you need to save each month if you want to retire at 30? Better start banking $6,050 a month. It may be time to upgrade your sleeping bag.
I Keep Failing at Retirement
"Kamikaze missions are rarely successful, least of all for the pilots," said Robert Gibbs, former White House Press Secretary.
Global Market Comments
February 5, 2025
Fiat Lux
Featured Trade:
(THEY’RE NOT MAKING AMERICANS ANYMORE)
You can count on a bear market hitting some time in 2038, one falling by at least 25%.
Worse, there is almost a guarantee that a financial crisis, severe bear market, and possibly another Great Depression will take place no later than 2058 and would take the major indexes down by 50% or more.
No, I have not taken to using a Ouija board, reading tea leaves, nor examine animal entrails in order to predict the future. It’s much easier than that.
I simply read the data that was just released from the National Center for Health Statistics, a subsidiary of the federal Centers for Disease Control and Prevention (click here for the link).
The government agency reported that the US birth rate fell to a new all-time low for the second year in a row, to 60.2 births per 1,000 women of childbearing age. A birth rate of 125 per 1,000 is necessary for a population to break even. The absolute number of births is the lowest since 1987. In 2017, women had 500,000 fewer babies than in 2007.
These are the lowest number since WWII, when 17 million men were away in the military, a crucial part of the equation.
Babies grow up, at least most of them. In 20 years, they become consumers, earning wages, buying things, paying taxes, and generally contributing to economic growth.
In 45 years, they do so quite substantially, becoming the major drivers of the economy. When these numbers fall, recessions and bear markets occur with absolute certainty.
You have long heard me talk about the coming “Golden Age” of the 2020’s. That’s when a two-decade-long demographic tailwind ensues because the number of “peak spenders’ in the economy starts to balloon to generational highs. The last time this happened was during the 1980’s and 19990’s stocks rose 20-fold.
Right now, we are just coming out of two decades of demographic headwind, when the number of big spenders in the economy reached a low ebb. This was the cause of the Great Recession, the stock market crash, and the anemic 2% annual growth since then.
The reasons for the maternity ward slowdown are many. The Great Recession certainly blew a hole in the family plans of many Millennials. Falling incomes always lead to lower birth rates, with many Millennial couples delaying children by five years or more. Millennial mothers are now having children later than at any time in history.
Burgeoning student debt, which just topped $1.5 trillion is another. Many prospective mothers would rather get out from under substantial debt before they add to the population.
The rising education of women is another drag on childbearing and is a global trend. When spouses become serious wage earners, families inevitably shrink. Husbands would rather take the money and improve their lifestyles than have more kids to feed.
Women are also delaying having children to postpone the “pay gaps” that always kick in after they take maternity leave. Many are pegging income targets before they entertain starting families.
As a result of these trends, one in five children last year were born to women over the age of 35, a new high.
This is how Latin Americans moved from eight to two-child families in only one generation. The same is about to take place in Africa, where standards of living are rising rapidly, thanks to the eradication of several serious diseases.
The sharpest falls in the US have been with minorities. Since 2017 the birth rates for Hispanics have dropped by 27% from a very high level, African Americans 11%, whites 5%, and Asians 4%.
Europe has long had the same problem with plunging growth rates but only much worse. Historically the US has made up for the shortfall with immigration, but that is now falling thanks to the current administration policies. Restricting immigration now is a guarantee of slowing economic growth in the future. It’s just a numbers game.
So watch that growth rate. When it starts to tick up again it’s time to buy….in about 20 years. I’ll be there to remind you with this newsletter.
As for me, I’ve been doing my part. I have five kids aged 15-34, and my life is only half over. Where did you say they keep the Pampers?
I’m Doing My Part
Global Market Comments
February 4, 2025
Fiat Lux
Featured Trade:
(LEARNING THE ART OF RISK CONTROL)
Now that you know how to make money in the market, I’m going to teach you how to hang on to it. There is no point in booking winning trades only to lose money by making careless beginner’s mistakes. So today, I am going to talk about risk control.
The first goal of risk control is to conserve whatever capital you have. I tell people that I am too old to start over again as a junior trader at Morgan Stanley if I lose all my money. With my attitude, nobody would hire me anyway. So, I’m pretty careful when it comes to risk control.
The art of risk control is to make sure your portfolio is profitable, no matter what happens to the market. You want to be a winner, whether the market goes up, down, or sideways. This is what I do.
Remember, we are not trying to beat an index here. Our goal is to make actual dollars at all times, to keep the P&L chart always moving from the lower left to the upper right. You can’t eat relative performance, nor can you use it to pay your bills.
The second goal of a portfolio manager is to make your portfolio bomb-proof. You never know when a flock of black swans is about to alight on the market, or a geopolitical shock comes out of the blue causing markets to crash.
The biggest mistake I see beginning traders make is that they are in too much of a hurry to get rich. As a result, they make too much money too soon. I can’t tell you how many times I have heard of first-time traders losing all their money on their first trade, well before they got a handle on the basics.
I’m usually right 80% to 90% of the time (this year it’s 95%). That means I’m wrong 10% to 20% of the time. If you bet the ranch on one of my losing trades, you’ll get taken to the cleaners. Never bet the ranch.
If you do, you are turning a calculated list into random risk, or throwing darts at a dartboard and hoping for the best. It is akin to buying a lottery ticket. I often tell clients they have gambling addictions. Make sure you’re not one of them. You can’t trade yourself back from zero with no money.
If you can master the skills I'm teaching you, you can make a living at this FOREVER! So, what’s the hurry? As my old trading mentor used to tell me, the late Barton Biggs of Morgan Stanley, “Invest in haste, repent in leisure,” a time-tested nostrum that is always true in this business.
I recommend that you use NO real money on your first few trades. Start with paper trading only. All of the online trading platforms offer wonderful tools that allow you to practice trading before you try the real thing. If you lose in their “pretend money”, no harm, no foul. They don’t want you to go broke either. Broke customers don’t pay commissions. They also sue.
The more time you spend learning to trade, the more money you will get out of it. Remember, work in, money out. Spend at least an hour or two getting to know your own trading platform well.
Once you start trading will real money it will become a totally different experience. Your heart rate steps up. Your hands get sweaty. You start checking your watch. It’s a lot like going into combat. In fact, combat veterans make great traders, which is why the military recruits so actively from the military. I think all these instincts trace back to our Neanderthal days when our main concern was being chased by a saber-toothed tiger.
The time to learn a trading discipline is NOW. All of a sudden, your opinions, your ego, and your savings are on the line. It’s crucial for you to always start small when using real money.
That way, making a beginner’s mistake, like confusing “BUY” and “SELL” (I see it every day) will only cost you a cup of coffee at Starbucks, and not your kid's college education, your house, or your retirement. It won’t take long for you to grow from one contract to thousands, as I have done myself for many years.
It’s all about finding your comfort level and risk tolerance. You never want to have a position that is so large that you can’t sleep at night, or worse, call me in the middle of the night and ask what to do with it. My answer is always the same. Cut your position in half. If you still can’t sleep, cut it in half again.
I make a bold prediction here. The more experience you gain, the faster your risk tolerance goes up.
I’ll give you one more piece of advice. Take your broker's technical support phone number and paste it to the top of your computer monitor. You don’t want to go look for it when you can’t figure out how to get out of a position, or your platform breaks. These are machines. It happens. As they teach in flight school, it’s not a matter of if but when a machine breaks.
There’s one more thing. When you’re ready to commit real money, don’t forget to take your account off of paper trading. The profits you make there can’t be spent.
Risk management is an important part of the position sheet I update every day.
Take a look below at a past position sheet I sent out during sharply rising markets.
The important thing to look at here is my long/short balance. On the left is the position name and on the right is the position weighting. I usually run 10% positions so I don’t have all my eggs in one basket. Maybe twice a year, I’ll run a 20% position in a single stock, and once a year I’ll have a 30% weighting. Above that, I start to lose sleep.
I have further subdivided the portfolio into “RISK ON” and “RISK OFF.” “RISK ON” means the world is getting better, while “RISK OFF” means the world is getting worse. The long positions have positive numbers, while the short positions have negative ones.
I like to balance “RISK ON” and “RISK OFF” to remove overall market risk from the portfolio. When markets are rising, I turn positive. When markets are falling, I tilt negative. At the bottom, I have my total net exposure. On this particular day, I was running 60% in long and 20% in shorts, for a total net position of 40% long. This is an aggressively bullish portfolio.
When I’m bullish, the net position is positive. When I’m bearish the net position is negative. When I have no strong views, the net position is zero. That way, if nothing happens you still get to rake the money in.
I have no positions at all only a few days a year. I only play when the risk/reward is overwhelmingly in my favor, and sometimes that is just not possible.
One more warning to the wise. There are literally hundreds of gurus out there marketing services promising 100% a year, if not 100% a month, or even 100% a day. They are all fake, created by 20-year-old marketing types who have never worked in the stock market, or even traded. Unfortunately, I work in an industry where almost everyone else is a crook.
I have worked in the markets for more than 50 years and have seen everything. Ray Dalio is the top-performing hedge fund manager in history and he only averages 35% a year. The number of real traders who are right more than 80% of the time you can almost count on one hand. If returns sound too good to be true, they never are.
I want to offer special caution about naked put shorting strategies which are promoted by 90% of these letters. This is where a trader sells short a put position without any accompanying hedge, hence the word “naked.” This is an unlimited-risk position.
You might take in a $1 premium with this approach, but if the market turns against you, and implied volatilities go through the roof, your losses could balloon exponentially to $100 or more, wiping you out. The newsletters recommending these have absolutely no idea when or if this is going to happen.
I call this the “picking up the pennies in front of the steamroller strategy.” No professional trader worth his salt will put money into it. It is banned by most investing institutions. And only a few brokers will still let you do this, and then only with 100% margin requirements, because when losses exceed 100% of capital, they’re left carrying the bag.
Many of those strategies you see being hawked online look great on paper but can’t actually be executed. In other words, you just paid thousands of dollars for a service that is utterly useless. Sounds like a “No Go” to me.
Stop losses are an important part of any trading strategy. No one is right 100% of the time. If they claim so they are lying. The best way to avoid a big loss is to take a small one.
There are many possible places to use stop losses. I use 2% of my total capital. If I start to lose more than that I am out of there. It’s easy for me to do this because 90% of the time the next trade will be a winner and I’ll make back all the money I just lost.
Others use a 10% decline in the underlying stock as a good arbitrary point to limit losses. Others rely on Fibonacci levels (I’ll get to him later). Many traders rely on key moving averages, like the 50-day or the 200-day.
The problem with this is that high-frequency traders have access to the same charting data as you do. They’ll program their algorithms to quickly take a stock through your stop loss level, buy your stock for cheap, and then take it right back up again to book a quick profit. You are left with a “SELL” confirmation in your inbox and no position in a rising market. No wonder people think Wall Street is rigged.
Another concept is the “trailing stop”. That’s when after an initial rise, you place a stop-loss order at your cost. That way you CAN’T lose money. This is known as “playing with the house's money.” This approach has one shortfall. You can’t place stop losses in the options market that are executed automatically. The same is true for options spreads.
In this case, you use what is known as a “pocket stop loss” where you set your mental level on when to get out. Also, these are not automatic, they do establish a trading discipline. Caution: You can’t execute a pock-stop loss when you’re playing gold or on a one-week cruise in the Caribbean.
So, there you have it. By managing your risk prudently, you can tip the risk/reward balance in your favor.
I hope this helps.
“In the US, you had ten bad years in a row (during the Great Depression) and it still turned out to be a pretty good century, said Lloyd Blankfein, CEO of Goldman Sachs.
Global Market Comments
February 3, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE TRADE WAR BEGINS)
(SPY), ($COMPQ), (TSLA), (VST), (MSFT), (ADBE), (DELL), (NVDA)
As I write this, tariffs are coming into force and confusion reigns supreme at the borders. The worst-case scenario has arrived.
In the Marine Corp., they say that a missing 50-cent part can ground a $50 million dollar airplane. It turns out that many of the 50-cent parts are made in Canada and Mexico, which are now in trucks stuck in massive traffic jams at the border. The border is in no way set up for any change in the tariff regime.
Think of it as a mini Covid shock to the supply chain. The parts will eventually show up but will be more expensive.
This is not what traders wanted to hear. That great whooshing sound was the stock market giving up hard-fought gains for the day. Nervousness is running rampant.
With mass firing on the way throughout the government, it’s just a matter of time before the passport renewal process extends from weeks to years. I am telling friends and family to renew now before the process clogs up and shuts down. At the very least, fees are about to go up a lot, now at $130.
When I opened up my laptop on Sunday night and saw the NASDAQ ($COMPQ) down 900 points, I thought that a new war had broken out somewhere or another 9/11 event had taken place. That recovered to down only 400 by the New York opening. This is exactly the set up I had been waiting for since mid-December. I started piling in on longs in big tech stocks, turning my January performance from lackluster to robust in a matter of days.
And that’s the way it’s going to be in 2025. Maintain iron discipline and hold out for these rare sweet spots, then pile in. Never chase, that was last year’s game. We could be range trading for quite some time. Index players might be lucky to make anything by year-end, and might be better off parking their money in 90-Treasury bills, now yielding 4.2%.
By the end of the week, most of the losses were recovered, except for the big AI providers like (NVDA) and (AMD), which have had their own problems for the last seven months. The net is that it is potentially bad news for AI providers and great news for AI users, which is almost everybody.
I have heard from several clients that they spent the week trying to trip up the DeepSeek program and have come up with hilariously inaccurate answers. For example, DeepSeek didn’t know that my former USC classmate OJ Simpson died last year and thought he was a current NFL football player. And don’t ask who Winston was in 1984. Other examples about.
In the meantime, the big tech companies are all tinkering with DeepSeek, making changes and improvements. It is definitely a clever programming improvement, but it’s not going to destroy the world.
Whatever happened to Cold Fusion?
Remember that 1990’s meme that set stocks on fire? It was supposed to give us free electricity forever. Except that here I am 35 years later, and cold fusion is still 20-40 years into the future. It’s always 40 years in the future. The same thing happened with the 3D printing craze and the fax mania before that.
That’s what came to mind last December when I first heard that the Chinese app DeepSeek had delivered a revolutionary new AI program that was supposed to cut the need for high-end chips by 99%. I ignored it just like all of the other Chinese apps that come out on a daily basis.
Which leads me to the quandary of the day. Why the heck is Europe suddenly doing so well? The German stock market has outperformed the S&P 500 (SPY) by a large margin in recent months. Whenever I mention putting a dollar into any European country, my continental friends say I’m out of my mind and that they only want more American investment ideas. Is there something going on here?
My only thought is that the markets may be discounting an end to the Ukraine War this year. If so, some 10 million barrels a day of oil would be unleashed on the market, taking prices down to $30 a barrel. Ukraine would reclaim its position as the world’s largest agriculture exporter, collapsing prices for wheat and sunflower oil. And Europe will be able to pare back its recently increased defense spending.
You heard it here first.
By the way, the 9/11 reference brings to mind one of the most notorious short sales of all time. The day before the attack, a Swiss bank acting on behalf of an anonymous client bought several thousand short-dated put options on American Airlines (AA). After two American planes were deliberately crashed in a suicide attack, the trade made $200 million. The FBI set a trap to arrest those who came to collect. But they never showed. Eventually, the trades were unwound by the exchange. It’s all true.
We managed to attain a respectable +5.80% return in January. That is close to my average monthly return for all of 2024. The magic is still there.
That takes us to a year-to-date profit of +5.80% so far in 2025. My trailing one-year return stands at +85.34% as a bad trade a year ago fell off the one-year record. That takes my average annualized return to +49.96% and my performance since inception to +757.69%.
I used the Monday meltdown to start filing in positions in Nvidia (NVDA) and Vistra (VST). That is on top of my existing short strangle in Tesla (TSLA). The Mad Hedge Technology added a slew of long on Microsoft (MSFT), Adobe (ADBE), Dell (DELL), and (NVDA).
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 74 of 94 trades have been profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.
Try beating that anywhere.
Technology Stocks Destroyed on News of China’s DeepSeek, an AI program that takes them a great leap forward. U.S. technology firms like Nvidia plunged, as Chinese startup DeepSeek sparked concerns over competitiveness in AI and America’s lead in the sector, triggering a global sell-off. DeepSeek launched a free, open-source large language model in late December, claiming it was developed in just two months at a cost of under $6 million. These developments have bolstered questions about the large amounts of money big tech companies have been investing in artificial intelligence models and data centers.
US Home Sales Hit 30-Year Low in 2024, the second year in a row of weak sales. High costs related to homeownership sapped sales again. The average rate for a 30-year fixed mortgage has hovered between 6% and 8% since late 2022. Avoid interest rate plays.
Nvidia Drops $600 Billion in Market Capitalization, the largest in stock market history. CEO Jensen Huang’s net worth dropped below $100 billion, while CEOs of the Mangiest Seven plunged by $67 Billion. I told you it was coming. Buy when the washout finishes. The bubble didn’t burst.
The Cruise Business is Rocketing, with Royal Caribbean (RCL) just running up its best five-week sales period in history. There is a two-year wait to order the enormous new ships, the biggest, 264,000-tonne Icon of the Seas, carries a mind-blowing 7,400 passengers. Buy (RCL) and (CCL)on dips.
US Consumer Confidence Dives amid renewed concerns about the labor market and inflation. The Conference Board said on Tuesday its consumer confidence index fell to 104.1 this month from an upwardly revised 109.5 in December. Economists polled by Reuters had forecast the index rising to 105.6 from the previously reported 104.7.
Fed Leaves Interest Rates Unchanged at 4.25%, tanking stocks. All interest rate plays will remain dead in the water. Will the pause be for six months or a year, or will the next Fed be a rate rise? Jay Powell is waiting for the impact of new government policies like all the rest of us. Buy financials on dips. The Fed's balance sheet continues to shrink and is down to $6.8 trillion, withdrawing liquidity from the system. All references to “progress” on inflation were dropped.
Coffee Prices Hit a New All-Time High at $3.60/pound for Arabica. Brazil, by far the world's largest producer, has few beans left to sell, and worries over its upcoming harvest persist. Dealers said 70%-80% of Brazil's current arabica harvest has been sold and new trades are slow. Brazil produces nearly half the world's arabica beans, a high-end variety typically used in roast and ground blends. This is yet another climate change play.
Waymo Self-Driving Taxis Expanding to Ten New Cities. After testing the Waymo Driver in multiple cities, the company says the technology is adapting successfully to new environments, leading to the expansion. In addition to ongoing trips to Truckee, Michigan's Upper Peninsula, Upstate New York, and Tokyo, the expansion includes testing in San Diego and Las Vegas, with more cities yet to be announced.
Tesla Bombs in 2024, with earnings at $25.5 billion last year versus $27.2 billion, or down 5.5%. Even a presidential friendship can’t boost earnings. Despite missing on every metric, the shares were only down $3 today. Tesla is more about belief in the future and today’s facts. But full self-driving will launch in the US in June after being stalled by the previous administration. No guidance for sales in 2025. Energy storage was the big grower last year and will do well this year. Not the rose bed I was promised. My short position is looking good, but I’m maintaining my long-term target of $1,000.
US GDP Finishes 2024 at 2.3%, less than expected but still the strongest in the world. Household spending grew at a 4.2% pace, most since early 2023. Equipment spending fell at a 7.8% rate on the Boeing strike impact. What happens next is anyone’s guess.
Microsoft Blows Up on Cloud Guidance, on huge earnings disappointment, taking the stock down 6%. The company beat estimates on the top and bottom lines but fell short on estimates for its Intelligent Cloud business. Microsoft’s Commercial Cloud segment revenue, which includes cloud services sales, saw revenue of $40 billion, a 21% year-over-year increase but shy of Wall Street expectations of $41.1 billion. Microsoft's intelligent cloud business, which includes its Azure platform, saw revenue of $25.5 billion. Wall Street was expecting $25.8 billion. I’m buying the dip.
Weekly Jobless Claims Fall 16,000 to a seasonally adjusted 207,000 for the week ended Jan. 25, the Labor Department said on Thursday. Economists polled by Reuters had forecast 220,000 claims for the latest week.
Consumer Inflation Expectations Comes in Soft. The personal consumption expenditures price index increased 2.6% on a year-over-year basis in December, while core PCE was at 2.8%, both in line with expectations but well ahead of the Fed’s 2% target. Personal income climbed 0.4% as forecast, while spending rose 0.7%. Markets liked the number.
Apple is Catching a Bid on the assumption that diplomat Tim Cook can somehow avoid import duties from China. Even at a 100% tariff, it would probably add only $100 to the cost of an iPhone, which is made in China.
My Ten-Year View – A Reassessment
When have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties is now looking at a headwind. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
My Dow 240,000 target has been pushed back to 2035.
On Monday, February 3 at 8:30 AM EST, the ISM Manufacturing Index PMI is out.
On Tuesday, February 4 at 8:30 AM, the JOLTS Job Openings is released.
On Wednesday, February 5 at 8:30 AM, the ISM Survives PMI is printed.
On Thursday, February 6 at 8:30 AM, the Weekly Jobless Claims are disclosed.
On Friday, February 7 at 8:30 AM, Nonfarm Payroll Report for January is announced. At 2:00 PM the Baker Hughes Rig Count is printed.
As for me, the University of Southern California has a student jobs board that is positively legendary. It is where the actor John Wayne picked up a gig working as a stagehand for John Ford which eventually made him a movie star.
As a beneficiary of a federal work/study program in 1970, I was entitled to pick any job I wanted for the princely sum of $1.00 an hour, then the minimum wage. I noticed that the Biology Department was looking for a lab assistant to identify and sort Arctic plankton.
I thought, “What the heck is Arctic plankton?” I decided to apply to find out.
I was hired by a Japanese woman professor whose name I long ago forgot. She had figured out that Russians were far ahead of the US in Arctic plankton research, thus creating a “plankton gap.” “Gaps” were a big deal during the Cold War, so that made her a layup to obtain a generous grant from the Defense Department to close the “plankton gap.”
It turns out that I was the only one who applied for the job, as postwar anti-Japanese sentiment then was still high on the West Coast. I was given my own lab bench and a microscope and told to get to work.
It turns out that there is a vast ecosystem of plankton under 20 feet of ice in the Arctic consisting of thousands of animal and plant varieties. The whole system is powered by sunlight that filters through the ice. The thinner the ice, such as at the edge of the Arctic ice sheet, the more plankton. In no time, I became adept at identifying copepods, euphasia, and calanus hyperboreaus, which all feed on diatoms.
We discovered that there was enough plankton in the Arctic to feed the entire human race if a food shortage ever arose, then a major concern. There was plenty of plant material and protein there. Just add a little flavoring and you have an endless food supply.
The high point of the job came when my professor traveled to the North Pole, the first woman ever to do so. She was a guest of the US Navy, which was overseeing the collection hole in the ice. We were thinking the hole might be a foot wide. When she got there, she discovered it was in fact 50 feet wide. I thought this might be to keep it from freezing over, but thought nothing of it.
My freshman year passed. The following year, the USC jobs board delivered up a far more interesting job, picking up dead bodies for the Los Angeles Counter Coroner, Thomas Noguchi, the “Coroner to the Stars.” This was not long after Charles Manson was locked up, and his bodies were everywhere. The pay was better too, and I got to know the LA freeway system like the back of my hand.
It wasn’t until years later, when I had obtained a high security clearance from the Defense Department that I learned of the true military interest in plankton by both the US and the Soviet Union.
It turns out that the hole was not really for collecting plankton. Plankton was just the cover. It was there so a US submarine could surface, fire nuclear missiles at the Soviet Union, and then submarine again under the protection of the ice.
So, not only have you been reading the work of a stock market wizard these many years, you have also been in touch with one of the world’s leading experts on Artic plankton.
Live and learn.
1981 on Peleliu Island in the South Pacific
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
