1-10-2017 TUESDAY AFTER LUNCH MONEY MEMO
By the Financial Foghorn
“The law does not pretend to punish everything that is dishonest.
That would seriously interfere with business.”
January 10: Gold $1184.20 up 70 cents. Silver $16.80 up 17 cents.
I was talking yesterday to George, one of my fraternity brothers from long ago. His 2016 consisted of a pair of heart attacks, a triple bypass operation, and surgeon slices all the way from his neck to his groin. Oh yeah, and 11 broken ribs as they tried to bring him back with the crash cart in the ER. So, compared to George, my 2016 with a couple of cataract surgeries and a prostatectomy was pretty breezy. I’m going to try and keep my upbeat attitude going forward.
During our wide ranging conversation, I said something along the lines of, “I think Clemson and six would be a pretty good bet.” And George said, “I’d take that.” I answered with, “You mean you want to take Alabama and bet.”
“No,” he said, I’ll take Clemson and the six points.” No fool George. Which reminded me that this is the season of bets and predictions…especially where our money is concerned. So, speaking of bets…
Let me start with Jim Dines and his Annual Prediction Issue which I perused last night. Dines’s prediction issue usually hits my mailbox near the second week in January, in order for Jim to observe the first week’s market activities, especially how the big money, i.e., pensions and hedgies have positioned themselves for the year ahead. To wit: the first week is usually a good indicator for January, and the January barometer has been accurate 50 out of 67 years for the year as a whole. (That’s a 75% accuracy rate. Not exactly chopped liver.)
For the first week, the Dow was down, the Nasdaq was down, but the S&P was “up a little” 11 points. Hardly a roaring endorsement for the year, yet since 1950, 35 of 42 years starting with positive 5 day periods ended the year higher, an 83% prediction rate success.
Dines likes history. Since the stock market allegedly follows the economy, there may be some important clues to be found from the past.
First of all, there’s the historical pattern of Presidential terms generally. Since Andrew Jackson’s time (that would be 1829 until 1837) the first two years of a President’s term have generally been weak economically as the President and his newly powerful minions try to overcome what the preceding bastard did and get a hold of matters political, economic and social. The ending two year stretch of a President’s term is almost always stronger the first two. Cf, Richard Nixon and his money pumping scheme of note, and what Jerry Ford inherited.
Since World War II, the big one, there have been 12 recessions, a state of affairs now generally defined as a slumpy period when Gross Domestic Product (GDP) falls for two consecutive quarters. According the politically handpicked committee that awards the recession distinction…based upon arbitrarily measured and fudged statistics produced by other handpicked government appointees and employees…the Obama administration has dodged the recession bullet for almost eight years now. What an economic miracle is Washington D.C., aka the swamp.
So, if we’re talking about financial markets which follow rigged economic conditions, and ignoring the men behind the curtains who rig and jiggle the financial markets on a daily basis with derivatives, we’re seriously overdue for a recession and also a market correction. And yet, the markets continue to levitate mightily since the start of our March 2009 bull market. Go figure.
The above having been said, it should also be noted that historically seven of our last 12 recessions, began…in the first year of a President’s term. And of those 12 previous recessions, nine of them began during the onset of a Republican administration. This quaint historical pattern may have taken flight since the turn of the century when the men-of-math began to work the levers of power and money from our nation’s capital. But again, go figure.
But if history has any predictive value whatever here, Mr. Trump might have a relatively short “honeymoon period.” After 100 days, it’ll be the country that gets screwed.
Passing on from Mr. Dines now, if we look at the old and only somewhat discredited “Super Bowl Theory,” if an AFL team wins the Super Bowl, the market will head down. I.e., better hope Dallas wins the Super Bowl and not the New England Patriots, no matter how partial you are to Tom Terrific Brady.
And while we’re searching such cheery possibly informative history, let’s not forget the last time a “business person” was elected President. That would be Heebert Hoover in 1928, and we all know how that turned out.
Personally, no matter how the history things play out, and no matter how long the ill-at-ease Hillary folks continue to protest the new administration, life will at the very least be interesting in 2017. Numerologically, it is a “1” year. (2 plus 0 plus 1 plus 7 equals 10 which is a “1.”) New beginnings are in the offing.
Foghorn says, although history is not on the side of the markets, there will be ways to make money. Gold and silver are still cheap. Hang in there.