The Bumblebee Algorithmic Strategic Investment Calculation (BASIC) is predicated on the deep and apparently little known insight that stock prices cannot keep going up when the companies of which the stocks are stock don’t keep making more and more money.
So taking into account that the overall earnings for the S&P have declined for the last five quarters, BASIC forecasts that stock prices are not going to go up unless there is something going on that is hidden somewhere and unknown. But since what is hidden and unknown is unknown, it cannot be part of the BASIC forecast, and so the forecast is that stock prices are not going to go up.
Now even though that is BASIC’s forecast and Bumblebee Investing’s forecast and my forecast, I am always on the lookout for signs that I’m wrong. So I took note when Goldman Sach’s somebody was on television several weeks ago explaining that GS was bullish and expecting new market highs. This was so contrary to what I saw in the economy that I concluded they were talking their book.
And then it wasn’t a surprise when Goldman’s David Kostin appeared on CNBC Thursday and suddenly reversed Goldman’s bullish stance. Time to talk the market down so they can cover their shorts from their customers’ sales.
This leads me to think maybe it is time for me to sell short so I too can cover from Goldman’s customers’ sales.
Now apart from paranoid speculations, housing is looking good, as is employment, and retail sales came in higher than expected this week. But industrial production and durable goods are weak, inventories are accumulating, freight revenues are seriously off.
Mostly there just isn’t any pizazz in the economy, and the stock market has yet to mark itself down to reality. Or it did, but then reversed and came back to La-La Land. Probably on Goldman’s customers buying.
Bumblebee presently intends to initiate a short position on Monday, assuming there is no contraindication in overnight developments.
Gold continues to drift inside its new up-channel. Technically there isn’t any change, and I don’t expect to initiate any new positions until the bottom of the channel is reached, if it is.
WTI is also in a channel, near the high and unlikely on fundamentals to go much higher.
It is important to remember that crude oil became “finacialized” some years ago. That means it became a vehicle for big money to trade and speculate in rather than a hedging tool for consumers of crude. Prices are to a large extent determined by financial speculators who frequently drive them away from where supply and demand would otherwise place them.
The result is that, like gold, crude oil has to be traded more technically than fundamentally, although, unlike gold, the fundamentals limit the range of price distortion.
Bumblebebee expects prices to decline in the near term, but doesn’t feel strongly enough about this to risk any money.
Money and Banking Part 14: Financial Crises
Eric Tymoigne, New Economic Perspectives
“While Visiting the London School of Economics at the end of 2008, the Queen of England wondered “Why did nobody notice it?”
They Will Never Get It…
Pater Tenebrarum, Acting Man
“We and many others have made a valiant effort over the years to explain what actually moves the gold market…. Sometimes it is a bit frustrating when we realize it has probably all been for naught.”
How Wall-Street Hocus-Pocus Inflates S&P 500 Revenues
Wolf Richter, Wolf Street
“Despite what you might think, there’s a difference between our financial markets and casinos in Las Vegas: casinos are not rigged.”
Michael Hudson: Warning to Europe – How the TTIP Threatens Public Health Care and Pension
Michael Hudson, Naked Capitalism
“The aim of the TTIP is to replace the application of national laws with special courts of referees nominated by the special interests. This includes the organization of health care. Last week Britain’s main labor union, Unite, warned that the TTIP would mean that the National Health Service would have to be wound down and privatized. Although ‘Austria, Germany, Greece and Italy do have explicit reservations in the TTIP text to protect existing rules relating to healthcare,’ the privatization lobbyist strategy is to have the treaty “provisionally applied” to force matters, by backing compliant politicians. Objections will be sidestepped as the “provisional’ law becomes a fait accompli.”