A couple of notes to start:
Strong numbers out of $AMBA in their earnings report last week, but I hate seeing them so concentrated into another customer ($SNE) now that they’ve weened off their dependence on $GPRO.
I’m just getting started on the $HUBS position and the action has been straight up against me since I shorted it. I’m likely to add a second short tranche sometime in the $50s, but I don’t have to rush it.
Great article from @carlquintanilla on the TV App Revolution. Someone just sent me this old clip of Carl and me discussing this very topic…back ten years ago! Ha.
Now onto today’s report.
Stock markets rally with the Dow Jones up triple digits early this morning and threatening the 18k level again. Maybe it’s because everybody’s so bearish right now. I mean, I can’t hardly believe the overwhelmingly negative/angry/contemptuous response to my recent articles and newsletters about why I think the economy is actually stronger than people realize with reasons to be bullish. For example, last week’s “The economy is booming, the Fed is likely to raise rates, so be bullish“. My favorite comment was:
“Good call Cody. You are like a modern day Doogie Howser!”
I’m flattered to be in that company, as I told Jay Leno on the Tonight Show, the same thing a long time ago.
More seriously, one guy emailed me: “Two comments: (I) the ECRI disagrees with you, and they’re a wee bit more sophisticated/credible than you are when it comes to economic forecasting; and (II) the economy and markets are two separate things. The economy seemed strong in summer of 2007–nonetheless, the Top was in.”
Now, as I’ve noted here on Marketwatch in years past, I take a lot of pride in my economic forecasting. And I happen to be old friends with the folks over at ECRI, whom I respect. So I did a little Googling to look back at the last ten years:
ECRI in 2007 – “What the ECRI leading indices are telling us today is that we still have a Goldilocks economy”
Me in 2007 –“Seriously, when things are this great, caution should reign. It always blows my mind how the pundits and money managers always explain that you should be long and strong because ‘This is an ideal setup for stocks. Earnings and earnings growth are strong, interest rates are low historically speaking and the ROW (rest of the world) is on fire.’ See, that’s why the Nasdaq has doubled and the S&P 500 and DJIA are at all-time highs. Sell to the trumpets, folks.”
ECRI in 2011 – “U.S. Economy Tipping into Recession”
Me in 2011 – “How to trade the oncoming stock market bubble”
To be sure, I’m obviously cherrypicking quotes from those years, and I’m certainly far from infallible with my own analysis. But you can see once again why I always stress being objective and using our own analysis rather than piggybacking on others.
As to the guy’s second point, there really is a huge difference between 2007 and 2016 in the setup in the economy, corporate earnings, the Fed and the stock markets:
Back in 2007, I wrote – “For the last few years, we’ve correctly been betting that with stocks, it’s been ‘heads, bulls win; tails, bears lose.’ But that’s no longer the case, as the collapse of the dollar in 2007 has likely begun to undermine the Fed’s ability to cut. For most of 2002 to 2006, I’d repeatedly written about how ‘steady’ this economic boom has been. That steadiness is less so in 2007.”
Cody back in real-time now. The set-up here in 2016 is in some ways, exactly opposite the set-up from 2007, as the dollar isn’t collapsing and the currency wars of the developed world have escalated to the point where there is an all out race to devalue every fiat currency.
One of the main reasons that everybody seems to bearish and fretting about the economy is because we’ve grown accustomed to seeing these bubble-crash-bubble-crash cycles playing out over four to five year periods. Bubble from 1996-2000, crash from 2000-2002, bubble from 2003-2007, crash from 2007-2008 and now we’ve seemingly bubbled from 20010-today and everybody is sure that the cycle has to end already.
History rhymes though, it doesn’t repeat. There will certainly be another crash or five in my life time. But, man, nobody was out there predicting the current bubble from 2010 to today the way I was with my endless articles in 2010 and 2011 about how we were heading into a stock market bubble and I’m not seeing the end of the cycle yet.
So I’ll stick with my own analysis which is increasingly bullish right now about the set-up for both the economy and the stock market (as the emailer noted, these are not the same thing to be sure, but they are presently aligned in my analysis) and portfolio positioning. That portfolio positioning includes holding the Facebook I repeatedly highlighted I was loading up on at $20, Sony which we’ve owned since the teens and more recent additions of Lion’s Gate and FireEye.
I’m not as screamingly bullish as I was back in 2010 and 2011 and my portfolio reflects that with higher cash balances, fewer long positions and a couple more short hedges. But I am bullish and long some stocks I expect to Revolutionize the world.
