The Equity Markets and U.S. Dollar Continue Their Bull Runs

by Victor Sperandeo with
the Curmudgeon

Disclaimer:  All opinions expressed herein, unless otherwise noted, are those of Victor Sperandeo.  Some of Victor’s opinions are in italics.


In Pamplona, Spain the running of the bulls is a tradition from the 14th century.  People run in front of the bulls along a set path (and sometimes in narrow streets) to show how brave they are. 50-100 people get injured per year and several have died over the past few years.

The US stock and dollar bull run continues without the expected pause, while no one has yet been injured by being long US stocks.

The New Normal for Markets?

Markets since March 2009, have tended to move up in a straight line on some important news event or (sometimes) with no apparent trigger. This form of "investing" seems to be the new normal. Either way this is not a "trading market," but a get long and cover shorts at all costs domain.


Curmudgeon Asks:  What Ever Happened to Profit Taking?

In all of US stock market history, a new sustainable advance following an intermediate decline was accompanied by either “backing, filling, basing” OR a test of the recent lows after an initial rise.  Not this year! 

·       On February 11th, the DJI closed at a 2 year low, then commenced a strong rally for all stock indexes without either basing or a test of the lows.  That “never look back” rally was in almost all asset classes.

·       On October 24th, the Dow Jones Industrials (DJI) closed at 18,223.03 and was then DOWN in 8 of the next 9 trading days to close at 17,888.28 on November 4th.  

·       The S&P 500 was down (on a closing basis) for 9 consecutive trading days over the same time period- from 2,151.33 on October 24th to 2,085.18 on November 4th.  That was followed by the strong rally which started on November 7th and is still going gangbusters.

·       The Russell 2000, which has a 52-week trailing P/E of “nil,” has been by far the strongest index since it bottomed on November 3rd at 1,156.89 (close).  It’s been up for an incredible 15 consecutive trading days to close Friday, November 25th at 1,347.20 (=190.31 points or 16.45% during that time).

SOURCE:  Yahoo Finance


Other Markets Last Week:

Meanwhile, with the US equity markets and the dollar making new highs, currencies, bonds, gold, silver, platinum, crude oil, most soft commodities (cotton, sugar, cocoa, coffee) moved lower last week.  The grains moved higher in a small way with industrial metals the big winner (December copper +8.38% in 4 days and 28% in a month).

Bullish and Bearish Scenarios:

The basic reason for the bull moves remains Trump’s unexpected victory as the next US President.  Some experts predict the US economy to grow at 4% after Trump’s fiscal policy initiatives are passed by Congress1. Moreover, the 4th quarter is also expected to be another strong quarter with the Atlanta Fed projecting 3.6% real growth. That is the bullish case.

Note 1. (Curmudgeon):  A 4% US GDP growth estimate is really a stretch of the imagination.  None of the details of Trump’s fiscal policy programs have been disclosed, there is no guarantee that Congress will pass them as is, funding for the programs is uncertain (considering an already increasing US budget deficit and national debt) and there is no known time-frame when any new fiscal policies will become laws or approved as US budget items.



The bearish case is that US note and bond yields are rising quickly, and in a straight line2. 

Note 2. (Curmudgeon):  Higher yielding fixed income securities are competition for stocks, increased yields raise borrowing costs which lower corporate earnings and might drastically reduce debt driven share buybacks along with mergers and acquisitions.

Here are a few charts which illustrate the rise in rates, using the 10 Year Treasury Note as a benchmark:


Chart Courtesy of




Chart Courtesy of Dow Theory Letters (Subscription Required)




Italian Referendum and Effect on EU:

Rarely mentioned is the December 4th Italian referendum vote to change their Constitution. The Constitution change is primarily to save the Italian banks. Understand that Italy -like Japan -has not grown its economy in any noticeable way in 20 years.  Many bank loans are non-performing. The polls are indicating a "NO" vote, which would be forecasting the continued trend towards an end of the European Union (EU).  The demise of the EU would be a true game changer.


Of course, polls have proven a poor guide to the future in Brexit and Trump elections.  However, the Italian referendum seems to be going with the peoples wishes, not the establishment elites. Reuters believes a defeat for the constitutional reform referendum is likely.


This vote is so complex for most Italians that it is really a vote for or against Prime Minister Matteo Renzi.  A "NO" vote would be one more step to the end of this camouflaged experiment of "New World Order" socialism run by non-elected officials in Brussels.


European Migrant Crisis:

The mess the EU is in was gravely aggravated due to the allowing of millions of migrants into Europe by the dictate of Germany’s Angela Merkel and the EU bureaucrats in Brussels. The people did not get a vote or even an opportunity to express their opinions on the migrant crisis in Europe.

It is my strong view the vote will be NO, because the people feel the Socialist laws have now turned into a fascist force upon them! 

This “Shock Video” went viral all over the world, along with many other reports, and interviews, available on YouTube and Google. The 80-year-old man seen in the video is Luigi Fogli who runs Hotel Lory in Ficarolo, Italy. Fogli briefly considered providing asylum accommodation services for migrants arriving from North Africa, but dropped the issue when he discovered he would ONLY be paid "7 euros" per night for each “refugee” ...


“At that point, the local prefecture simply confiscated his hotel and forced the invaders upon him,” according to Diversity Macht Frei.


There are many other reports on this poor man, who is forced to house 15 migrants for 7 euros a day... Note that an espresso coffee is approximately 2.2 euros, and a Starbucks Latte is 4.76 euros in Zurich. A common hotel room In Italy is 79-150 euros a day.  Can you now understand why Angela Merkel is also behind in the polls?

Market Positioning vs Trump Administration Policies (?):    

My market thinking before the election was to wait till after the Fed officially raised rates on 12/14/16 and then to go short looking for a repeat of January/February 2016 and continue up to the European elections in April 2017.


I'm flat now on all "trading positions" - and have been since the election. (Of course I’m long Gold and Silver as investments dating back to the early 1990's and have added along the way -never selling any yet).


On November 8th (election day in the US), I believed Hillary would win the Presidential victor, or at least the Senate would be controlled by the Democrats. With the GOP controlling the House, the Senate, the Executive branch, and soon the Judiciary branch too, there is certainly a reason to be a bull in the long run.


However, higher interest rates are here and moving up rapidly, while new US laws, budget proposals and the minds of men in the future Trump administration can change from a politician's campaign promises. Recognizing that Donald Trump has not one fixed principle in his head, and is a 100% pragmatist, he can change his mind at the mere suggestion of someone he respects.

For example, Trump was for "water-boarding" and worse to get information from captured enemies. Then in interviewing General James (“Mad Dog”) Mattis for Secretary of Defense the General disagreed. So now Trump is against torture of captured terrorists? I can give dozens of examples of Trump changing his positions. These are interesting times indeed.


Curmudgeon’s Closing Comment:

Even if stocks on a fundamental basis look expensive, Vinny Catalano, President of Blue Marble Research, told the Financial Times that money managers would feel obliged to keep buying. “On a technical basis, the music is playing, there are no negative signals and people are dancing,” he said. “It’s career suicide if you’re not in the market.”


The Curmudgeon still has small short positions in inverse index mutual funds and Leuthold Grizzly Short (GRZZX).   Evidently, lessons learned in almost five decades of stock market investing must be unlearned to profit in today’s stock market.


End Quotes:      


Let’s end with two sentiments of “Mad Dog” Mattis, which may portend the future of US security, which is certainly important to all.              


1. “Be polite, be professional, but have a plan to kill everybody you meet.”

2. "Demonstrate to the world there is ‘No Better Friend, No Worse Enemy’ than a US. Marine.”


Quotes by General James Mattis. 

Good luck and till next time...

The Curmudgeon


Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional.  He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996.  He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies and government policies.  Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

Copyright © 2016 by the Curmudgeon and Marc Sexton. All rights reserved.

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