Above all else, we want to wish you and yours a wonderful, healthy, safe, prosperous and
Very, Very Happy New Year.
As covered for many months now, 2020 lights the fuse of change which is set to disrupt all that we “know” around us as the years ahead launch a fresh new decade.
While there is always a huge influx of “projections” made for the next year – this time each year – we prefer to remain focused on the main current driving all expansion. It is admittedly a little nerve-wracking to finish up a year this strong – especially when it surprised almost everyone given where we were 12 months ago.
The contrary nature of what the masses expect and what actually then unfolds has filled many a book and research paper over decades past. We suspect that part of human psychology and investing interactions – and surprises – will never change.
It is easy to forget that while we are indeed ending the year at records highs in most areas – those records came just in the last 75 days basically – while the previous 20.5 months had been a long, bumpy and fairly-wide trade range.
All along, we suggested one focus on several things well outside of the media topics:
√ Long trade ranges break up – not down
√ Trade ranges are more like rest stops – often “digesting” the activity of the previous year or two
√ The lengthier trade ranges are – the more powerful and long-lasting their eventual breakouts tend to be
So far – so good.
As The New Decade Dawns
We enter this year quite a bit differently (crowd emotions) than last. Terrified and mentally leaping from the ledges as they entered 2019 – the crowd seems relatively stable as 2020 dawns.
Given record flows into bonds and out of stocks for 2019, I’d remind us all that the current sentiment (while far more bullish than before) sits on a false foundation – set to collapse, literally – at a moment’s notice.
Doubt that? Let two weeks of red ink unfold and you will see several things:
√ A rapid change to bearishness
√ 10-year treasuries dropping 15-25 basis points in yield
√ A growing level of the “altitude sickness” we have repeatedly portrayed for you here over the last 10,000 Dow points.
A Baby Bull
Long-term, train your mind to ignore the chatter about an “old bull market.” By every definition – this is a young, relatively new bull market.Yes, I know – it is hard to wrap your head around that one.
Depending on the Index you follow – it is months old – not years. The Russell 2000 is last in line of the major indices to trigger a new bull market cycle – and it is only 5% away from all-time new highs.
Remember – all but one of the major indices entered a bear market in Q4 of 2018. The reason most of the prognosticators were fooled is that it was basically over in 2 trading sessions.
Yet, even as all that unfolds, fear is present just under the surface. A vast portion of the crowd anticipates the next shoe is sure to drop soon – and their money tells you how they feel far more than their answer to “are you bullish or bearish.”
For those asking the question – the concerns will become more properly-timed when sentiment is raging bullish – for a very extended period of time –and is matched by massive inflows into stocks and out of bonds.
That set of events will not unfold at lower prices.
They will only unfold at (much) higher prices.
Hence, for our final note of the year: pray for a correction…
And just in case you forgot about why one would be so imbalanced as to do so:
Your password for the video is”Faith77″
The Crystal Ball
As stated, too many waste too much time on targets and directions, etc. Hell I don’t even agree with the aged (for too old and damaging) process of breaking things into 12 month readings. Who would have ever thought the process taught to so many would be so harmful to their long-term interests?
Process? Yes, the process of comparison – the process of judging how you are doing by comparing it to something that often cannot even be replicated. The process of even breaking these judgments into 12-month increments is literally absurd over time.
For example – on Tuesday, every comp will start at zero – because it is January 2nd. LOL
For us long-timers – the game – and the mistakes in perception it drives – gets mundane. Wasted efforts, wasted emotions, wasted concerns, wasted fears.
Don’t do it again in 2020.
Our crystal ball? Well, it’s in the shop – repairs needed – has been there for years. But here is the deal:
The markets and investing are a lifetime event – like breathing. They are like climbing a mountain – a large one – the largest one you will ever climb. Sometimes the climb pauses for a rest, sometimes you have to go backwards and find a better pathway up, sometimes you hit sheer faces where you must go vertical – scary indeed but then you hit the flat spot at the top of the sheer face – and rest – before continuing the climb.
Every step is scary – the higher one goes and the farther away ground gets, the more you “know” how painful a slip can be.
So face it – that is the deal. No easy way out. No gain without risk. No investing without risk. No magic pathway. No way to beam you up to the top (yet anyway).
The cold, hard fact of the matter is more simple: stay on your path through every storm, every pause, every rest, every slip, every reversal in the climb – until you reach your top, your goal, your “index” – those are all that matter.
We noted above that it is surely an edgier feeling to be entering a new year on a high. Almost by instinct, we can surely expect some setbacks by mid-January as nervous-nellies and short-sighted traders grab their gains from 2019. The first few days of the year always see massive deposit inflow for pensions, etc….and then the work begins.
Expect the media tensions to only increase as 2020 unfolds. Like any other addictive force, after the first hits, the real damage comes as your brain needs more of the same thing to feel the same effect. Media angst and vitriol is no different. The stories have to get uglier for you to:
a) pay attention
b) them to sell ad time
The game will continue and it will get uglier as NOV approaches.
Particular areas of the year where we suspect could see some trouble on the pathway up the mountain?
FEB when the first primaries roll in – media chatter will increase – along with angst driven by said chatter
Summer doldrums (prep stage 1) – late May (ish), mid-June window to set the summer haze in motion
Summer swoon? I am reminded of the worries as 2016’s election approached.
I am reminded of the 17 days in a row with down closes just prior to election day and…
I am reminded of the 1000-point swing overnight as Election Day night results were posted.
This is not designed to be a projection or fear-inducing element. Think of it merely as a map of some trouble spots on the continued trek of our lifetimes – up the mountain ahead.
Use all of them to your advantage.
Closing it Out…
Thanks for reading all year –we surely hope these notes added value for you.
They are designed as small breadcrumbs, useful for all those steps into the darkness ahead, as we all trek forward – up our own mountain – in building for the wonderful future awaiting us.
A new decade is hours away now – and with it will come changes and disruptions that one can only begin to perceive. Be excited – not scared.
We can count on this:
We are surely on the edge of the most significant growth shift of our lives.
Fact: It won’t happen overnight.
Fact: It won’t be some bolt of lightning.
Fact: It will be like sitting on the beach, watching the tide rise – slowly but steadily, even without noticing it – and then looking around and the water is at your feet.
As stated often over the last year, with the “Generation Y tide” continuing its’ rise over the landscape, all that we deemed “normal” on the horizon will change.
Capabilities, knowledge, capacity to accomplish, services to build, benefits to bring to the consumer, ways to accomplish and overcome – leaping hurdles ahead – all of it will expand at the speed of light – or faster.
Even the perception of distance…
Imagine for a moment that you will – in the future – text someone on the Moon. You will exchange pictures and videos with your friends – on Mars. You will occupy a front seat into space – the final frontier.
Back on Earth, that same technology will expand your life, your abilities, your wealth, your capacity – everything – in ways we can just begin to imagine.
As important? A vast number of the things (read: problems) experts try to scare you with daily over the airwaves – will be solved by the same technologies and the same Generation Y tide.
The Barbell Economy™is driven by the two record setting generations of our time. We are all blessed to be living in these unique times.
Make yourself another promise this Holiday Season: Starting tomorrow, you will no longer be swayed by headlines like:
“The Latest Data Appear Much Like (enter any pre-disasterous period in the past)”
You see my friends, as technology takes over, the economic references to the past no longer bear much weight. To suggest that some part – any part – of our economy today relates to any event in the 60’s, 70’s, 80’s or 90’s etc etc is simply a foolish misunderstanding of reality.
There is nothing left of the economy we lived in during those times. Hence, comparing today – and/or the tomorrow’s to come – to those periods in the past is a great scare tactic, a wonderful emotional triggering event -but useless to your personal interests and future wealth goals.
Relax friends…our very best days are ahead.
As we send the year and decade off into the history books, we worked hard to find the best words to effectively portray for you, our sincere and heartfelt appreciation and gratitude for allowing us to be a part of your lives and to serve your needs.
I tried – but could not find them.
I am left with something more simple I suppose…
from All of Us to You:
And always remember this as the dark clouds of 2020 and beyond will surely gather around us at times in the months and years ahead:
√ We fight the good fight, we don’t stop.
√ We conquer, we overcome, we build around, through or over –
√ We solve problems – we expand – we succeed…even while all the problems will continue to unfold.
Pray for more of them.
Be well and travel safe!
….and have a wonderful New Year!!!