Good Afternoon,

Something better than you think is headed our way.

I have spent most of my career being told, often, that I wear rose-colored glasses.

I get it – it’s a nice way of saying that I clearly don’t realize how bad things are “out there.”

Though there is nothing I can specifically “show” you, I can state that this rose-colored glasses “chatter” tends to get much louder just before something very surprising happens – to the upside.

…and friends, it is getting very loud.

Make sure you keep this in mind:

America is in the business of overcoming obstacles, creating breakthroughs, pushing back against fears and learning well from experiences (good and bad) – and business is good.

“Quick work” seems sudden in markets and our economy.  What do I mean by that?  Markets can chop to- and- fro for months and months.  They can seem like they “take forever” to get moving forward again.  Chop and churn seems like it takes forever to pass…and then, quickly – the DOW moves 2,000 to 3,000 points.

Know this too:  we are entering the “season” of the calendar where these “surprises” tend to arise, often just at the depth of where it seems like nothing is happening at all.

Before?

Don’t shoot the messenger – but – that jolt forward would be even better if we could get one more little shakeout to test for strong hands.

Never be fearful of the setbacks which create the rate of return going forward.  Sharp setbacks cause the very elements I describe above…and they work very, very well.

How do we know?

Look at the latest AAII sentiment data.

Here we are setting new high closing records on Friday – quietly while most of the crowd was chattering about one setback or another – obviously lost in the haze that angst and fear cause.  Yet, just the day before, here is the AAII sentiment data

 

Note the “bullish” reading was just below 40%.  Notice also that the historical average, good, bad or indifferent has been 38%.  In essence, here we are at all-time highs and we feel about average?  We see that 60% of the audience is NOT bullish?

Seem reasonable to you?

Never kick a gift horse in the mouth as they say.  Do NOT underestimate how powerful these forces are which are building all around us.

People Make Markets® and the US is set to experience a flow of demand not seen before.

The good news about Demogronomics® and these insights is that we don’t need to agree on them.

Everyone is welcome to choose whether they want to “see” that or not.  However, and this is a big however, whether we agree on it or not – does not change the fact that these waves of change will unfold,

The largest generation of our time – Generation Y – will grow up and build their lives, replacing the Baby Boomers as the most powerful economic engine driving demand into the US and global economy.

Don’t wait until “it becomes more clear” as that is always too late.

Last Week

Most of the experts spent the week telling you how bad it was that “the Big 5” in tech had miserable reports for the quarter.  there was indeed a theme to their “misses.”  The theme was NOT that they were doing poorly.  The theme, when one twists the prism to the proper paradigm, was that they had more demand than they could meet.  Is that bad?

It is bad ONLY when one thinks like a short-term trader and not a long-term investor.

Instead of focusing on the squeeze in the bell-curve we have highlighted for several quarters as likely, think of what comes next.  Next, it will be better.  Next, it will be less bad.  Next, the higher demand levels will be met as productivity (and margins) expand.  Next is good news – not bad – and 88 millions kids becoming adults and building their lives pretty much assures this in the future.

The good news?  We all get to choose.

The bad news?  Grab an extra gallon of patience and bring it with you for the ride up this mountain.

Ratcheting Upward

The better news bout earnings – even after all the tech “bad news” the media wants to spook you with – is that they are rising – and beating expectations.  The major margin improvement is likely what is fooling most in the analyst crowd.

…read ’em and reap

 

On October 1, the expected rate of increase for the quarter YOY was about 26%.  We are already 11% higher than this – and that is inclusive of the “tech problems.”

Sorry, when I hear “tech is having a problem”, I chuckle a bit, scratching my head and wondering how in the world “well, we could not meet all the demand…” is bad – for anyone???

And yes – just when you thought the 4th quarter could not rise any further – it too continues to do so

 

Refinitiv confirms this in their reported data too:

S&P 500 key metrics:

The forward 4-quarter estimate improved to $215.32 this week vs $214.69 last week. The sequential increases each week are still a positive sign.  I’d add this:

When this year began, 2022 earnings a year in advance were “expected to finally break $200 a share.”

Instead, by the time we get there – and add one more forward quarter for the full 2022 outlook – the number is set to be closer to $221-$225, with 2023 seeing closer to $245 a share – and likely short as well.

So…

Happy November.  The Fall days are coming at us.  Cool weather and the Holiday Season just steps away – and the stage is set for surprises to the upside.

In a perfect world we would get one more series of nervous nellies selling.  Who knows what will trigger it.  Interest rate fears?  Inflation fears?  Political fears?  Just remember – the problems are always coming from left field – far away from all the headline inflammatory chatter.

Pray for the setbacks as we stage for the next breakout.  There is over $20 Trillion sitting idle as the investing audience is deeply fearful of what is ahead.  That is more fuel than we have ever witnessed.  Mix that with expanding margins and record earnings ahead – and, well, the outcome is better than you think.

Just remember that extra gallon of patience my friends.

 

Until we see you again, may your journey be grand

and your legacy significant.