Money, Currency, Value, Elusive, Changing, Unequal

This being the final posting for 2019, a divergence...

It's December 31. Do you know where your money is? Better, do you know what your money is?

To the unwashed, money is the crumpled pieces of paper in your pocket with pictures of dead presidents on them and some funny neo-Latin phrases and pulpy words like trust, debt, public, private, America.

It's not. Those papers are currency. Money is different. Gold is money. Silver is money. Diamonds and other precious gems are money. The paper is a convenience, a value identifier. In and of themselves, the papers with 10s or 20s or 100s on them are worth roughly the paper and ink, nothing more. But, in the minds of the unwashed, this is all there is. To them it is money. It is not money. It is currency.

The things we crave: food, shelter, cars, jewelry, these things have value. Words and numbers on paper, or digits on a computer or smartphone screen have only perceived value inasmuch as they can purchase the things we want or need, two wholly different things.

It is the thing itself that has value. The house, who some say is "worth" $450,000, others may see as worth less or as a massive misallocation of value. The house is shelter, an environment, a place of safeness, a sanctuary. It's value is derived from the joy or comfort it bestows upon the occupant(s), the safety it provides from threats of other men, from weather which we cannot control, form animal invaders. It's value, while it may be measured by a currency, is subjective. One man's 30,000 square foot castle may be no more comforting or safe than another man's cardboard box on a city sidewalk. It's a matter of perspective.

Further out, beyond the pointlessness of printed currencies, the anonymity of digitized value-measures, the sheer madness of crypto-currencies, are the certificates of ownership, of stocks, bonds, debentures, options, derivatives. Have these any intrinsic value? Not in the least. It is all perception and judgement of crowds. Often judgements are incorrect, inaccurate, altruistic, nonsensical, amusing, boring, tired, obsolete or otherwise jaded.

Like a horse race, the public gets to choose upon which favoritism is bequeathed. One horse may be valued at odds of eight-to-five. Another, sixty-to-one. They are both horses. They both run. Who is to say which horse is better on any given day? The judgement of crowds is more often wrong than right. The eight-to-five stallion does not always win the race. In fact, in practice, public favorites win only a third of the time. Imagine the same measure applied to value? A painting which sold for $300,000 in 2005, may sell for $2 million in 2020, and $45,000 in 2030. Such is the nature of value and currency. None of the numbers are correct indefinitely, but rather, acceptable in a given time, at a given place. Both value and currency are in constant flux and struggle against reality.

There is no real value in a painting.

A painting can neither feed nor clothe you, shelter you (perhaps from a rainstorm for a short period, but it would ruin the colors), but it can provide joy, prestige of ownership, emotion.

There's a number for all of that; it's elusive and always changing.

But, it's not money.

For auld lang syne, my dear
For auld lang syne,
We’ll tak a cup o’ kindness yet
For auld lang syne!

-- Robert Burns, 1788

At the Close, Monday, December 30, 2019:
Dow Jones Industrial Average: 28,462.14, -183.12 (-0.64%)
NASDAQ: 8,945.99, -60.62 (-0.67%)
S&P 500: 3,221.29, -18.73 (-0.58%)
NYSE Composite: 13,876.15, -67.99 (-0.49%)

WEEKEND WRAP HOLIDAY EDITION: Recapping: Stocks Up, Bonds Fluctuate; PMs Stable

Thank goodness, 2019 is nearly over and done. It's been a crazy 12 months, hasn't it?

With Washington in turmoil (think impeachment), Wall Street stepped up to the plate and hit stocks out of the park. It was a banner year for equity investors, one of the top three of the new century, and, with two trading days left, it has a chance to be the best year since 1997 on the S&P 500.

The NASDAQ has shown weekly gains in 11 of the last 13 weeks and the S&P has finished on the upside in 11 of the last 12 weeks.

Fresh all-time highs were attained by the major indices as early as April (NASDAQ), May (S&P), July (Dow), and as late as December for the NYSE Composite.

Bonds were up-and-down as the Fed began lowering the federal funds rate after raising it. Yield on the 10-year note was as high as 2.79% (January) and as low as 1.47 (August, September), but have steadied into a fairly tight range of 1.75% to 1.93%, the latter, higher figure reached just days ago.

Precious metals, have, for the ninth consecutive year, failed to break out of their doldrums. Holders of gold or silver have had a rough go of it this second decade of the 21st century. Silver continues to be stuck in a range between $17 and $18 per ounce, while gold presses up against resistance at $1500. Neither has been able to make any substantial progress other than sporadic, spasmodic moves in either direction.

Housing in the US continues to become more and more unaffordable for most people as wages can't keep pace with rising costs. Wealth inequality and the pauperization of the middle class is becoming a major issue that could balloon into campaign sloganism in 2020. Other than that, no predictions for next year, except to remark that the stock rally shows few signs of slowing any time soon.

If you're looking for predictions, go see a palm reader. What will happen in 2020 is fluctuation in all markets, some balkanization, especially in real estate and globally, in commodities.

Only two trading days remaining in 2019. Happy New Year!

At the close, Friday, December 27, 2019:
Dow Jones Industrial Average: 28,645.26, +23.86 (+0.08%)
NASDAQ: 9,006.62, -15.77 (-0.17%)
S&P 500: 3,240.02, +0.11 (+0.00%)
NYSE Composite: 13,944.14, +3.74 (+0.03%)

For the Week:
Dow: +190.17 (+0.67%)
NASDAQ: +81.66 (+0.91%)
S&P 500: +18.80 (+0.58%)
NYSE Composite: +54.89 (+0.40%)

Shades of the Late 90s: S&P Poised to Be Best Year Since 1997

With just three more sessions left in the year, the S&P 500 is on the cusp of becoming the best year for stock investors in 22 years, since 1997, recollecting back to the halcyon days of the tech and dotcom boom (and subsequent bust).

With the close on Thursday of 3,229.91, the S&P is up 29.24%. Friday's futures are pointing to a positive open, and the index needs to gain just less than 12 points to surpass 2013's gain of 29.60% to become not just the best year of the decade, but of the nascent 21st century. 22 years ago, in 1997, the index gained 31.01%, and that was on the back of gains of 34% and 20% in 1995 and 1996, respectively.

Closing out 2018 on December 31 at 2,506.85, the S&P has piled on more than 700 points, but not all of that was in record territory. Recall that the final three months of 2018 were downright frightening to investors, as the index tumbled from a September 20 closing high of 2,930.75 to a low of 2,351.10 on December 24, prior to Treasury Secretary Steven Mnuchin's (in)famous phone call, purportedly, to the Plunge Protection Team (PPT), aka the President's Working Group on Financial Markets.

The rest is for the history books or maybe Christmas fantasies. The tremendous slide in stocks was halted with the market closed on December 25. The index had declined from 2,743.79 on November 28 by nearly 400 points and that was after the nearly 300 point losses from late September through October with a brief rally prior to Thanksgiving.

On the 26th of December, stocks boomed, with the S&P gaining an astonishing 116 points, standing at 2,467.70 on the close of trading. Wall Street's worst fears had been vanquished. Stability returned and little by little stocks came back into favor, with slow but steady gains through the early months of 2019, finally setting a new all-time high on April 23rd, when the index closed at 2,933.68. The mini bear market lasted all of seven months.

Through the middle of the year, gains were sporadic due to tensions over the trade war between China and the United States, though any negative news was quickly dispatched with hope for a breakthrough in days following. This kind of knee-jerk up and down action continued through summer and into the fall, with the index first bounding through the 3,000 mark on July 12.

The celebration was short-lived, however, as the index dipped back below 2,850 in mid-August, but began to gather momentum which carried it through the end of the third quarter. From October 1 forward to today, the S&P has tacked on nearly another 300 points, cresting over 3,000 again for the final time on October 23. The gains in November and December alone are approaching 200 points, about seven percent.

Should the S&P close out the year with reasonable gains - and there's little reason to believe that it won't - it could be the beginning of something big, if one is a believer in the predictive nature of charts and the cyclical behavior of stocks, politics and people.

Going back to 1995, when the S&P pumped higher by 34.11% - the best gain since 1958 - the following four years were all solid ones for investors. A 20.26% gain in 1996 was followed by gains of 31.01 in 1997, 26.67 in '98, and 19.53 in 1999. Those were also the years of Bill Clinton's second term as president of the United States, and, similarly to today's political circus, he was impeached, his affair with Monica Lewinsky occurring in 1994, his eventual impeachment by the House of Representatives and subsequent acquittal by the Senate in 1998.

While the parallels between the final years of the 1990s to today's market and political environment may be described as strikingly similar there is no assuredness that the same bounty will befall investors during what is likely to be President Trump's second term in office. Since the recent impeachment fiasco has fallen flat and is currently stalled out, perhaps the Democrats in the House will go for a second try after the elections in November of next year (or maybe even before).

Democrats' undying allegiance to the faith of "orange man bad" is assured. However, it appears that the president, for all his warts and flaws and tweets, has been doing a bang-up job on the economy, and it's his successes that have triggered the Dems' ire for the most part. If the Senate remains in Republican hands, it's a safe bet that Trump will reign for four more years, and that possibly, his economic policies (remember, he's made and lost billions of dollars in private life over the years) will usher in four more years of outstanding returns on the stock market.

One caveat to bear in mind. After 1999, some may remember what happened. The tech boom went bust. The S&P lost 10.14% in 2000, 13.14% in 2001, and 23.37% in 2002. Of course, the NASDAQ fared much worse, losing 78% over the same three years.

As we approach a new decade, think positive thoughts.

At the Close, Thursday, December 26, 2019:
Dow Jones Industrial Average: 28,621.39, +105.94 (+0.37%)
NASDAQ: 9,022.39, +69.51 (+0.78%)
S&P 500: 3,239.91, +16.53 (+0.51%)
NYSE Composite: 13,940.42, +45.28 (+0.33%)

It's What You Buy and When You Buy (and sell) It

Stock pickers, fund managers, hedge specialists, and financial pundits will be singing the praises of the stock market for 2019, as it will go down in history as one of the better years in terms of percentage gains on the national indices.

Currently, as everybody takes a say off for Christmas, the S&P 500 is up 28.58% on the year, closing in on its best performance sine 2013 (29.60%). This is according to an interactive chart from Macrotrends.net, which shows the annual return on the S&P from 1927 to the present.

While annual returns provide a positive longterm perspective, what happens in real life is more nuanced. Not everybody buys in on January 1 and sells on December 31. Not only would that be foolish from a tax standpoint, i's hardly practical. Securities are bought and sold at varying times of the year. The trick is to time purchases and sales for maximum effect.

What the referenced chart of annual returns doesn't show, is, taking the time period from September, 2018 to the present day, the return is smaller. Those with functioning memories will recall that stocks tumbled in October and December of last year, but staged a mighty comeback in 2019. On September 17, 2018, the S&P closed at 2.929.67. On Tuesday, it stood at 3,223.38. For those who bought at that September 17 high, that comes out as a gain of 10.02% to today. Not bad, but hardly the gaudy percentage for the shorter duration.

This is not to suggest anything: that stocks are overpriced, or that a pullback is imminent, or anything, other than to illustrate that buying at the proper time results in higher returns. It also points up the fact that while the S&P, Dow and NASDAQ are all making new all-time highs presently, they were also doing so last year (and for many years before that). There's no doubt that stocks have been the all-star investments not only of the past decade, but for many decades before, and they probably will continue to be so into the future.

For holders of stocks or owners of pension funds, college funds, index funds, 401k funds, or mutual funds, this portends to be a Merry Christmas, especially if one followed the most simple constructive advice of investing: buy low, sell high.

As it should be, and to all a good night.

At the Close, Tuesday, December 24, 2019:
Dow Jones Industrial Average: 28,515.45, -36.08 (-0.13%)
NASDAQ: 8,952.88, +7.24 (+0.08%)
S&P 500: 3,223.38, -0.63 (-0.02%)
NYSE Composite: 13,895.14, -4.85 (-0.03%)

Sweden Done With Negative Rates; How Does The World Reverse Course?

From the land that gave us the Volvo and Greta Thunberg, comes news that the nation of Sweden has abandoned its five-year-long experiment with negative interest rates.

The news is actually about a week old, but, being that there was so much going on between the impeachment of President Trump, the China trade deal, and the public's general disinterest with anything not related to either the NFL or Christmas, that the Riksbank raising its overnight repo interest rate from -0.25% to 0.0% hardly warranted notice.

Nonetheless, the global response was as expected from the groupthink of the central bank community. Rates instantly rose, and a chorus of seemingly smart-sounding people recited verses calling for fiscal measures to be undertaken immediately, to counteract the anti-stimulative effect of cancelling out the negative rates that are, in turn, cancelling out currencies around the globe.

According to the central banking community, debt and spending must be promoted by governments as the bankers have done all they could do to alter the flow of goods and services and money in a positive direction. The Swedes have failed, and with that, so too the central banks of the Europe Union nations, Japan, Denmark, Hungary, and Switzerland.

What comes now is general consensus on the direction of economies and globalized financial repression. More spending must be undertaken by governments, on infrastructure, military hardware, green initiatives, social programs and anything else the politicians can get behind and garner more votes for themselves, virtue-signaling that they are the saviors of the free and not-so-free world.

Such a plan could not be concocted by a more smarmy gaggle of decrepit geezers and their enabling political hacks. The worldwide crackdown on savings was not efficient enough to erase decades of excess and misanthropic misadventures into economic dystopia. Now the banking and political community will expose the world to even more egregious profligate spending that will no doubt benefit few, mostly politicians and bankers.

While the Riksbank ponders life in the frozen wasteland formerly recognizable as a stable nation, the rest of the world trudges dangerously close to the financial abyss that negative interest rates have created. Reversing interest rates to a standard resembling something almost normal might prove a costly enterprise. After all, most corporations have been feasting upon low rates for so long, buying back their own stock and artificially raising equity share prices by a process of market starvation, a change that will ultimately cost more could very likely corrupt the process and actually foment a global recession.

Not to worry. The central bankers will no doubt have a solution for that as well while pointing their gnarly fingers the way of their political cronies as world economies lurch from bad policies to worse. With Christine Lagarde recently replacing Mario Draghi as president of the ECB, there's little doubt that the failed policies of her predecessor will be enhanced by more high-sounding rhetorical nonsense that will help speed the spiraling down of society into an inescapable morass.

Well, how about that. It's Christmas!

At the Close, Monday, December 23, 2019:
Dow Jones Industrial Average: 28,551.53, +96.44 (+0.34%)
NASDAQ: 8,945.65, +20.69 (+0.23%)
S&P 500: 3,224.01, +2.79 (+0.09%)
NYSE Composite: 13,899.99, +10.74 (+0.08%)