SD-2020 TRADING WITH THE TIDE

[sd]

2-12-20
With this week's rally, I have decided to become more cautious because of the still outstanding Corona virus continuing to be in the news-
News on CNBC this pm seems to indicate a higher surge in the death toll in China- While China is trying to posture that everything is improving, some workers returning to their jobs.
Some CNBC reports say that some guards have gone from simply wearing face masks have today donned full Haz-mat gear.
I have just put in orders to sell 7 funds in the company IRA account and to put the proceeds into cash- These funds all were focused on new economies, had declined last week some, and made higher moves this week-some reaching new highs- Since I cannot put stops under mutual funds- this type of open exposure makes me nervous- as these funds will only trade at the market close at 4 pm. Huge disadvantage and a solid reason to not be limited to owning only from a family of mutual funds for one company.

While the US markets -last week- have shrugged off the potential for the Corona virus to expand - and rallied on the NH Primary of Sanders winning- knowing he is unelectable-
Many areas of the markets are well extended- and I have added some stocks and increased ETF positions as the momentum has continued higher-
I lost about -3% in the prior week sell-off, and so now I have reentered a number of positions-most all moving higher- so I think it may be prudent to trail stops near or at the 5 ema.
I hate to be reactive to "Noise" in the news- but perhaps the growing concerns around this virus becomes the catalyst for the markets to turn on a dime, and react- I'm not hearing total reassurance that the contagion is well contained- actually- the opposite is true, and the potential for outbreaks in the US is not to be discounted-
As of today, I am positioned with an 85% in-market portfolio--A lot of Tech exposure. I don't think the markets have reason to see this increase as a sell-signal- so I expect some additional upside- allowing me to raise the trailing stop-loss each evening- I am positioned with TLT and VPU as defensive holdings presently- but I am largely long momentum sectors-Tech- and those trades are well extended- Past experience suggests that extended trades on the upside can often become the extended trade to the downside as the pendulum swings back sharply, and profits are taken by the quants and hedge funds-
Fundamentally, I believe that this year will be a solid market gain, as I think the Corona virus goes away- The US Flu has 10x more deaths than the world wide Corona virus already- and many more to come- None-the-less, If this expands further, the fear factor will overwhelm the realities that we will see people reacting more to this than the known FLU disease that likely will kill 10,000+ people in the US- already here among us, and spreading.
That belief should be a good reason to not react - just to be whipsawed a 2nd time this year- And If I get stopped out, where do I draw the reentry lines-?
Getting my stops up to protect my break-even entry costs would be prudent - should the need arise-- ARKK,ARKW,SPCE,WORK,UTX TDOC,DOCU, ARKQ,ibb,msft,smh,tlt,vnq, and a few others .

[sd]

Pleasant surprise today! Only UTX stopped out today- and I certainly anticipated the Corona news and the low futures this am would see a sharp market drop- While the indexes all closed a bit lower, stops - mostly set with the 5 ema-managed to stay clear of the potential volatility. Utx was a new position taken this week, lost $5 on the trade- approx 3% on a small position- Counter to this - SPCE-, docu, tdoc, work,smh -all recent adds- continue higher this week- Positions I had reentered last week- ETFs- are still trending higher- I consider this resolve in the US markets to be a sign of strength- until it does not- I fully expect that if this contagion spreads outside of Asia and cruise ships- and why would it not be able to do so? That the market's reaction will be considerable- The relatively minor pullback of last week will be considered a small preamble to a much larger impact- not yet recognized- Perhaps the "Black Swan" event of 2020
In 1918- a "great Flu" killed 50 -100 million people- world wide- John Garry "The Great Influenza"
Can't happen here and now as we are a 100 years more advanced in our medical advances- right?
I had a scheduled 6 months physical today , and asked Dr Curtis- What about this Corona virus with just over a 1,000 people dying- and yet we have the Flu that has killed so many more -every year- Some 20,000 deaths this year- but it's not very newsworthy-
But the Corona virus contagion is a total unknown- and it has locked China down- For weeks now- and possibly for further weeks- It will definitely impact China's growth- GDP production has halted during this event- and it will likely have a large trickle down impact- for global production based on China.


Last night I put in SELL orders for 6 mutual funds I held in the Company IRA that mostly give exposure to the new frontier, emerging markets- the "New Economy" - Essentially primarily gave me market focus outside of the US centric holdings that I hold in my other accounts- I had set this up intentionally this way a few years ago- also thinking that those monthly investments out of the paycheck would be purchasing stocks at a lower valuation - and would tend to balance out the portfolio with some "Value" investments- This past year, those investments gained for a decent return-and actually matched my personal return of a modest 18% gain- and the decision to sell at this time is based on the recovery from the last week- and potential new highs-
I never cared for the limitations within the company IRA selections-Only allowed one Mutual fund family as the only allowed selection This event allows me to put those assets into cash and do a roll-over into a Vanguard account.

[sd]

2-14 Bought a little MJ -cannabis play at the open, 80 shares- CGC apparently beat estimates and other cannabis stocks were also higher- I looked at several Pot based ETFs- TOKE, THCX, and MJ- I decided to go with MJ as it has much higher average volume- Sector has been a total loser since the IPOs- I also added into ARKG- 100 shares, - genomics,- despite the IBB still flat- and healthcare-flat- I think some of the newer genomic approaches will be given added support as the direction medicine turns to, to identify & stave off this contagion. ADDED to the VPU-Utilities- , ITA -defense was a new add- and added more into ARKF -SPCE entry is up strong this week- up 15% more this Friday - Like those green bars

Corona fears still very much in the news- a 10x increase was announced in the number of cases due to a different type of diagnosis- Some 400 Americans evacuated from a Cruise ship in Japan- going into quarantine when they arrive at a US military base. Reading some articles, and cnbc interview with Scott Minerd- The potential for a severe impact- stall of the China economy will be severe and have large repercussions- and it is bound to affect the Us companies that get products- or sell to- China. Like our FED, China has to be making financing available as companies cannot bear the burden of a month long shutdown....TSLA won't be meeting it's China sales or production estimates- at least in the near term. So many variables at play here-
Surprisingly, some of the Chinese companies are not down huge- BABA, BIDU-KWEB ETF and recovered from the Jan sell-off. and JD is actually up- due to it's food and delivery services?
If the virus turns out to be contained and the economy starts back up- Will there be a big relief rally in that sector? One other article suggested that this incident will only push the AI and robotics evolution faster. That would certainly make economic sense for a company to shift it's production- where possible - and eliminate the need for those susceptible human worker bodies......Likely the robotics/AI will continue to be a good investment theme until the social response of lost lobs- gets overwhelmingly loud.
I initiated a new rollover today - 47K out of the company retirement IRA - and will roll it into the Existing Vanguard brokerage IRA .I was advised that the rollover from that Company's management firm could take up to 4 weeks- Go Figure! The goal is to have those assets where I can distribute them into the account accordingly-
Interesting that the market is up, Tech is solidly trending , Utilities are breaking out to a new high, and TLT is up as well- Market is trending overall, and it's upwards momentum- seems widespread. NVDA had beat expectations and so that prompted the entry into SMH.
This past week saw nice upside moves- in the stocks I had bought- SPCE moved up over 20% on Friday- best net gainer in my stock positions- entry $21.01 -about a 38% gain in a week's time -big one day move Friday- Will tighten stops to net some of that gain - WORK, DOCU,TDOC, GNRC all trending well- MSFT pausing- under some threat of legal pressure-will set a stop under the present range-had just reentered after getting sloppy in a hurry to set a stop-loss and sold instead as a limit order.
I need to differentiate- individual stocks that are held are relatively small size compared to the ETF positions- only about 10% individual stock exposure- balance is in ETFs- which are overweighted towards Tech- and momentum .
One of my intentions was to import the google sheets for tracking the portfolio - and that can be automatically updated- Still on my -"TO DO" list. I've been slack in taking a more organized approach to what I need to follow more closely- Looking at charts once a week and adjusting stops higher is fine during periods of strong market trends-My account- is just now back to a new high- making up for the approx -3% whipsaw -from stopping out a few weeks ago. The obvious result is that my account would be that much higher now if I held without those
tighter stops . However, I feel that if getting stopped out a few times does have a drag on net gain overall- it will result in holding onto a larger % during the inevitable point where the markets actually have a substantial sell-off of -10% or more-Didn't happen in 2019- The Corona virus did not prompt that- YET. Speaks to the chase for Yield in the markets surging ahead regardless. And the accomodative FED - However, Politics are an unknown- and if a virus cannot discourage the markets- a real democratic threat for President or the Senate would certainly be a rational fear. Bloomberg appeals to the more conservative elements- Noticed he is showing him with Obama in TV commercials from an earlier time- Interesting that Biden is not showing himself as VP with Obama- It suggests that Obama does not support Joe- who is indeed damaged by the corruption and influence peddling vis-his son's positions in Ukraine and China companies. And did someone say Hillary and Bloomberg? Contested democratic convention?
As I don't spend much time tracking what moves the markets during the weekdays, I tend to rely on Arthur Hill and the other stockcharts commentary available to members-and catch-up
And maybe Earnings do matter since we are relatively expensive.
Goal this year will be to max out the ROTH-in both of our accounts- which would be my advice to anyone that wants to keep the gov't out of All of their investments- Max the Roth as a priority- and then do the tax-deferred account- One can even roll out of the tax-deferred IRA into a Roth - but you have to pay the tax when you do so as income- but particularly for those with decades to allow that to grow- get that Roth funded to the annual max allowed - and then do the deferred. Employers often do not offer a Roth-option- but it is certainly available to the individual to do on their own-.
Also- max out the HSA and then use the investment options in the HSA account to grow on their own- You get the tax relief on the initial investment out of the paycheck, plus the benefit of growth without any tax penalty- to be used just for medical expenses- An early investment there could become a substantial sum of monies over a few decades- providing a nice health care buffer-. or braces, glasses, deductible coverage etc.

[sd]

A good article in SA with a rotation strategy switching between QQQ and TLT with a net outperformance vs spy and a reduction in Risk- Similar to Brian Livingstons' momentum thesis-
seekingalpha.com/article/4323927-2-multi-bagger-high-growth-strategies-1-for-retirees?ifp=0&utm_medium=email&utm_source=seeking_alpha&mail_subject=reits-surge-on-merger-mania&utm_campaign=nl-investing-income&utm_content=link-1

Brian Livingston does an outstanding job of educating investors and Portfolio design in his book "muscular Portfolios"-
This link provides access to the various informations available

mailchi.mp/brianlivingston.com/191231

The design of these portfolios is not to try to "Beat" the market- but capture a decent market gain and protect from larger losses-

The methodology set forth provides a simple approach for adjusting one's portfolio as market conditions change- based on a straight forward tally of momentum direction- and criteria to alter the position weightings. Potentially this could be used for the majority -or all of one's portfolio-

[sd]

Just adjusted stops higher tonight- Corona virus is still in the news, but the markets are moving forward. SPCE- very nice short term gain of 38% on the ist stop- and a 2nd stp @ $32- Nice quick gain like this could get me excited about stocks- Docu and TDOC still trending and stocks are rising- as well as funds- Odd that utilities and GLD are gaining- as well. Still all good as stops are being adjusted higher- Sold the SPCE trade for a very nice +$800 gain in less than a week- but it has rebounded- Walked in the door tonight and the wife wanted me to Buy some Virgin Galactic in her account tomorrow- Go Figure!

[ira85]

Follow-up on the subject of finding a wealth management program or professional. I am researching wealth management services. I had my third meeting with a local professional yesterday. We've spent about 5 hours reviewing my financial situation and family trust (in lieu of last will and testament). He's reviewed last years tax return, monthly statements for my brokerage firm, TD Ameritrade, my life insurance, and my real estate. He's proposed creating and managing an investment portfolio. Hasn't given many details. I'll write a summary once/if we reach an agreement. So far his portfolio ideas seem very similar to the program available for free at Personal Capital.

I ran across a suggestion for do it yourself portfolio management, or perhaps better described as a stock trading system rather like a newsletter, a big newsletter, Investor's Business Daily. I've seen IBD but I've never subscribed. A friend used to swear by IBD. It was his main tool. Today IBD offers a promo $5 for 5 weeks so you can see how it works before making a commitment. It's $35 / month. There are also a number of additional tools available with subscriptions separate from the main paper. These include Leader Board and Swing Trader. IBD is known for using and recommending the CAN SLIM system for analyzing stocks.

My first thought is IBD has been around since 1984 and I hardly ever hear about it. Does it have much to offer? My second thought was that's a pretty steep subscription price. That could be as much as a year worth of wealth management services at Vanguard (ball park estimate). Lastly, a daily would either eat up a big part of my day, 5 days a week or I'd be skipping a lot of stuff I'm paying for.

Comments about IBD? -ira

[sd]

Hi IRA ,

Follow-up on the subject of finding a wealth management program or professional. I am researching wealth management services. I had my third meeting with a local professional yesterday. We've spent about 5 hours reviewing my financial situation and family trust (in lieu of last will and testament). He's reviewed last years tax return, monthly statements for my brokerage firm, TD Ameritrade, my life insurance, and my real estate. He's proposed creating and managing an investment portfolio. Hasn't given many details. I'll write a summary once/if we reach an agreement. So far his portfolio ideas seem very similar to the program available for free at Personal Capital.
I ran across a suggestion for do it yourself portfolio management, or perhaps better described as a stock trading system rather like a newsletter, a big newsletter, Investor's Business Daily. I've seen IBD but I've never subscribed. A friend used to swear by IBD. It was his main tool. Today IBD offers a promo $5 for 5 weeks so you can see how it works before making a commitment. It's $35 / month. There are also a number of additional tools available with subscriptions separate from the main paper. These include Leader Board and Swing Trader. IBD is known for using and recommending the CAN SLIM system for analyzing stocks.

My first thought is IBD has been around since 1984 and I hardly ever hear about it. Does it have much to offer? My second thought was that's a pretty steep subscription price. That could be as much as a year worth of wealth management services at Vanguard (ball park estimate). Lastly, a daily would either eat up a big part of my day, 5 days a week or I'd be skipping a lot of stuff I'm paying for.

Comments about IBD? -ira



I would say it sounds like you are talking with a manager that has a grasp on the importance of the wider picture-exactly what you would expect from a financial planner- and I think that is an essential component to get that wider and balanced perspective of the entire picture -Trust vs wills doesn't come with a robo platform- and neither does the particular input once your personal preferences are identified- When one has spent decades working- and hopefully accumulating some assets, it's perhaps necessary to allow someone else that has no skin in the game to put things in their proper context. I think that is the advantage of considering an adviser - for that unbiased input and review of one's situation- and also why I elected to have an adviser manage a portion of my relatively small account.- You may wish to consider keeping a portion of those assets in an individual brokerage IRA account -
Managing an entire account on your own - that has been relatively inactive can be a real stressor- to put on yourself- That is why I offered the suggestion to not take it all onto your shoulders- I would suggest that you also interview at least one other wealth manager- fiduciary manager- to compare apples to apples-
For myself, I handed off approx 50% of I disagreeets to a manager that I spent some time interviewing with- and put the remainder into Vanguard brokerage accounts- Ira's and Roth for my wife and myself-As several years have passed- as expected, I have managed to outperform the more conservative adviser in this relatively small sample period of a few years, .That said, it comes with a price of my personal time and involvement, and is likely only worth doing as it provides me some intellectual challenge but takes up what would otherwise be free personal time- As you asked me once- time management is a priority to keep in balance- Work- home-garden-and now boat/fish and include some deserved leisure time with my spouse.
If you hand over the bulk of your management to an adviser- that frees you up to manage a smaller % on your own if you have the time, interest, and real desire- Or to not worry about any of it at all- and spend your time engaged in other activities you may enjoy- without stressing about making trades/investments/ downturns etc. I'll expand on that in a follow-up post.

IBD- O'Neil- I just pulled my copy of "How to Make Money in Stocks " William J O'Neil - " A winning system in good times or bad" Copyright 1988, 1991,1995.
As i knock the dust off and browse a few pages- O'Neil likely had the right idea- CANSLIM- Identify the winning stocks with leadership- in winning sectors- Absolutely the right approach- IMO- and he identified it decades ago.....
So, They have Been around for a very long time- I have no idea what they offer now, 2020 , but $35/month is a relatively small amount for a source of very specific information tailored to a market approach- as long as you can cancel should you not find their service fitting your approach, I would give it a trial- A number of different sources can identify high momentum sectors and sector leaders-
You will have to judge the merits of what is offered by IBD- but it would seem to be worth while to give it a try- Often it is not the information that is presented, but the operator's use of that information that leads to success or less than ideal results- I think that had i learned to apply the IBD criteria a decade ago, I would be much more ahead of where I am today- Sometimes, you are not ready to adopt/apply the information presented- based on purely personal perspective at the time.
I have no accurate comment of what IBD offers today in 2020, but I would suggest that identifying a momentum approach that also incorporates a value thesis should have a basis in sound fundamentals- Caveat Emptor- Thanks for posting- Btw- it is just you and I based on the visitor log.

[sd]

2-21-2020 Home today due to a huge 2.5" blizzard in NC- but work Saturday-
The markets declined most of this week based on higher concerns of the Corona virus- Not a real surprise there- and my way of dealing with that is to have stop-losses in place and to take the loss as prices drifted lower-
I had some fun this past week- trading SPCE with a small %- and actually engaged a fellow employee to get active in his long stagnant account with a $600 balance- I also traded just a small amount- and captured a quick move higher- split the stops on some 73 shares, and made a quick gain- That was all fun within the trading account- which is up above 20% gain since Jan 1 -
However, the investment account- is only up 3% with an almost 80% position in cash this Friday close on the fears of the Corona virus-
I'm much more conservative with my retirement -Vanguard account- primarily ETF's and a focus on technology- and trailing stops-
A 3% gain in 6 weeks is not bad- but I was anticipating a larger gain- as I had a considerable tech exposure - but these are trailing stops being executed at a lower pullback price-
So, If I can continue to protect my downside exposure- my upside is now through VPU and TLT at the close of business today-
As I mentioned to IRA in the prior post- this takes one's personal time to try to surf the momentum direction- and if one is trying to capture just a few % differential through personal attention vs handing iot over to someone else- on'es free time applied to other pursuits has an intrinsic value higher than mere $$$. Quality of family time in shared pursuits...etc.
We just finished adding the max to our Roth IRAs tonight- I share this because it is important to try to do as much as one can within the safety of the Roth IRA from future taxation.
The trading account has gained 23% since the start of the year- some lucky trades and tight stops- and the investment account is about +3% and a large cash component hoping for a decline lower and 20% exposure with TLT and VPU.
While I hope for a decent pullback to justify getting stopped out for a 2nd time this year, I also think I will look to the bigger picture in asset allocation going forward- I must live under a rock, as ESG funds have done very well this past year- Go figure- Yesterday I was trying to minimize the damage of a diesel spill on the project site- I thought I was pretty avante guard- The well-driller for the geo-thermal wells machine leaked about 20 gallons of diesel into a shallow settlement pond overnight- We consolidated the surface diesel to the edges where we used a shop-vac to suck it off the surface and discharged into a 55 gallon drum- and then ignited to burn -off- We then used a weed eater with a propane tank to burn off any remaining surface residue - Surface Soils were excavated and contained - Personal attempt at my own socially responsible environmental pro-active response.....
From an investing view- , I have quickly gone defensive with stops executing near the 10 day ema- This is the 2nd time this year - and I would expect that this time may see a larger dip lower. Stock prices are generally at the higher valuation levels- so, this may become a market reason to have a mild correction. Hopefully deeper- This Corona virus seems to have a greater potential for earth wide expansion- pandemic perhaps- but these initial stages are somewhat contained- and so it's a fear trade on this week- but it's not a panic decline
I will have to reasses the new allocation- ESG style funds will also be in my radar for 2020-

[ira85]

Lots of interesting ideas SD! The article on Multi-Bagger investment systems was very interesting. Simple, objective, control/reduces risk. I'll have to look into that more thoroughly. Very promising!

Your comments about time management. . . very important. Many of us have been in positions to decide am I going to take the path toward career advancement and long, long work hours? Or will I put the emphasis on family and do the best I can do in my career limiting myself to 40 hours a week. I used to work a lot of 16 hour days and 80 hour weeks. I was a notorious worker. That's one of the reasons my portfolio is a mess. I always had good intentions, but pressed for time I would read some interesting things, but seldom followed through with action. Hence I developed no reasoned, complete financial plan. I'm retired now so I certainly have more time. But instead of taking the DIY approach, I'm leaning more toward hiring a wealth manager. I'd like to get one who would work with me to implement a dynamic investment strategy, like the Multi-Bagger system SD wrote about in his post earlier this evening. The system stays invested all the time, switching between QQQ and TLT.How do you know when to switch? Every month, you check the three-month relative performance of QQQ and TLT. You invest in the security that performed better over the previous three-month period. That's it. Clean, simple, no emotion, efficient. Reduces downside risk and vlatility.

I think it would be very hard for me to sit on a fully invested portfolio and passively ride to a huge loss, knowing this system was out there, available, and I wasn't even giving it a chance.

This time management issue cannot be avoided. We will all be confronted with decisions throughout our lives about how hard we will work. We'll also have to chose which activities are worth our time and energy and which ones aren't. Some will decide not to work very hard and say it ain't worth it.

Lastly, have you heard of Dan Zanger. I just ran across him today. He's a pretty successful stock trader. He talked about how he was a tremendously hard worker. His work was successful as he developed ways to spot, then buy, rising stocks, then sell them before they went down. Sounds simple enough. It looks like his newsletter is about $1,500 a year.

Zanger said he learned technical analysis from William O'Neil. He said he would never have had the success he's had without O'Neil. Here is a sample of what's available.
chartpattern.com/golden-rules.cfm
www.youtube.com/watch?v=AxRhsDsrGw4
With the assistance of Google you can find several interviews with Zanger on YouTube.

We just scratched the surface today.

We have some long term participants on this site. And we have guests. I hope our guests find the discussion of using a wealth management professional, time management, objective investment systems, and Dan Zanger interesting. I hope some of our guests will register and leave us some feedback. We'd like to address issues people are interested in. Thanks for stopping by. -ira

[sd]

Hi IRA,
I think it's truly an excellent idea to have a go with a financial adviser- particularly if you find one that understands your desire to not simply sit through a significant decline and will be proactive.
While the TLT/QQQ exchange looks simple and interesting, I would actually want to backtest it manually over the past 15-20 years to compare the actual periods of different market conditions- and to realize the drawdowns, whipsaws that such a crossover approach may encounter- and what % of a decline of profits would be given up over the period of 30 days ? I think Brian Livingston -or someone else noted that any such call for action should be prepared to hold for at least 30 days - and might even see a reversal back in the other direction-
To manually backtest, Stockcharts would be the ideal-resource- but you would have to view a 1 year chart-for each specific year you back test- and print out the chart of each fund, compare each period- and pencil in hand- log in the actual signal- Or- perhaps just an excel spreadsheet would be the simplest- recording the weekly closing price- and while choosing a monthly time frame may be convenient- a lot can happen over a month- why not also consider just updating the system to add up the change over the prior 12 weeks- and do it weekly vs monthly?
If I was going to adopt such a system, I would want to check it both ways- likely more potential whipsaws on the weekly time frame-
$1,500 sounds pricey - at least for my budget- I googled newsletters- blog.wallstreetsurvivor.com/2019/03/01/best-investments-newsletters-3/?gclid=Cj0KCQiAv8PyBRDMARIsAFo4wK1qwPn4Ne6tM9ED_5bd3InBEapKOuffUVzCe4Y3LaekbaStyP3Al_saAoxFEALw_wcB

I also would suggest checking out www.leavittbrothers.com/- solid market analysis- 2 week free trial- but I don't subscribe to any- Just stockcharts- with a lot of good commentary- from their contributors. View stockcharts tv for good up to date analysis- and I just found :
www.youtube.com/watch?v=Y1TZOV-BjAQ- "The Final Bar" -worth a watch -to get the market analysis..
a good video on individuals managing larger money - from SMB- can apply to the individual managing their own account-Real talk about trader's emotional issues-
www.youtube.com/watch?v=MmryR1iu9dA
Also-m Tom Bowley-also has a pay for service- You can get a lot of his experience through stockcharts www.youtube.com/watch?v=41E6CfLewds
He also offers different portfolios- to members- www.earningsbeat.com

[ira85]

Regarding a system for switching between TLT and QQQ to reduce risk of major drawdowns SD noted While the TLT/QQQ exchange looks simple and interesting, I would actually want to backtest it manually over the past 15-20 years to compare the actual periods of different market conditions . . .This touches on a couple of things that seem important. This post is about the big picture of the US economy, not about stock trading. But these issues affect how I manage my investments. So this is related to investing broadly. Fair warning.

How far back do you have to back test to get really different market conditions? I'd say you would need to include the decade of the 1970's to have data from a really different economy.

The US had persistent problems with inflation in the 1970's. The inflation rate reached 11% in 1979. To break the back of inflation the Federal Reserve raised the federal funds rate from 11% in 1979, to a peak of 20% in June 1981. The prime rate rose to 21.5% in 1981. Interests rates have been falling since 1981, that's 39 years of progressively easier money. The Fed Funds rate is about 2.0% now. The Prime Rate is now 4.75%. Lowering interest rates is believed to stimulate the economy, making it cheaper for companies to build more production facilities, hire more workers, expand their business, and improve earnings. This period of monetary easing goes back as far as many adults can remember. No one seems much concerned that there may be a price to be paid for making money so cheap. Do we believe that all state and county governments are putting money away for a rainy day, just in case interest rates go up a couple of percent and they might have problems meeting their wage and benefit obligations to employees and retirees? Might there be a sharp up tick of bankruptcies? Or a serious recession? A stock market crash?

And what about the belief that lowering interest rates stimulates the economy, making it cheaper for companies to build more production facilities, hire more workers, expand their business, and improve earnings? It seems many large US companies have found it difficult to expand their business. So many companies have been using the easy money from fiscal stimulus to buy back their stock. The PE ratio improves even if sales are flat because there are fewer shares outstanding. Does the federal government run bigger deficits because debt payments are easier to make with low interest rates?

Does lower interest rates keep us out of recessions? For the 100 years of the 1800's there were 24 recessions. That's our base rate, one recession about every 4 years. In the 40 years from 1942 to 1982 when the easy money started the US had 9 recessions. Since 1982 we have had 3 recessions. That doesn't prove that monetary policy can prevent recessions, but it' supportive evidence. So there may be strong incentives to keep stimulating the economy, even though we know it isn't working as we had expected, e.g. companies using cheap money to buy back their own stock while they send manufacturing to Asia.

I often hear pundits say the business cycle hasn't been repealed. How can we be so sure? We have managed to lower interest rates and found new ways to provide monetary easing. We have kept interest rates low for years. We seem to have avoided recessions, lowered the unemployment rate,and dodged both inflation and deflation. The dot.com bust of 2000 and the Great Recession did result in two major stock market crashes. But the damage was quickly cleaned up for the most part with much less hardship than the Great Depression. It's the Goldilocks economy. Everything is just right.

What's the point to all this? Monetary easing and low interest rates seems to have helped us to have a long period of relatively stable economy, prosperity, strong employment, and no major civil unrest or political unrest associated with our economic policy and fiscal accommodation. It seems to have been spectacularly successful. But maybe the business cycle still works. Maybe we have created a bubble in the credit markets such that there may come a time when interest rates must rise but the economy can't handle the rising rates. In such a scenario we could have widespread bankruptcies and job layoffs. Maybe the suffering hasn't been avoided, but rather delayed. The US suffered a great deal in the Great Depression. Let us hope that isn't repeated.

Pundits often like to find a way to use the old saying, “But its different this time.” Well maybe this Goldilocks economy really is different. For a hundred years we averaged one recession every 4 years. Well for the past 39 years we've had 3 recessions, 1 every 13 years. If it turns out the business cycle still works, Goldilocks was temporary, and all good things must end then it could get ugly. Hang in there Goldilocks. Make it different this time. -ira

[sd]

Informative Ira !
I don't know what the catalyst will be for the next recession-it's likely something not on anyone's radar at present- a global pandemic could certainly be the spark - but we will have to see- It seems that there are always several things that occur over the course of every year that seem dire initially , but fade - But lots to fear should one want to look through those dark glasses-
We are now truly almost a linked global economy, and perhaps that makes us more vulnerable to events outside of our country.
Consider the rapid advance of technology as both the driver of the new boom in economies, and possibly the cause of great social disruption that could be seen in the next decade- as jobs are replaced by automation , wages for the masses become stagnant, social programs will demand more out of everyone's paycheck, and social unrest and income inequality gain momentum.
Or- what happens should one of those radical countries get their hands on a nuclear device- and detonates it in Europe, Israel, the US?
Or a biologic weapon, or drugs in the water supply? or hack into our power grid? Plenty negative options to consider-
But, as you pointed out, we actually have made relatively rapid recoveries from the recent recessions-

Pundits often like to find a way to use the old saying, “But its different this time.”

Some things are indeed different- but some things- like reversion to the mean will likely always hold true- eventually- as the market cycle is ultimately based on supply, demand, and valuation. If one listened to Marks (sp) several years ago as his announcement that the markets were too richly valued -and bailed out, would have lost out on several years of gains.
Those-like myself- that allowed fear to restrain from investing- thinking the worst was yet to come- were wrong then- and will likely be wrong in the future. That said, blindly holding to one's declining positions is a strategy of HOPE- I'm hoping for another 3-5% decline this week to justify my tactical jumping out early- and hope to get to purchase at a net discount-
I ended up chasing the market from the initial pullback and early exit a few weeks ago-

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My rationale for my recent approach with tightening stops on price weakness is also based on a "fear component- "- While I had a good run in Dec & Jan being overweight Tech, The sell off at the end of Jan had my positions stop out, and then I found I had to repurchase higher going into Feb -"Chasing" price higher. With this past week taking me out of the majority of my positions- I have "Locked In " a relatively small gain % wise- My expectation is that fear of the Corona virus and the impact on tech companies will drive the index lower, offering me the opportunity to pick up shares at the 50 ema -and possibly lower. The attached chart illustrates a couple of years of "normal" price action- with multiple pullbacks to the 50 ema the norm-
and often much deeper- The recent 237.50 high is above the 220.00 50 ema by approx 7%-and if I get to purchase at the 50 ema- that would be approx a +4% savings vs my stop/exit.
Of course, I may have to chase price -again- and repurchase higher -well above my stop- thus diminishing my return vs someone that held and stayed the course- Of course, if we see a greater decline- -10% is not unusual, I'll be willing to add some size . Notice the wide gap between price- the 5 ema and the 50 ema was last this wide in Feb 2018-
Valuations are also considered to be on the higher side - and so some tech selling by large institutions was locking in some of those higher profits-
And, while I stopped out of my larger tech position- I had initiated a smaller position the prior week in TLT and VPU- and just bought a small SLV position- Still holding TDOC- virtual doctor exam - no office visits.
By no means do I intend to overweight TLT at this early juncture- I will set some lower limit orders- -10% even up to -20% to purchase index positions at lower prices-
Recognizing that a rise in TLT is a market-getting defensive shift, may be a good barometer of sentiment.
But, then again, I may have this all wrong.

i.imgur.com/0WgeR0M.png

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2.24 Futures down -on Spread of Corona- Tiered lower limit orders for VGT,voog,arkk,arkw,arkq--adding to TLT with a limit $147-likely won't fill.
Tiered orders-Below 2020 values, and lower @ 2019 lows

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aS ANTICIPATED: oNCE IN A WHILE YOU GET IT RIGHT.
i.imgur.com/BamZ7dq.png