The Dow Speaks: “In Trump We Trust”

From Acting Man, by MN Gordon

The Worst Job in the World

The rewards of being the President, these days, are few and far between.  Just ask President Trump.  The work hours are terrible, the pay is far less than that of a corporate CEO, and you’re endlessly surrounded by shabby politicians.  What’s more, the  hand towels  aboard Air Force One have the shoddy over washed roughness of those at a turnpike Motel 6.  But that’s not the worst of it.

While we’re at it, let us introduce you to the runner-up, i.e., the second-worst job in the world. We are not sure what job title this poor man actually has (elephant rectum administrator? Pachyderm intestinal inspection officer?), but we sure hope he’s at least getting paid well.

Photo via Top Media Trends

Any and all efforts to remake foreign policy to address the threats of the 21st century – not the 20th century – are undermined by the intelligence community with vehement efficiency.  Before you can say Jack Robinson, the leaky conduit to the mainstream media boils up the latest brouhaha to simmering pot.

For example, last week Trump had to fire his national security adviser for engaging in statesmanship with the Russians.  Then, after that, John McCain – a Class A ignoramus – went and kvetched about Trump’s efforts from Europe.  Good grief!

Trump critic John McCain, a.k.a. the Angel of Death (whenever he visits a foreign country, the probability that its inhabitants will soon be wading knee-deep in blood and guts rises astronomically). McCain is one of the most influential shills for the military-industrial/ ”national security” racket in Congress (which is the by far biggest racket in the world, see “War Racket Update” on the trillions of dollars that have disappeared in the Pentagon without a trace, “The Greatest Racket of All Time” on the massive boondoggle known as the GWOT, and “The Myth of War Prosperity”, a reminder that war is actually not “good for the economy”). Not only is McCain opposed to Trump because the latter apparently refuses to toe the neo-con line on Russia and Syria, but he’s probably also still sore about Trump publicly uttering misgivings about his “war hero” status. There appears to be some evidence that McCain’s war time record is actually not all it’s cracked up to be (that would actually make him especially useful for the men behind the curtain). His attempts at humor leave a lot to be desired as well.

Photo credit: Mike Segar / Reuters

With the exception of being a flatus odor judge, we can’t think of a stinkier job than being the President of the United States.  Can you?

There’s little privacy.  Newspapers across the planet psychoanalyze your every facial expression; many conclude you’re mentally ill.  You can hardly wander the halls of your own home in your bathrobe – during night hours no less – without it making front page news.

And here is the third-worst job in the world: Caiman dental hygienist. If you have this kind of job, we strongly recommend to live every day as if it were your last.

Photo via Top Media Trends

Wild and Wacky Markets

Yet, despite all this, has there ever been a President before President Trump who made the job look so doggone fun?  In all seriousness, what could be more fun than getting paid to look CNN’s Jim Acosta in the eyes and tell him that CNN will no longer be referred to as “fake news;” but rather, as “very fake news?”  As far as we can tell, Trump’s having a rip-roaring good time.

Indeed, publicly roasting the mainstream media – calling them the enemy of the American people – must be one of the few redeeming perks of the job.  But, on balance, the advantages of being leader of the free world come up short when compared to nearly all other gigs.

The “very fake news” moment. There is actually no shortage of questionable reporting by the mainstream news media, which is often little more than thinly disguised propaganda, particularly on the issues of war and prior to major elections. A few examples: the top ten scripted media stories; on CNN specifically: top 4 reasons it’s called fake, the mysterious mic outages, CNN fake news compilation part 1, part 2, part 3, and this golden moment “Donald Trump has ‘undermined the messaging so much’ that he can actually control what people think – and that is our job.” (note: we haven’t watched all these clips in their entirety, we just skimmed a few and picked the ones that seemed interesting. They probably have their own bias issues, some will be more interesting than others. Nevertheless, we think Trump had a very good point when he once remarked that “without the media, Hillary couldn’t be elected dog catcher”).

Where markets are concerned, in these early days of the President Trump era, wild and wacky occurrences have become the norm.  The DJIA, S&P 500, and NASDAQ are setting new highs practically every day. In fact, this week the Dow marked its 10th record close in a row.

You have to go back over 30 years to find the last time the Dow pulled off such an achievement.  It’s breathtaking.  But that’s not the half of it.  The Dow’s jumped and jived in ways that have broken the bounds of what market technicians thought was possible.

On Wednesday, if you weren’t aware, the Dow closed 2,000 points above its 200-day moving average.  For perspective, the last time this happened was… never.  In other words, in the Dow’s 120-year history this has never, ever happened.  What to make of it?

DJIA, daily. The gap between the average and its 200-day moving average has become quite large. Even if one assumes that the bull market is set to continue, there are probably better moments to enter the market than this one. Generally we would note: from a purely technical perspective, the market seems to be in fine fettle. From a valuation perspective it is utterly toxic and investors shouldn’t touch it with a 10-foot pole. From a sentiment and positioning perspective it is one of the most over-loved markets in history. Stunning new records are set in a wide range of sentiment indicators with unwavering regularity. Sentiment always follows prices, but is not the fact that new record readings in the relevant indicators are seen here and there that is so astonishing. What is astonishing is the huge margin by which previous records have been exceeded in some cases, as well as the persistence of these extreme readings. This persistence effect is likely to be mirrored in the other direction once the bear market phase is underway – click to enlarge.

The Dow Speaks: “In Trump We Trust!”

Every suspicion inside of us, from our brain to our gut to our big toe, says stocks should have crashed long ago.  They are overvalued to the extreme by all valuation measurements.

The S&P 500’s Shiller price-to-earnings ratio was 29.29 at yesterday’s close.  That is well above its 16.72 long term average.  Likewise, the Buffett indicator – market capitalization to gross national product – ended the day at 130.7 percent.  This is considered “significantly overvalued.”

At the end of January the PE-10 (or CAPE, or Shiller P/E ratio) stood at 28.2. Currently it clocks in at 29.3. Only at the 1929 peak (32.6) and the year 2000 tech mania peak (44.2) was it even higher than today. These previous peaks were exceptionally bad times to buy or hold stocks, but this time it is of course going to be different, because… well, for some reason (feel free to make one up!) – click to enlarge.

Certainly a crash is coming eventually, but is it imminent? Never in our lives can we recall a market that over-appreciated the abilities of one man to the extent of today’s market.  The words spoken by the Dow are: “In Trump We Trust!”

Expectations of forthcoming tax cuts, deregulation, and prospects for faster economic growth, including corporate earnings growth, have been priced into the market as if they were a done deal.

Who knows?  Maybe they are a done deal.  President Trump has achieved the impossible before.  Who are we to say he won’t do it again?

But, on the other hand, what if Trump is unable to his push tax cuts through Congress?  Or what if his efforts to bring jobs back to America start a trade war?What tune will the Dow be singing then?

They’re so bullish, it hurts! It is highly likely that the real hurt is yet to come.

Screenshot via CNBC

We can already envision the teeth gnashing panic that will erupt on Wall Street when investors realize en masse that they’ve pushed the market well out over the ledge.  Our advice is to make an Irish exit from the party now while one still can.

Charts by: StockCharts, Doug Short / AdvisorPerspectives

Chart and image captions by PT

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.

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