- Wall Street’s “calm streak” — What if it’s 1995 all over again?
- If Obamacare repeal doesn’t happen, is the rest of Trump’s agenda doomed?
- The one thing Trump can get done this year, and Dems will go along
- Another “glitch” disrupts hundreds of popular ETFs
- The feds don’t know how to score good pot
- Oil touches November lows… a caveat about falling gold production… “a borderline messianic complex”… and more!
A headline you will see nowhere today: “Major Stock Indexes Still Only 2% Below All-Time Highs.”
When we left you yesterday, the Dow industrials and the S&P 500 were in line to break a remarkable streak — 109 trading days without a one-day decline of more than 1%. In the event, that’s what happened.
The mainstream settled quickly on an explanation: If Obamacare repeal goes down in flames when the House votes tomorrow, it threatens everything else about Trump’s economic agenda.
Around here we’re always wary of such facile explanations for a single day’s movement. As we said yesterday, the market just might be due for a rest. But a reporter who writes that for an establishment media outlet will quickly get slapped down by an editor demanding some sort of narrative. If it weren’t the looming Obamacare vote, it’d be something else.
In any event, we see the last time such a lengthy spell of stock market calm was broken was in May 1995. Looking back, that happened to be the moment that launched the final phase of the 1982–2000 bull market, when retail investors finally piled into stocks and the biggest gains could be had.
No, that’s not a guarantee we’re headed into the final and most profitable phase of the present bull that began in 2009. But we can’t dismiss the possibility either…
But let’s play with the mainstream’s thesis for a bit — this notion that all of a sudden the market is getting antsy that Trump’s economic agenda might not be enacted within his administration’s first 100 or 200 days.
If it’s true, we’re most amused. With the help of Jim Rickards and especially David Stockman — a veteran of D.C. budget wars — we’ve been saying for nearly four months that hopes for massive tax cuts and a massive public works “stimulus” were likely to be dashed by infighting among congressional Republicans.
Sure enough, that’s what’s happening with Obamacare repeal — or, as its critics rightly call it, “Obamacare Lite.”
Cue the hand-wringing in The Wall Street Journal. “The fight in Congress over health care could go on for a while. The more of the legislative calendar it chews up, the longer it will take for the corporate tax cut investors are banking on to come to the floor and the longer the odds on it becoming law. That, in turn, should be factored into stock prices.”
The thinking is that if corporate tax rates were cut from 35% to 20%, earnings in the S&P 500 companies would jump 10%. If the rates aren’t cut, that earnings jump doesn’t materialize.
In our tireless attempts to stay ahead of the crowd, we submit a new thesis today: The one thing in the Trump agenda that stands the best chance of passage is corporate tax reform.
That’s because it’s the one thing on which the president could line up Democratic support.
Nearly a year ago, we noted the bipartisan groundswell in favor of corporate tax reform. President Obama wanted to lower the corporate tax rate — not as much as Trump, but even 28% is lower than 35%.
Senate Minority Leader Chuck Schumer has been beating the drum for corporate tax reform for years. We pointed out something he said last October, when he was assuming a Hillary Clinton victory, a Democrat-controlled Senate and a Republican-controlled House: “We’ve got to get things done… The two things that come, that pop to mind — because Schumer, Clinton and Ryan have all said they support these — are immigration and some kind of international tax reform tied to a large infrastructure program.”
OK, so the players are different than he expected, and there won’t be any immigration deal… but there’s still broad agreement on corporate tax reform. Schumer is still in a position to make it happen, even if he wants to go to the mat on Obamacare, Supreme Court nominations and everything else.
Besides, if Obamacare Lite crashes and burns tomorrow… what’s to stop the president from pivoting to a different priority? Something he can get done so he can point to a “good deal” he managed to cut during his first year?
That brings us to one of the gutsiest propositions anyone on our team has unveiled since Trump’s election: Using a proprietary trading formula, you can parlay a coming corporate tax cut into a truly improbable gain — a grubstake of a mere $2 that turns into $5,744.
We know. Big claims require big evidence. But we spent $43,527, and counting, on research fees for this project. We invite you to click here and examine the evidence for yourself.
Hey, lookee here: The market isn’t melting down again today. And that’s even as traders keep half an eye on what appears to be a terrorist attack in London, on the first anniversary of an attack in Brussels.
At last check, the Dow was slightly in the red, the S&P slightly in the green. The 10-year Treasury yield is drifting down to 2.4%; gold is drifting up toward $1,250. The dollar has arrested its free fall of recent days, the dollar index now 99.7.
The big economic number of the day was a mild disappointment, with existing home sales dropping 3.7% in February. But the year-over-year trend is still solid growth of 5.4%… and the typical home stays on the market only 45 days now, compared with 59 days a year ago.
Crude has slipped again after the latest weekly inventory numbers from the Energy Department; at $47.66, a barrel of West Texas Intermediate is now its lowest in more than four months.
It took 20 months, but there’s been another disturbing “glitch” with many popular exchange-traded funds.
On Monday, the New York Stock Exchange’s Arca platform performed a software upgrade. And it bollixed up trading in 341 ETFs, according to The Wall Street Journal. “Traders found themselves unable to fill orders they had intended to execute in the closing auction.”
That’s the worst possible time of day — near the end of the trading session, which sets the daily settlement price for big stocks and ETFs. Thanks to the glitch, NYSE didn’t release a list of final closing prices until early evening.
No, it wasn’t a huge deal. This time. But it reminds us of David Stockman’s warning a year ago: ETFs might be plenty liquid, but the underlying stocks often aren’t. If momentum traders are dumping ETFs, that forces market makers to dump the stocks making up the ETFs. That can accelerate the selling spiral.
Just imagine what might’ve happened if Monday’s glitch had happened on a chaotic down day — like yesterday…
The federal government is so incompetent…
[This is where you chime in and say, “How incompetent is it?”]
… that it can’t even grow decent marijuana for research purposes.
The Drug Enforcement Administration licenses a 12-acre farm at the University of Mississippi for growing weed that’s used to supply doctors conducting research into medical treatments.
Dr. Sue Sisley of Scottsdale, Arizona, is one of those doctors. She’s doing a study with veterans suffering from post-traumatic stress disorder.
It took her two years to get her shipment of weed… and she was aghast when it arrived. “It didn’t resemble cannabis,” she tells the PBS NewsHour. “It didn’t smell like cannabis.”
“Working with the Multidisciplinary Association for Psychedelic Studies (MAPS),” writes Nick Gillespie at Reason, “Sisley and her colleagues tested the pot and found that it was contaminated with mold and not at the right potency for their research. Your tax dollars at work, growing schwag that doesn’t even rise to the level of reggie.”
Maybe someone should tell the feds there are lots better sources in the private sector where they could score a product of higher quality…
[Ed. note: Clearly, with marijuana now legal to one extent or another in half the states, the world is moving on from the feds’ reefer-madness mindset. But what is it that makes certain penny pot stocks leap 10- or 20-fold in a matter of days or weeks?
Our team recently uncovered the “secret logic” behind these extreme moves. You can see the fruits of their research right here.
“The amount of mineable gold reserves,” a reader writes after Monday’s episode, “is in a big-picture sense determined by the cost of mining and the price of gold.
“Those tonnes of gold reserve that can be mined at a profit are called ore, by definition, and that ore is extracted from the mine reserve.
“What is missing from the hype on shortages of gold is that as the price of gold moves higher, more tonnes of unprofitable resource (rock that contains gold but at a given cost structure would be unprofitable to mine) moves into the profitable and mineable category of reserves. Thus as the price of gold moves higher, so does the number of tonnes of gold ore/resource (resource to reserve category).
“But I do agree this does not cover all demand… only new discoveries would add significantly to overall gold reserves. The expected rise in price is somewhat mitigated by the increase in mineable gold reserves.”
The 5: A valid point. It works the other way, too: One reason oil prices have stayed persistently low the last couple of years is that American shale producers figured out how they could still turn a profit with oil at $50 a barrel.
“Monday’s 5 had an individual who made such preposterous claims that I kept thinking that I had called up The Onion’s website by mistake,” begins today’s mailbag.
[Oh, dear, a second day of piling on…]
“After bragging about just how incredibly smart he is, which in my mind indicated that he’s harboring a massive inferiority complex as well as a borderline messianic complex, he goes on to state that we mere mortals are too stupid to understand just how brilliant the Affordable Care Act is. No evidence of any kind is presented nor any facts because he is just so incredibly brilliant that he knows better than all of us peons.
“Tell me, O great one. How many hundreds of millions of dollars did the ACA website cost again? I’m not talking about the ACA itself, just the website. And while you’re at it, how well did that website work? How many people gave up after a few days or a week of trying to log on and being unable to?
“Nancy Pelosi (you probably worship the ground that she walks on) recently put out a Twitter that asked people to tell her what they liked most about the ACA, and she was deluged with comments the opposite of what she was expecting. They mostly complained that the costs had skyrocketed to intolerable levels for their middle-class incomes. Answer those questions with some facts, why don’t you, and you might want to occasionally get out into the real world while you’re at it.”
The 5: As long as you brought it up, here’s something interesting to watch tomorrow with the vote on Obamacare Lite. See if House Speaker Paul Ryan keeps the roll call open longer than the customary 15 minutes.
We remember that’s what his predecessor Denny Hastert did in 2003 to assure passage of the Medicare prescription-drug boondoggle. An epic, middle-of-the-night, three-hour roll call gave President Bush time to twist the arms of recalcitrant Republicans….
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “Smart dust” is virtually invisible to the human eye, but Congress has verified its existence.
Swarms of nanosized electro-particles have been deployed, and they’re intercepting data about our lives.
Instead of being fearful, America’s top expert says you could get rich — as you’ll learn when you click here.
