Economic data releases that were delayed due to the partial government shutdown, including fourth quarter Gross Domestic Product, have been rolling in.

Sacagawea lived from May 1788 to December 1812. She was a Lemhi Shoshone woman who is best known for her help guiding the Lewis and Clark Expedition in achieving their mission objectives by exploring thousands of miles from North Dakota to the Pacific Ocean.

I was traveling last week seeing portfolio managers and doing gigs for our financial advisors and their clients. I have been doing such events for much of the past six months. The recurring question from clients is, “What about the national debt?”

Fed Chairman Jerome “Jay” Powell will deliver his semiannual monetary policy testimony to Congress on Tuesday and Wednesday. In past decades, this testimony was a huge deal for the financial markets. These days, not so much. The Fed is a lot more forthcoming.

Despite Friday’s Fling, there was a very negative NYSE breadth divergence which appeared during the final two hours of trading. It feels like a blow off trading top to me.

Data delayed due to the government shutdown have begun to arrive, filling in the picture for 4Q18, and we’re also getting fresher data on the economy in early 2019. The figures have been mixed, and often surprising, which allows one to make about any kind of argument one wants.

We revisit this “Who do you trust” meme this morning because of what I have been saying the past few weeks. After identifying the selling climax low of December 24, when 48.5% of stocks made new lows, I recorded two 90% upside days (90% of volume and upticks came on the upside).

In the next few weeks, economic reports that were delayed due to the partial government shutdown will continue to trickle in, helping to piece together the fourth quarter picture. That’s fine but investors are more interested in the future.

In his post-FOMC press conference on December 19, Fed Chairman Powell said that low inflation would allow the Fed to be more patient in adjusting rates. The stock market fell. He said essential the same thing in his January 30 press conference.

So, I need to apologize to everyone for not being able to do a verbal recorded call last week, or write a missive the last three sessions of the week. The problem was that while in NYC my media events began around 6:00 a.m., followed by more media events, then it was portfolio manager meetings.

"Time is Archimedes’ Lever in Investing - Archimedes is often quoted as saying, 'Give me a lever long enough and I can move the earth.' In investing, that lever is time. The length of time investments will be held, the period of time over which investment results will be measured and judged, is the single most powerful factor in any investment program.

During an economic slowdown, the government often employs fiscal stimulus to “prime the pump.” In such cases a burst in aggregate demand boosts income, which adds to consumer spending, which adds to income, and so on. This process can work in reverse.

For investors, the year began in fear. The global economic slowdown, the yield curve, Fed policy, trade policy, and the partial government shutdown generated risk. Last week, the news was mixed. There is no sign that the budget stalemate in Washington will end soon. There were renewed reports that President Trump is considering imposing tariffs on all imported motor vehicles.

Ned Davis wrote the book “Being Right or Making Money” in 1991. As most of you know, Ned is one of the best on Wall Street. The book resides on my desk, because I often refer to it.

In the last couple of years, Nobel Laureate Robert Shiller has championed the idea of economic narratives. Economic data describe “the fundamentals,” but stories are often the key drivers of activity. Investors are currently faced with two competing narratives. 

Recently, much has been written, and said, about a retest. The reference is about the major indices pulling back to their recent December closing lows, creating a double-bottom in the charts.

Everyone knows how to win. Few know how to lose. Yet the secret to making money in the various markets is knowing how to lose. How to control your losses.

Financial market volatility remained elevated in the first few days of 2019, but it’s much more palatable when it is to the upside. Market participants remained concerned about a number of issues (global growth, trade policy, dysfunction in Washington), and fear remains a key factor in the outlook. Whether that fear abates or intensifies will tell the tale.

The Federal Open Market Committee raise short-term interest rates for the fourth time in 2018 and signaled more to come in 2019, albeit most likely at a slower pace. Market participants overly focus on what the Fed will do instead of why the Fed will do what it does.

Watch out indeed, for 2017’s December low was violated in February 2018 and the rest, as they say, is history. Accordingly, it will be interesting to see what the December Low Indicator says in 2019.

Recently, our email box has been filled up with questions like this one from one particularly bright Raymond James financial advisor, namely, Michael McCormick of the venerable Chicago-based money management firm of McCormick Retirement Group, who wrote, and we responded...

Looking around, we don’t see many people who used to be in this business. Maybe they just couldn’t take being wrong. Or, maybe their clients couldn’t take their claiming they were always right. Or, maybe they got tired of issuing lots of predictions while, at the same time, watching the stock market going nowhere this year.

Nonfarm payrolls rose less than expected in November. The three-month average remained relatively strong, although below the pace of the first half of the year. That's not surprising. As the job market tightens, the number of available workers decreases.

The key phrase in Fed Chairman Powell’s speech to the Economic Club of New York was widely misinterpreted by thefinancial press and, in turn, the markets. That’s not unusual. The markets don’t do nuance. Stock market participants were likelylooking for an excuse to rally.

For years we have quoted Benjamin Graham’s book The Intelligent Investor, which Warren Buffet has said is the best book ever written on investing. The operative quote from said book is “The essence of portfolio management is the management of risks, not the management of returns.” He closes that thought by saying, “All good portfolio management begins, and ends, with this premise.”

Years ago we studied the tactics of Jesse Livermore, along with a number of other stock market operators, and have found many of those strategies to be just as valid today as they were decades ago.

The recent data releases continue to suggest moderately strong economic growth in the near term and little threat of higher inflation. However, investors remain anxious about a wide range of issues.

The Leonid meteor shower hit its zenith over the weekend, and you didn’t even need a telescope to see it. You did need a warm blanket, but all you had to do was lay down on your back to enjoy a great show.

The midterm election results were about as anticipated, with Democrats gaining control of the House and Republicans retaining control of the Senate. Peace, love, and everyone sings Kumbaya, right?

We could almost hear our history professor espousing Hoffer’s works recently when we were asked by a particularly smart media type if trust and character would really command a “premium” price earnings (P/E) ratio in today’s environment? Our response was “of course,” and as an example we offered up a quote from John Pierpont Morgan...

The year-over-year increase in average hourly earnings was a bit exaggerated in the October employment report, but the underlying trend is higher. Growth in nonfarm payrolls rebounded from the effects of Hurricane Florence, while Hurricane Michael “had no discernible effect,” according to the Bureau of Labor Statistics.

Up until last Monday (October 29, 2018) we had focused on our short-term model’s “sell signal” of October 2, 2018. The “S” word alone makes most investors uneasy. They find the “B” word, “buying” more pleasant.

Real GDP rose at a 3.5% annual rate in the advance estimate for 3Q18, about as expected. However, there were a few surprises in the details. Consumer spending growth was even stronger than anticipated. However, business fixed investment was unexpectedly weak.

And the perfect storm has hit the equity markets over the past month. However, we had an early warning of such events when, on October 2, 2018, our short-term proprietary model registered a “sell signal” and we said to sell trading positions.

Periods of low market volatility (or complacency) are often followed by turbulent readjustments, including sharp intraday moves lower and higher. There has been a long list of concerns in the last few months: the November 6 election, tighter Fed policy, higher long-term interest rates, trade policy disruptions, risks to the global economy, labor market constraints, and so on.

My friend and mentor Ray DeVoe use to say that going over old reports can be an exercise in humility, as you cringe while reading some errant forecast of another time. “How could I have been so stupid?” is the unsaid reaction. On the other hand it can be an ego trip, as you proudly go over some forecasts that were right on target.

We really like Rudyard Kipling’s line, “If you can trust yourself when all men doubt you, but make allowance for their doubting too;” and clearly “men” doubted us when on October 2 our short-term proprietary model flashed a sell signal and we subsequently advised selling trading positions.

It was the best of times, it was the worst of times. Why did the stock market fall? No reason, and every reason. There doesn’t need to be a catalyst. Sometimes the market is simply going to do whatever the market is going to do, but the list of worries was already there.

The United Stated Mexico Canada Agreement (USMCA), which must still be approved by Congress, is mostly the same as the old agreement, but don’t call it NAFTA 2.0. The agreement should not have much of an impact on overall economic growth or inflation, but it is a hurdle cleared.

John Maynard Keynes, the British economist whose ideas fundamentally changed the theory and practice of economics, once said, “When the facts change, I change my mind - what do you do, sir?” So on a short-term trading basis, we came into last week believing the S&P 500 (SPX/2885.57) was going to grind higher into our envisioned mid-November’s “energy peak.”

We have heard the statement, “Nobody can consistently time the stock market’s ups and downs;” and, for the most part we agree with that. However, if one listens to the message of the market, one can certainly decide if one should be “playing hard,” or not playing so hard.

Judging by incoming calls and emails, investors are becoming more concerned about the possibility of recession. The flatter yield curve may be partly to blame, but there are growing concerns about the impact of the president’s trade wars and Fed rate increases have created some anxieties.

Well, “you did it,” as the senior index followed most of the other indices to new all-time highs. We have repeatedly written that this was going to happen given the Advance-Decline Line’s continuing new highs, as well as the stock market’s strong breadth.

There is currently little doubt that the U.S. and China are in a trade war, where retaliation begets retaliation. Conflicts with Mexico, Canada, and the European Union are effectively in a temporary ceasefire, but remain unresolved.

Federal Reserve officials will meet on September 25-26 to set monetary policy. It’s widely expected that the Federal Open Market Committee will raise the federal funds target range by another 25 basis points, to 2.00-2.25%.

After nearly 48 years in this business, we have seen a number of cycles and developed a long-term perspective. We have often spoken about the difference between a “secular bull market” and what many consider to be a bull market because it is up 20%+. The reciprocal is that a 20%+ decline represents a bear market.

Being wrong and admitting it, what a novel idea, yet as Bernstein states, “It helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future.” Indeed, the real trick is to be wrong quickly for a de minimis loss of capital.

Nonfarm payrolls averaged a 185,000 gain over the three months ending in August, a relatively strong pace considering that labor market constraints are more binding and reports of worker shortages are rising.

The Endless Summer (1966) is the crown jewel to ten years of Bruce Brown surfing documentaries. Brown follows two young surfers around the world in search of the perfect wave, and ends up finding quite a few in addition to some colorful local characters (Endless Summer).

For financial market participants, the ten-year anniversary of the financial crisis will bring back a lot of bad memories, chiefly among them is the failure of Lehman Brothers (Sept. 15, 2008). In the weeks ahead, we’ll see retrospectives on the events that led to the crisis, the failure to predict how bad things would get, and how we should prevent a similar setback.