Carty Capital Management
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Looking for the Wrong Pitch

Good Morning,

 

The insanity must stop - or many, many millions of investors will continue to misunderstand how powerful the changes are which currently roll through the US economy.

 

Now, I usually try to control my comments but the bull eventually gets to deep and you gotta throw out the penalty flag.

 

Case in point:

 

Yesterday, the DOW and S&P 500 fell.  They dropped by 48 basis points.  For the non-math people, that's less than one-half percent.  Frightening right?

 

Uh - no.

 

Here was the headline and photo moments after the close on CNBC:

 

 

 

Now - forget the hyped photo momentarily.  Also, for a second, forget that a 23 year-old producer likely typed the headline about what's really scaring the market (back to that in a moment).

 

Go instead to the comment below the photo:  "...worst day since September 5th."

 

Next - check below in the short-term chart I have provided which goes back to September 4th.  The blue dot shows you that point in time:

 

 

 

How About Another Perspective?

 

The point?  Yes indeed, September 5 was a down day as can be seen in the dip right after the blue dot.  But this is more important:  That was over 1,300 Dow Points Ago (DPA).

 

So you tell me which pitch we should be focused upon?

 

The 1300 points up - or

 

The 48 basis points down?

 

Make certain you and your clients know the right pitch.

 

For a glimpse - check the short video message here.

 

Your password on the video is GenYupside35

 

Now you may feel this is trivial but let me tell you it happens in every timeframe and it has gone on for years.  To this day, the masses continue to show mortal fear of any red ink - likely burned into the psyche from 2008-2009.

 

So deeply, I might add, that it will take decades to mend.

 

If yesterday was the beginning of a 3,000 point setback (which would only be 14%) as an example, for the next 5 years, we would hear about the "correction" in late 2017, and not the nearly 17,000 points traveled since March 2009.

 

Make no mistake - watching the wrong pitch is a very expensive past-time indeed as it relates to you investment and wealth-building plans over the long-term, second only to fear itself.

 

Wash from your brain that fear is an emotion.  Instead, make sure you stay aware that it is instead an expense.

 

And As For The "What's Scaring The Market"...

 

Well that part is simple.

 

Nothing "scares" the market.

 

Only the participants in the market are scared.

 

Their fears dwarf most logic, most of the time - and all logic some of the time.

 

Re-read that last sentence and let it sink in.

 

And as for what scares participants?

 

The constant flow of moronic garbage spewed at any average listener.  The sleight of hand, put into words, which twist almost any news into bad news.  We have watched it for decades.

 

All the while, the market has continued to be the single largest contributor to overall wealth-building - no matter the events short-term.

 

The sad part of the story?

 

Somehow, someway - the twisted process of selling fear by quoting a mishmash of headline material that any 5-year old could put together with their iPad and Google has been sold to the crowd as "talent and expertise."

 

Make no mistake - talent and expertise it is not.

 

The term snake oil does come to mind though - briefly.

 

Of course, someday all the news will be "correct".

 

There will be a significant market swoon.

 

It will last a short period of time in comparison to the rise before it.  It will become "the worst we can recall..." and will eventually reach that epic and most expensive stage of:

 

"it's never been this bad...."

 

And when that is over - from whatever level it unfolds, afterward, history has taught us a long recovery will take place.

 

And the game will then enter the second inning.

 

So How About a Few Good Pitches

 

Let's focus instead on reality - on the real elements unfolding which are a logical part of the larger demographic trend unfolding - set to surprise as many investors over the next two decades as the Boomers' rise did in the 80's and 90's.

 

Don't be impatient - the game is early....

 

All we need to do is be disciplined enough to wait.

 

Let's check out some of the latest data - all surprises to the upside:

 

 

 

 

 

18%!!!

 

Let me know the last time you saw a change to the upside of 18% of anything in the housing market.  By the way - it's just getting started.

 

And the Latest in Q3 Earnings?

 

Well, the press will tell you year-ver-year growth is paltry compared to the last two quarters.

 

That would be true - but once again, the wrong pitch to pay attention too.

 

The YOY growth rate is slower because of the deception of large numbers.  The first two quarters of last year were easy to beat - they were the energy market's junk pile where companies went to die - or so we were told.

 

You do remember that lunacy right?  Expensive oil is bad for us and so is cheap oil?  Just be ready for the next brick in that pathway - it will be about the twisted, completely misunderstood and long-hated dollar.  It started the year high - that was bad.  It went down for 9 months - that was bad.  Now it is setting up for a rally.  be assured, if it unfolds as we suspect - that too will be bad.

 

Back to the right pitch:  earnings are setting records!

 

 

 

 

 

We already sent along the new highs in the Thomson data stream earlier in the week.  This data from Zacks keeps you on track in the midst of the flood of earnings being releases.

 

In the first chart above, note that we are already tracking at new records on actual earnings in real dollars.  Also note, the forward expectations based on these reports are all new records as well, either quarter-over-quarter or year-over-year - or both.

 

Revenue momentum and positive revisions trend for Q4 are the two standout features of this earnings season, with results from about one-third of the S&P 500 members already out.

 

So far, total earnings for the 164 S&P 500 members that have reported already are up +7.0% from the same period last year on +4.8% higher revenues, with 72% beating EPS estimates and 68.3% beating revenue estimates.  That is a far better beat and rise rate than assumed as the season began.

 

As important, note the revisions trend for Q4 remains very positive, with estimates actually going up since the quarter got underway.  Recall, that is opposite of what normally unfolds.  Even if this trend flattens out for the rest of the season, it is nevertheless a new development on the revisions front.

 

Last for Now....

 

Let's cap this off with a few more pitches, not covered at all by the broadcasters, missed by many watching the game - but far better to be looking for as you step to the plate:

 

 

 

 

 

 

Yes friends...those are both better than expected as well.

 

So let's review again.....

 

....which pitch do you think is more valuable to be looking for?

 

The one that scares the crap out of you...or

 

The one that is logical, boring and in sync with the powerful demographic forces afoot?

 

In Summary

 

The higher these market numbers get, the more intense the "altitude Sickness" we often cover will become.  Make no mistake about this though - "bullishness" espoused in the press is only skin-deep as they say.

 

Let a week or two of red ink unfold in markets - which is what we continue to suggest we pray for - and those bullish feelings will vanish and a whole flock of Black Swans will appear.

 

Pick your poison as they say....

 

More of the Same On Tap

 

...for the long-term investor who does not care to get involved in the trading/knee-jerk chop, let's stay focused on the valuable data.

 

It's the long-term current we need to invest upon - not the short-term waves which will assuredly always roll ashore to block the horizon.

 

Those waves are the noise too many get lost in...and the reason the long-term game is so hard to win based on fearful activities.

 

Play it Again Sam....

 

Pray for that correction.

 

In the end, like it or not, long-term investors have learned Demographics Rule The Long-Term Game

 

Generation Y is set to do much greater things - far beyond what the Boomers accomplished - or what can be defined today.

 

Imagine explaining an iPhone X to your buddies in 1982 - and then extrapolate that forward for the next 35 years.

 

"Drinks at the new bar on Mars tomorrow at 7:00 anyone?"

 

Until we see you again - may your journey be grand and your legacy significant.

InvestingMike Williams