Monday, April 18, 2022 9:35:34 AM
Trusting the Message of the Markets
By Michael J. Ballanger
Good Friday, April 15, 2022
“A man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse, for that means that he cannot trade with confidence and comfort.”
- (Reminiscences of a Stock Operator – Edwin Lefevre)
Few investors under the age of sixty have even heard the name “Jesse Livermore” and even fewer have read as much as one page ever written by the legendary author “Edwin Lefevre” who wrote what many consider their personal investment “bible of sorts” in the classic “Reminiscences of a Stock Operator”. The book was given to me as a gift in 1973 by my finance professor while attending Saint Louis University and while I did my best to read it, I never really grasped it until some thirty years later, after I had won and lost over $500,000 three times by committing critical errors that, ironically, were all dealt with between the spines of that book. I have it in my office at all times and as amazing as it is that it has survived after all these years despite owner-instilled savagery, such as mottled coffee stains and spilled red wines of various vintages and flavours, as well as beautifully-distinctive burn marks from the days when I actually smoked (the nature of which I refuse to divulge). The quotes from “Old Turkey”, purported to be “the man” himself, Jesse Livermore, are like biblical parables.
How this majestically dovetails with where we are in the global markets today lies within the message of my GGMA 2022 Forecast Issue, where with the NASDAQ and S&P at record highs, I issued my version of the “Sell EVERYTHING” but not until the first week of January gave me the required evidence. I made my “Bear Market” call on January 7th of this year knowing full well that I might be (fairly or unfairly) deemed a “perma-bear” at best and “the two hands of a broken clock” at worst. What is important is for me to constantly revisit my bearish stance and try to validate with unbiased and ego-free methodology.
I met Yale Hirsch in 1997 in Connecticut where we dined and opined in absolute intellectual splendour and as the founder of “The Stock Trader’s Almanac”, he has provided me with a wealth of historical data and while it is not predictive on its own, for those with experience, it is a HUGE help. The April Almanac says “April is still the best Dow month (average 2%) since 1950” and that “Rarely a dangerous month except 2002, 2004, and 2005”.
Bear markets are like thieves in the night; they remove all of your valuables before they leave but not before they defile those to whom you are close. I can safely say this because it was only after I learned to ignore the media and co-workers and employers and managers that I realized how dangerous “alternative agendas” can be to one’s personal investment performance. As a case in point, there is no better cheerleader for the Wall Street Agenda than Mad Money host Jim Cramer.
Brought to you by the man that pronounced back in March, 2008 that investment banker Bear Stearns was “fine” (it wasn’t) and advised “Do NOT take your money out!” (you should have), Cramer is now telling investors that the current negative sentiment on Wall Street is setting up a bottom. Frankly, I find this offensive because as long as Cramer has been a part of the Wall Street “tribe”, he knows full well that the major bear markets of the past ninety years do NOT end after a ninety-day, 6% decline and particularly with retail investors still clamouring for deal flow and dip-buying, the bullish bias totally engrained in their collective psyche by decades of Fed gratuity. Bear markets end when the last bull sitting on a street corner with holes in his shoes smoking a discarded cigarette butt closes his stock account. The old timers that mentored me back in the Seventies and Eighties spoke of the dark days before December 1974 where the salesmen (there were no “wealth managers” back then) had to endure rising inflation, failure in Viet Nam, and Watergate as they watched stock prices (and client lists) shrink away into oblivion such that by the end of 1974, the public absolutely hated stocks. Based upon the number of advertisements I see on social media platforms and cable TV paid for by twenty-something stock-trading “gurus”, I would submit to one and all that stocks are still anything but “hated” because hiding behind every Millennial and Genexers’ bearish façade lies a maniacal dip-buyer resembling one of those cavernous-eyed marijuana junkies in that now-famous propaganda film from the 1950’s “Reefer Madness”.
Further validating my bearish stance is the recent Op-Ed published by Bloomberg whereby the highly-influential former Fed governor Bill Dudley wrote the following shocking words:
“It’s hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it’ll have to inflict more losses on stock and bond investors than it has so far.”
Since my introduction to the financial services industry in 1977, there has been only one Fed bigwig that ever breathed such sacrilege to the World of Wall Street and that man was Paul Volcker whose pronouncements were not unlike those of Bill Dudley last week. What followed Volcker in 1979 was a bear market from January 1981 to August 1982 that crushed not only the double-digit inflation of the era but also all speculative (and non-speculative, for that matter) interest in the business of common stock investing. I recall riding in an elevator with a Wood Gundy salesman standing in the corner staring at his shoes, audible “sighs” emitting from him as each floor light blinked on the way to the parking garage. In my most disingenuous, smarmy voice, I asked “So Dougie! How’s it going?” while sporting my most annoying horse-tooth grin, to which Dougie responded with the finest description of bear market sentiment ever spoken:
“Mike, let me tell you how it’s “GOING”; I have one client left and that’s me – and I’m looking for a new broker.”
The chart shown below snaps us back to the month of April which is regarded as the trading year’s “best month”. However, it is also the end of the now-famous “Best Six Months” period of the trading year stretching from the beginning of November to the end of April which sets up another annoying adage “Sell in May and go away”. From where I sit, failing a miraculous stick save recovery in the next fifteen days, the big money has decided to skip April and fast-forward directly to that May directive where they “go away”.
Now, before you throw in the towel on all of your despicably-performing junior miners, let it be known that the gold miners, both senior and junior, put in crackling performances last week and especially Thursday, where the HUI rose .33% against a $13 drop in bullion prices and weak stocks. This positive divergence by the miners is at once both predictive and rare because we have been bereft of such occurrences for most of the past two years despite fiscal and monetary conditions that were about as gold-bullish as I have ever seen. I am long calls on the silver ETF (SLV:US) and on the Junior Gold Miner ETF (GDXJ:US) from the first and the eighth of the month as well as an obscenely large allocation to a basket of junior developers and explorers whose abject refusal to accept “Fair, just, and reasonable” valuation levels has me seeking out a ball-and-chain hammer to inflict retribution on anyone suspected as being the culprit behind such shenanigans. (It has to be someone’s fault, after all.)
Using gold as the proxy for all precious metals securities and commodities, I see new high ground dead ahead as the big money is drawn to sectors outperforming their benchmarks and since oil and industrial metals (nickel, copper, cobalt) are the most obvious targets for the Fed bazooka on the lookout for inflationary inputs, gold and silver may diverge because they represent far less of a threat to corporate profits than rampaging energy and base metals.
I learned many moons ago that the action of “the tape”, while difficult to translate at the best of times, still represents the market’s all-important message and that gold is beginning to go “lock and load” on the $2,089 level from August 2020 suggests that there is a “Clear and Present Danger” developing out there in both the geopolitical and fiscal/monetary policy arenas that is most certainly going to involve a gargantuan battle between the inflationary forces of geopolitical upheaval and the deflationary efforts of fiscal/monetary tightening with the casualties being stock investors and the survivors being those both outside the system and well-armed with hard assets and precious metals-centric portfolio holdings.
“The nature of the game as it is played is such that the public should realize the truth cannot be told by the few who know.” – Edwin Lefevre
MJB
https://lemetropolecafe.com/chien_du_cafe.cfm?pid=17636 (sub. req. ~ 2 week free trial available)
By Michael J. Ballanger
Good Friday, April 15, 2022
“A man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse, for that means that he cannot trade with confidence and comfort.”
- (Reminiscences of a Stock Operator – Edwin Lefevre)
Few investors under the age of sixty have even heard the name “Jesse Livermore” and even fewer have read as much as one page ever written by the legendary author “Edwin Lefevre” who wrote what many consider their personal investment “bible of sorts” in the classic “Reminiscences of a Stock Operator”. The book was given to me as a gift in 1973 by my finance professor while attending Saint Louis University and while I did my best to read it, I never really grasped it until some thirty years later, after I had won and lost over $500,000 three times by committing critical errors that, ironically, were all dealt with between the spines of that book. I have it in my office at all times and as amazing as it is that it has survived after all these years despite owner-instilled savagery, such as mottled coffee stains and spilled red wines of various vintages and flavours, as well as beautifully-distinctive burn marks from the days when I actually smoked (the nature of which I refuse to divulge). The quotes from “Old Turkey”, purported to be “the man” himself, Jesse Livermore, are like biblical parables.
How this majestically dovetails with where we are in the global markets today lies within the message of my GGMA 2022 Forecast Issue, where with the NASDAQ and S&P at record highs, I issued my version of the “Sell EVERYTHING” but not until the first week of January gave me the required evidence. I made my “Bear Market” call on January 7th of this year knowing full well that I might be (fairly or unfairly) deemed a “perma-bear” at best and “the two hands of a broken clock” at worst. What is important is for me to constantly revisit my bearish stance and try to validate with unbiased and ego-free methodology.
I met Yale Hirsch in 1997 in Connecticut where we dined and opined in absolute intellectual splendour and as the founder of “The Stock Trader’s Almanac”, he has provided me with a wealth of historical data and while it is not predictive on its own, for those with experience, it is a HUGE help. The April Almanac says “April is still the best Dow month (average 2%) since 1950” and that “Rarely a dangerous month except 2002, 2004, and 2005”.
Bear markets are like thieves in the night; they remove all of your valuables before they leave but not before they defile those to whom you are close. I can safely say this because it was only after I learned to ignore the media and co-workers and employers and managers that I realized how dangerous “alternative agendas” can be to one’s personal investment performance. As a case in point, there is no better cheerleader for the Wall Street Agenda than Mad Money host Jim Cramer.
Brought to you by the man that pronounced back in March, 2008 that investment banker Bear Stearns was “fine” (it wasn’t) and advised “Do NOT take your money out!” (you should have), Cramer is now telling investors that the current negative sentiment on Wall Street is setting up a bottom. Frankly, I find this offensive because as long as Cramer has been a part of the Wall Street “tribe”, he knows full well that the major bear markets of the past ninety years do NOT end after a ninety-day, 6% decline and particularly with retail investors still clamouring for deal flow and dip-buying, the bullish bias totally engrained in their collective psyche by decades of Fed gratuity. Bear markets end when the last bull sitting on a street corner with holes in his shoes smoking a discarded cigarette butt closes his stock account. The old timers that mentored me back in the Seventies and Eighties spoke of the dark days before December 1974 where the salesmen (there were no “wealth managers” back then) had to endure rising inflation, failure in Viet Nam, and Watergate as they watched stock prices (and client lists) shrink away into oblivion such that by the end of 1974, the public absolutely hated stocks. Based upon the number of advertisements I see on social media platforms and cable TV paid for by twenty-something stock-trading “gurus”, I would submit to one and all that stocks are still anything but “hated” because hiding behind every Millennial and Genexers’ bearish façade lies a maniacal dip-buyer resembling one of those cavernous-eyed marijuana junkies in that now-famous propaganda film from the 1950’s “Reefer Madness”.
Further validating my bearish stance is the recent Op-Ed published by Bloomberg whereby the highly-influential former Fed governor Bill Dudley wrote the following shocking words:
“It’s hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it’ll have to inflict more losses on stock and bond investors than it has so far.”
Since my introduction to the financial services industry in 1977, there has been only one Fed bigwig that ever breathed such sacrilege to the World of Wall Street and that man was Paul Volcker whose pronouncements were not unlike those of Bill Dudley last week. What followed Volcker in 1979 was a bear market from January 1981 to August 1982 that crushed not only the double-digit inflation of the era but also all speculative (and non-speculative, for that matter) interest in the business of common stock investing. I recall riding in an elevator with a Wood Gundy salesman standing in the corner staring at his shoes, audible “sighs” emitting from him as each floor light blinked on the way to the parking garage. In my most disingenuous, smarmy voice, I asked “So Dougie! How’s it going?” while sporting my most annoying horse-tooth grin, to which Dougie responded with the finest description of bear market sentiment ever spoken:
“Mike, let me tell you how it’s “GOING”; I have one client left and that’s me – and I’m looking for a new broker.”
The chart shown below snaps us back to the month of April which is regarded as the trading year’s “best month”. However, it is also the end of the now-famous “Best Six Months” period of the trading year stretching from the beginning of November to the end of April which sets up another annoying adage “Sell in May and go away”. From where I sit, failing a miraculous stick save recovery in the next fifteen days, the big money has decided to skip April and fast-forward directly to that May directive where they “go away”.
Now, before you throw in the towel on all of your despicably-performing junior miners, let it be known that the gold miners, both senior and junior, put in crackling performances last week and especially Thursday, where the HUI rose .33% against a $13 drop in bullion prices and weak stocks. This positive divergence by the miners is at once both predictive and rare because we have been bereft of such occurrences for most of the past two years despite fiscal and monetary conditions that were about as gold-bullish as I have ever seen. I am long calls on the silver ETF (SLV:US) and on the Junior Gold Miner ETF (GDXJ:US) from the first and the eighth of the month as well as an obscenely large allocation to a basket of junior developers and explorers whose abject refusal to accept “Fair, just, and reasonable” valuation levels has me seeking out a ball-and-chain hammer to inflict retribution on anyone suspected as being the culprit behind such shenanigans. (It has to be someone’s fault, after all.)
Using gold as the proxy for all precious metals securities and commodities, I see new high ground dead ahead as the big money is drawn to sectors outperforming their benchmarks and since oil and industrial metals (nickel, copper, cobalt) are the most obvious targets for the Fed bazooka on the lookout for inflationary inputs, gold and silver may diverge because they represent far less of a threat to corporate profits than rampaging energy and base metals.
I learned many moons ago that the action of “the tape”, while difficult to translate at the best of times, still represents the market’s all-important message and that gold is beginning to go “lock and load” on the $2,089 level from August 2020 suggests that there is a “Clear and Present Danger” developing out there in both the geopolitical and fiscal/monetary policy arenas that is most certainly going to involve a gargantuan battle between the inflationary forces of geopolitical upheaval and the deflationary efforts of fiscal/monetary tightening with the casualties being stock investors and the survivors being those both outside the system and well-armed with hard assets and precious metals-centric portfolio holdings.
“The nature of the game as it is played is such that the public should realize the truth cannot be told by the few who know.” – Edwin Lefevre
MJB
https://lemetropolecafe.com/chien_du_cafe.cfm?pid=17636 (sub. req. ~ 2 week free trial available)
Dan 
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