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June 26, 2018 | Bouncy FAANGs Muffle Bears’ Hubris, at Least for the Moment

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Monday’s plunge was so exhilarating that permabears could be forgiven for making whoopee after the close. How soon we forget how extremely rare it is for the stock market to sell off for more than a couple of days!  In this instance the upturn came midway through day two, producing a sufficiently vigorous rally to suggest that some of the FAANG stocks could be at new record highs by week’s end.  That wouldn’t change the fact that institutional investors face some very serious headwinds if they intend to drag the broad averages to new highs as well. The negatives bear repeating, since they amount to more than just a wall of worry. To wit: 1) Fed tapering is shrinking the world’s supply of dollars even as the U.S. central bank continues to raise rates; 2) the housing market appears to have peaked, and we’ll know soon whether corporate earnings have, too; 3) a global trade war actually seems possible; maybe Trump isn’t just bluffing? 3) the price of  oil remains stubbornly high and is threatening to move above $70/barrel; 4) a strong dollar is undermining the profits of U.S. multinationals; 5) the magnitude of ‘creative destruction’ going on in commercial real estate is beyond anything classical economists could have imagined; and, 6) off-line retailers of every stripe, including even McDonald’s, are struggling to keep profit margins from falling to zero. These things together may not add up to a hill of beans for a whole bunch of portfolio managers, but those of us who have actual skin in the game can read the signs and prepare for a day of reckoning that is as certain as the next sunrise.

 

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June 26th, 2018

Posted In: Rick's Picks

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