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Talk to God

Updated: Jul 20, 2023

Are your financial advisors recommending that you buy stocks now? If so, you do not have a financial advisor at all; you have a JP Morgan lap dog.


We have seen lots of commentary suggesting that now is a good time to shift your allocation to reflect a greater weighting in equities:






I can’t say that August’s price action was exactly textbook, but it did more or less jive with traditional technical analysis. The S&P 500’s rally began with extremely oversold conditions and the rally ended exactly at its 200-day moving average.

That sharp reversal alone is enough to concern me (although obviously not Ned Davis or Jim Cramer), but there are certain fundamental issues that are perhaps even more ominous. For example, Wal Mart and Micron Technology (MU) both tried to guide Wall Street analysts’ estimates lower a couple of months ago and then both reported disappointing earnings anyway. Micron’s warning was particularly dire because their stuff is in virtually all tech hardware— if companies aren’t buying memory from Micron, it means they’re not producing anything.


So, while we’ve been somewhat preoccupied with the Fed and their next move, we have become more focused on earnings and the risk to forward estimates. I think many investors began to share our concern in June, which may be why stocks sold off so sharply. Many companies began guiding the quarter lower, and their stocks had been so badly clobbered by the time they actually reported that we got a "bad news is good news" rally based on "better than feared" results. Now, you can call us old school-- and I hope you will-- but better than feared is not a good reason to invest in something (unless the price is extremely low). I suppose it’s reasonable for stocks to see some respite from large-scale selling based on that, but we haven’t been inclined to commit any real capital to such a strategy.


Recent earnings results showed a clear deterioration in operating margins virtually across the board, and input costs are only just starting to soar around the globe. In other words, earnings forecasts are still way, way too high.

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After three months of declining job openings, the Bureau of Labor Statistics reported on Tuesday that, contrary to the hopes of everyone from Jerome Powell to the President, the number of job openings in July surged from 10.7 million (since revised to 11.04 million) to north of 11.2 million, blowing away the consensus estimate of 10.375 million.



The number of actual hires shrank again and dropped to the lowest level since August 2021. So, job openings jumped, indicating continued labor market strength, while hiring was weak. And it wasn't just hires that came in weak: the number of quits dropped to 4.179 million from 4.237 million as far fewer workers were comfortable enough to quit their job in hopes of getting a better paying one.


After three months of much needed drops in job openings, July’s reversal pushed the ratio of job openings to unemployed workers to nearly the highest on record. Meanwhile, even as job openings increased, both hires and quits continued to deteriorate, thereby extending the ongoing weakness in the labor market.

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The market’s technicals have deteriorated, the Fed is telling us that it’s going to continue to aggressively hike interest rates, and we’ve got a terrible labor situation. If your financial advisors are recommending that you buy stocks in this environment— or trying to dissuade you from taking some write-offs— you should fire them. It’s that simple. Forgiveness is between them and God.



Click here to invest with Chad.


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