The Day The Stock Market Music Died

The U.S. stock bull market is alive and well.  While a breakout by the S&P 500 Index above its January peak remains elusive, it seems only a matter of time before the fresh new all-time high confetti is once again falling from the rafters. But underneath the market surface, a disconcerting trend with corporate earnings began developing a few months ago and is continuing to pick up steam. As stocks chase new all-time highs, are they doing so long after the corporate profit music has died?

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Jive Turkey

News out of Turkey dominated the market headlines on Friday. The Turkish lira currency tumbled sharply against the U.S. dollar, falling by as much as 16% as concerns mounted about the financial health of the world’s 13th largest economy. Makes for interesting headlines, but since I don’t own any Turkish stocks in my portfolio, I’ve got nothing to worry about here, right? Not so fast.

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Hoodwinked?

I’m admittedly left nonplussed and scratching my head. You may have heard the news. The Chief Executive Officer of a car company that you hear about in the news every now and then called Tesla teased the following on social media Tuesday afternoon: “Am considering taking Tesla private at $420. Funding secured.” He went on to add “Investor support is confirmed.” Umm, OK. While certainly newsworthy, all of this left me to contemplate a few things about this “news” event.

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Extraordinary Hubris

It sounded so much differently just eight trading days ago. Facebook announced its latest quarterly results after the close on July 26 that disappointed expectations. A primary concern among investors was the projected decline in user growth attributed at least in part to the fallout from Cambridge Analytica, which involved the mishandling of data associated with up to 87 million of its users. The stock price tumbled more than -20% in response to the news. But all of this worry about future growth is so July 2018. For while on one hand the company talks about its long-term effort to improve the security of the user data on its platform, at the same time it is out sniffing for even more sensitive data to collect.

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I Think The S&P 500 Should Be At 1900 Today

I think the S&P 500 should be at 1900 today. Except that I don’t. Because if the stock market “should” be trading -33% below its closing level on Monday, then it would be, or at least somewhere close to these levels. Same with bond yields. I keep hearing for so many years now about how bond yields should be so much higher than they actually are today. But instead of making bold proclamations that the stock or bond market should be trading somewhere vastly different from where they are presently, we are better off taking the time to understand and explore why stocks and bonds persist in their current state and what may cause them to finally begin to deviate from the patterns that they have been following for so long now.

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