August 28, 2018

“The more I see New York, the more I think of it.
I like the sight and the sound and even the stink of it.”

 – From “I Happen to Like New York,” by Cole Porter,
a song from his 1930 Musical, “The New Yorkers”

I live on a small island, which is 12 miles north to south and 2-3 miles wide – about the size of Manhattan – but we have only 2,000 people year-round, as opposed to the 2,000,000 who crowd into the Big Apple. But human nature is the same everywhere. My island is heavily anti-Trump, and so is Manhattan. I dare not say a positive word about Trump’s economic policies, and neither can most New Yorkers. I subscribe to both New Yorker and New York magazines for their excellent writing, but the group-think of their left-wing politics and anti-Trump rants grows tedious over time. The same goes for The New York Times.

As for Wall Street, market pundits have their own form of myopia – often based on flawed formulas from the past. I keep seeing some of the same silly arguments arise, like “this is the longest bull market ever” (not so, as I have shown) or that “valuations are historically high” (not so, when looking at rising forward earnings) or “the yield curve is nearly flat” (not so, when you compare the Fed funds rate to 10-yr bonds).

Another bugaboo is a fear of September or October, but the last third of the year has been positive lately:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

Turning to Washington DC, there’s something about the Beltway that causes otherwise sane and brilliant people to lose track of what’s happening outside of that magic circle that surrounds the capital city. Each Sunday morning, I force myself to watch NBC’s “Meet the Press” and assorted other Sunday talk shows. I actually time their discussions and find that over 90% is Trump-phobic or Beltway-related trivia. There is virtually not a single word about any other issue in the wide world swirling around outside the Beltway.

Venezuela is falling apart in social chaos and starvation under the socialist leadership of Nicolas Maduro (but not a word on Meet the Press). South Africa President Cyril Ramaphosa is channeling Zimbabwe’s Robert Mugabe (still alive at 94) by confiscating white-owned farms without compensation – all without much notice by the U.S. press. Also, you wouldn’t know the status of the nuclear deals in Iran or North Korea by listening to the Sunday morning talk shows or the evening news – not a peep. Turkey was the “flavor of the week” for a week, but not a word about any foreign nation on the latest Sunday gab fests.

Is the End of the Bull Market Near? — Will 2008 Happen Again?

Negative news sells, and it sells a lot better when coupled with fears of an unpredictable President. The August cover for FORTUNE magazine went hard-core into “End of the World” fears in a 9-page article by Geoff Colvin, while New York Magazine created “slasher film” imagery in its mid-August cover:

The August Fortune article begins by reminding us that this expansion is 110 months old, the second oldest in history, but that means nothing. Please repeat after me: “Economies don’t die of old age – and neither do bull markets. Average ages mean nothing.”  Colvin adds some legitimate concerns, like (1) “a trade war makes other problems worse” and (2) “rising oil prices will gum up global gears,” but after his article was written (in mid-July), trade negotiations have eased tariff fears and oil prices have come down.

Due to long magazine lead times, this article was written in mid-July, before earnings season began, but now we know that S&P revenues rose 10.3% to a new record high and earnings rose 25.6% to new record highs. Profit margins are also at a record high, but the S&P 500 is barely at a new record high. That leaves some room for more growth in the “P” of the Price/Earnings ratio to catch up with 2018’s earnings surge.

The New York cover article (“2008: 10 Years After the Crash”) hardly deserves a serious response. The editors know that millions of younger readers love horror films, so their cover is based on the “Scream” franchise mask. The articles inside maintain this overtone of horror. The main article is titled, “The financial crisis broke the modern world, and we are still living in the ruins.” Yah, sure: Global wealth in constant exchange rates has risen over 60% since 2008, making the crisis look like a blip. Some “ruins”!

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

In New York’s 18 pages of scary articles, the longest is “America Stopped Believing in the American Dream,” by Frank Rich. Equally cynical posts were: “Every Job Became a Hustle,” “A Generation Lost Trust” and “The Market Was Revealed as a Casino.” Then came a statistical spread, “It Was Bad – Real Bad,” with this lead-off buzz-kill: “Total US household net worth dropped by $11.1 trillion in 2008,” but why didn’t they follow up that dismal statistic with this: “Households Gained $45.8 trillion, 2009-18.”

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary

After U.S. household net worth dropped $11 trillion from 2007 to 2009, U.S. household net worth soared 83.5% in the next nine years, from the first quarter of 2009 to the first quarter of 2018, rising from under $55 trillion to over $100 trillion. (Second-quarter 2018 statistics will be released in early September.)

Tell the whole story, New Yorkers. You don’t have to let your anti-incumbent bias cloud your analysis.

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*

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