Wednesday, December 28, 2016

Holiday Trading...

is always light and when you consider the aspect that trading volumes have declined in recent years, it would be foolish to enter the market. One deep pocket could send a share up or down which brings to mind an old Wall Street proverb:
"The market can stay irrational longer than you can stay solvent."
With that said there are a few points worth paying attention too as the market will begin in earnest around the third or fourth of January.
A strong dollar will cause harm to US companies. I call to mind when Oracle released earnings a week ago. They said, "The strong dollar hurt the bottom line." Dear reader, the dollar was 93-cents during their reporting period. It is now at 103.
King $Dollar
It will be helpful for US consumers, but it will lower our exports and increase our imports. This will add to our deficit. It will be a drag on GDP. This will make a headwind for gold. However, I like to note that on the 27th of December at 2:30 AM, there was a serious buyer of gold as 59,000 contracts were bought. This is a very rare occurrence. In addition, corporate America won't be manipulating their stock in 2017 because corporate debt is 45% of GDP. They don't have wiggle room to do buyback and service their previous debt. The market is in over-bought condition as the PE ratio in high at 28.
Not Only That...
According to the St. Louis Fed, public debt is at an all-time high while the velocity of money(M2)is at an all-time low. With Trump coming, the Fed said that our government in general, runs more deficits than surpluses. Our monetary base has exploded and yet, Americans only save less than 5% of earnings while the Chinese save 35% of their earnings.
All of the above is food for thought as we should take some time to reflect, give thanks and enjoy the holidays. Peace.