Let’s start, as we sometimes do, with stocks whose prices have gone insane. And regarding the S&P 500, the following can be considered obscene; therefore parental discretion is advised when we go to a preferred graphic, courtesy of “Others Parrot; We Do The Math Dept.” This aligns with S&P’s yesterday (Friday) agreement at 4136 with Q4 earnings season in full (or rather “mess”):
= 40.1x and unsustainably much too high!
What’s up?
Aside from the various daily top ten rankings posted by S&P members on our website, we don’t otherwise focus on individual stocks per se (as we often tongue-in-cheek say, our trading preference is instead the safety of the futures markets versus the daunting risk of stock ownership ). But certain stock stories are inevitable from the FinMedia flow. Namely:
Meta Platforms (aka “Faceplant”) just reported Q4 earnings per share down -17% year-on-year along with a -4.5% decline in revenue… and shares are up then by +29%.
Apple’s Q4 EPS fell -10% along with earnings -5.5%…and shares then surged +4%
We’ve also heard from some non-S&P 500 “Me! Me!” Stock called Carvana with a loss per share of -$4, which means that according to pure “portfolio theory” (is that still taught?) the stock price should be that much lower in a year… and yet money is being spent on it in a six week +449% increase.
Speaking of money being thrown into the market, on our MoneyFlow page, the weekly, monthly and quarterly metrics still value the S&P by +175, +416 and +231 points, respectively. Satisfied with your stockbroker’s discretionary decisions? creepy stuff
Oooh, and then there’s the Economic Barometer, which, as noted a week ago, dropped like a stone by its fourth-quarter metrics…yet the Bureau of Economic Analysis’s first report on gross domestic product for the fourth quarter came in at + 2.9%. How does this happen? A gob smacker, that.
Of course, other similar examples can be cited, but the bottom line from our perspective is that the stock market is clearly not being used to encourage prudent investing as valuations obviously mean nothing, nor is it being used to play financial roulette. Rather, it has turned into Russian roulette. And when the demand for dough becomes so status quo that the chamber with the ball comes out… look down. We don’t understand what the money throwers are thinking…or maybe it’s just that they aren’t.
Anyway, since dear old Dad taught us how to read the paper’s stock charts in 1964, we’ve never seen such market mispricing, warping, and potential price destruction in six decades.
As we’ve pointed out ad nauseam, the S&P’s risky yield of 1.622% now is far less than half the 3-month US T-bill riskless yield of 4.523% on an annualized basis. And among the S&P 500 heavyweights are some ridiculous price-to-earnings multiples: Nvidia’s 88.6x, Amazon’s 92.7x, Berkshire’s 308.5x, and Salesforce’s 613.7x, for example.
Also, the US debased dollar has been leading the ugly dog contest for nearly two years (until last October), winning again as the Fed looks set to continue raising interest rates. Remember Algore’s infamously pesky remark in 1992 when the then-vice presidential candidate from Madison, WI said, “All that should be down is up, and all that should be up is down”? This fits perfectly with S&P and gold today. The good news is: everything eventually returns to a reasonable rating (see our final chart below).
But as for The Now, let’s move on to Gold’s predicted falling saga after price dutifully returned to the 1800s and settled at 1878 for the past week.
“And a timely call, mmb…”
Very nice, Squire, but this isn’t about us. We hinted here two weeks ago (gold then 1928) “…a test of those 1800s may be near…” However, we remain firmly optimistic for much higher gold levels and continue to expect this short term excursion into the 1800s to prove price supportive. Additionally, gold was very strong on the week, reaching as high as 1975 on Thursday… only to then plunge -100 points in just 35 hours to 1875 yesterday.
Therefore: The Federal Open Market Committee was premature when it reduced its bank’s funds rate hike from +50bp to +25bp? After all, the Bureau of Labor Statistics created 517,000 non-farm payrolls for January, a six-month high and a +99% increase from December, although ADP’s calculation of just 106,000 jobs showed a -58% drop. But it all depends on who counts what… and maybe for what purpose. And should you score at home, ex-COVID, that’s the second largest job count disparity in the 14 years that these two measures have coexisted (i.e. one of those things that makes you go ‘hmmm…’). . ).
Regardless of the slowdown in FedFunds rate hikes, FedChair Powell & Co. continue to spread their aggressive wings in anticipation of continued inflation, particularly spurred by job and wage growth (judging by the BLS version, which also includes increases in hourly earnings and hours worked included). ). And on this side of the pond, both the European Central Bank and the Bank of England maintained +50bp rate hikes.
In any case, the dollar’s strengthening after the FOMC during the week threw the wrench in the works of not only gold but also silver, copper, oil, the €uro, Swiss franc and bonds. And that is jeopardizing the longevity of gold’s weekly parabolic long trend (now 13 weeks long). Because as we see below, with gold today at 1878 (and its series of conventional studies going negative) the price is only 22 points above the 1856 level, whichIfeclipsed the following week reverses said trend to short:
How far does gold fall then? Again, we emphasize the 1800s as supportive, so don’t get overly nervous out there: However, for the last 10 parabolic short trends, the average pullback from the flip price is -153 points, suggesting from 1856 to 1703 in this vacuum. That would be quite an incongruous hit, but hopefully avoidable as “Gold Awareness” becomes more popular.
Now let’s jump to the Econ Baro, which has gotten a bit of a grip from an improved week for incoming metrics. Job growth also contributed, as did December factory orders, Q4 productivity and the Institute for Supply Management services index for January. However, the ISM Manufacturing Index weakened, as did the Chicago Purchasing Managers’ Index of the Month and the Conference Board Consumer Confidence; construction spending also contracted in December. But all in all it was net pop for the baro:
As for our dual-panel magnification of gold, the carnage on the left side of the daily bars per price from three months ago to today is evident as the rightmost bit shatters. And for the 10-day market profile on the right, gold made the journey from first to worst:
Then, of course, there’s the two-part takedown of poor old sister Silver. This defines the regression trend of the last 21 days as now negative, according to their “baby blues”, which has already fallen below 0% (left). For her profile (right), basement dweller is her plight:
We end it for this week with the lopsided smile we got from this article (` hat tip): “The White House calls Exxon’s record earnings ‘outrageous’.”
“So why the crooked smile, mmb?”
Quite simply, dear Squire: Because both Microsoft and Apple did more in Q4, but apparently weren’t mentioned there. Which leads us to ask again…
What’s up?
It’s best to get some gold before it returns (way up) to its rating!
Applause!
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