“If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at any moment.”

— Marcus Aurelius

Getting’ scary out there, eh? 

It’s just like 2000 all over again – only worse!

Or like the recession in ’08…

This is crazy. The market’s rigged. No way this is related to what’s happening in the economy. 

Wouldn’t touch “it” with a 10-foot pole.

The collapse is imminent.

Face the Elephant

So, eh, I thought we might want to quarantine a few elephants from what appears to most to be a rapidly shrinking room.

Is the market scary? Yep. Always has been and always will be. They call it “investing” and not “fun” because you invest your time, energy, emotions, and money for a long period of time. There are ups and downs when you look at the short-term and compound growth over the long-term.

Is the market connected to the economy? Nope. It’s not connected to what we’re seeing right now.  It’s showing you the efficiencies and rising margins we will see "next" - as in “2022” next.

Wouldn’t touch it with a 10-foot pole? Well, let’s hope that most investors continue to feel that way. It creates value over the long term. It’s only when everyone wants in that you should be cautious.

Is the collapse imminent? YES! There WILL be a corrective wave associated with the growth we’ve seen over the last five months. No doubt about it. But that should not be your focus. So, unless you need ALL of your money in the next year…

Oh, and I am simply sharing a conceptual perspective here. I am not trying to suggest a timing in the market. That’s a fool’s game. 

Now, here’s the thing that will make you even more uncomfortable: All that chatter you see above - regular comments in conversations these days - is NOT what you see during market tops.

In fact, when we’re at a market top the chatter is more like this:

• "Mike, what do you think of futures and leverage?" 
• “You know I have a credit line on my house and it only costs 6% a year - I can beat that easy in the NAS 100, no?" 
• "Hey, my mom asking me how to buy Tesla?" 
• "I finally did it - those CD's I have been rolling over since March of 2009 - well, I cashed 'em in and bought Apple."

Throw in a few Uber driver stories about trading on their new 5G iPhone while waiting at a red light and, well, you get my drift. 

In short:

√ Fear and disbelief do not exist at market highs. 

√ Trillions don't sit in banks earning ZERO at market highs. 

√ Bullish sentiment chatter during the same week equity fund flows show outflows in 11-digit size - does NOT exist at market highs. 

And that’s what we have now.

We are all witnessing something extraordinary. This is the shift. The baton is being passed. Everything will change. The New Economy is literally forming before us. Imagine if I told you in 1982 - at Dow Jones 970 - that the DOW would be up to 20,000+ in the next three decades or so?

You all would have laughed me right out of the building.

Folks, the same rocket that got launched in early 1980 is now being launched again in early 2020.

On its trip from 970 to 20,000, we had horrendous events alongside terrifying occurrences, both natural and man-made. Massive setbacks, bear markets, corrections, recessions, wars, terrorism, fraud, bank closures, real estate collapses.  

You name it - we had it. 

As for the next 35 years, they will likely have even scarier events while things steadily move to the upside over time.  

So, are we to believe that the same government agency who could not even remotely figure out why we were running out of humans to fill jobs 6 months and 2 weeks ago now somehow knows what will happen in the next 10 years?

Hilarious. 

Maybe they could walk across the hall and talk to the government agency that forecasts the weather.

This Bull Market is Just a Baby

While the new focus seems to be the scary height of the stock market, and the country watches all the politics and vitriol, the New Economy is smokin'.

And it's darned near brand new.  

Check out the latest manufacturing data. And yes, it’s the same manufacturing America thought it had shipped off to China 25 years ago.

• Production Increases - check. 
• New Orders Record- check. 
• Growing Backlog – check.

The New Orders part of the ISM Manufacturing data is kind of a forward-looking thing. 

The August four-month change data (second image below) shows us the highest reading in the 72-year history of the data.  

I thought you might also find it compelling to see what the last record was: the 1980 read!

Ring any bells? It should.

I wonder right now if they even had a clue of what was coming after that record push way back in 1980.  They would have if they were watching Demogronomics™

Folks, check the level of inventories. You haven’t seen them this low since 2009, when the Dow Jones was at 6,700 and the S&P 500 was 666.

The great news is that it’s not just the core business inventories that are running extremely low. It’s their customers as well. Plants will be running full speed for months just to catch up to previously "pretty damn low inventories."

Here’s a bit more:

The first chart above shows production.  

Only one window was higher than it is now. That was back in 2004 coming out of the Tech bubble bear market. Rolling in at 63 is extraordinary - and it was covered in the press for about four minutes.

The second image above shows that even though production continues to rise, it still appears that demand is outpacing supply, as Backlog Orders also expanded for a second straight month. Backlog orders rose 2.8 points to 54.6. That 2.8-point month-over-month increase is in the top decile of all monthly changes and leaves the index at the highest level since November of 2018.

Think rocket-ship. 

Mike Williams, TruVestments