TSP Charts: Quicklook August 3rd 2019

There is nothing like another “raising tariffs” tweet during a global industrial recession and busted interest rate expectations all in the same week to push the market off the top of its price channel. Let us hope speculators don’t start looking at declining earnings and profit margins.

It is August and do you know what that means…
Subtract buybacks (BB) & inflation from revenue growth = 2.5% real growth for the 500 largest companies in the US and a recession outside the US in tech and the industrial economy

Declining earnings with rallying stocks. If only there were signs of a bubble…

I’m sure the 5000 year low in global interest rates is nothing to worry about….
What a coincidence that Swiss and German bonds go negative across duration at the same time gold breaks out to a 6 year high…

Meanwhile Goldman Sachs says corporations are on track to burn another $1,000,000,000,000 (trillion) of your their cash on buying back their own stocks on the open markets in 2019. Which may explain why buybacks have exceeded free cash flow for the first time since the financial crisis. I wonder how long they can keep this up. Because corporate buybacks have been the only net flows into the stock market this cycle!

Apple is leading the way in burning cash to prop up their stock price and will be negative net cash in 2-3 years at this rate. But for some reason Warren Buffet’s Berkshire Hathaway is raising cash and just passed Google and Apple to be the largest net cash holder.

And we all know Warren Buffet is an investment slacker. Hint, hint.

It remains my view this bull market has been driven by global central banks buying financial assets with printed money and US corporations burning their cash flow on buying their own stocks on the open markets.

This view was hammered home with the latest revision to GAAP corporate earnings (as reported to the SEC, not investors) now showing a 10% decline in gross profits since 2014 and still below 2011 levels.

This bull market is running on borrowed time and borrowed money and a lot of very passive investors.

Don’t be a passive investor, be a smart investor.

Invest smart,

Michael Bond

Also see our Best TSP Funds for 2019

TSP & Vanguard Smart Investor serves serious and reluctant investors with market warnings and a simple-to-execute allocation strategy. Michael Bond has a degree in investment finance and served in the USAF.

Categories: TSP Charts

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