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Count Me Worried

Weekly Writing 2018.12.10

Does anyone remember the story of the Nikolai Kondratiev cycle? I would suggest you spend a little time on the internet researching this cycle. 2019 minus 1929 adds up to the approximate time this cycle comes around. There really is nothing mysterious about it—it’s just a prime example of human nature which never changes. Also, from a timing standpoint—which never can be pinpointed exactly—the economic and monetary fundamentals have been for quite some time heralding its arrival.


The following is a repeat from last week’s blog. I reprint it just to bring home the comments following it.


Evidence continues to mount that the stock market pays little attention to anything other than what the Federal Reserve says — or what it thinks it says. That, along with the normal holiday seasonal strong period to this point has proven very helpful.


I can think of a number of fundamental reasons why it should do otherwise, but that works only in the long run, and psychology rules in the short. I note Wall Street after 9 years of upside is projecting a double digit increase in earnings for 2019. To that, I say a fool and his money are soon parted.


As mentioned ad nauseum, the major problem remains excess corporate debt, which was the late 1920’s problem. Over the next three to five years, trillions of dollars of debt will need to be refinanced. If the Fed continues to raise short-term rates, this is going to be an almost impossible task. As Warren Buffett once said: “when the tide goes out, we will find out who has been swimming naked.”


1.    It appears the normal pre-Christmas bullish period of stocks has been trumped (no pun intended).

2.    The Federal Reserve now knows (I think) they have raised rates too high.

3.    2019 will reveal most all of those who have been swimming naked

4.    The period of moving to financial safety is probably underway.


I wish I could think of something positive. I’m sure there are quite a few out there, but I’ve become overburdened and blinded by that which is otherwise.


The Best,

Don S. Peters

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