In late September 1977, my new bride and I began an extended Honeymoon trip that would take us to Atlanta, New Orleans, Las Vegas and then on to stops in San Francisco, Monterey, and finally a grand tour down the beautiful Big Sur coast highway to San Luis Obispo, and a return back to San Francisco up through the California valley. We visited the Hearst Castle in San Luis Obispo, where the tour guide remarked that everything, which looked like gold was gold, including the faucets in the bathrooms, and the fixtures in the huge swimming pool. William Randolph Hearst was so wealthy that he had full grown trees floated in on barges, transported to the Castle, and then re-planted, because he knew he would not live long enough to see newly planted trees reach maturity.
Hearst had made his fortune in the newspaper business, and re-invested his initial wave of wealth in thousands of acres of seemingly low value real estate, upon which there was soon discovered vast deposits of oil, and later uranium. Hearst became immensely wealthy during a period in United States history, when there was little taxation. This was the time of the so called “Robber Barons”. Among Hearst’s eccentricities was his dinner parties at the Castle, the invitations to which were highly coveted. Hearst would invite notable guests of the time with different views to sit opposite each other at a huge dinner table overlooking the Pacific Ocean. The highly animated conversations which followed were of intense interest to the newspaper man, and was one way he was able to keep his finger on the pulse of the times.
According to the tour guide, arising out of one of these debate like dinner parties, Hearst became an advocate of the graduated income tax system. He declared that is was not in the best interests of our country for anyone to ever amass the incredible wealth he, and a hand full of others, had accumulated. He believed that such a concentration of wealth came with a byproduct of power and influence, which he feared would likely be abused. Hearst then applied his own power of the press to advocate for a graduated income tax system, and other wealth tax reforms.
Hearst believed democracy requires a broad and strong middle class, and an educated and well informed electorate to survive. A case could be made that the lack of one, or both, of those two requirements has led to many failures of would be democracies in Latin American down through the decades. In many Latin American countries the nation’s wealth is owned almost entirely by just a few very powerful families, and too little of the population is educated, and/or well informed. As Helen Fortney, my high school civics and social studies teacher, once said: “In a well-functioning democracy the political pendulum swings back and forth, but the democratic process survives and adjusts with the times”.
Given the current wealth and political divide in our country, and the emerging and imminent natural takeover of our institutions by a new generation, I am fascinated that the leading candidates for the up coming presidential election are all in their seventies. The country is on the cusp of so many generational, and demographic changes, that an objective analyst may conclude that at least one representative of a younger generation would be leading in some of the polls. Perhaps that brewing storm of generational, and demographic change, will emerge in a later election cycle, but the evidence grows that perhaps the pendulum may be reaching another extreme, just as it did when Hearst was moved to action. Stay tuned!
TATY — A REPRESENATIVE OF A FAMILY OF STRATEGIC SUPPLY AND DEMAND INDICATORS
TATY is shown above in yellow and the S&P-500 is shown overlaid in red and blue candle chart format.
TATY finished the week at a strong 155 level. As long as this big picture indicator continues to paint out bottoms in, or near, the red zone surrounding the 140 level, periodic assaults on new all time highs will remain likely. When TATY is making bottoms in the red zone demand is in the superior position to supply. The law of supply and demand determines the price regardless of market valuation, which in the current case is not cheap, or the news. If one had taken the news into account, then most clients would have been in cash several thousand Dow points ago. The news may very well grow worse, it really is a dangerous world out there, and there is a big election looming on the horizon, which will no doubt be lucrative for the folks delivering all those attack ads to come.
TATY is an objective measure of the balance of supply and demand generated by the only source, which is really worth anything — the stock market itself. If you want to listen to opinion, then listen to the evening news. If you want to know the facts about how all the opinions of the market participants have resolved themselves into aggregate action, then watch our objective strategic and tactical indicators.
TATY continues to signal demand is in the superior position to supply, so we expect an upward drift, and an occasional assault on new all-time highs along the way. The stock market is entering the holiday season, which in the past has translated into low volume dull market behavior. The political arena may be interesting these days, but I suspect the upcoming holiday period in the stock market may be typically dull?
SAMMY — A REPRESENATIVE OF A TACTICAL FAMILY OF SUPPLY AND DEMAND INDICATORS
SAMMY has an enviable history of identifying re-surging demand following a period when sellers have exhausted their propensity to sell. As such SAMMY is of little value during a period of extended rally, as is the current case. SAMMY is shown above alone, and below with the SPXL 3X S&P-500 ETF overlaid. The SPXL leveraged ETF is for reference only.
THE BOTTOM LINE
Historically the Holiday Season is a low volume and listless trading period for the stock market. The current conditions in the balance of supply and demand suggests that the price is likely to attempt more assaults on new-all time highs. However, these new assaults on all-time highs may be achieved on low volume, and as a product of a dull and listless drift higher. There have been many new highs over these last many months, but the stock market’s overall gain during this period has been less than satisfying given the anemic relative net gain. For example, take a look at the S&P-500 in September of 2018 as shown on the first chart above versus Friday’s close, which is less than two hundred points higher!
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