E Market Briefing For Monday, Oct. 8

Investors and pundits who were blindsided by the ongoing distribution and insider selling are catching on to the deception. Note that nobody is talking about buybacks now (most require bond offerings; a characteristic that goes away as interest rates firm); nor the insider selling so evident throughout the year’s first half.  

As I wrote then; buybacks were a fine palliative for shareholders thrilled by superficially higher earnings; while of course initial perceptions of tax cuts also helped that picture. But as huge insider holders benefited from price appreciation; it was a golden invitation to lighten-up; and that’s why we had historic insider-selling (is that the untold story of 2018’s first half?). 

Not to mention the interest rate climb, out of the ’emergency low rate’ hole that was maintained far too long (for which I blame Bernanke); set-up the faster-than-consensus recovery. Hence I pointed-out money managers just can’t have it both ways for long. They wanted a ‘dream world’ of low rates, a growing economy, and continued buy-backs to extend the advance. 

Ripple Effects 

For my part this overdue decline (other than rotational selling for months; so it’s really not entirely new; and why I have been persistently concerned in recent weeks) has more to go. And it’s not just higher rates hurting small companies; though that’s part of it too of course. Mostly it’s ‘debt service’; a lack of future buy-backs; trade issues; and worries about Midterms.  

How do you handle this? Easy. You’re already prepared if aligned with my views. You retain core investment (or some speculative) holdings; but for months have used rallies (plenty of ‘Rinse & Repeat’ bounces) to achieve greater liquidity and cash reserves, preparing for bargains ‘down the road’.

Meanwhile, we’ve warned for a year how high-priced properties were only selling at sharp price reductions; and then even rental concessions to get (mostly millennials) into deluxe rental properties. Everyone went overboard in the big markets like New York and San Francisco; while South Beach or much of Coastal Florida, was already showing signs of price concession (for the same and other reasons; not just demographics and rising tides).