Hi all. Half a year has gone by. I think of something and by the time I put it down on paper its already old news that most people have read about in much better English than I can ever write. So let’s kick off this year on a positive note.

Below is an interesting chart of S&P returns since 1872. 2019 was good, very good!

We’ve had a great year. Nearly every single asset class has gone up. The most successful investor we all think of is Warren Buffet. However, his year was not good. He underperformed the S&P500 by nearly 20%. It seldom happens that he makes a loss.

1999 and 2009 were the last times. We are nearly at the greatest bull run the market world has ever seen. Yipee.

With interest rates in negative territory, it just makes sense for investors to take on more risk. Looking at currencies the least dirtiest shirt is the US dollar. A strong dollar keeps emerging markets weak. So global growth will be stagnant. In an environment like this, the only growth you will find is in technology. Remember the top five (FANG companies) comprise nearly 20% of the S&P500.

Below is a chart of the S&P500 with overlays based on different price to earnings ratios.

You can clearly see that when the S&P500 expands above a P/E of 20 that we have a contraction just as we had in 2008. Where we are now is simply unsustainable.

So, what will happen? After March the FED has said it’s going back to normalisation. In an election year, they will come under increasing pressure to keep the party going.

So my call is that nothing big should happen until the end of the year. Yes, there could be a slip between the cup and the lip but its party time, so splash out on a magnum of some Krug or Veuve Clicquet champagne.

Two warnings, I don’t really understand astrology but there is a Jupiter/Saturn conjunction that kicks in at the end of the year (December). The last time this happened was in May 2000 that saw the market decline post dot com boom until the low of 2003.

Also, an interesting market cycle called Benner predicts a large market correction that will have bottomed in 2021 (the lower right-hand corner in red). Check out the other dates that it predicts as bottoms, 1913, 1933, 1949, 1987, 2003. The only one not predicted was the 2009 low after the property crash in 2008.

With the assassination of that thug Soleimani in Baghdad. Too easy a departure for such a nasty creature. Everything has its place. Unfortunately, I think restraint would have been better here. Remember what allowed the US to prevail in the cold war was patience, restraint and willingness to avoid quick solutions which are usually violent. A long-forgotten US diplomat George F. Kennan recommended the cold war strategy of  “long term, patient but firm and vigilant containment of Russian expansive tendencies”. This I think would have been a better approach. But Trump is a man with a hammer and to him, everything looks like a nail.

After the attack the share prices of most of the US defense companies rallied except one. It’s the company that designed the 737 max “made by clowns who in turn are supervised by monkeys”. It’s responsible for two crashes where 346 people died.

What I find amazing is that the man who oversaw this Dennis Muillenberg is heading off with a payment of $80 million and vested stock options of $18.5 million. When you see a CEO get fired and head into the sunset with such an exorbitant payoff you know the rot is deep.

Take a look below at the chart of this wonderful company called Boeing. The old Wall Street saying goes “Bulls make money, bears make money and pigs get slaughtered.” Well, this porker is heading to the knacker’s yard.

This company is ready to drop from $330 to $150. Now that’s a big call.

So I’m looking forward to some nicely braised tofu vegan steak in the next few months. I think it’s better to go for the steak than the sizzle.

On the opposite side of this, I have been looking at Rare Earths for a long time. My brother Daragh interested me in them as they are an essential component in everything electronic from like phones to tablets and such like. Most of the companies that produce these are Chinese and are small-cap. The chart below is a monthly chart of an ETF called REMX that only holds these shares. I see great potential for rare earth’s as I believe the Chinese will use them going forward to inflict pain on US tech companies. REMX has fallen since April 2011 as the Chinese allowed easy access to these. It looks like the supply of these valuable commodities is being slowly restricted.

I will try to write more regularly even if its for me to keep a record for myself.

As Shakespeare said in his poem Troilus and Cressida that