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Gene Inger: The Inger Letter- November 23. 2016

Gene Inger

Gene Inger


Harvesting gains - on a short-term basis approaches, but isn't quite at that point yet; as I've indicated higher prices every day with pullbacks in context of the uptrend consistently projected (since the Election) to hit S&P 2200 or higher, before Thanksgiving.

This week I called for minor dips getting nowhere and always higher as it evolved. The optimism we expressed both before and after the Vote at the same time we allowed for pullbacks, has been rewarded with what's been a rotational advance that we called based on 'Fun in America'; as we believed not much changed with regard to near-term business; but a lot changed with respect to 'perceptions' of where the Nation's headed. 


So sure, there's a bubble in Euphoria building as our advance crept in pretty-steady-fashion toward new highs. This enthusiasm is increasingly confounding to those who rightfully recognize the impact of higher rates from the Fed (especially if they move a full 'half-point' and not just a low Quarter-point hike), as are likely as we move past OPEC and to the Fed meeting. Of course a half-point move would likely mean nothing more is on the table (market could sell-off then rally) in the foreseeable future. 

There are other aspects; such as what that would do to 'debt Service' by the United States; not to mention entitlement increases should inflation be ultimately triggered (so as to repay debt with depreciated US Dollars, as I've often pointed-out, even though citizens don't really want it). And a higher rate environment plus revitalization of American industry and growth helps to change the mood; and that's why we got so bullish and said so before the Election if it went thusly.

It's not Trump per se; and it's irrelevant whether the immediate result is a blow-off and ensuing correction (along the timelines we have and will outline as we develop the first short-term exhaustion) or even if (more). I also have said setbacks can be dramatically different (redacted details; please join us for our 'Black Friday' special if you'd like to be a member at ingerletter.com). And that goes for rotation within sectors; a response to 'trade tariffs', as may become leverage to renegotiate Agreements. Or replace with a series of bilateral agreements.  

I'm aware some were surprised that I immediately withdrew concern as to what some call 'hideously overvalued' markets. And I said I would if we had a Trump win; not because of 'him' again; but because a gridlock preventing (even if they wanted the Country to do better) sensible fiscal stimulus will now be broken; so you have an actual functioning Capitol Hill and White House. And one that is more interested in domestic than foreign growth; at the same time as globalism is restrained (it will never be eliminated, nor should it be; but like a delicious meal; too much of a good thing is not so good; just as I've said about low rates for too long). 

Once all this transpired, as I proclaimed a month ago; I would be bullish beyond belief for (redacted) term; and because it's been 'as if' a yoke oppressing investors was removed (it was in many ways; more details). 

We looked at lines and trends on charts; but we anticipated how those would change if this Election occurred thusly; because of the vision that it gives for (particular) stocks (in both directions); and projected a run-up to 100 (Par) for the US Dollar Index; a level I've projected the process to get us too for about four years now. That includes the decline from 1.37 in the Euro (pressing Par from the other direction eventually we said) or the British Pound down from 1.50 or higher to near, but not all the way to, Par. Remember we called Brexit and said the EU will need the UK a lot more than the UK needs the EU; but they would work trade out. I've projected the same to happen with the U.S. in the wake of this Election.

Bottom-line: this move is being led by Oil; first and foremost. Politics is a strong backdrop; but every jiggle up and down (working forward) has related to a combination of the Dollar and Oil. This should persist. Now the Saudi's express 'their' view that all OPEC members will concur with Production Cuts at the November 30 meeting in Vienna. 'Perhaps'. (I'm detailing how to address the OPEC event for traders; so it's reserved.)

Remember, after Riyadh blackmailed oil producers, including Russia as well as the United States, and then threatened America right as Trump won, with 'destroying the US economy if we didn't buy oil from them'; it was pretty clear where their interests lie (balance for our subscribers). 

Some of us have long memories; I recall what the Saudi's did in 1973, and that set-up what I called the most bullish buying spot in my lifetime. On TV back then I suggested that was the time to buy stocks for your retirement, your kids, your belief that we would be able to get through it and prevail. And again after the 1987 Crash; and again after a forecast 2000 collapse; and immediately (but not later) after the 2008 'Debacle'. Now the market has signaled a transition we thought implicit if Trump won; but again it's a 'process'. It can include a curvy road in 2017.  

Daily action - has talked about some of the sectors that benefit or are riskier in the new environment; or that will rotate, keeping this alive for the moment, but not necessarily that much further. It's more extended.

Nevertheless, we continue long the S&P, with expectations of this week being an 'absence of offers'; the inverse of sometimes seen pre-holiday 'absence of bids'. This time, an 'absence of offers' has been the call.

The super-bears are out there, worried about money-multipliers; a frail mandate to enact legislation; an incredible deficit ahead; and they are fervently embarked on a sell-everything approach. Wrong. (Reserved) long-term positions throughout, while avoiding committing a bunch of fresh cash into the market 'now', other than trading swings. 

There might be a 'fiscal horror-show' some envision; I've shown those charts myself. At this point we expected the thrust to S&P 2200 and a bit more; and sort of smirked at (this is a macro forward discussion).

But for now this is about more than debt and deficits; until it exhausts upside. It's possible things get more severe; but I suspect (reserved). Rather stock markets will (redacted), but this is next year. The surprise to most will be if the market (redacted) to tax cuts, to increased deficits, or to a strong Dollar; because (more; sorry future tense outlook).

It is that outlook (perception) that I've respected these weeks since the Election, including a belief that Jared Kushner (wrote about Jared and what it meant, before the media and now Forbes made him a household name) would exert a sobering influence on 'the Donald' (more).    

Prior highlights follow: (mostly reserved for subscribers; join us).

The magnitude of tectonic shifts - increasingly are toned-down in the United States, as far as calming the misguided or disappointed masses of voters, who used linear thinking; didn't grasp a necessity to shift from what truly was obnoxious campaign rhetoric, to orderly governing; and only now are starting to realize that while the outgoing leadership sure did some things (several favorable; several not) it was time to embrace an attempt to recover America's leading business (not just consumption) roles; while enhancing greater (shared) global security not isolationism. 

Abroad the implications are also superficially being calmed; with most of the globalists increasingly resigned to 'carving-out' a place for them. For sure they're still disruptive, but for the first time in four decades they are on the defensive. And the majority of people think this is due to Trump. I know it is not; that rather it's an evolution of a realization that predates it by years, but was suppressed by the Establishment approach I simply called 'pouring gasoline on the (debt) fire' for far too many years. 

This all matters to credit and equity markets because the United States, in my view all along, must be the shining North Star to focus the future on; and not China (saddled by issues we address).

Conclusion: we are experiencing a major 'sea-change' in politics; in the foreign policy arena; and in credit markets. Most importantly, favorable 'capital-based' cycles in American history (detailed discussion).

Aside that, the business environment looks favorable; there's a sense of relief that America is back; trepidation that it be done responsibly; with an eye on the ball of jobs and growth; not infringing anyone's rights.    

The bifurcated sector-rotation shifts are more than a mere post-Election response. It's a catalyst to shuffle money; as markets reflect dynamic American economic prospects; sure, soon it will be too much too fast, but this swing isn't exhausted just yet.

Enjoy the holiday!   

Gene Inger

The Inger Letter