Leuthold, echoing everyone I've interviewed

David_Snowball

Hi, guys.

Sitting here on day two of a power outage that might stretch for several days more. The straight line wins that came across Iowa took out about a third of the trees and rather more than a third of the power lines in the area. Our entire end of town is being affected by a major transmission line that went down. They're guessing two to three more days before the lights are on. Augustana, across the river, is also without power and under a boil order. I'm afraid that a major purge of the refrigerator needs to commence.

All of which is slightly relevant because I don't have internet access or a computer. And pretty much limited to a trickle of mobile data which explains why the formatting of this node might be a bit shoddy. Regrets for that.

I've probably interviewed six managers in the last six weeks or so. Today Leuthold posted a note on market sentiment and valuations, both of which they find to be irrational. The last paragraph of their note is a virtual word for word restatement of what every single manager, equity and fixed income, but I've interviewed has said.

For what that's worth, David

"Market valuations and investor sentiment are right back to the dangerously high levels that informed our market caution in January and February. That's remarkable because those levels reflected a high conviction that the economic expansion could continue indefinitely. Today, with the economic and earnings outlook as uncertain as it’s been in perhaps 80 years, valuations and sentiment have snapped back to those frothy levels. And arguably, the situation for a multi-asset investor is considerably worse than six months ago because the fixed income alternatives are even more outrageously priced.

The Fed is overtly trying to crush every investor with a cautious stance, but that doesn’t mean a degree of caution is not appropriate."

Old_Skeet

Hi @David_Snowball,

I live in a 100+ year old neighborhood with above ground powerlines that snake through the alleyways. Yep, it has a good number of 100+ year old oak trees ... and, frequently tree limbs take the powerlines down. My solution ... for the past twenty years ... has been a Generac standby power generator that runs off of natural gas. With this, I do not have to seek fuel to run it. Something to think about going forward if you don't already have one. Mine will run pretty much to whole house plus some reserve for a life line for a neighbor or two.

On asset valuations ... Yep, I'm with the call that a good number of asset classes are extremely overbought and selling at premium prices including most stocks, bonds and real estate. Many homes in my neighborhood are selling well above their appraised and listed prices due to location to the central business district in Charlotte. I remember ... years back ... people paid dearly to get out of the neighborhood. Well, and now, they are paying dearly to get back in to avoid long commute times. Most homes in my area are selling at 110+ percent of appraised value. So, yes ... from my perspective ... if you buy now you will indeed have to pay up not only for real estate but for stocks and bonds as well.

Seems, to me, inflation is back. Take care ...

Hope you get your power back soon. I'm sure it is no fun being without it.

Old_Skeet

David_Snowball

@Old_Skeet: bought my place five years ago and thought long and hard about a generator, in particular one that tamped into the natural gas line. And then I kept thinking, "I lived around the Quad Cities for 32 years and have had one outage that lasted more than an hour or two. What are the odds that this will be a good investment for me?"

"Rising," apparently.

(sigh)

I do rather worry about the RobinHood crowd and the prospect that they're pushing things higher, in part by triggering the algos. The observation that the S&P 495 is underwater by 5% year-to-date while the S&P 5 is up dramatically, does feel worrisome.

David

Old_Skeet

Hi guys,

For those that have frequent power outages as I do a battery backed up led light bulb might be of interest. I have a good number of them in use in addition to standby power generation.

Here is the link for the bulbs. About $10.00 each at Home Depot.

https://toolguyd.com/led-light-bulb-with-battery-backup/

hank

Thanks David for sharing those reports. Doesn’t surprise me. Bill Fleckenstein’s usually reliable site is down today due to a power outage as well. (Not sure where he’s located.) A big-time gold bull for sure. So I’m unclear whether it was the weather or gold’s $100 slide today that knocked his lights out.

ET91

Thank you David for the update. Thank you for looking out for us. Hope your electricity comes back soon.

MikeW

Thanks so much for sharing this David. Reading this keeps me grounded which is difficult with the market going up on a daily basis and FOMO.

rforno

David_Snowball said:

I do rather worry about the RobinHood crowd and the prospect that they're pushing things higher, in part by triggering the algos. The observation that the S&P 495 is underwater by 5% year-to-date while the S&P 5 is up dramatically, does feel worrisome.

David

Be well, David.

Speaking of the RobinHood crowd, I saw TSLA is doing a 5:1 split. Since TSLA is a totally unhinged herd-mentality momentum stock, I have to wonder, would this attract RobinHooders and other bet-it-all-on-red folks? Heck, do RobinHooders play with stocks that cost more than $30/share?

Shostakovich

Thanks all for this commentary.

I feel increasingly uneasy about markets and the economy (and I've been skeptical since January, holding 30% cash in a 401k).

Not sure what the alternatives are for an average Joe retail investor. I'm rotating into cash and flexible bonds. That's about all I got.

I feel comfortable that there will be a regime change in Washington this fall, but I'm not comfortable that will do enough to get things back on track.

JoJo26

rforno said:

David_Snowball said:

I do rather worry about the RobinHood crowd and the prospect that they're pushing things higher, in part by triggering the algos. The observation that the S&P 495 is underwater by 5% year-to-date while the S&P 5 is up dramatically, does feel worrisome.

David

Be well, David.

Speaking of the RobinHood crowd, I saw TSLA is doing a 5:1 split. Since TSLA is a totally unhinged herd-mentality momentum stock, I have to wonder, would this attract RobinHooders and other bet-it-all-on-red folks? Heck, do RobinHooders play with stocks that cost more than $30/share?

Yes, I'm a "Robinhooder" at own stocks anywhere from $10/share to north of $200/share.

The Robinhood crowd, simply does not have enough capital to really sway the markets. They're de minimis relative to all of the institutional capital out there.

Old_Joe

@David_Snowball

Hi David- it looks like the situation in Iowa is finally getting a bit of attention. This, from NPR:

'The Devastation Is Widespread.' Iowans Continue To Struggle Following Deadly Derecho

Thousands of Iowans are still coping with the aftermath of a storm that pummeled the state last Monday with 100-mile-per-hour winds — a storm that flattened corn and soybean crops, damaged grain elevators and leveled banks, churches and homes.

More than 158,000 Iowans were still without power as of Friday evening, according to Iowa Public Radio. By Sunday morning, more than 98,000 continued to lack power, according to the monitoring site PowerOutage.US.

"The devastation is widespread. It's intense. Block after block of houses, every one with some amount of damage. Trees piled 6 to 10 feet high along the road. It's like walking through a tunnel of green with some fluorescent orange of placard houses that are unsafe to enter," Tyler Olson, a city council member from Cedar Rapids, told NPR's Weekend Edition on Saturday. "The city itself has been working hard to get roads cleared, so that has taken place in many parts of the city. But we're still without power. The majority of our citizens are without power."

The storm system that flattened crops and toppled trees is called a derecho, a particularly damaging and severe kind of wind storm that can cause hurricane-force winds, tornadoes and heavy rains. As many as 14 million acres of farmland were damaged by the storm, The New York Times reported.

"It's by far the most extensive and widespread damage that we've seen on this farm," Aaron Lehman, who grows corn and soybeans in Polk County in central Iowa, told Harvest Public Media. Lehman, who serves as president of the Iowa Farmers Union, said the damage was worse than a typical tornado.

"Unlike a tornado, which is a mile wide, this stretched for a width of really intense damage — of approximately 40 miles, probably closer to 60-70 miles wide," he said.

In Cedar Rapids, some families were left living in tents. At one badly damaged apartment complex, displaced children played outside amid shredded shingles, rusting nails and the chunks of fiberglass insulation, Iowa Public Radio reported.

"I didn't hear no sirens until our electricity went off. And then we went out and looked out the window and then it just all happened," said 14-year-old Lenberg Phillip in an interview with Iowa Public radio. "We were just watching out the window and then minutes later the roof came off."

Olson says they're still hoping to get a presidential disaster declaration.

"We need electricity," Olson said. "The [Iowa] National Guard arrived a couple of days ago to assist with utility with power back on, but we have citizens without food, without medicine. And we're working as hard as we can as a city to meet those needs but we really need the federal government and their resources."

President Donald Trump has not signed an emergency declaration yet. On Tuesday, he tweeted: "Sad to see the damage from the derecho in Midwest. 112 mile per hour winds in Midway, Iowa! The Federal government is in close coordination with State officials. We are with you all the way - Stay safe and strong!"

At a press conference in Cedar Rapids on Friday, Republican Gov. Kim Reynolds said the soonest she'd be able to submit an application for a disaster declaration is on Monday, according to Iowa Public Radio.

"We're moving forward, we're coordinating efforts, we're working with the local emergency managers and working with city officials and the mayor," Reynolds said. "They're on the ground. They need to let us know how we can supplement and help them with the work that they're doing and that's how we can efficiently and effectively serve citizens."

This all comes as Iowa continues to battle the COVID-19 pandemic. While the rate of infections appears to be decreasing, now averaging 458 new cases a week with more than 52,000 cases and 975 deaths, experts are worried about how the state will be able to handle two disasters at once.

"[The pandemic] has complicated relief efforts," Olson said. "It's hard to gather people together. It's hard for repair companies, insurance adjusters, to go into homes. Obviously protections that are in place because of the pandemic. And it really, the city's resources were strained before in trying to deal with that and now we're dealing with this probably historic disaster."

We surely hope that things are improving for you folks .

Regards- OJ

davidrmoran

>> Today Leuthold posted a note on market sentiment and valuations, both of which they find to be irrational.

something-something can stay irrational longer than you can stay whatever