Market’s Hardly Playable Until Trump Changes Tune

Trump’s face on a gold coin is the crowning irony of his jagged reign. Not only has our President proved a bad businessman when he got involved in New Jersey gaming where he built a monstrous casino and hotel which later lapsed into receivership. 

Market bulls still need to respond to the issue of the price-earnings ratio for the S&P 500. They put it at 20 times earnings. But you award a 20 P/E only when the outlook for earnings, interest rates and inflation is benevolent. 

I cannot find any blue sky benevolence anywhere, and I don’t see it coming around the corner. What I see is faltering corporate earnings, 30-year Treasuries flirting with a 5% yield and an inflation rate tied to the price of oil which is anyone’s guess. 

How can you invest with oil jitter-bugging higher, near par? My portfolio has moved from a belief in our long term future to serious doubt that price-earnings ratios can’t propel prime growth stocks, interest sensitive paper and cyclicals as well. Past week we’ve seen market weakness in prime industrials when General Electric, Microsoft or Apple can’t rally.

Airline stocks, where I’m short, like United have begun to break down. You gotta own energy plays like Occidental Petroleum, even Exxon. Home Improvement stocks like Home Depot is a possible turnaround. 

What about my longs?  Well It's been a painful, even tearful unwinding but I’m down to 2 properties. Namely, Goldman Sachs and Amazon, both 10% holdings. My reasoning is the market can’t go up without them. They’re bull market paper.  Lots of earnings and low price-earnings ratios. These managements are toughies. They still retain plenty of cyclical risk particularly to declining stock market turnover. 

I don’t like to parade naked in stocks no matter how bearish I’m at. You can always be wrong, too. So I hold 10% positions in both operators. They act better than the market. Many days contrapuntal to market weakness. The market can’t rise without their company. 

I’ve shorted United Airlines and Delta Airlines, but so far no collapses. Both act better than the markets. I banged out American Express and Boeing. Both are weakish, particularly Boeing which is tied to the course of airline stocks and the price of oil. What’s more, Boeing needs to deal with quality control issues on aircraft assembly. 

Faults in aircraft assemblage are a recurrent issue for Boeing. It had trouble with several new aircraft models. Unless management can put to bed quality control recurrences such glitches could impact its price-earnings ratio. When everything is humming in terms of new orders and production flow, Boeing, because of its leadership in jet aircraft models, can sell at 20 times earnings. Mechanical issues impacting production line flow can crush its price-earnings ratio. 

My shedding of many points in American Express is more of a travel and leisure easement caused by wartime footing 

in the Mideast. 

Finally, I said good-bye to both stocks which continue to work lower. Buffett nearly proved that some stocks were good forever. Namely, American Express, Coca-Cola, Apple and Berkshire Hathaway. But don’t count on it.