Thursday, April 25^th, 2024

Do FED Officials Talk Too Much…YES!!!

In recent days, FED officials have been making “HAWKISH” statements about monetary policy. Their words have helped drive BOND YIELDS HIGHER and STOCK PRICES LOWER as you have seen today….

Don’t get me wrong: I think the FED has done an excellent job of balancing its “DUAL MANDATE” of fostering GROWTH while curbing INFLATION. But I also wish the FED’s “POWERS TO BE” would stop preening for the news media and just stick to their jobs. It’s annoying to see the markets REVERSE COURSE and head LOWER, in REAL TIME, as a FED official is thinking out loud.

Case in point: In remarks made Tuesday (April 16^th, 2024) during a panel discussion in Washington, DC, FED CHAIR JEROME POWELL emphasized the FED isn’t persuaded yet that INFLATION is moving toward the central bank’s 2% target.

“The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence,” POWELL said. “If higher inflation does persist, we can maintain the current level of restriction for as long as needed.”

POWELL’s remarks represented a clear “SHIFT IN TONE” from his previous statements. The EQUITY MARKETS “TANKED” in response….

Most of POWELL’s “MINIONS” have been echoing his newly minted DOWNBEAT stance. FEDERAL RESERVE BANK OF NEW YOURK PRESIDENT JOHN WILLIAMS last week said:

“There’s no clear need to adjust monetary policy in the very near term.”

In fact, some FED officials, such as GOVERNOR MICHELLE BOWMAN, have even broached the possibility of RAISING RATES again if future readings DO NOT show INFLATION coming DOWN more sharply.

There will be no “RATE CUT” in June 2024…

After starting 2024 by pricing in as many as six (6) rate cuts this year, or 1.5 percentage points of “EASING”, traders are now doubtful we will even see a half point of reductions.

POWELL strongly indicated at the DC confab on Tuesday (April 16^th, 2024) that WALL STREET should get accustomed to “HIGHER-FOR-LONGER RATES. He suggested the central bank may carry out FEWER than the three (3) quarter-point reductions its officials had forecast during its most recent policy-making meeting in March (2024).

All of this“PUBLIC OPINING” has put investors in a “SOUR MOOD”. The S&P 500, as measured by the benchmark SPDR S&P 500 ETF (SPY), is losing momentum:

The SPY has fallen below is 20- and 50-day moving averages, as investors start to worry that we might not get ANY rate cuts this year (2024).

Rather than implement orderly “MONETARY TRANSITIONS”, as the FED did under earlier regimes, the now “EXCESSIVE COMMUNICATION (aka; oral diarrhea) has been generating unnecessary MARKET VOLATILITY.

After rallying by more than 10% in the first quarter of this year (2024), returns in the month of April (2024) so far have been less enticing for the S&P 500, with the index LOWER by about 4.4%.

Each sector has DECLINED for the month (April) except COMMUNICATION SERVICES, which has notched a slight GAIN of LESS than 1%.

HOWEVER, many analysts are still “BULLISH” over the stock market’s prospects this year (2024)…

ECONOMIC GROWTH remains RESILIENT and CORPORATE EARNINGS are projected to show HEALTHY GAINS

BUT, PULLBACKS should be expected… as we’ve seen in recent days.

The robust pace of the rally has made stocks “PRICEY”. Keep in mind, market PULLBACKS are NORMAL.

On average, the S&P 500 undergoes about three (3) 5% pullbacks per calendar year.

So, while FED officials “YAK, YAK, YAK” away, you should take advantage of pullbacks to add quality investments to your portfolio AND utilize monetization strategies like “PUT” OPTIONS to get “P.A.I.D.”!!!

That’s our ATWWI “SILVER LININGS” playbook for the NEAR-TERM…

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Wednesday, April 24^th, 2024

“CONSUMER SENTIMENT” Just Hit a Multiyear “HIGH”

The U.S. consumer has been “WORRIED” for years...

It wasn't just 2022's brutal “BEAR” market. Between the PANDEMIC and the HIGH INFLATION of 2021, consumers hit the ”PANIC” button long BEFORE stocks began falling.

The market decline occurred alongside a seemingly obvious looming recession. BUT, that recession hasn't shown up yet... And now, the American consumer is finally getting “OPTIMISTIC” again.

Consumers are the most “BULLISH” they have been since mid-2021. This recent sentiment breakout is not just a good sign for the economy... It's a good sign for stocks, too.

It's important to remember that the market doesn't always “BOOM” in a healthy economy. Stocks can do “POORLY” even if the economy is doing just fine. On the flip side, stocks often begin major “BULL RUNS” during the depths of a recession.

STILL, stocks need a strong economy to thrive over the long term. That means an improvement in consumer sentiment is “GOOD” news for future returns.

We can see this through the University of Michigan Consumer Sentiment Index. Researchers at the University of Michigan build this index by surveying at least 600 Americans each month.

This index has decades of HIStory behind it. So it gives powerful insight into what the typical American thinks about the state of the U.S. economy.

Today, people are finally waking up to the fact that the economy is NOTas bad as many had thought. This index has been on the RISE in recent months. And it recently BROKE OUT to a multiyear HIGH.

Take a look...

Consumer sentiment has been “SOUR” for a while. Given the PANDEMIC, MULTIDECADE-HIGH INFLATION and, a STOCK MARKET “ROUT”, that's no surprise.

BUT, as you can see in the chart, sentiment is finally REVERSING. This index recently hit its HIGHEST level since 2021… AND the “BREAKOUT” we just saw is a powerful sign for stock returns going forward.

To see it, I looked at each new instance of CONSUMER SENTIMENT breaking out to current levels. That has only happened ten (10) other times in nearly half a century… AND, it has ALWAYS led to continued stock GAINS.

Stocks in general have led to fantastic returns since this data acquistion began in 1978. That was near the generational bottom in the early 1980s. The S&P 500 Index has returned 9.2% a year since then.

But you can “CRUSH” that return if you “BUY” when CONSUMER SENTIMENT is on the RISE.

Solid outperformance is even more impressive when you consider the track record: Stocks were HIGHER a year later 100% of the time!!!

Still, NOTHING is “CERTAIN” in the markets. This could be the first time stocks FALL after CONSUMER SENTIMENT breaks out. BUT HIStory shows betting against this kind of track record isn't “WISE”.

Instead, we should look at this for what it is... The consumer is finally “WAKING UP” to the “STRONG STATE” of the U.S. economy.

A lasting economic “BOOM” is a GOOD sign for stocks… AND YOU, ME, WE, the ATWWI FAMILY will be prepared to MONETIZE market(s) associative “REACTION” and get “P.A.I.D.”…

PEACE & BLESSINGS
Kenneth Reaves, Ph.D.

Tuesday, April 23^rd, 2024

The “DANGERS” of Giving in to FOMO

Whenever there’s a hot trade in the market, whenever an asset class captures the headlines for producing HUGE gains, the automatic response for most investors is, “DAMN…I have to jump on board!!!”

To them, VALUATIONS don’t matter…. LOGIC doesn’t matter… All the time-tested market-based FUNDAMENTALS don’t matter.

All that matters is… “This asset is moving higher. My friends and neighbors are making more money than me. So, I HAVE to get on board.”

It’s a classic “FEAR OF MISSING OUT “ (FOMO) event…

“BELOVED” ATWWI FAMILY MEMBERS, I must tell you… FOMO will DESTROY you!!!

If your neighbors are getting “P.A.I.D., then GOOD for them.

If Biff and Muffy at the holiday cocktail party are bragging about their HUGE profits in cryptocurrencies, then GOOD for them.

That’s wonderful… You should be glad that your friends, neighbors, and in-laws are doing well.

“PROSPERITY” is a GOOD thing…

BUT, when logic doesn’t support the trade – or when your own financial objectives require a more conservative stance – then chasing the trade is a MISTAKE!!!

You should focus your investing and trading strategies on WHAT IS RIGHT FOR YOU. That means you will underperform your neighbors sometime.

But who cares???

As long as you meet the performance necessary to achieve your long-term goals, then it’s a “WIN”.

When I am “TRADING”, my immediate objectives are to make profits on SHORT-TERM TRADES. But my recommendations fall within the constraints of a LONGER-TERM objective… AND, in the LONGER-TERM, it’s the “CONTRARIAN” – or less popular – trades that will generate the LARGEST gains.

“LOGIC” AND “REASON” ALWAYS “WIN” OVER “EMOTION”!!!

CHASING PERFORMANCE… CHASING THE “HOT IDEA”… is almost ALWAYS a “BAD IDEA”.

Traders who RUSH to get into trades simply because it’s the “HOT IDEA” of the moment, or because their neighbors are profiting, are making a “MISTAKE”.

If the trade doesn’t have a “FUNDAMENTAL” backing… if it doesn’t fit with your overall LONGER-TERM strategy… then it’s NOT likely to turn out well.

SO, when it’s time to sit on the sidelines, I don’t mind telling people to DO SO until a better opportunity arises.

YOU, ME, WE the ATWWI FAMILY do notneed to CHASE ANY TRADES just to keep pace with the neighbors.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Monday, April 22^nd, 2024

How AI Farming Is Already “TRANSFORMING” America

Go onto any American farm today, and you will see some familiar sights. Rows of crops and tractors tending to the fields.

You may even see a new machine attached to tractors today. It looks like this:

The company that manufactures this product calls it the “SEE & SPRAY” system.

It’s still in its early stages. BUT, it’s already having a “MASSIVE” impact where it’s being rolled out.

The “SEE & SPRAY” uses a combination of ROBOTICS and 36 CAMERAS that can scan 2,100 square feet at once. “MACHINE LEARNING” allows it to identify weeds.

Then, utilizing dual tanks that can be used individually or in tandem, the weeds get sprayed.

Having two (2) different tanks allows the “SEE & SPRAY” to essentially make two (2) passes at once.

BUT, the real story isn’t the “TIME SAVINGS”…. It’s the “COST SAVINGS”!!!

“BOOMTRAC” technology keeps the sprayer arm within 10 inches of the target height. This improves spray ACCURACY and reduces herbicide WASTAGE.

The “SEE & SPRAY” can reduce herbicide use by as much as two-thirds. That is a ”HUGE” cost saving for farmers.

BUT, that’s not all…

The tractor can be operated “REMOTELY”, with movement pre-programmed via AI-powered tools.

A farmer can use a computer or tablet to get a “SEAT” and monitor progress from the cameras. Or do that while being chauffeured around their field.

The “SEE & SPRAY’s” sensors allow monitoring of seed, water, fertilizer and pesticide levels while operating an “AUTONOMOUS” tractor. It’s an “INCREDIBLE” LEAP FORWARD!!!

AND, all it costs is… $25,000

That’s not “CHUMP CHANG”, by any means. It’s $14,000 for the hardware and $11,000 for the installation.

That said, the “SEE & SPRAY” is an attachment that goes onto some of today’s top-of-the-line tractor models. So it’s not a standalone cost.

BUT, this technology pays for itself quickly, especially given the costs of pesticides and herbicides.

AND, it’s easier on the land, too. Fertilizer “RUNOFF” is affecting life downstream from farms, creating unintended effects.

In Florida, FLORIDA FERTILIZER RUNOFF CREATES ALGAE BLOOMS. This makes waterways impassable and sucks out oxygen, which endangers fish and other unique species, like manatees.

All told, adding this $25,000 piece of technology to a farm is a giant leap forward for farmers, consumers and, the environment.

The “SEE & SPRAY” is a sign that a new “GREEN” revolution is already here.

AND, it’s powered by AI…

At a time when we hear so much about what AI “WILL DO” in the next five (5) or ten (10) years…

AND, about the SEMICONDUCTOR FACTORIES breaking ground today that will be making CHIPS by the end of the decade…

The “GOOD OLE” American farm is already putting this tech to work… TODAY!!!

That’s no surprise. HIStory shows that farm technology tends to lead to other innovations elsewhere.

That’s why AI farming is one of the most exciting areas investors are overlooking today.

All technologies allow people to do more work and the biggest technological benefits in human HIStory have started on the farm.

For thousands of years, simple hand tools like SCYTHES and PLOWS were used for farming. “BEASTS OF BURDEN”, such as OXEN, were used to help plow fields.

The hours could be long during planting and harvesting season.

By today’s standards, it was beyond backbreaking labor... AND, it was also the human condition for all but a few “ELITIES” for most of HIStory.

With the rise of the “INDUSTRIAL AGE”, everything CHANGED!!!

Steam-powered machines could do the work of dozens, then hundreds of humans. Gas-powered tractors eliminated much of the back-breaking labor.

HIStorians even credit farm technologies such as the COTTON GIN with ending institutionalized human slavery.

Today, fewer than 1% of Americans are employed directly on farms, and less than 2% in the broader agricultural space...

AND, the percentage of time and income that Americans have spent on food has DROPPED thanks to these technological improvements.

It’s been a true transformation in just a few generations… AND, it’s all thanks to TECHNOLOGY.

The next “TRANSFORMATION” has arrived…

Today, farming is the “VICTIM” of its success…

Thanks to so many advanced technologies, FEW FARMERS ARE NEEDED. That’s allowed for the growth of cities, modern corporations and, thriving businesses OUTSIDE of agriculture.

HOWEVER, there are times when additional physical human labor is still needed on farms. That means we have occasional LABOR SHORTAGES.

Technologies such as ROBOTICS AUTOMATION (i.e. “SEE & SPRAY” tractor) can solve this problem.

In the farming industry, AUTOMATED ROBOTS can help REDUCE harvesting costs, enhance food quality, increase yields, streamline operations and decrease waste.

Tools such as DRONES can also be helpful on the farm. They can provide a “CROW’s EYE” view of where crops are. With AI-powered “RECOGNITION SOFTWARE”, they can identify trouble spots that may need more water or fertilizer.

They can take over most of the roles still needed by human labor… AND, they can help eliminate WASTAGE.

That includes food that goes bad before it can be harvested and processed. But it can also include reduced fertilizer use.

Currently, FERTILIZER COSTS run an average of 20% of a FARM’s COSTS, according to the USDA. For some crops, such as CORN, it can be as much as 35%.

Even modest savings in this big cost can make a huge difference in a farm’s profitability.

AI-related stocks, particularly “CHIPMAKERS”, have already made a big move. BUT, NOT AI farming stocks.

Since these technologies are still so new, the market is barely aware of their potential. Only a handful of farms are using these AI-powered tools today.

And globally??? There has been no rollout yet…

So, the AI farming trend is likely to play out “MASSIVELY” over the next few years, driving billions of dollars in COST SAVINGS for farmers.

Many third-world countries didn’t get modern gas-powered equipment or start to use fertilizer until the 1970s.

The result? Global crop yields surged nearly fourfold. All without substantially increasing the amount of land or labor required.

With today’s new AI farming tools, we could see similar gains.

Today, 40% of the world’s population earns its income substantially from AGRICULTURE.

That’s incredibly different than the 2% in the U.S. If 40% of America’s workforce was on farms, we would have over 65.8 million farmers.

AI farming tools could mean the rest of the world uses far LESS human labor within just a few years. That means less back-breaking labor. And higher global incomes.

In turn, AI tools will help keep food prices from trending HIGHER and drive DOWN FOOD INFLATION over time.

That’s good news for farmers, consumers and shareholders who own the right AI FARMING COMPANIES.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Friday, April 19^th, 2024

A Stock Sold in “PANIC” Is a Confession of “FOLLY”

Last night's (Thursday, April 18^th, 2024) retaliation by ISRAEL fueled a shocking selloff that abated by the sunrise. Once again, “PANIC” SELLING turned into a confession of “FOLLY” for many around the globe.

A slingshot selloff happened last night at roughly 10 pm, with futures dropping sharply, BITCOIN (BTC) crashing under $60,000, and OIL prices spiking. Markets instantly reacted NEGATIVELY to the news that ISRAEL had conducted operations in IRAN. By morning, things had abated, with prices moving back to where they started. Some traders and investors lost A LOT of money by “PANICKING”.

The RUSSELL 2000 is still very weak. The Russell 2000 ETF (IWM) has its next support level at $190. From there… it’s a steep move down to about $177. We are almost to “OVERSOLD” territory, suggesting we are heading toward a bottom.

This is a ”VITAL” LESSON on “TAMING” EMOTIONS and ensuring you have all the proper information BEFORE deciding on your money activity. The EQUITY SIGNALS are still negative as we head into the Third Friday in April (when monthly options expire).

I have a hard time imagining that too many funds will want to be “SHORT” oil over the weekend, which could force “BUYING” during today’s trading session. But stay vigilant, as any lack of action by IRAN over the weekend could fuel a resumption of SELLING next week. This is why you must willing to ride the wave of GEOPOLITICAL tensions and FED “FOLLIES” until we see action on BANKING RESERVES in May (2024).

Rushing to the “EXIT” during a market “FIRE DRILL” guarantees you will be TRAMPLED NOT SAVED!!!

BUT, most people don’t think this way…

The average trader/investor acts like a “MOVIEGOER” to a HORROR film—screaming at the first sight of trouble and spilling their popcorn long before the credits roll.

Such REACTIONS to instant “CRISES” lead to “BAD” financial decisions.

When prices rebound, PAPER LOSSES transform into REAL LOSSES!!!

We often hear three (3) “ADAGES” – two (2) anonymous and one (1) attributed to BUFFETT.

The first goes: Buy on the sound of cannons, sell on the sound of trumpets.

The BUFFETT one goes: Be greedy when others are fearful, and fearful when others are Greedy.

Or: 

“BUY” when there's "BLOOD" in the streets...

Perhaps we should have a new ATWWI version of these quotes to claim our own…

When “PANIC” hits the Street, FILL your pockets!!!

When “TRIUMPH” fills the Street, EMPTY THEM!!!

Or go even shorter…

“BUY” amid “CHAOS”... “SELL” during “APPLAUSE”!!!

A “PATIENT/DISCIPLINED” trader/investor should act more like the “STOIC” SPECTATOR who waits out the INITIAL “PANIC”.

Markets, like HIStory, tend to REPEAT themselves, often rebounding as swiftly as they fall.

Five (5) Takeaways:

• 1.“PATIENCE”/”DISCIPLINE” is/are the best way(s) to PERSERVE your PORTFOLIO and your “WEALTH”.
• 2. SHORT-TERM fluctuations are “NORMAL”; focus on LONG-TERM GOALS and STRATEGIES.
• 3. A WELL-BALANCED and DIVERSE PORTFOLIO can weather storms better than high-conviction ones.
• 4. Learn more about MARKET CYCLES and HIStorical TRENDS to eliminate “PANIC_DRIVEN” decisions.
• 5. Have “CLEAR” INVESTMENT CRITERIA to know when to ”BUY” and “SELL”. This eliminates “EMOTIONAL” decisions.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.