Markets are priced for perfection

What a week for stock investors! All the main averages and most of the minor indexes registered historic highs. No question, Donald Trump has been good for the markets. The question is when will investors begin to take profits? Calling a top (or a bottom) in the markets is notoriously difficult. Granted, over the years I have been lucky and managed to catch a turn or two once or thrice. As readers know, once we hit 2,330 on the S&P 500 Index, I expected and still do expect some profit-taking. That doesn’t mean you should panic nor do anything more than raise a little cash. My strategy is to re-employ that cash as we pull back. The timing of such a move is always more of an art than a science. Think of it as a process. Sell a little today, a little more tomorrow, and so on. I’m not looking for a big pullback, maybe 4-5%. After the market declines, use the same kind of technique to buy back stock. But don’t go overboard because I believe the Trump Rally still has legs. What, you might ask, has our new president accomplished in order to justify this on-going rally? Well, aside from a flurry of executive orders that have reversed some of the prior president’s executive orders, not very much. But it is what he has promised that has investors drinking the Kool-Aid. The litany of tax cuts, infrastructure spending, Obamacare overhaul and an end to onerous rules and regulations has given investors hope. Analysts and pundits are fueling those feelings by drawing up all sorts of ‘what-if’...

The market stalls at record highs

  Stock market averages made another batch of new highs this week only to fall back in what may be buyer exhaustion. If the trend continues, investors may be looking at a 4-5% decline from here. It is too early to tell, because one day does not make a trend. We could easily experience a rebound next week, but I would still consider the present levels of most indexes ripe for a fall. My column last week pointed out that we are now in a “danger zone.” Sure, the markets could continue to grind higher but every additional point just sets us up for an overdue correction. Since all eyes and ears are on Washington, progress on President Trump’s agenda is dictating where the markets will trade. Every television appearance and tweet by President Trump simply adds to investor expectations. At this point, investors expect that tax cuts, a wholesale revamp of rules and regulations, plus a multi-trillion dollar infrastructure spending plan is just around the corner. It is not. For those of us who understand the pace of reform in the nation’s capital, it would be best to take a longer-term approach to Trump’s agenda. It appears, for example, that health care will be the first area our legislatures will be addressing this year. That does not mean that one day soon Congress will vote on a soup-to-nuts replacement of the Affordable Care Act. Instead, expect to see a flurry of piece meal changes over the course of many months. Lawmakers will attempt to address the failings of the present health system without disrupting those who are already...

Danger Zone

  “Highway to the danger zone Gonna take you Right into the danger zone” Something new is happening to the stock market, it has actually had two negative days in a row. That doesn’t mean much after weeks of gains, but it just may signal a temporary halt to the Trump Rally. My short-term target in this Trump-inspired rally was achieved this week. The benchmark index, the S&P 500, not only reached 2,330 (my target) this week, but went beyond it. The S&P 500 kept on climbing, reaching an intra-day, record-setting high of 2,351.31 on both Wednesday and Thursday. The index has subsequently fallen back but not by much. The Dow, NASDAQ, the small-cap Russell 2000 Index, plus a slew of other averages also reached record highs. Make no mistake, that’s a good thing. Hence forth, any further gains will put us on a highway to what I call the danger zone. Like the movie, “Top Gun,” we can cruise into the danger zone (where most accidents occur), but as Goose and Maverick discovered, one wrong move can send us into a tailspin. Let me make something clear, however, when (not if) this tailspin occurs, your portfolio will come out of this intact and reach even higher highs over the coming months. That is the reason I have been counseling readers to expect a decline–but not try to play it. In this Teflon market, little can dent theses gains. There were rumors, for example, that a $4 billion hedge fund was in trouble. The markets barely moved. Then there was Fed Chairwoman Janet Yellen’s annual Humphrey Hawkins testimony before...

Stock markets at historical highs

The bears headed for cover this week as all three U.S. indexes made new, all-time highs. That’s a good sign and augers well for even more upside ahead. Credit goes to President Trump and his tweets once again. This time, his promises to address tax reform within the next few weeks had the Algos (algorithmic computer software traders) hitting the “buy” buttons on their machines. Investors (if there is still such a thing) had been worried that Trump and the GOP would get bogged down in Obamacare repeal and immigration issues. If so, that would be a major distraction and might mean that tax reform and fiscal spending would be pushed back to next year or even later. The tweet seemed to put that story to bed, and the rest was history. Good quarterly earnings have been supporting the over-all market. Expectations have been for a 6% increase in corporate earnings, but that number proved low. Companies have been reporting better than that (7%-plus), but forward guidance has been better than expected. Whether it is Trump or the gathering strength of the economy, business executives are more optimistic about the U.S. economy and their fortunes than they have been in years. Technically speaking, the Dow and the S&P 500 Indexes have established a new trading floor at 20,000 and 2,300. Readers may recall that I am looking at 2,330 as a short-term top in the S&P 500 Index, with the other indexes following suit. The downside, if it occurs, could be in the 5-7% range. Be aware that tagging a short-term top or bottom is notoriously difficult, especially in...

Trump tweets tweak markets

Financial markets, under the new president, continue to react on an hour-by-hour basis to Donald Trump’s latest electronic missives. That’s no way to conduct business but it is what it is. At what point will traders begin to discount these tweets? It will take some time, in my opinion, because there has been nothing quite like this in the history of the world. What makes it worse, as it turns out, some of the new president’s statements have proven less than factual, while others have clarified the growing mountain of fake news that media outlets appear happy to broadcast. In the middle are the High Frequency Traders and the computer algorithm geeks who find themselves running from one end of the boat to the other as markets gyrate to the political tune of the day. I have no sympathy for these boys. They have controlled well over 70% of the volume in stock markets for years. It was a game they controlled thoroughly. I suspect that may change because Trump’s outbursts and actions are so unpredictable that programming computers to react to him is well-nigh impossible. Once enough money is lost in the attempt, traders will learn not to react to all these statements. In the meantime, readers, we have the advantage. Although this week was chock full of volatility, those who remained invested did okay. Markets held their own moving marginally higher or lower versus last week’s close. Part of the reason was better than expected non-farm payrolls, which came in at 227,000 jobs gained versus an expected 175,000. Overall, U.S. job growth accelerated in January by 1.64%....

All you need to know about Medicare

More of us are signing up for Medicare every day. And like social security, there are plenty of unanswered questions for those of us who are beginning the process. There are plenty of places to seek answers, but how to separate facts from sales pitches from health insurance brokers is part of the problem. Here is a primer that may help you navigate these muddy waters. Presidents as far back as Teddy Roosevelt in 1912 toyed with the idea of a government-sponsored health insurance program. Harry S. Truman and John F. Kennedy both tried and failed to get an act passed. But in 1965, under the administration of Lyndon B. Johnson, Medicare was finally passed. You qualify for Medicare at age 65, or older, if you are a citizen or permanent legal resident who has lived in the U.S. for at least five years. Here are the qualification rules: You (or your spouse) need to have worked long enough to qualify for Social Security or railroad retirement benefits, or worked as a government employee or retiree who may not have paid into Social Security, but has paid Medicare payroll taxes while working. In addition, you qualify for Medicare if you are disabled and have received Social Security benefits for at least two years. A disability pension from the Railroad Retirement Board or Lou Gehrig’s disease, permanent kidney failure, and a kidney transplant also counts toward Medicare benefits as long as you or your spouse have paid some Social Security taxes over a certain length of time. Last year, nearly 165 million American workers were contributing to Medicare through payroll...