Making Hay Monday - April 28th, 2025
Serendipity, Odds, & Breakouts
The U.S. Leading Economic Indicators (LEIs) have been in a grizzly three-year bear market. Yet, America has avoided an official recession outside of two quarters of falling GDP in the first half of 2022. Most Wall Street strategists are now ignoring the LEIs due to their premature warnings. However, the ratio of Leading to Coincident Indicators (i.e., those that track current economic conditions) is now down to a level that has only been touched in actual recessions for over 50 years. In fact, this measure is lower now than it was during the downturns of 1991 and 2001.
Per the savvy folks at InvesTech Research, the U.S. Leading Economic Indicators (LEIs) have been in retreat for 35 of the last 37 months. They also point out that the warnings from this usually trusty measure have been extremely premature. The pressing question presently is if redemption is at hand for the LEIs. Based on the sheer collapse looming in ocean-going freight shipments, it’s reasonable to think that will soon be the case. Unfortunately, the global economy won’t be a beneficiary of any reputational restoration for the LEIs. It’s also important to realize the U.S. stock market is part of this indicator. As a result, the recent correction in the S&P will be producing some degree of weakness after two years of mostly flattering the LEIs.
"If you have a big enough moat, you don’t need as much management. You know, it gets back to Peter Lynch’s remark that he likes to buy a business that’s so good that an idiot can run it, because sooner or later one will. He was saying that what he really likes is a business with a terrific moat where nothing can happen to the moat. And there aren’t very many businesses like that." -Warren Buffett
What Are The Odds?
“Serendipity” is one of my favorite words. Not only does it mean unexpected good fortune, something all humans welcome, but it also has a pleasing verbal cadence.
This weekend Team Haymaker received a serendipitous event when Barron’s ran the below image as its cover story. That was a pleasant coincidence based on last Friday’s Guest Haymaker featuring a bullish view of the gold miners from our frequent contributor Kevin Muir.
We are the first to acknowledge the unhappy tendency known as the Curse of the Cover Story. Barron’s isn’t as star-crossed in that regard as is The Economist, but it is another reason to expect a near-term correction in the most highly valued – by far – precious metal. Long gone are the days when platinum sold at a premium to gold. Silver, meanwhile, is trading at one of its biggest discounts ever to bullion.
But the point of Kevin’s missive is that the gold miners are a much different story. They, too, are at a massive markdown to their usual ratio to the gold price. For sure, if gold backs off after its remarkable run, the miners will suffer. At that point, though, they should merit your close attention.
Serendipity also applies to this Making Hay Monday (MHM) because, as I was looking back at prior write-ups we’ve done on today’s featured stock, I came across our MHM from January 29th, 2024. That was another issue when we relayed a slew of charts of companies whose shares were in breakout mode.
Here’s an abridged list of the companies we covered, their prices at the time and their current quotations. (Note, the below excludes those like Paccar and IBM; we wrote at the time those had experienced earlier breakouts and had already surged.)