Making Hay Monday - December 9th, 2024
Mega Trading Alert Edition (By popular demand)
Special message: This is another change-up edition of Making Hay Monday (MHM). As you will soon see, we are focusing, as promised, on stocks that have been slammed this year and, accordingly, are likely under tax-loss-selling pressure. Consequently, we are skipping our usual Charts of the Week and Power Punchers, Promising Picks, and Down-&-Out Sections. However, we have included a link to a list of those for our paying subscribers at the end of this issue.
“Oh, East is East, and West is West, and never the twain shall meet,
Till Earth and Sky stand presently at God's great Judgment Seat.” -Rudyard Kipling, The Ballad of East and West
Momentum vs Valuation: Where the Twain Ain’t Meeting
Mark Twain once famously quipped, “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
In the fullness of time, his wise words were actualized to a degree he probably couldn’t have envisioned.The first month he listed has indeed turned out to be a particularly dangerous month in which to own, much less speculate, in stocks. Over the past century, Octobers have contained some of the worst panics, crashes and sudden corrections markets have endured.
Even this year, October was a rare down month, albeit modestly, in an otherwise rip-roaring year, at least for U.S. stocks. This has created that unusual situation where the S&P 500 and the NASDAQ have experienced two consecutive 20% plus return years, as this newsletter recently pointed out. Yet, as Evergreen’s co-CIO, Jeff Dicks, articulated on a recent podcast with David Lin and the geriatric Haymaker, history isn’t encouraging for what happens next. (For the 99% or so of you who missed that, here’s a link to that podcast.)
Ironically, the point of this Making Hay Monday (MHM) is to provide you with a Holiday Season shopping list of stocks you may want to investigate. We’ll soon get to that, but first it’s important to emphasize the peculiarly dangerous aspects of the current overall market environment.
Serendipitously, for the timing of this MHM, the Wall Street Journal ran an article on the front page of its Exchange section this Saturday with this extremely apt title:
That neatly sums up what I’ve been hearing with increasing frequency on a slew of recent podcasts from some of the brightest minds in the financial game. (We’ve included a link to a prime example of that from my pal Adam Taggart at the end of this MHM.) The recurring message is that a 50% type meltdown is coming but not quite yet. In fact, thanks to abundant liquidity and relentless momentum, the odds favor further gains. This upbeat take is usually followed by the caveat that once the indicators of the pundit in question start flashing red, it will be time to head for the hills — pronto, if not sooner.
It's that aspect that has me worried. Even for professional investors and strategists whose systems are able to provide at least some advance warning, exiting in time is likely to be challenging. For the typical retail investor, it’s probably a classic case of “mission: impossible”.