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    America Shall Inherit the Earth

    America Shall Inherit the Earth

     

    Tuesday, November 17, 2015

     

    “Men, all this stuff you hear about America not wanting to fight, wanting to stay out of the war, is a lot of bullshit. Americans love to fight. All real Americans love the sting and clash of battle. When you were kids, you all admired the champion marble shooter, the fastest runner, the big-league ball players and the toughest boxers. Americans love a winner and will not tolerate a loser. Americans play to win all the time. That’s why Americans have never lost and will never lose a war. The very thought of losing is hateful to Americans. Battle is the most significant competition in which a man can indulge. It brings out all that is best and it removes all that is base.” - General George S. Patton’s Speech to the Third Army.

    “The goal is to be the winner” – Donald Trump

    By all estimations the US is winning.


    With the Fed keeping a Rate hike on tap for December the Dollar has broken higher as capital seeks a higher and safer return in the World’s Reserve Currency.

     

    Figure 1 - Source: barchart

    And after the recent ADP private payrolls report where small businesses were once again driving job creation, domestic job growth is now at a level that supports higher interest rates.

    Figure 2 - Source: ADP

     

    Combine that with the SEC Legalizing Equity Crowdfunding by adopting the final rules under Title III of the JOBS Act and you have the forces of labor & capital mobilizing in the World’s strongest economy!

    Feels bullish to me …

    Yet at August’s lows investor sentiment was as bad as it was during the 2008 financial crisis.

    To be fair this rally has become narrower and narrower as can be seen by declining issues outpacing advancers for most of this year (blue lines below).

     

    Figure 3 - Advance-Decline Issues

     

    Anecdotally we know that many hedge funds have underperformed this year in an otherwise flat equity market, proving just how narrow the rally has been and how difficult it has been to make money in 2015.

    Interestingly those stocks that have been doing well are largely New Technology companies:

    Name

    YTD Performance @ 11/06/15

    Amazon (AMZN)

    +112%

    Facebook (FB)

    +37%

    Google (GOOG)

    +40%

    LinkedIn (LNKD)

    +9%

     

    Aside from companies such as Baidu (-12% ytd 11/6/2015), Alibaba (-19% ytd) and Tencent (+36% ytd) the universe of Big Tech is almost entirely dominated by US based corporations.

    To be sure there is a lot of trouble brewing under the surface … here is one that may be most ominous and is just rearing its head in the public conscience.

    “A former UPS truck driver who retired in 2007 after more than 30 years on the job told CNN his monthly pension check of $2,903 will be cut to $1,452 as soon as July, if the Treasury Department approves the plan.” – Atlanta Business Chronicle

    GS: The reason? Investment returns have not kept pace with requirements primarily due to low rates of return on fixed income.

    Additionally, terrorism has reared its ugly head in Paris and Putin now acknowledges that the downing of a Russian Airline in Egypt last month was due to a bomb. [GS: watch out for more home grown terrorism in Russia as a backlash from their involvement in Syria].

    All this to say the market is still indecisively oscillating between the May highs of 2134 and August lows of 1867:

     

    Figure 4 - S&P500 trading in a broad range (blue lines)

     

    We Refuse to Tell The Market What To Do.

    Bear in mind [excuse the pun] the market will look and feel strong when approaching old highs as if it was surely going to move higher and visa-versa, it will appear feeble and week at the August lows [probably coinciding with fears of further weakness out of China].

    Our goal is not too be sucked in at either extreme but to wait patiently for a break either direction and then to swiftly follow through on our predetermined allocations.

    As they say in Afrikaans, Vasbyt literally meaning bite hard or stay strong!

    --Greg

     

    Thank you for reading my post. I regularly write about private market opportunities and trends. If you would like to read my regular posts feel free to also connect on Linkedin, Twitter or via Atlanta Capital Group.

    Greg Silberman is the Chief Investment Officer of Atlanta Capital Group. Atlanta Capital Group specializes in creating custom private market solutions for RIA/Family Office clients and is an active acquirer of independent wealth management practices.

    Advisory Services offered through Atlanta Capital Group.

    Nothing in this article should be interpreted as a recommendation to buy or sell any security. Please conduct your own due diligence.                  

     

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