7/26 Comments
I have been absent for a while because of some health issues with my wife and also that I broke my arm on my dominant side. I was left with using my left hand for typing for quite a while. All is well now.
I updated the Watchlists in the high growth stock section. I have been in INDL for quite a while. INDL is a triple India index ETF and is the best performing symbol in my portfolio. My view on India long term is bullish. They have revamped their economic system by going to a digital economy and may end up becoming the first cashless society. If you know what is going on in China with the One Belt, One Road initiative, India is a beneficiary. Their demographics make them one of the few nations with a positive economic outlook. INDL is thinly traded, so volatility is to be expected.
The US market has been quite strange to me. Normally we would have had a market top by now. Central banks have shelved market tops, at least for now. Japan is on an unusual trajectory. Their economy topped around 1989 and they have felt deflationary pressures ever since. I believe demographics are behind their economic malaise. The BoJ currently owns 40% of Japanese sovereign debt. They continue to buy more Japanese treasury debt at the equivalent of $720M USD/year. Eventually, the BoJ will own most of the sovereign debt, at which point I expect Japan just to default and have a big JGB burning ceremony. The BoJ assets are part of the consolidated government balance sheet. Historically this amount of debt monetization would lead to massive inflation such as occurred in the Weimar Republic. I believe Japan lives in extraordinary circumstances by owning their own debt and having significant deflationary pressures. Deflation is counteracting inflation. The Japanese solution would not work in the Western world where everyone owns each other's debt. A Greek default, for example, would hurt Germany and France. So far, Japan is effectively monetizing their debt with no runaway inflation. I do not know of any nation in history that has accomplished this feat.
I haven't mentioned IBD's Market School model in some time, which is an entirely mechanical model with the only input of NASDAQ price and volume. The model outputs recommended portfolio exposure and distribution count. The current exposure recommendation is 100%, which is where I am. There is a divergence between the model and IBD's Big Picture when it comes to distribution count, however. Both models count distribution in a 25-day look back window. Bill O'Neil and his portfolio managers have followed a procedure for quite some time that IBD has never adopted. In an ongoing rally that gets into trouble (measured by high distribution and a pullback), Bill O'Neil begins to look for a new Follow-Through Day for the purpose of zeroing the distribution count. This happens even when the market does not go into a correction. This distribution reset happened on 7/12. So the market exposure model is at 100% exposure with a zero distribution count.
Mike Scott
Cloverdale, CA