The Keystone Speculator’s 2020 Predictions & Results
January 2021
January 2021
2020 was a wild year. The beginning of the year was as forecasted with a big drop, and then a central banker induced rally. Coronavirus (COVID-19) appears, a pandemic was always on the plate, and Congress steps in with mountains of fiscal stimulus giving affluent people big checks to spend. The stock market was goosed into the stratosphere to end 2020 at a new all-time record high at 3760.20 and all-time closing high at 3756.07 on 12/31/20. The SPX placed its low at 2200 in March 2020 and stocks were saved by the monetary and fiscal stimulus fired out of both barrels. What a year.
Keystone called the SPX 22-handle area but then the four central banker horseman of the financial apocalypse (Fed, BOJ, ECB, PBOC) ride over top his skinny body the Fed leaving a hoof print on his forehead. Stocks were expected to roll over again during the year but with the stimulus flowing like Niagara Falls, the bulls ran higher and never looked back.
The February-March crash was comical since all the analysts below ran to adjust their numbers lower and of course all the money managers show up on television professing that they 'have been moving clients money out of the stock market for the last six months'. The liars are on tape from the week before telling everyone to go triple-leveraged long. The stuff is funny.
None of those analysts saw that drop coming. 2021 looks like a repeat of 2020. The analysts dropped their estimates for the SPX shown below, but then raised them again during the year. You can look like Nostradamus if you massage the prediction all the way until it comes true.
Taking a tally of the 2020 predictions below, 83 are correct and 110 are incorrect. The pandemic threw the year into disarray. That is only a 43% correct percentage for 2020. The virus shot the tech and biotech stocks to the moon. XLC is a rocket launch as Zoom and all that rot launched higher. Same with food delivery services. Chips rally. Hospitality, hotels, airlines and all that stuff tanks since everyone is staying at home. Coronavirus dictated the path of 2020.
December 2019
It is time for the yearly prediction game on Wall Street. A game of skill and experience where everyone comically ends up a loser one year from now. Humorously, the Wall Street strategists and analysts will adjust their forecast numbers as the year proceeds depending on which way the wind blows. Keystone has remained consistently at the bottom of the forecast pack the last couple years and this year is no different. Here are the analyst calls for 2020 for the S&P 500 (SPX; the US stock market).
Piper Jaffray 3600
Credit Suisse (Golub) 3600 (increases the call from 3425 on 1/21/20)
Credit Suisse (Golub) 3600 (increases the call from 3425 on 1/21/20)
Oppenheimer (Stoltzfus) 3500+
Morgan Stanley (Wilson) 3500 (increases the call from 3000 on 1/10/20)
Morgan Stanley (Wilson) 3500 (increases the call from 3000 on 1/10/20)
Yardeni Research 3500
BTIG (Emanuel) 3450
Canaccord Genuity (Dwyer) 3440
CFRA (Stovall) 3435
J P Morgan Chase (Lakos-Bujas) 3400
Goldman Sachs (Kostin) 3400
Evercore ISI 3400
BMO (Belski) 3400
Wells Fargo 3388
Citigroup (Levkovich) 3375
RBC Capital Markets 3350
Scotiabank 3350
Ned Davis 3325
Jefferies 3300
Bank of America (Subramanian) 3300
Barclays (Deshpande) 3300
Stifel Nicolaus (Bannister) 3265
Deutsche Bank (Chadha) 3250
Societe Generale 3050
UBS 3000
The Keystone Speculator 2294
The central bankers are the market. Very simply, if the Federal Reserve and other central banks keep printing money and flooding the world with massive liquidity, stocks will continue going up. However, once confidence is lost in the central banks (perhaps the stock market will be unable to print new record highs despite ongoing intervention and/or wages begin to drop), the game is over and stocks will crash. It is a very sick binary financial world the demented central banks have created but it is what it is. The Fed has to keep providing more heroin (stimulus and easy money), as evidenced all through last year and especially with the obscene Keynesian money pump in Q4, to keep the patient (stock market) alive.
The historic central banker Keynesian intervention started in March 2009 when former Federal Reserve Chairman Bernanke, Helicopter Ben, started printing money like a madman to protect America’s wealthy class that own large stock portfolios. The Great Recession was occurring and the wealthy class were screaming from the rooftops that they are losing all their money. The ongoing, near-11 years, of non-stop central banker easy money liquidity pumps asset prices higher across the board. All asset class prices are in the stratosphere including stocks, bonds, real estate, vineyards, art, collectibles, antique and vintage cars, the list goes on and on (everything that the wealthy class owns). The ole Wall Street adage about stocks never growing to the sky is proven wrong because no one factored in over one-decade of central banker easy money.
As spurts of QE (quantitative easing) and other easy money monetary policies are implemented (China’s central bank cuts triple R’s to begin 2020) by various global central banks acting in collusion, the economic data will perk-up. Strategists and analysts will proclaim a sustainable recovery in progress only to see the data fizzle a couple quarters later. Then the Fed (US), BOJ (Japan), ECB (Europe) or PBOC (China), the four central banker horsemen of the Apocalypse, step in to save the day and pump the stock market higher. One-half of Americans do not own a single share of stock and do not benefit from the central banker largess. The wealthy class own the large stock portfolios and they have grown effortlessly filthy rich over the last decade. Each day, the huddled masses watch the rich bastards rape America for all its worth. The payback during the future class war will be ugly.
The end game occurs in the stock market, under this new regime of central bank control, when all faith, confidence and trust is lost in the Federal Reserve and the other big-spending Keynesian-worshipping global central banks. But does it? Fed Chairman Powell hiked rates in December 2018 only to reverse course in the first few days of 2019 due to stock market turmoil. If ever there was a time for investors and traders to lose confidence in the Federal Reserve and all central banks, it was then, and yet, once the Fed and its partners in crime began the coordinated money printing effort last year, the global stock markets took off higher like a banshee.
Thus, it does not matter that faith and confidence is lost in the Fed at least in the near-term. Humans are greedy bastards. All that matters is an ever-growing money supply that fuels the upside in asset prices. Even when the Fed makes the bonehead move of the century a year ago, traders do not care; instead they buy stocks with both fists because the printing presses keep running full tilt. All that matters is the never-ending liquidity provided by the central banks. If the Fed and other central banks are loose and accommodative, stocks go up. If the Fed attempts to tighten monetary policy, like December 2018, the stock market falls apart. The world is awash in liquidity so spending money and buying assets is easy and effortless. The party is in full swing.
The Fed, BOJ, ECB and PBOC, and over 20 other global central banks, colluded last year to send stocks to the sky. The Federal Reserve hit the afterburners in Q4 with a larger QE pump than in the prior years; this monetary pump runs from 12/16/19 thru 1/18/20. Stocks catapulted higher in Q4 2019 on the easy money liquidity. Kicking off this new year, 2020, the PBOC cuts its triple R’s (RRR; reserve requirement ratios; the amount of money a bank has to keep on hand versus the amount to lend out) and stocks are off to the races again. The central bankers are the market. Equities will be in trouble if the Fed and other central banks keep printing money but the stock market fails to attain new record highs. For almost 11 years, the ongoing central banker stimulus party has created record highs in the stock market over and over again. If stocks could not reach new record highs, that would be a flashing warning sign that the central bankers have run out of gas.
Another problem that may develop is wages rolling over. The Federal Reserve’s grand 11-year financial experiment remains a failure since the bumbling bureaucrats are unable to create sustainable inflation at or above +2.0%. The reason they cannot, and they know this, is because wage inflation is not occurring. Inflation cannot occur without wage inflation occurring. Wages remain stagnant lucky to print a +3% handle in recent months, however, the dirty little secret the Fed will never want you to know is that wages must rise at an annual pace of +4.0 to +4.5% to create sustainable inflation in the economy. The US is nowhere near this level and as the economy falters and rolls over, wages will actually stagnate and decrease again. Once this occurs, it is proof positive that the Fed failed after one decade (but they did succeed in making the wealthy elite class filthy rich). Confidence will be lost as market participants realize that the Fed and its partners in crime such as the BOJ, ECB, PBOC, BOE, RBA and others, have created unmanageable mountains of debt without the global economy improving.
The comments from the Fed and other global central banks are important, but secondary. The only thing that stocks and other asset classes care about is the actual actions of the central banks, which creates liquidity, and the world is awash in liquidity, so asset prices keep floating higher.
The end game occurs when the Fed and other central banker accommodation ends regardless of how it is jawboned before or after. There has to be a time coming where the Fed is going to want to cut rates again. The economic data will weaken after the latest Q4 sugar-high, but with only about 150 basis points of runway to cut to the downside, the sick US economic airplane will sputter and likely be unable to maintain loft.
Investors will love the Fed cutting rates again and that will cause Pavlov’s dog to buy stocks, however, when the zero bound occurs again, ZIRP (zero-interest rate policy), the party is likely over (or sooner as confidence is lost in the Fed and other central bank bozo’s). At that time, the US and global economy will likely be unable to recover even with the promises and action of more central banker easy money. Perhaps this is our destiny. For now, it is all wine and roses and rainbows and blue skies.
In a nutshell, stocks will continue to rally as long as the central banks keep pumping. The sicko’s will not be able to pump as much this year considering last year’s obscene Keynesian party. When the central banker accommodation ends, stocks will tank. This is the problem with developing a long-term forecast. If the Fed is dropping money from the sky, like the last 11 years, stocks will rally and the analysts with the highest numbers above will look like geniuses. However, if the Fed and other global central bankers run into problems and the world’s entire financial system is exposed as the fiat money house of cards it is, it is over for the stock market. Does this happen in 2020 or can we continue the easy money party for another year? Central banks, such as the ECB, are running out of assets to buy. Comically, the BOJ holds bonds, stocks and ETF’s; those sick bastards are buying anything with a heartbeat.
The 18-year stock cycle is very reliable so it is a shame that the Federal Reserve and other global central bankers have damaged this forecasting tool with their ongoing over one-decade long Keynesian financial experiment. The Fed has destroyed all price discovery in markets as well as the expected business and economic cycles with their money-printing madness. The Fed members coo dovishly to drive stock prices higher to protect and serve the wealthy elite class. When they leave public office, they are rewarded for their loyalty with lucrative speaking engagements at the investment banks. This is the way the corrupt crony capitalism system works in America. There is no chance to fix it anymore, that time already passed, the crony capitalism system will simply collapse over the coming months and years like all other ism’s in history.
Don’t worry, the US will probably morph into a socialism-light nation a decade or two from now after a lengthy and violent class war occurs trigged by the recession that is on our doorstep. The wealthy elite class, that controls the rigged phony capitalism system, simply became too greedy. All ism’s be it socialism, communism, fascism or even capitalism fail after about 200 to 250 years so America is overdue for a change. Capitalism failed in America for two simple reasons; human greed and non-transparency. It’s not rocket science. The United States is best described as a ‘faux free market crony capitalism’ financial system. The truth hurts. It is tragic and disappointing that the upper middle and wealthy elite classes (30 million people) sold out their fellow Americans (300 million people) over the last five decades. Payback will be a bitch.
The 18-year cycle is likely right-translated due to the multi-year central banker intervention. Therefore, a day of reckoning still looms for stocks despite the never-ending central banker money pump. No one knows when. Keystone calls for a huge -29% pullback this year since the 2000-2018 secular bear still needs to growl strongly so it can finish its cycle and then the 2018-2036 secular bull can begin. The huge cyclical rallies inside the secular bear, such as 2003 to 2008 and 2009 to present, are very common and expected. The only thing missing is a significant pullback to put the period and exclamation point on the secular bear. If it is this year as Keystone predicts, the 18-year cycle will be right-translated for two years running from 2000 to 2020 and then the secular bull will be expected to run from 2020 to 2036. What does all this mumbo-jumbo mean? Very simply, loss of faith and confidence in the Fed and the other global central bankers may be coming sooner and faster than anyone expects.
Earnings are about 170 now and with a 19 multiple that yields 3230 for the SPX. Earnings of 175 times 18.5 also yields 3230-ish. Thus, to begin the new year, earnings are at the 170-175 range and the PE at 18.5-19.0 which is a healthy valuation. The SPX 3600 most bullish price target in the list above would reflect earnings popping to 180 with the multiple at 20 which would be an overvalued market. For the 3450-ish targets, earnings at 177 with a 19.5 PE would be in play, a smidgeon above current levels with companies becoming slightly more overvalued. The 3300-ish target, which is in the current neighborhood as the new year begins, is 174x19.0 or 169x19.5. The 3000 target by MS and UBS is 158x19 or 167x18. The analysts with SPX targets at 3300 and higher are expecting earnings to remain the same or increase this year and not decrease in any way. Targets below 3300 are factoring in a move lower in earnings as the year proceeds.
Another reason Keystone is more negative than other analysts is due to the mountain of buybacks (stock repurchase programs) that took place over the last decade. This sick financial engineering will expose the stock market as being far more overvalued than anyone realizes. After the big crash that occurs this year, people will look back and opine about how they were so stupid to not realize that the steady trend higher in earnings in recent years was due to financial engineering and not true fundamentals such as growing demand for products or services.
Most companies have bot back one-third or more of their stock which artificially boosts the earnings numbers. It is scary math when you look at things from this perspective. In other words, the massive buybacks create lower PE’s and create a false sense of security that the markets are fairly valued. In reality, they are greatly overvalued, as all other asset classes are, due to the rampant free-wheeling easy money liquidity created by the central banks. Without the buybacks and other nefarious financial engineering practices over the last decade, the market PE’s are likely more in the 23 to 30 range (if buybacks did not occur) rather than the 18 to 19 range touted by the business media. Earnings per share (EPS) is increasing as the shares are steadily decreased. The artificially pumped earnings numbers then maintain low PE’s. Bob Shiller’s PE is above 24 at levels where stock market tops occur although he is quick to say that extra time may pass before the stock market top occurs. It is comical that a Nobel Laureate doubts his own work that tells him the markets are very richly valued right now.
Keystone expects earnings to drop significantly by the end of the year. Global demand for goods and services will collapse this year. Once the sh*t hits the proverbial fan, let’s say it is this year, the earnings may tumble to about 150-160 by the end of the year with a 15 multiple which is Keystone’s 2294 target. This also represents a 100% Fibonacci retracement of the +29% gain in 2019; a -29% crash. The highs for the stock market will occur early in the year probably January. Tech stocks, the FAANG’s (FB, AAPL, AMZN, NFLX, GOOGL), chips and consumer staples will likely top out last in the February-April period.
The SPX rallied over 700 points in 2019 and this year Keystone expects a drop of about one thousand points. The stock market will crash from -20% to -30% and be in a bear market to end the year. There are probably a lot of you asking what is Keystone smoking? Well, suffice it to say, that you do not get invited to a lot of parties with such gloomy forecasts and dystopian visions. Time will tell. That is the fun about long-term forecasting, one opinion is as good as the next when the year begins. 2020 will be known as the year of the central bank missteps which sink the global markets (this has to occur for the stock market to crash; the loss of confidence in the Fed and other central banks).
Super Tuesday election day is 3/4/20 and may identify the top democratic candidate for the November presidential election on 11/3/20. These are two key days for the stock market. King Donny will receive his answer in early November as to whether his reign from the Whitehouse Palace will continue into 2024, or, if he will be drop-kicked out of the Lincoln bedroom into the dumpster on the far side of the parking lot.
The SPX is at record highs at 3231 as the new year begins. Bingo. The all-time record high is 3258.14 and all-time record closing high is 3257.85 on 1/2/20 the first trading day of the year. Floor traders cheer the power of the central bankers.
The stock market needs to resolve the uber complacency that is rampant in markets for the last six weeks. It is rare to see a period of time go by this long with the euphoria and fearlessness at such high levels. However, many traders are now opining about a selloff occurring. This makes you think sideways chop ahead and that is not good for anyone, not algo’s, not bullish traders, not bearish traders, nor long or short-term traders; everyone is chopped up like mincemeat. This action will likely occur in the beginning of the year. If the whipsaws are long enough points spreads it may be a nice trading market. The S&P 500 will likely make some additional new record highs, the 1/2/20 joy proves that, but the high for the year is expected in this SPX 3250-3280 area and may be the 3258.
A sideways triangle pattern may form in the early months of the year, the chop occurring from SPX 3250-ish down to 2850-2950 (near a correction where it bounces) and then back up chopping and narrowing itself into a decision time around April-May at 3050-ish. An alternate is a choppy difficult market moving through a more elevated and tight range of 3100-3250 and then failure in April-May.
So a big drop will occur in H1 with the SPX bottoming around 2750-2850 in May or early June. The Federal Reserve will ride to the rescue once again, reversing its projected path of staying on hold in an election year, and cutting rates like mad since things will be going wrong all over the place. The company firings and layoffs will be ramping up significantly. The SPX will then launch higher on the easy money as usual, say to 2900-3000, but as everyone realizes the Fed is the Wizard of Oz, a clueless phony behind the curtain pulling levers, and the SPX is unable to move higher, all hope is lost, traders will exclaim that Chairman Powell does not know what he is doing, the Fed is out of ammunition, and then the H2 ugliness will kick into gear.
From August on it will likely be all downhill for equities. There will be fits and stops but any recovery rallies should be shorted. As Q4 plays out, there will be massive selling in the stock market and the SPX will end the year near its lows at SPX 2294. Humorously, this analysis creates an image of a glass half-empty.
A recession should take hold this year. The universal consensus on Wall Street is 100% agreement that a recession will not occur this year. Many say 2021 is when the recession arrives and others say it can be pushed off indefinitely due to the brilliance of the central bankers. No one expects the recession to be upon us in the weeks and months ahead that is why it will occur. Manufacturing is in a recession already. The great American consumer carried the economy on their backs during 2019 but in 2020 you will see spending fall off a cliff. Bad times will be at our doorstep. The time to prepare is disappearing fast. It is our destiny. Buddy, can you spare a dime?
Always remember, trading positions are not necessarily placed based on the prediction and yearly forecast information below. Keystone relies on the charts in real-time to dictate the entries and exits of positions throughout the year. If you seek the smoothest path possible through the trading year while keeping risk to a minimum, then simply follow the Keybot the Quant algorithm, Keystone’s proprietary trading model.
All the information in the K E Stone blogs only continues with the support from the international audience, so don’t be a cheapskate. The market commentary, technical analysis and Keybot the Quant’s bull-bear calls are provided subscription-free so do not take the information for granted. Let some moth’s out of those wallets and handbags.
2020 Broad Market Predictions; SPX, Currencies, Treasuries, Commodities
SPX High for 2020: 3280 (+1.5%)
SPX
Closing Price for 2020: 2294 (2020 begins at 3231) (-29.0%)
SPX
Low for 2020: 2170 (-32.8%)
Dollar
Range ($USD): 92-100 perhaps dead-flat thru 94-99
Dollar
Closing Price ($USD): 95 (currencies move sideways this year)
Dollar/Yen
Range (USD/JPY): 106-114
Dollar/Yen
Closing Price (USD/JPY): 108
Euro
Range ($XEU): 1.08-1.15
Euro Closing Price ($XEU): 1.13
2-Year
Note Yield Range ($UST2Y): 1.25%-2.00%
2-Year
Note Closing Yield ($UST2Y): 1.82%
5-Year
Note Yield Range ($UST5Y): 1.17%-2.00%
5-Year
Note Closing Yield ($UST5Y): 1.87%
10-Year
Note Yield Range ($UST10Y; $TNX): 1.35%-3.00%
10-Year
Note Closing Yield ($UST10Y; $TNX): 2.15%
30-Year
Note Yield Range ($UST30Y; $TYX): 1.90%-3.30%
30-Year
Note Closing Yield ($UST30Y; $TYX): 2.65%
2-10
Spread at End of Year: 33 Bips
Will
Yield Curve Invert for the 2-10 Spread? No, but the damage was done last year
Unemployment
Rate % Range: 3.4%-4.6%
Unemployment
Rate % December 2020: 4.5%
GDP
Average for 2020: +1.2%
Will
GDP Print Below +1.0%? Yes, for Q3 and Q4
WTIC
Oil Range ($WTIC): 44-69
WTIC
Oil Closing Price ($WTIC): 45
Brent
Oil Range $BRENT): 52-73
Brent
Oil Closing Price ($BRENT): 53
Natty
Gas Range ($NATGAS): 1.72-2.80
Natty
Gas Closing Price ($NATGAS): 2.13
Gold
Range ($GOLD): 1500-1730
Gold
Closing Price ($GOLD): 1670
Silver
Range ($SILVER): 16-24
Silver
Closing Price ($SILVER): 23
Copper
Range ($COPPER): 1.80-2.80
Copper
Closing Price ($COPPER): 2.20
Commodities
Range ($CRB): 160-200
Commodities
Closing Price ($CRB): 169
Financials (XLF) Higher or Lower? Lower
Reginal
Banks (KRE) Higher or Lower? Lower (Flat)
Technology
(XLK) Higher or Lower? Lower
Semiconductors
(SOX or SMH, XSD) Higher or Lower? Lower
Communications
(XLC) Higher or Lower? Lower
Telecom
(VOX) Higher or Lower? Lower (Flat)
Airlines
(XAL) Higher or Lower? Lower (Flat)
Energy
(XLE) Higher or Lower? Lower (Flat)
Oil
& Gas Exploration (XOP) Higher or Lower? Higher
Industrials
(XLI) Higher or Lower? Lower
Materials
(XLB) Higher or Lower? Lower
Transportation
(TRAN or IYT) Higher or Lower? Lower (Flat)
Retail
(XRT or RTH) Higher or Lower? Lower (Flat)
Consumer
Staples (XLP) Higher or Lower? Lower
Consumer
Discretionary (XLY) Higher or Lower? Lower
Homebuilders
(XHB) Higher or Lower? Lower
Home
Construction (ITB) Higher or Lower? Lower
Health
Care (XLV) Higher or Lower? Lower (Flat)
Biotech
(IBB or XBI) Higher or Lower? Lower (Flat)
Real
Estate (XLRE or VNQ) Higher or Lower? Lower
Utilities
(UTIL or XLU) Higher or Lower? Lower
The
following sector ETF’s are topping out right now and can be shorted going
forward all year long; XLU, XHB, ITB, RTH, XLY, XLI, XLB, XLRE.
The
following sector ETF’s are topping out right now as well but will not peak
until the February-April period. Thus, short these ETF’s sometime after
February and then for the whole year forward after that; XLK, XSD, SMH, XLP.
Tech, semiconductors and consumer staples will top out after the broad market.
The
only sector ETF on the long side that has potential is XOP so that can be bot
on pullbacks. XOP should stumble sideways to sideways higher this year. XLE
should continue to struggle. Keystone is not holding any of these sector ETF’s
currently but will freely short any of the tickers on the short side in the
above two paragraphs any time throughout the year ahead. Just think, Keystone is
calling for all the sectors to be lower this year while the other analysts on
Wall Street are all predicting 80% or more, or all, of the sectors to be up to
reach those lofty SPX price targets. One of these two predictions is wrong.
Which one do you think is wrong?
AAPL (Apple) Higher or Lower? Lower (Apple, Alphabet (Google) and Microsoft will be the last three high flyers to top out and roll over)
ADBE
(Adobe) Higher or Lower? Lower
AMZN
(Amazon) Higher or Lower? Lower
AVGO
(Broadcom) Higher or Lower? Lower
BA
(Boeing) Higher or Lower? Lower
BKNG
(Booking; Priceline) Higher or Lower? Lower
BLK
(Blackrock) Higher or Lower? Lower
CRM
(Salesforce) Higher or Lower? Lower
FB
(Facebook) Higher or Lower? Lower
GE
(General Electric) Higher or Lower? Higher (C&H on weekly)
GOOGL
(Google; Alphabet) Higher or Lower? Lower (Alphabet, Microsoft and Apple will
be the last three high-flyers to top-out and roll over)
HD
(Home Depot) Higher or Lower? Lower
INTC
(Intel) Higher or Lower? Lower
JPM
(JP Morgan Chase) Higher or Lower? Lower
MA
(MasterCard) Higher or Lower? Lower
MSFT
(Microsoft) Higher or Lower? Lower (Mr Softy, Apple and Alphabet will be the
last three high-flyers to top out and roll over)
NFLX
(Netflix) Higher or Lower? Lower (Flat)
NKE
(Nike) Higher or Lower? Lower
NVDA
(NVIDIA) Higher or Lower? Lower
RTN
(Raytheon) Higher or Lower? Lower
SBUX
(Starbucks) Higher or Lower? Lower
STZ
(Constellation Brands) Higher or Lower? Lower
ULTA
(Ulta Beauty) Higher or Lower? Lower (Flat)
UAA
(Under Armour) Higher or Lower? Lower
V
(Visa) Higher or Lower? Lower
There are five major themes this year; first, the central bankers reach their denouement (day of reckoning; confidence is lost), second, the recession arrives, third, ETF’s will exacerbate market selloffs and an equity meltdown during the year, fourth, the buybacks will be exposed as stealthily inflating valuations far higher than anyone realized, and the fifth theme, massive tech industry layoffs and carnage is coming, with tens of thousands of layoffs month after month, never-ending, which will shock the young people working with computers, software, hardware, R&D and programming, that thought they were set with a tech career for life. They will realize they are not. The tech industry will be harpooned this year.
The SPX will peak for the year in January-February at the 3250-3280 area.
The SPX will print an outside reversal year where price prints a higher all-time record high, which occurs on the first trading day of the year, but finishes the year with a lower low as compared to last year.
US dollar index, euro and yen will generally move sideways.
People around the world are growing more distrustful of governments. As the stock market tanks, it will be surprising to see that Treasury yields only move moderately lower and not uber lower. Yields will relax lower as the stock market selling occurs, however, yields will not drop as far as expected. Market participants will realize that the 30-year bond rally is over (yields will slowly begin to creep higher say from 2021 forward).
GDP will be far weaker than expected all year long due to BA’s troubles, the manufacturing recession, growing job losses, an approaching recession, ongoing trade battles, protectionism and other headaches.
Long-established international parts and products supply chains will disappear and new allegiances will form due to the ongoing trade battles. China will permanently lose manufacturing contracts but countries such as Vietnam will benefit.
The Federal Reserve is currently on hold and Wall Street believes that there will not be any cuts or hikes to interest rates this year. Keystone forecasts four cuts as the US economy falls apart and the global stock markets drop off a cliff. The Fed will be racing back towards ZIRP.
Wages will roll over to the downside which cements the conclusion that the 11-year Federal Reserve Keynesian financial experiment has failed. Inflation cannot exist without wage inflation occurring. Confidence is lost in the Fed and central banks.
The Federal Reserve wants to be on hold this year because of the November presidential election. The Fed tries to create the illusion that it is non-biased in this faux free market crony capitalism system by remaining as quiet as possible into the US election. However, with markets tumbling lower and economic data tanking, the Fed has no choice but to step in and cut rates creating market turmoil, accusations that Powell is rigging the game for Trump by providing stimulus, and lots of other drama. Confidence is lost in the Fed and other central banks.
The United States will slip into recession in Q2 and Q3 or sooner. It will come upon us faster than any recession in history. The job loss numbers will be stunning and mind-numbing, especially in tech industries, causing Americans to mini-panic and immediately stop spending money. It will be amazing how fast the economic conditions deteriorate in the US this year; it will be quite a show. Over a very few short weeks and months it will feel like the economy and markets are falling apart creating negativity in consumer’s minds.
The US and other nations, even Germany, will attempt to provide fiscal stimulus to support economies but it will fail since the attempts are half-hearted with limited funding and the nature of the projects are long-term. Much of the fiscal money will not have an immediate impact so the economies will weaken further with or without fiscal stimulus.
The US Congress will continue tightening the screws on social internet companies especially Facebook and Alphabet with new regulations on privacy and other matters. Obviously, such actions will hurt stock prices.
Congress has not funded a bill to protect the country’s computer systems, internet and electronics against a solar flare, plasma event or an EMP (electromagnetic pulse). That is pure incompetence since America can prepare for this possibility with just a few billion dollars. It’s too late. A solar event occurs damaging electronic systems on Earth which is a wake-up call for the globe. People do not realize that about a year ago a plasma wave from the sun missed the Earth by only one day’s time.
The US power grid is extremely vulnerable to a terrorist attack. The large transmission lines can be taken down with explosives that would then cripple a large city creating mayhem. There will be a major incident concerning the power grid this year. People realize how dependent they are on electricity for daily life.
There will be one or more major power outages that impact large population areas or cities for a day or more.
Since the global economy is likely nearing the end of a long-term Kondratieff Cycle, the world is likely at a turning point with either war, a major terrorism incident and/or a pandemic likely to occur this year, or, two of them, or even all three.
The current top candidates for the democrat nomination for president will flame-out including Biden, Warren, Buttigieg and Sanders although Bernie Sanders will be the most popular of this bunch that fades away.
Bloomberg and Steyer are two democrat billionaires that everyone will ignore. They are like gnats buzzing around your eyes and ears that you keep trying to swat away.
Amy Klobuchar will be the surprise in the Iowa and other early democrat primaries; she then gains traction and goes on to win the democratic nomination. The only way the democrats can defeat Trump is if the top candidate wears a skirt (but Warren is not going to cut the mustard). Klobuchar is more of a moderate that will receive Biden’s supporters after he quits and is also palatable to the independents that will decide who wins the presidency.
The willing boot-lickers that cheer the Democrat and Republican Tribes daily are firmly entrenched in their respective camps. The independents in the middle will dictate the winner. Klobuchar appears scandal-free and without drama which many voters will find appealing. The non-stop theatrical 24/7 Trump Circus may be getting old with lots of voters even those that support the orange-headed carnival clown. The ladies may vote for Klobuchar since she is a woman and not a crook like the female candidate four years ago. Proportionally more women vote than men by 55 to 45, respectively, another reason the democrats only chance to win is Klobuchar. Further, Trumpster has trouble handling and talking to women so the debates would be easier for her. The democrats will likely realize that their only chance at defeating Trump is Klobuchar and that will help her gain traction quickly. America is ready for a female president instead of the same ole, or another, silver-haired white guy.
After the Super Tuesday primary elections on 3/3/20, the democrat field will narrow down to a surprising mix of Klobuchar, Sanders, Yang and Gabbard with Warren still lurking around in the background like a schoolmarm watching over kids taking a history exam. All the early front-runners will lose favor and the polls will be proven wrong once again.
Joe Biden will drop out of the democrat race after Super Tuesday. He made a mistake in running. He appears tired and disoriented. Instead of being the man that the candidates would come to and kiss his ring, he will fade away into the dustbin of politics, that is if the Ukraine scandal does not develop further and cause him and his son legal problems. Nonetheless, the other candidates will seek his support and he will endorse Klobuchar.
Pete Buttigieg will drop out of the democrat race after Super Tuesday.
Potential democrat vice president candidates are Kamala Harris (black woman; social justice warrior), Sherrod Brown (can deliver Ohio which every president must win), Elizabeth Warren (white schoolmarm; bankster basher), Bernie Sanders (silver-haired white guy; popular with the under-represented, disadvantaged and younger folks), Cory Booker (black man; social justice warrior), Pete Buttigieg (gay man; lacks black support) and Andrew Yang (minority man; fresh outside-the-box ideas). One of these characters will likely receiver the veep nod.
President Trump will not be on the ticket in the Fall either due to the ongoing or additional impeachment and other scandals or for health or other reasons.
Pence will be at the top of the republican ticket in November and pick a woman as his potential vice president candidate either Kelly Ayotte, Condoleezza Rice or Nikki Haley.
If Pence has to run in Trump’s absence, he will lose.
If Trump goes the distance and runs for re-election in November (if he gets thru all the scandals and his health holds up), he will win against every democratic candidate except Amy Klobuchar. That is why you have never heard Trump mention her name (independent of the fact that she is not in the top four in the polls). She is likely the only person that Trump is concerned about. He will not perform well against a woman but will crush any of the democrat male candidates.
If President Trump wins re-election, he will shock the republicans by becoming more centrist. King Donny craves adoration, it is his daily fuel, and he will be thinking legacy, so he will want America to fall in love with him every way possible and he is the reality television president. He is skilled at manipulating the crowd like any entertainer worth their weight. He will want to look good for the history books. The republicans will be singing the blues as Trump makes nice with democrats and wants to spend the next four years in the center being everyone’s president rather than only hanging out with the far-right crowd.
If Trump wins re-election, he will surprise everyone when he selects judges that are more centrist than right-leaning. This will make more people like him and help him to create a happy legacy.
Warren will remain a loud voice especially if the economy tanks but she does not have the charisma for the top job. She will, however, become directly involved in fixing the banks and crony capitalism problem in America if the democrats win.
As the Republican Tribe and Democrat Tribe strategize and battle one another as noted above, a charismatic person, man or woman, will emerge declaring a pox on both their houses. The charismatic person’s popularity will soar with the independents and the 2020 presidential election will set up as a three-way race. Tulsi Gabbard may split from the democrats and run as an independent or it will be someone not yet in the public light.
There will be lots more scandal and drama around presidential debate locations, questions and other matters. The conventions of both tribes will be wild raucous events with lots of drama and controversy.
A few judges that President Trump appointed will be asked to rule on different matters impacting his future during 2020 and Trump will be mad and feel betrayed that they are not supporting him as he expects.
The middle-class tax cut does not occur this year which will further sew the seeds of poor versus rich hatred over the coming years and fuel the coming class war.
The US and global financial system will be exposed as having far more “shadow leverage” than anyone realized. Of course this will lead to global financial contagion and all the rats racing to exit the ship.
Shadow leverage, ETF’s, and financial engineering that artificially pumped earnings (central bank largess), will all be identified in hindsight as problems no one saw.
Markets will crash and the misery will be exacerbated by ETF’s. The exchange-traded funds will be a big story in 2020. Everybody and his bro owns ETF’s; hedge funds, individuals, companies, banks, algo’s and quants, even the central banks such as the BOJ! The ETF’s are derivatives representing a basket of stocks so the amount of selling and mass confusion that will occur will be historic. Everybody, and of course his brother, will be running out of the same ETF doors at the same time causing big block selling of individual stocks.
In addition, the ill-prepared Baby Boomers, that have been living high off the hog in recent years, will panic as they see their stock holdings fall apart. The worry by boomers that they will lose what little savings they have, with their retirement years directly in front of them, causes a mini-panic and they hit the sell button, and this age group owns a lot of stocks. The market selling will intensify.
Volatility will be wildly elevated this year ending the 11 years of central banker-induced low volatility. The Federal Reserve and other central banks maintain their jack boots on the throat of volatility as one of the major tools to keep stock markets elevated (and support and protect the wealthy elite class that own large equity portfolios).
The stock market will have at least one major flash crash this year and perhaps several. This activity will scare away investors and exacerbate the sick market malaise as the year plays out. Buyers will dry up because worries over the stability of the stock market will increase. Average people will begin to shun the markets and call Wall Street players a bunch of crooks, which they are.
Countries become more hostile to one another as trade wars and protectionism increase. Foreigners are seized and used as political pawns and political prisoners.
Protectionism increases hand and hand with growing mistrust between countries around the world and a global recession taking hold. Nations will be worrying about themselves first and foremost and screwing everyone else, like the 1930’s, stabbing each other in the back as everyone tumbles down the rabbit hole.
Iranian and/or Iraqi radicals will retaliate for the drone assassination of Iran General Soleimani at or around the time of President Trump’s State of the Union speech 2/4/20.
The Middle East situation deteriorates as Iran remains defiant not responding to President Trump’s bullying tactics to get them to the negotiating table. It only gets uglier and uglier with the war drums beating daily.
European indexes will top out and roll over this year with the US indexes, such as the DAX (Germany) and CAC (France), however, Portugal (PSI) and Spain (IBEX) are places to consider parking some dough since stocks in these countries may hold up better as the global economy falters. Portugal may be the cleanest dirty shirt in the European laundry hamper this year.
Populism continues to increase around the world. Peak populism has not occurred as yet. A lot of the populism movements will morph into a class war situation, rich versus poor, where the common people rise up against the elite privileged class that controls the corrupt and rigged governments and markets. A class war will begin in the States after the recession starts and the social unrest, violence and demonstrations will continue for several years forward.
The central bank denouement moment occurs this year when the money printing continues but stocks are unable to print new record highs. Once this realization sets in, it triggers a global contagion event, perhaps in the June-August period. Confidence is lost in the Fed, BOJ, ECB, PBOC (the four central banker horsemen of the Apocalypse) and other global central banks. Stock market selling becomes rampant and a ‘short the rallies’ sentiment develops.
The BOJ fails at reflating its economy creating fear that the central bankers can no longer save the world. Global contagion accelerates. Confidence is lost in the power of the central bankers.
A credit event may begin in Asia/Japan and create global contagion.
The US-China trade war drama will continue without much progress. China will keep pushing things forward waiting for the US election to see what happens. King Donny may disappear in November, or, he may be around for the next 4+ years; China is willing to take their chances in November.
Trump will become frustrated at the lack of progress with the China trade deal during the year and accuse the communists of reneging on the Phase One deal. That will create more issues between the two nations.
US and Chinese boats will collide in the South China Sea. Further escalation will be avoided by both sides but Trump and Xi will have a falling-out.
China and the US will continue fighting for worldwide tech dominance. The race to 5G systems continues since the one with the fastest data speeds wins. By year end, the entire industry will slow in its development as ongoing nation battles slow progress. Tech companies are stuck in the middle since they will be forced to choose the US or China.
China tries to move the main financial hub from Hong Kong, due to the ongoing social unrest, to Shanghai. It is not well-received. China is not willing to open its markets to the world without everyone playing by their rules. Screw the communists. Halfway through the year, China realizes it is going to be a tough sell to make Shanghai the financial hub. World players view the Chinese government as dishonest, which they are.
The North Korea situation proves problematic for Trump. Kim Jong-un and Trump have a falling-out. Trump’s responses to North Korea provocations are timid since he will have many other problems he is juggling at the same time.
North Korean Leader Kim Jong-un conducts an underground test which angers Trump but the US response is muted.
Verbal and even physical attacks will increase on politicians and corporate executives. These are the seeds of the coming social unrest and class war in the United States. You will see more news stories about protests in front of the McMansions of executives.
The wealthy class will start to see the class war develop and fear backlash and violence. The privileged class will seek gated communities and apartments with security guards on duty. Wealthy neighborhoods will pay for a guard on duty 24/7. The huddled masses will be targeting America’s privileged class with violence since those greedy bastards destroyed the country over the last five decades (shipping jobs overseas, gutting the middle class, which now is a lower middle class, so stock prices could catapult higher making the wealthy more filthy rich, the middle class used to be the bedrock of the United States but the privileged elite class, that control the rigged crony capitalism system, destroyed American society with their greed).
Apathy increases across America due to the new Gilded Age. The ‘American Dream’ is the ‘American Joke’; the dream stuff only happens on a television-reality show nowadays rarely in real-life. The divide between rich and poor is the widest in 50 years and growing wider. A class war is coming to a city near you. Frustration by common Americans, the huddled masses, will boil over and explode into a hatred for the wealthy class that rigged the financial system in their favor for the last 11 years.
Biometrics will be called into question this year. Fingerprints can be hacked which turns the whole industry on its head. Ditto face recognition systems. Data breaches occur where people’s biometrics are stolen. AAPL is hurt since it placed a lot of trust in these biometric systems.
Biometrics, bioengineering, biomechanics and biogenetics will all be huge fields going forward. If you are a young person, pursue an education and career that has the prefix “bio” in it and you should be fine in life.
As the recession nears, many different industries will be impacted. Budgets will be slashed. The meal kit and delivery services such as Hello Fresh and Blue Apron, APRN, are going to be crushed. Once folks lose their jobs, they do not order this stuff anymore. GRUB will suffer. Humorously, traders have already beaten these stocks to a pulp anticipating trouble ahead, thus, APRN and GRUB stock prices will likely hold up better this year as the rest of the market crumbles. A descending triangle on APRN must be respected to begin the year but the positive divergence on the monthly and weekly charts are a go for a big rally in Blue Apron that had become a bloody apron. If you are a speculative trader, consider APRN as a long as the year begins but don’t remain married to it after it pops and trends higher for a few weeks.
Same dealio with monthly service providers such as VZ, T, CMCSA, Hulu, NFLX, ROKU, and many others. As people are laid off, they will decrease their subscription services hurting the sales and margins at these companies. Young folks under 30 have not yet seen, felt and dealt with an economic recession; the world you perceive as reality that you expect to continue is about to change drastically. Probably at least one in every four of you will lose your job. Your significant other will likely lose their job so calculate a budget based on only one salary. VZ, T and CMCSA are printing historic long-term multi-month and multi-year tops right now. If you are long, take the money and run and feel free to short them ahead. NFLX and ROKU may experience more of a choppy sideways path ahead this year.
Budgets in wearables technology, autonomous vehicles and AI will be cut as the recession is upon us. Folks in these industries will be losing their jobs when they thought they were in a solid and hot tech sector.
Young people working in technology jobs will be shocked at how they are tossed out into the parking lot like a piece of garbage when the recession hits. Many will never work in their chosen technology field again. The competition for the remaining technology jobs will be fierce and hopeless for many folks as the economy turns into an employer’s market again. Companies will only hire the candidate that is the combination skydiver, rocket scientist, musician, academic scholar, engineer, Bill Gates wannabe, orator, artist, extrovert and all-around tech genius that also performs charity work on the weekends, and, most importantly, willing to work for peanuts. This is what happens in recessions.
The point-of-sale payment platforms will struggle in 2020. As the recession bites, the public will actually move more towards cash transactions to screw the government out of taxes and stretch the family budget. The cash society rises.
When the tech companies begin axing employees by the hundreds, even thousands, the ancillary shops and restaurants will suffer. Fired workers will no longer buy café latte’s at SBUX anymore. Ditto lunch at MCD, WEN, YUM, QSR or DRI. Yourself and coworkers will no longer stop at DNKN for doughnuts during the morning commute since many of you will be laid off instead eating a piece of cold toast in your bathrobe on the living room sofa.
The entire tech industry, that could do no wrong since the 1980’s, experiences its first major pull back and slap upside the head. Everyone that thought computer and tech jobs provide a guaranteed future of joy and prosperity will be living a nightmare instead. Young folks will be confused since many will lose their coveted tech job and their identity while at the same time they are ill-suited to work a trade job. Well, many will have to trade the computer keyboard in on a plumber’s plunger.
By year end going into 2021, laid off Americans will be asking politicians to extend unemployment benefits.
Corporate debt becomes a major concern and liability for the stock market in 2020. Corporate executives and individuals bot a bunch or stupid stuff and invested in idiot things at inflated prices due to the easy availability of money (central banks) over the last 11 years. The frog has been boiled slowly so many people and companies do not realize the trouble they are in; they all will going forward.
Companies with strong cash flows that can make debt payments will survive better in the months and couple-years ahead than marginal companies in debt. Assessing companies on these fundamentals are key.
Airlines may hang in there this year. Fuel costs may moderate lower as global demand retreats. Even though travel may be slow, the airlines may not be beaten down as badly as the broad market. The wealthy class, that do the bulk of the flying anyway, will continue to fly since they have all the money. Cheaper fuel costs will help the airlines and other transportation companies. XAL, DAL, UAL, AAL, LUV, SAVE, ALK will likely fall like all other stocks this year but with a little luck for the bulls some may end flat on the year. There are no attractive trades in that bunch because there are even better shorts in the market to play now. AAL (already getting beaten-down), SAVE and ALK may hold up a bit better than the others. The only trade Keystone will consider would be long AAL when it comes down to 23-25; once this occurs, American Airlines may travel sideways to sideways higher for the remainder of the year.
TSLA stock will peak out and fall precipitously. The demand for electric cars will fall off a cliff this year. Over half of the EV’s sold are to Californians so that market is saturated. Who is stupid enough to buy a glorified electric golf cart when there is a gas station on every corner? Subsidies are drying up. Competition is increasing so EV companies will be slitting each other’s throats for business. Tesla (Musk) is laying in bed with the communists thinking they are the big savior for TSLA. The commies are simply sucking all the technology out of Tesla and handing it to their local EV manufacturers. China will hose Tesla once they steal all the EV knowledge. Chinese regulators will begin hassling and screwing Tesla in a couple years allowing the domestic EV companies to flourish. TSLA price will peak-out in the March-May period and that will likely be its lifetime high. Keystone does not trade TSLA.
PTON stock is like TSLA stock massively shorted which enables it to linger at an elevated price for long periods of time. Traders betting against Peloton may be disappointed like the shorts have been burned in Tesla stock the last few years. PTON will probably remain elevated bumping sideways all year long. It is ridiculous that people would spend thousands for a bedroom clothes hanger plus kicking in big bucks per month. They can buy a cheaper clothes hanger at Walmart. As the recession bites, the monthly subscriptions are going to suffer so PTON may deteriorate during the back half of the year. Go Peloton Wife! Pedal Faster! Keystone does not trade PTON.
Autonomous car industry will continue to only simmer in the background as everyone wonders where all this fancy stuff is at. Keystone told you a year ago it is far further off in the future than anyone realizes. As the recession bites, the budgets for this driverless car mumbo-jumbo will be cut further delaying the industries development. Don’t hold your breath at seeing an autonomous car in your neighborhood anytime soon. Smart tech folks working in this industry will regret it this year as they are sh*t-canned in layoffs. They will be part of the tech carnage this year and the autonomous car research will slow.
The marijuana and hemp industries will continue growing rapidly in the United States and Canada. Smoke ‘em if you got ‘em. The US will continue moving towards full legalization for recreational and medical use. The successful US presidential election winner will have to embrace pot since two-thirds of the US is in favor of legalization and Canada has already gone there. SMG, TLRY, CRON, CGC, MJ, IIPR, GWPH, GWPRF, CARA, CBIS, ZYNE, APHA and ACB are potential long-term long plays. The need for SMG, Scotts, potting soil and fertilizer products will likely remain robust although the stock price is very elevated and will likely relax lower this year. Only two catch Keystone’s eye. TLRY is a buy now. MJ will bounce now, then retreat again, and is a firm buy in February. Perhaps people will need to be smoking some pot later this year as the economy and markets fall apart. ZYNE may have potential.
Bitcoin, NYXBT, will likely chop sideways all year long continuing to find its way. GBTC, RIOT, LFIN, BLOK, BTSC, KODK and OSTK are potential plays in the cryptocurrency and blockchain arena but your money may disappear fast in this shark tank; it’s the Wild, Wild, West. The blockchain stuff is even losing a bit of favor and interest among investors. Keystone considers RIOT a long play right now; it should receive a big bounce, however, be aware this is a highly speculative and dangerous ticker. KODK is in an uptrend so the dips can be bot early in the year although Keystone will likely not play it.
Platinum and Palladium were great long play calls by Keystone last year. Prices are parabolic now, however, so it is best to simply watch. Shorting upside momo moves is typically suicidal, however, PALL may set up as an attractive short in March when it will likely peak-out.
PAAS is long and strong and should keep moving higher for Q1, so a buy the dip strategy would work, but stay away after March-April. PAAS is in a long-term two-leg bull flag and should top out at 24-29.
MGPHF and other graphene plays remain very long-term speculative lottery ticket plays. Keystone continues to hold MGPHF and will add to it this year but is obviously disappointed to see the crash in Mason; it is a back-burner speculative long play. MGPHF is a penny stock that is washed out now and the possie d on the monthly and weekly charts say up going forward. MGPHF may double from 15 cents to 30 cents in Q1.
FMC is printing a long-term top and can be shorted during 2020. It may be prudent to give it a few weeks at the start of the year and see if it tags 120, or not.
As a general rule for 2020, the short side will provide far more opportunities than the long side.
GE, General Electric, is beaten to a pulp and its monthly chart shows beautiful possie d. If someone is looking for a place to park some money, General Electric is a good place to stash some dough this year. GE is trying to breakout from a C&H pattern on the weekly chart; a move above 10.5 opens the door to 14.5 this year. Keystone currently does not have a position in GE. Price may want to check back in January so put it on a potential buy list for February with the 14.5 target this summer.
DBA, the ag ETF, is a buy this year. Keystone does not hold DBA now although he holds JJG on the long side.
Homebuilders and real estate plays are a short this year including KBH, DHI, PHM, LEN, TOL, NVR, VNQ, XLRE and others. KBH, DHI, LEN, NVR, VNQ and XLRE can be shorted going forward all year long. PHM and TOL will not top-out on their long-term multi-month and multi-year basis until February-April. Keystone does not currently hold any positions but will probably short NVR going forward. SRS is an attractive long play from 16-18 this year; it is a double-leveraged short real estate ETF (it goes up as the real estate sector deteriorates).
BECN, Beacon Roofing, is an attractive long-term long play since the many McMansions in America will need new roofs and the cost to replace these fancy roofs will cost as much as a small house. BECN may be a good place to park money this year. Keystone does not have a position currently. View it as a defensive position.
ODFL and WERN are two truckers that are about to experience blow-outs on the interstate, swerve to each side and then drive off the road into the trees. Old Dominion and Werner can be shorted going forward for the year ahead. Keystone does not hold a position but will likely short one of these this month and going forward.
Gene-editing stocks. DNA analysis is popular. CRSP, EDIT, NTLA and SGMO are plays in the space but none of them are attractive to play technical-wise. It is likely prudent for long-term investors to tuck one of these four into their portfolio going forward but perhaps wait for the stock market wash-out and try to get them cheaper. Keystone does not own any of them currently.
Sensor companies are in vogue but things got out of hand to the upside last year. Some possibilities are SNE, APH, CTS, DYSL, ELSE, LFUS, ST, TEL, TDY, VPG and INTC but every one of these tickers will be lower a year from now. All the tickers are susceptible to topping out and falling from current prices going forward except for TDY that will likely not top-out until March-April.
Drone-makers. Drones will rule the skies. The United States now sanctions assassinations via drone so all other countries will join this aerial death party. AVAV, GPRO, AMBA are in the space but not attractive plays currently. GPRO may manage to bump along sideways to sideways higher this year.
VNM, the Vietnam ETF is attractive going forward since the Vietnamese are willing to work all day for a hotdog and a Coke. VNM may move sideways to sideways higher this year. Keystone does not own it currently.
Indonesia, EIDO, may feel love in the same context as VNM.
Mexico, EWW, is likely a safe long play that will bounce sideways this year.
Brazil, EWZ, land of beautiful women, remains a hot play, like their ladies, but only for H1. In the back half of 2020, EWZ will likely fall apart.
PG, Procter & Gamble, is a nice short play for this year. Ditto KO. Both are topping-out on a long-term basis as the year begins; they can be shorted during Q1 and that position held most of the year forward.
MRK, Merck, the drug-pusher, will top out this year in the February-April period.
SBUX, Starbucks, where you lose ten bucks every time you walk into the place, is a short from 96 and higher throughout the year ahead.
FB is topping-out right now and is a short going forward throughout the year ahead. Ditto GOOGL. Ditto INTC.
AAPL will top out in the February-April period and is then a short going forward. There is a theme where the majority of the tech sector, semiconductors and so forth, will print a long-term top in the February-April period (after the broad market). Mr Softy will be the last man standing and the last ticker to roll over probably around May-April. That is when it is truly lights-out for the US economy and markets.
SSG, a double-leveraged short semiconductor ETF, is an attractive play going forward this year. SSG is beat into submission, a bloody mess laying in the alley, it has nowhere to go but up. Any last remaining bears in the chip sector capitulated and gave up. Keystone does not currently own SSG but will buy it tomorrow.
LOW can be shorted going forward this year.
LB, Limited Brands, is a potential place to park money this year. LB should move sideways to sideways higher during the year and is a long idea. Skimpy lingerie is back in style (not that it ever went out of style).
CTAS, Cintas, can be shorted all year long as it prints a multi-month and multi-year peak. Ditto UNF. When the uniform providers roll over this year, that signals that the manufacturing and healthcare industries, top users of these services, are sick and becoming sicker.
DIS, the Mouse House, can be shorted at any print above 152. It will be a multi-month and multi-year top for mighty Walt Disney much to the surprise of all the money managers holding big blocks of DIS shares. All the idiot managers will stare at each other wondering what to do as DIS trends lower month after month during the year.
WMT, Walmart, can be shorted now going forward throughout the year ahead. TGT is also printing a multi-month and multi-year top but Target will not peak-out until February-March. Walmart rolls over first.
AMT, mighty American Tower is topping-out. However, Keystone has no credibility with the tower space since this was a short call last year but AMT ran higher. In fairness, the Fed pump starting 1/3/19, right out of the gate last year, sending all stocks to the stratosphere, and blowing any bearish forecast out of the water. Anyhoo, AMT is a short going forward for all year long. Ditto CCI. They may squeeze out more upside juice in January make sure the MACD line does not move any higher on the monthly charts, if it does, the stock will instead top out in a month or two forward. These may set up nicely for the short side this month. The tower plays are tricky because M&A may pop them higher out of the blue, however, they have been pumped pretty hard already.
MA, MasterCard, and V, Visa, have been steady upside darlings for the Wall Street money managers over the last few years. It’s over. MA and V can both be shorted going forward for the remainder of the year. They have placed a long-term top. If you made a ton of money on them on the long side you had better cash-out and git while the gittin’ is good.
As always, perform your own due diligence on the companies and sectors above and consult your financial advisor before placing any trades. Do not forget to support the K E Stone financial blogs.
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Further Futurist Musings as 2020 Begins
A class war will likely begin in the United States after the recession starts this year. The middle class, poor and disadvantaged have been beaten-up for a decade as they watch the central bankers reward the wealthy class with daily riches (higher and higher stock prices). America is in a new Gilded Age; the land of the have’s and have not’s. The divide between rich and poor is the widest in five decades and growing ever-wider. As the recession occurs, and folks lose their jobs, the anger among the huddled masses will morph into an ugly class war that will continue for many years forward. The US will likely evolve into a socialism-light type government over the next couple of decades.
If wealthy, it would be wise for you to play-down your riches. Once the recession hits and the class war begins, anyone wealthy will have a bullseye on their back. The Mercedes-Benz will be keyed and tires slashed in the grocery store parking lot. Bricks will be thrown through McMansion windows. Mansions will be spray-painted with slurs. Some mansions will be set ablaze. Large demonstrations will occur in American cities. Shop windows will be broken and looting will be rampant. Much of America will feel entitled to seek retribution from the elite class that took advantage of the rigged system over the last 11 years.
The need for gated communities will rise greatly. The wealthy will seek safety where a security guard is on duty overnight. This will be the new America in a few years. Others in the privileged class will hire bodyguards for protection. The elite class did not think or care about how society would be destroyed due to their greed over the last five decades. The politicians, corporate executives, the Federal Reserve and the elite privileged class, that control the rigged crony capitalism game, along with the upper middle class that serve the wealthy, this group about 30 million strong, screwed the other 300 million huddled masses. There is no reversing the deed.
On the nightly news, stories about politicians, corporate executives and other wealthy individuals getting attacked in public will become common. Protesters will demonstrate in front of the McMansions that the privileged elite class purchased with their stock market blood money. The wealthy class destroyed the middle class in America so their families could enjoy ever-lasting generational wealth. The elite did it because they could; they control the rigged crony capitalism game and the faux free market.
In a year or two, common folks will be demanding resignations and claw-backs of wages to compensate for the huge losses coming in the stock market. Many Americans, lacking an adequate job since the Great Depression in 2008-2009, will give up all hope. Desperate people do desperate things. Banks will likely be firebombed receiving blame for serving the wealthy class over the last decade.
Most folks are aghast reading such a dystopian outcome for our beloved United States but do not shoot the messenger. The elite class will have to be asked why they sold their souls and destroyed the middle class, and America, over the last five decades.
A cash society will flourish again just when everyone thought cash transactions were going 100% digital. As the global recession bites, folks will choose to use cash to pay for services and products under the table (to avoid paying taxes). This behavior will seriously hurt the coffers of local, state and Federal governments placing strains on public services. The local tax bases will erode. Congress will try to implement legislation to mandate the use of digital payments (for the purpose of tracking money for taxes).
The period of deflation and disinflation will be ending over the next year or so. Inflation will slowly creep back into the picture and then rampant hyperinflation a few years out from that, say 2022-2025 which will be a whole new set of serious problems. No one is ready to pay $10 for a gallon of gas or for a gallon of milk but you will in a few short years ahead.
When the hyperinflation kicks in (due to the velocity of money accelerating from the liquidity on the bank balance sheets), the US dollar will crash, and a whole new global monetary system will likely be implemented. This may only be a few years away.
Holograms will be the next major technology breakthrough. Vacant shopping malls will turn into senior living centers. Drones will rule the Earth’s skies in the decades forward. The only way to escape the surveillance is to live underground. Drone warfare will be all the rage. Drone assassinations are now sanctioned by the US government and other global nations will follow. Dystopian images appear.
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