The Bells of August – Fat Tail Daily | Australian Markets

The large news got here on Friday. The Wall Street Journal:

JACKSON HOLE, Wyo.—Federal Reserve Chair Jerome Powell opened the door for charge cuts subsequent month when he stated the labor market may be softening enough to rein in inflation that’s being pushed up by tariffs.

Investors took the trace. Whee! Yahoo! Finance:

Dow jumps 800 factors to report, S&P 500, Nasdaq soar as Powell’s Jackson Hole finale fuels bets on September charge cut

This makes the stock market bubblier than ever. And as we identified final week, gloomily, all bubbles pop. Our own, unpatented, methodology for coping with the risk of a Big Loss is solely to avoid main stock market allocations till the Dow/Gold ratio sinks to 5…then to HODL (maintain on for expensive life).

There’s nothing magic about ‘5.’ It doesn’t guarantee that stocks gained’t go additional down, however it assures us that we’re a minimum of getting a good deal. Then, we are able to wait comfortably for the subsequent bull market.

Currently, the ratio is round 13.

Meanwhile, our Doom Index tells us that the economic system is holding up …for now. Our ace researcher, Joe Withrow, compiled a record of indicators that ought to inform us how close we had been to a actual meltdown. Last week, Joe gave us an replace:

Interestingly, the Doom Index ticked up to a ‘12’ ranking this month. This places the index in impartial territory for the primary time in over three years.

The major driver of this uptick was a main surge in loaded imports. After final month’s 12.8% yr-over-yr increase, imports jumped one other 39.2% this month.

Joe provides insight:

Now we have now two straight months of rising import quantity.

This may very well be a signal of further frontloading for sure items and supplies forward of pending tariff negotiation deadlines. If that’s the case, then this month’s uptick will likely be short-lived.

However, if we see continued import power even after upcoming deadlines, that will be a signal that President Trump’s trade offers aren’t inhibiting the circulate of items. We’ll gain more insight within the months to come back.

Imports are a signal of retail shopping for…which suggests a healthy retail sector. But wait…

There’s all the time more to the story. Ainvest:

Corrugated Cardboard Box Sales Plummet, Indicating US Retail Demand Correction Ahead

This decline may point out a correction in retail spending, which makes up virtually 70% of the US economic system.

According to basic Dow Theory a downturn within the stock market shouldn’t be confirmed till the Transports additionally flip down. Companies can manufacture all they need. But till the product is shipped, there’s no sale…no transaction…nothing that will enhance the economic system.

But Joe thinks the cardboard market is popping round:

The Cardboard Box Price index is beginning to show indicators of life. After hitting its lowest degree in over 20 years …it has elevated barely in every of the previous two months. This alerts a slight uptick in international trade and shopper demand.

Joe supplies more element (which yow will discover in our Monthly Strategy Report to paying subscribers, the subsequent of which, for September, is due out on Wednesday from Tom)…and involves a conclusion:

In abstract, surging imports pushed the Doom Index up to impartial ranges this month, however we’re seeing underlying weak point in a quantity of our different metrics. Caution remains to be warranted.

The stock market, nevertheless, is one other factor.

And from Wall Street, we hear bells ringing.

Yahoo! Finance:

Should You Buy the Dip as Palantir Stock Falls for 7 Straight Days?

TipRanks:

Palantir Stock (PLTR) Tumbles 17% From Record High; Here’s How to Buy the Dip Without the Risk

Benzinga:

Palantir Just Broke Below 50-Day Average—Is It Time To Buy The Dip?

This is a bubble mentality. Palantir was promoting for 250 occasions earnings and 90 occasions gross sales…actual hallucinatory ranges. It has come down 20%, however that leaves it nonetheless deep in cuckoo land.

And now, virtually all the financial press has a single concept — buy the dip! Even when the dip is no deeper than a wrinkle on a younger model’s face.

One day, when the Dow/Gold ratio falls to five, stocks will likely be a discount again. Then, buyers will likely be disgusted by stocks, not enchanted by them. That’s the dip we need to buy.

All advice is common advice and has not taken under consideration your personal circumstances.

Please search unbiased financial advice concerning your own state of affairs, or if doubtful in regards to the suitability of an investment.