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Only Delusional Stockbrokers Could Love This Market

By Bill Bonner on April 8, 2015

Dear Diary,

It’s my party, and I’ll cry if I want to
Cry if I want to, cry if I want to

– “It’s My Party,” Lesley Gore

I would like to thank the many dear readers who wrote with advice for our ranch foreman, Jorge.

Jorge suffers from what doctors think is arthritis. It’s forcing him to retire from the ranch sooner than he would like.

We are at the end of an isolated valley in Argentina. And we are not sure which of the proposed remedies will be available here. But we will pass on the suggestions to Jorge.

We’ll return to the ranch in a minute, but let’s first take a look at our regular beat of the financial markets.

Corporate Insiders Jump Ship

Corporate insiders are selling 22 times more stock than they are buying. From Fox Business:

“What we’re seeing now is a dramatic reversal in that sentiment,” says David Coleman, editor of Vickers Weekly Insider Report, whose firm tracks buying and selling of all publicly traded companies. “The trend has reversed from what had been historically high levels of buying relative to selling.” […]

TrimTabs Investment Research reports that insiders at public companies have sold $2.6 billion worth of shares so far in June. That’s 22 times more than the $120 million in stock they have bought. […] TrimTabs’s 60-day total of insider buying has fallen to the lowest level since December 2004.

What do corporate insiders see coming?

From Bloomberg:

Last week’s news of the weakest hiring since December 2013 rounded off a quarter in which retail sales and capital goods orders all pointed to a first quarter flop. That leaves JPMorgan Chase & Co. estimating growth was just 0.6%.

Zero point six percent is optimistic. Our friend and economist Richard Duncan puts the first-quarter growth figure at 0.1%. He says the US economy may already be in recession.

A Delusional Market

We’ll wait to find out. But it’s not as though we have to hold our breath. A stock market sell-off and a recession are coming. They always do.

Not every day at the beach is going to be sunny and bright. Even in California, it’s got to rain sometime.

Market corrections are even more certain. People make mistakes. They pay too much. They buy the wrong things. Profits go down. Businesses go broke. Stuff happens.

What kind of world would it be otherwise?

Imagine if bad restaurants never went out of business… worthless smartphone app makers never went bust… every girl was homecoming queen… and every war was won – by both sides.

We’ll leave it to you to think about that in the dark of night. For our money, we’ll assume that things will not always work out as planned.

We will bet, too, that a stock market that is worth more relative to GDP than at any point in history bar the dot-com bubble is suitable only to delusional stockbrokers.

Guesswork, Guff and Gobbledygook

Now, back to the ranch…

You may be wondering why we report on the goings-on at a remote Argentine cattle ranch in the electronic pages of a financial newsletter. We wonder the same thing. And we’ve never come up with a convincing answer.

Of course, the world of money doesn’t stop at Wall Street. And there may be useful insights about money beyond the guesswork, guff and gobbledygook of financial chatter. What happens here is real life… often painfully and expensively real.

Besides, it’s our Diary and we’ll write what we want to. Our aim is to make it worth writing and worth reading. Sometimes we hit the mark. Sometimes we don’t.

Our wife, Elizabeth, has begun to teach English to some of the young girls who live on the ranch. It began when one of them asked to learn English so she could go visit her aunt, who lives in New York.

Then word got around that the class included cookies and juice. Within two weeks, Elizabeth had six students – all between 8 and 12.

We don’t know where this leads… but both students and teacher are working hard.

Talk about hard work! Monday, Jorge took five gauchos with him up to the high pasture at the back of the ranch. It is a pasture of about 5,000 acres. So it takes a group of mounted gauchos an entire day to round up the cattle.

That was the easy part. The hard part was spending the night up there.

A Torturous Night

They couldn’t come back home because it takes so long to get up there.

But last night, they must have longed for the comfort of their simple houses. We have two bunkhouses up in the high pasture. But they are tiny, simple stone buildings with nothing but stone floors… and no heating.

The gauchos make a fire, cook their rice and some tough meat… and let the smoke go out through holes in the roof. But there are no trees, just sagebrush. So the fires are never very hot and never last very long. And it was bitter cold last night.

The poor gauchos – and Jorge – slept on the ground, on the saddle blankets, covered up with ponchos and tarps.

They must have tossed and turned… watching the skies, waiting for the first light of dawn so they could get up from their tortures and get to work.

Then they spent the day roping, branding, castrating and marking the cows – about 300 of them.

Then they mounted up again for the four-hour ride back down to their houses in the valley.

“How was it?” we asked Jorge when he got back last night.

“It was okay,” he said with his broad smile. “But very cold. I only got through it by telling myself that this would be the last time I’d ever do it.”

“But you’ll miss it.”

“I’ll miss the farm and the cattle, but not spending the night up there. It’s too rough.”

“Well, you can rest tomorrow. Then we’ll ride up to Tacana.”

Stay tuned…

Regards,

Signature

Bill


 

Market Insight:

Don’t Get Distracted by the Greek Sideshow

by Chris Hunter, Editor-in-Chief, Bonner & Partners

The headlines are filled with news of the visit by Greek prime minister Alexis Tsipras to Moscow today.

The Greek government has to find roughly €460 million ($500 million) to pay back a loan to the International Monetary Fund that comes due tomorrow.

It’s highly unlikely that Russian president Vladimir Putin will pony up the cash. Thanks to the big fall in oil prices and economic sanctions, Russia’s state coffers are hardly overflowing.

But Tsipras is keen to give the impression that, unless Brussels unblocks emergency funding earmarked for Greece, he’s happy to cozy up to Russia.

And the last thing other European leaders want is Russia meddling in their affairs.

As we’ve been telling paid-up Bonner & Partners subscribers in their three-times-weekly bonus letter, The B&P Briefing, Greece is a major distraction from the real story in Europe.

And that’s the outperformance of European blue-chip stocks versus their US counterparts.

As you can see from today’s chart, since the start of 2015, the SPDR Euro Stoxx 50 ETF (NYSE:FEZ) – which tracks 50 European blue-chip stocks – is up by almost 8% so far in 2015 versus a 0% gain for the Dow.

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