Long Meandering Commentary -- Nothing About The Bakken -- Not Ready For Prime Time -- December 3, 2016

The usual dislaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have read here. If this stuff is important to you, go to the source.

The usual "error" disclaimer: in a long note like this there will be factual and typographical errors. Facts and opinions will be interspersed and it is often hard to tell facts from opinions in commentaries. There is no attempt to make this a "fake news" story. The commentary may not be ready for prime time, and I may change my views over time, but it's kind of how I feel right now.

The usual meandering commentary warning: this is one of those meandering commentaries that may not hold together. I have no idea where the commentary will lead, so we will find out together, I suppose.

This is in response to two articles a reader sent me this morning. I had seen the headlines of both articles earlier in the week but had not gotten around to reading either. In fact, I had not planned to read either.

One article did not interest me at all, and the other was just going to be a feel-good article about Trump, and I was already pretty much feeling good about Trump and didn't need to read another article to get my spirits any higher. My spirits were as high as they were going to get that day.

The "Trump-feel-good" article is a must read. It's by Holman W. Jenkins, Jr., on the editorial staff of the WSJ and one of my favorite -- perhaps my favorite -- columnists in the WSJ. Since I've read the article now, I'm not going to go through it again. I'm going to look at some of the 386 comments. Generally, the number of comments any article gets at the WSJ varies from zero (0) to ninety-nine (99). Obviously Holman's article caught the attention of a lot of readers, especially with his "smug obliviousness" tag.

So, we move on.

The second article over at Yahoo!Finance: what 13 strategists forecast for the S&P 500 in 2017. I could say I have absolutely no interest in these kinds of articles. One can find anything one wants to find.

But, as usual, if I said that, I would be wrong. There is a usefulness to these articles: like Twitter, one just needs to know how to "use" articles like these.

The article is a collection of thirteen paragraphs, each summarizing the "predictions" of where the "market" will go in 2017.

Again, I highly recommend reading the comments before reading the article.

Now the take-aways from the article itself. The article provides two numbers: the "target" for the S&P 500 and the forecast for EPS for the S&P 500.

Currently, the S&P 500 is: 2,191 -- at the close, Friday, December 3, 2016.

Currently, the EPS for the S&P 500 can be found at these sites:

• US Trust wealth survey: $87.17, real, June, 2016
• Y charts: $32.51, October, 2016 
• Goldman Sachs prediction before the election: for 2016, $105 to $110
• Bloomberg: $106 in 2016

So obviously there appears to be an "apples vs oranges" thing: obviously whatever these guys are measuring it's not the same thing. I certainly don't get it.

Having said that, it appears the "number" that the Yahoo!Finance folks are following is the same number that GS and Bloomberg are following: the 2016 S&P 500 EPS is about $105.

Back to the linked article. First EPS:

• target range: $123 - $132
• average: $129

Now, the S&P index:

• S&P 500 close, December 3, 2016: 2,192
• target range for 2017: 2,300 to 2,400
• mode: 2,300 (6 of 11 analysts target 2300)
• average: 2,322

Percent changes, S&P:

• S&P index: 2300 - 2200/2200 = up 4.5% average forecast for 2017 over 2016

Percent change, EPS:

• If GS and Bloomberg are/were correct that FY16 EPS is/was in the range of $105, then:
• 129 - 105 / 105 = a 23% increase in corporate earnings in 2017 for the S&P 500

My thoughts (talk about cognitive dissonance):

• a Republican Senate, Congress, and President will do the easy things first; the tough things later
• the easy things include "huge" corporate tax relief -- even the Dems will come around to this when they see all the sweeteners; shoot, even Pelosi's husband is going to love this (talk about a "conflict-of-interest" story the mainstream media never talks about)
• the easy things will all be great news for the market
• the tough things will all be bad for the market but we won't see them until much later, if at all
• Republicans like to spend money just as much as the Democrats
• Trump thinks big: you have to spend money to make money
• the mainstream media will all of a sudden get religion: the national debt is bad. (Apparently under the Democrats, the bigger the debt the better [Krugman]; under the Republicans, the mainstream media will harp about the debt; the national debt is already $20 trillion after Bush-Obama; a story about another one-to-two trillion vs 20 trillion won't have legs; and, by the time we get to $25 trillion, the Trump administration will be nearing its mid-point and the electorate will decide if things are good or bad -- in other words: lots of hand-wringing by everyone over the debt, but that won't stop Congress from spending money)
• my hunch is that Krugman will still argue that "debt is okay -- the more the better"; the important thing is where the government spends its money as it goes deeper into debt
• lots of spending on the military
• Saudi needs lots of stuff: security (military) and technology (petrochemical industry); the US can (and will) provide both
• entitlement cuts: lots of talk but marginal; and compared to everything else, really, really marginal
• all that protectionism talk -- counterintuitively will actually help America; Canada, China, Mexico, EU will be falling all over themselves to protect their market share with America
• energy will be America's advantage over EU, China -- and it will be a huge advantage
• human psyche affects the economy more than economists understand: a "make-America-great-again" attitude from the top is incredibly better than "Carteresque-gloom-and-doom-wear-a-sweater" attitude; consumer confidence at a 9-year high will drive US economy
• the first thing Wall Street will be looking at: how fast Trump moves on corporate tax relief
• the first thing I will be looking at: how fast Trump moves on pipelines

How in the world did Hillary lose this election? The answer is below the graph:

How in the world did Hillary lose this election? Under the Obama administration Wall Street won; Main Street lost. Trump figured that out. 

By the way, that graph above is the 10-year graph. The "max" graph for the S&P is even more "amazing."

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Buffett: Stay Calm and Make Bread

From Forbes:

The biggest post-election winner has been Warren Buffett.

Shares of the Berkshire Hathaway investment giant he leads are up 8%, which has boosted his fortune by more than $5 billion—bringing his total net worth increase for the month of November to $7 billion.

Berkshire Hathaway has performed well in part due to a surge in the stock price of Wells Fargo, after a fraudulent accounts scandal dogged the company earlier this fall. Buffett is now the world’s third wealthiest person, behind only Bill Gates and Amancio Ortega, the Spanish retailing billionaire worth $72 billion.

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Stay Calm and Make Bread

Homemade bread, herring, Deer Stag Cheddar, and a little bit of Scotch.