Investors Whistle past the Mother of All Graveyards – Ep. 313

Investors Whistle past the Mother of All Graveyards – Ep. 313

2017 Optimism
This is my final podcast for 2017. I just watched the U.S. Stock Market ring the closing bell for the final time in 2017. Everybody is excited; everybody is optimistic. I spent most of the day watching the financial coverage, mostly on CNBC to see the attitude and the types of coverage the market has received.
The Dow Gained 5,000 Points in a Single Year
Of course this is a record year in the stock market; an all-time record high in the Dow. I think this is the first year that the Dow has ever gained 5,000 points in a single year, in fact the Dow was up every month of 2017 - that's never happened before in history. I think we've gone 14 consecutive months without a decline. Not only were we up every month, but 2017 represented the year ever of the lowest stock market volatility. So as the market was going up, it barely ever went down. So no one was nervous.
Unprecedented Rise Occurs at the End
To me, this type of unprecedented rise does not happen at the beginning of something. It happens at the end. Anybody who believes that 2018 is going to be more of the same is in for a rude awakening. I think the final minutes of the trading day set the tone for next year. Even though the markets were up every month of this year, they were not up in the final week. The Dow and the S&P were both down this week. The entire decline for the week happened today, actually in the last 10 or 15 minutes. The Dow was down about 30 going into the last 15 minutes and it ended up -118. The Dow was never really positive today, same with the S&P.
Last Year Optimism was all about the Dollar
The NASDAQ was the biggest gainer of the year with well over a 30% gain. The Dow up about 25%, the S&P up about 19%, so certainly a big year, but to me, this is the end of this big bull market. The action in the final minutes may be an indication of what is to come. I have not seen this much universal optimism on an asset since last year at this time with respect to the U.S. dollar. Everybody was bullish on the dollar. In fact, the big short was the Chinese Yuan. All these big hedge funds were shorting the yuan - it's going to collapse. What was I saying a year ago? I said these trades were going to blow up. anybody shorting the yuan was going to lose money.
Dollar Index Down Almost 10% this Year
What has happened to the dollar this year? The dollar index is down almost 10% for the year. This is the first annual decline for the dollar since 2012, so it is the first drop in 5 years, but it is the biggest drop in 13 years. The last time the dollar was down more than this was 2003. What happened in 2003? The dollar fell in 2003-4-5-6-7 and 2008. It didn't stop falling until August of 2008 and the only reason it stopped falling is because it was saved by the financial crisis.

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