Arrowhead-Asset-Management

P.O. Box 2049
Wimberley, TX 78676
Contact Us

The Difference Between the US Stock Market Economy and the “Main Street” Economy

June 1, 2020

When it comes to the US economic information we get as citizens and consumers, the numbers we hear from the politicians (and the often lazy corporate media) is mostly domestic political economic propaganda. 

In fact, the rhetoric of these financial self-interested parties is either largely big lobby money talking points designed to keep voters thinking the politicians and their corporate paymasters are working for the average American - or just plain financial gossip meant to create advertising sales drama in the lives of Americans. Additionally, most of the cable TV pundits are either selling a book, hawking their expertise and services, or just plain using media as political propaganda!

And given the self-destructive gullibility of at least 40% of Americans, it is no wonder the United States has just over 4% of the world population yet has 1/3 of all the Coronavirus deaths in the world. 

For those functionally paranoid Americans who need a "Deep State" conspiracy to make themselves feel better for their own failures, why don't we simply "follow the numbers" to identify what the so-called "Deep State" actually is:

The real and obvious "Deep State" is the two party corporate lobby money owned political duopoly that tries everything they can to keep the general public (the American middle class) with just enough working income that they can get just enough credit to buy just enough stuff to keep the illusion of the American Dream going as long as possible.

As far as poor and lower-income middle class Americans (of all races) go, the two party lobby money political economic system has given up on caring about them years ago. 

To make financial matters even worse, the election of Donald Trump with his reckless deregulation pro-Wall Street lobby money economy, we can generally ignore what the performance of the large company stock market indices (Dow 30, S&P 500, etc.) indicate about the overall health of the entire US economy.

Why? Because the huge multinational companies in the large company US stock markets indices (Dow 30 index, S&P 500 index, etc.) are the primary contributors of tons of lobby money that buys the loyalty of the "legally corrupt" Federal politicians.

If the reader hasn't figured it out, the big lobby money corporations (and their lobby-money trade associations) literally write the national business & tax laws FOR the compliant pro-Wall Street politicians - who submits the lobby money written legislation for almost certain approval.

And why does this matter? Because the lobby money written laws clearly favor the economic success of the largest US companies, their profits, their executives' compensation packages, while at the same time fostering the growing monopoly control of the US economy and the American workforce. 

The proof is in the numbers - if one wants to know the truth and are willing to stop denying the realities driving the US economy. 

For example, since Trump slithered into the White House in January of 2017, the large company stock indexes have far outperformed their smaller US company indexes.

As highlighed below, the underperforming small and mid-size company stock indexes directly represent the 2nd (lower) class status of the "Main Street" economy and a majority of American workers.

Look at US stock market performance during Trump's first 3-years (pre-Pandemic months) in office (Feb 1, 2017 through January 31, 2020): 

SPY (500 Large US companies):       + 52% (16% annually)
IWM (2000 Small US companies):     + 23% (  7% annually) 
MDY (400 Mid-Cap US companies:   + 26% (  8% annually)

It is plain to see the US Standard and Poor 500 stock index (symbol SPY) doubled the performance of the Russell 2000 Small Company stock index (symbol IWM) and the Mid-Cap 400 stock index (symbol MDY) respectively.

These stock market performance numbers tell us everything we need to know about our legally corrupt Wall Street "pay-to-benefit" US political economy.

In fact, a functional national "best economy ever" (as Trump loves to proclaim) scenario that benefits all Americans would NEVER be so lopsided in favor of the largest American "big lobby money" companies as we clearly see above. 

The reason is very simple: The current US economy, especially under the Trump - Republican "economy" - which callously states: You should go to work even if you are in danger of getting Covid-19 and possibly die - has now become the lobby money "death panel" financial system.

Yet Trump is only the latest "extreme" example of the ugly American lobby money "pay to play" political economy. Yet to a lesser degree, it has been a slow progression in that directly since the pro-Wall Street, anti-government administration of Ronald Reagan. 

But make no mistake: Donald Trump and his right wing evangelical kleptocarcy is taking the dismantling of the US worker economy to another level - creating an anarchistic American oligarchy that is only on display in countries like Russia and a few other authoritarian-run economies.

It is staggering ironic that the politicians and voters who call themselves "conservative Republican" or "pro-growth Democrats" both claim they support the US small business owner - and their "hard work" that is supposed to represent the equal opportunity attainment of the American Dream. 

Yet the facts speak otherwise: The elite lobby money controlled two-party political duopoly - especially after this Covid-19 nightmare - the current "profits over lives" US political economy - has created anything but the "best economy ever" for the lower 80% of the US consumer economy 

The US stock market that is the real US economy

The large company stock indices (Dow 30, S&P 500, etc.) are no longer valid economic indicators for the underlying strength of both the overall stock market and its reflection of the US economy.

Even before the Coronavirus hit, the upward trend of the US stock market was being dominated by fewer and fewer very large companies. It’s the first and most obvious sign of a weakening and exhausted stock market. 

The Coronavirus simply forced the very overconcentrated and narrowing upward trending US stock market to come tumbling down earlier than expected.

In an election year, Trump was doing all he could to keep his meager growth - skyrocketing national debt (and low-paid worker) economy hidden, as least until after he was re-elected.

Covid-19 only accelerated the inevitable weakening US economy into a failing stock market - and due to his Administration's deregulation agenda - the early signs of a ineffective US Federal government (as we see very disconcertingly with the chaotic Federal response to Covid-19). 

Look at history. In the post-Vietnam America, almost every time Americans elect a "privatization" Republican president, we see a major market collapse some time in his second term. We saw it after George W. Bush, his father, and even Ronald Reagan. And Donald Trump is the "extreme" deregulator!

In Trump's case, the Coronavirus simply accelerated the inevitable 2nd term recession into his first term.

Sceptical? Remember that we did not see any major stock market recessions during both 8-year terms under Bill Clinton and Barack Obama? That's not coincidence!

The reason is obvious to non-ideologues: 1) Clinton and Obama did not - as a national political economic policy - dismantle most government programs for future privatization AND 2) Clinton and Obama hired much smarter and top-level advisors who were mostly academics, not ex-lobbyists and anarchistic anti-government ideologues.

For their so-called "conservative" poltiical economic tenets, Republican leadership ideology is really all about "starve the government tax beast." In effect - "Make government fail so they can justify privatizing any government service the public can be duped into accepting."

And, now, during a very harsh economic response to the Covid-19 crisis, the last thing Americans need now is a dysfunctional "profit over lives" mindset from the cult-like "free market  fundamentalists."

Be aware: If the current Trump / Republican gamble of opening the US economy by relaxing the Covid-19 restrictions is too earlfy and fails - and we see a huge second wave of Coronavirus contagion and deaths, say hello to President Biden, a Democratic-controlled Senate and House, and some different neoConfederacy state Governors. 

How to tell what the real US economy is doing through these 4 stock market ETFs

For your edification (and factual thinking), here are the 4 most important and under-acknowledged economic / industry sectors that actually represent the true health of the entire US economy, which I recommend that you keep track of to help you understand the strength and weakness of US stock market:

Russell 2000 Stock Index (symbol IWM) - This US stock index represents 2000 domestic smaller stocks, an excellent gauge of the health of many small and mid-cap companies that manufacture and distribute goods and services within the United States.

Like we are seeing now in a financial crisis, IWM is also a leading stock market indicator whenever the politicians can no longer hide a weakening US economy in spite of their lobby money favoritism - which is always expressed through paying the politicians to write tax laws benefiting the rich and the most powerful corporations - or by passing bigger and bigger Wall Street bailouts.

Retail sector (symbol XRT) - Mainly brick and mortar retailers, these companies largely control the family budget, when we aren't in a pandemic lockdown. Almost 70% of the GDP is driven by consumer spending - so it’s an excellent measure of the strength of the “Main Street” U.S. economy and consumer confidence.

Of course, the US Retail sector has been ravaged over the last 20 years by the likes of Wal-Mart, Costco, Sam's Target etc. - and more recently by Amazon. But such a local retail success ravaging would not have occurred if  US consumers cared about their local economy and supported local businesses, even though consumers had less and less money to spend due to political cooptation.  

Regional Banks (symbol KRE) - The small business and consumer bank company stock index. Regional Banks measure the health of the financial system in the U.S., where many local folks put their money.

Regional banks are also the key to the US economy because they measure the health of not only the financial system in the U.S. KRE is also a reliable indicator of what the Federal Reserve might do regarding raising interest rates, and how consumers are behaving concerning saving and borrowing habits. Also, whenever the US economy get overheated, regional banks are the first US sector to signal a weakening economy.

Transportation (symbol IYT) - Good indicator of economic health as the movement of goods and services across the country is the lifeblood of the economy. The market direction of the IYT is a reliable way to measure industrial and manufacturing strength supply and demand.

However, there are are two additional “growth sector” ETFs that are valid stock market indicators of the future of an innovative US economy:

Biotechnology (symbol IBB) - Watching the biotechnology ETF is a great way to assess where speculative investor money is flowing. if IBB is moving up, it’s an excellent indication that investor sentiment is also bullish.

Conversely, should buyers abandon biotechnology, it can be an early warning that sentiment is getting more negative, suggesting when investors might prefer to sit on the sidelines.

Semiconductors (symbol SMH) - The Semiconductor industry is on the forefront of innovation and a major player in many of the strongest technology trends. As a result, the U.S. semiconductor industry has become a major innovator among all U.S. industries.

Together, these six sector investments described above provide a succinct way to assess whether 90% of Americans are benefiting from America’s “lobby money” controlled political economy. 

In the end, when the lobby money politicians make taxpayers bail out corporations that pay no taxes - or companies managed by speculative megalomaniacs who expect the government to save them from their own incompetence - we will almost always see the Russell 2000 (IWM) leading the overall stock market down!

Rocky Boschert 

Another Massive Bailout For the American Oligarchs

Other than being just one more huge tax payer funded giveaway to the Wall Street oligarchs, at least this newest "CARES” bailout gives a $1,200 piece of the remaining bone to individual / unemployed (and other needy) Americans.

Not surprisingly, some Senate Republicans complained that  "lavishing" American workers with $1,200 each to deal with their pandemic layoffs would create lazy "entitled" workers. Yes, we wouldn't want the "servants and peons" of the rich to be treated fairly!

So let's see, this huge amount of money may even pay the rent or even part of someone's mortgage for possibly one month. Forget the expenses of food, utilities, gasoline, health care, etc..

Yes, Trump, his ideologue Republicans, and the corporate Democrats were sure generous - especially when the middle class tax payer must once again insure that the hugely profitable corporations on Wall Street get $ billions in bailout grants, loans, and government purchases of their toxic debt.

At least for once the lobby money codependent Senate Democrats showed some courage and forced the Republican senators to give needed survival money to small businesses, the unemployed middle class, and low income workers seriously affected by the pandemic.

Fortunately, included in the ironically named CARES bailout are the conditions that no corporate bailout money can go to further enrich Trump's real estate businesses, the Trump-Kushner family businesses, the crony businesses of Trump's favored privatization profiteers, and any all members of Congress.

In reality, if the US Federal government was adequately prepared for this pandemic - and managed by competent problem-solvers like we see everyday with our Governors and Mayors - our economy and our health care system may never have been allowed to get so dysfunctionally stressed and "sick."

The reality is obvious: Whenever rigid anti-government privatization ideologues disguising themselves as business savvy politicians gut our public health and safety budgets, we can see the dangerous scenario such governing incompetence can create.

It's time for a serious Federal income tax re-evaluation

This latest bailout makes me wonder: Why are Americans even paying taxes anymore to a Federal government that is hell bent on privatizing everything and using most of our tax dollars to benefit their insider business cronies, especially with massive corporate bailouts that seem to occurring with increasing regularity.

Most Americans are intelligent enough to know the majority of elected politicians don't work for the average citizen anyway. They work for their lobby money masters!

What are we getting anymore for our Federal tax dollars? 

This is an important and relevant question we must seriously ask ourselves.

As an educated citizen with the ability to make sane and constructive financial decisions  I have come to resent paying 1/3 of my gross income to consistently fund corporate welfare scams and bailouts for inefficient and poorly-managed Wall Street banks, polluters, war and prison profiteers, and favored privatizers who plifer our tax dollars to get richer with charter schools and for-profit military subcontractors. 

For best use reasons, I would rather have my forced tax money going to citizen welfare than corporate welfare!  

After decades of doing it, I'm fed up with bailing out the richest Americans - who we inevitably find out can't manage money very well - whenever we have another financial meltdown.

I want the option of allocating my tax dollars to the Federal government services I believe in supporting. Going forward, all citizens should have that choice. The politicians are too corrupt now to make those decisions!

The politicization of our tax dollars must end!

I want my tax dollars going to fund truly public entities: Public schools, government-operated Federal or State prisons, a Federal government-run military, and, for sure, a government tax-funded but privately-provided health care system.

It is time to say "You're fired" to the tax revenue privatization thiefs and politically connected hustlers that steal our tax dollars for crony privatization projects just because too many cult-like voters are to ignorant or angry to vote for intelligent problem-solvers.

From a sanity standpoint, I especially deplore paying taxes that end up going to shadowy uses by elected officials who directly support and endorse white supremacists, scapegoating conspiracy nuts, and other hate mongers - including extremist evangelicals. 

These promoters of racist, homophobic, and/or xenophobic divisiveness do not represent my values as an American - as they are using repressive big government tax revenue allocations to fund hate.

My tax dollars should only benefit and assist all Americans regardless of race, religion or sexual orientation who are truly in financial need - and/or for the direct benefit of national programs that benefit all citizens.

in other words, I no longer want my hard earned tax payments going to political hustlers whom promote the sick lie of hate or the irresponsible scapegoating of "the Other."

The  Covid-19 pandemic we are dealing with now - including another opportunistic Wall bailout for the Wall Street loligarchs - has turned a spotlight on what a dysfunctional political and economic nation we have become, which is undeniable when we are overwhelmed by a major public health crisis like now.

The politically corrupted use of our tax dollars, combined with the current Covid pandemic, clearly shows what happens when extremist ideological tax slashers underfund our national public health programs to instead rewards publicly-traded companies who care more about their stock price than the public health and safety of the American public.

Even without a health crisis, as a country, we can no longer afford adhering to a flawed capitalist government growth model that continues to add massive debt to our National balance sheet - while simultaneously only creating a meager 2-3% annual economic growth - especially when the minuscule growth it creates benefits fewer and fewer citizens as we move forward.

If Donald Trump and his crony privatizers believe that such an inefficient "debt to growth ratio" is a sound business model that represents a "best economy ever," he and his cabal is failing Americans miserably and doing nothing more than continuing this failing decades long economic con on gullible American voters.

Finally, we are at a point where ignorantly blaming foreigners (or tariffs - or whatever) for our own self-inflicted financial failings is nothing more than manipulative nationalist dribble. In truth, Americans have become self-destructively addicted to a faulty political economic mindset - and only a badly needed "sanity intervention" will prevent our nation from internally turning on itself, not unlike what we saw in 1930s Germany.

Rocky Boschert

2020 and Beyond: A Re-focused Investment Strategy We Can Rely On

Regardless of the constantly disruptive behavior we see almost daily in our domestic political economy, as your investment advisor I have now instituted a very reliable and flexible "quantitative" investment strategy that will almost certainly ensure our intermediate and long-term investment success - coinciding with risk-averse strategies to protect our money.

For most of our Fidelity accounts, this investment strategy will involve taking 10% to 15% positions in select ETFs (or mutual funds) and/or 3-4% positions in very select individual stocks that have begun a new intermediate-term upward momentum trend.

For technicians, this reliable confirmation buy signal refers to the "weekly price closing above the 13-week moving average (with strong trading volume)."

The buy signal described above has been verifiably back-tested for very positive historical growth results over many past years. 

The actual verified performance results has shown an 80-85% success rate over the 8-32 weeks following the investment buy signal trigger.

After the typical 8-32 week upward trending performance period, if the price of the investment is also hitting its own historic price highs, we will generally see a short pullback, or "consolidation" period, followed by a price continuation higher.

Then, we will hold the investment(s) through the normal correction period, and stick with said investment until we see the upward trend run out of money flow.

However, to ensure consistent long-term investment profitability, our investment strategy will require some degree of shorter-term investment rotation if any of our owned investments falter sooner than expected.

To minimize potential losses, all our investments will be kept on a short leash, if for some reason any of our investments do not continue their predicted upward trajectory.

In other words, we will watch closely for our predicted sustained long-term upward trend, hold those investments until the uptrend reverses, then, when appropriate, liquidate non-performing investments.

A practical shift in "new decade" investment choices 

Many of you probably consider our investment service to be focused primarily (or wholly) on the stock markets. Although largely true, this assumption will be tempered somewhat going forward.

Due to the increasing chaos we are seeing both globally and domestically, it is incumbent upon our investment service to manage your money with an intelligent and sensible risk-aversion - using the most commonly recognized investment vehicles - which may also include investments such as individual bonds and "ETN's" - that simply track the "price" of various commodities such as gold, silver, oil, natural gas, or even lithium.

To be both successfully profitable and risk-averse, be aware that our investment strategy will not favor any one ETF / fund asset class, sector, industry, or commodity. Individual stock selection is more complex, which will be covered at a later time.

We will, though, only invest in high visibility investments that are in sustainable uptrends and endowed with strong trading volume (high liquidity) that looks attractive as a suitable investment for your specific risk tolerance.

In 2019 US stocks were the global asset of choice for the most successful international investors. And, yes, we will continue to follow that trend in 2020 as long as it continues its positive money flow uptrend.  

In other words, we will watch closely for any global investment trend changes by tracking big investor money flows - both into and out of specific investment classes, sectors, or world regions.

Fortunately, our new reliable money management strategy described above will tell us what those big investor money flow changes will be - as they unfold.

Financial Media "Noise"

It is important to understand that the investment "noise" we regularly see or read in the financial media is based almost solely on daily performance trends, economic projection marketing, and investment firm sales pitches.

These financial media "touts" have very little idea what is going to happen in one month or longer with the economy or investments in general. Their advice may sound good short-term, but they do not en masse successfully identify longer term investment trends (except when we are already experiencing a long-term bull market in stocks).

In fact, like television and cable in general, so much of the financial media only exists to sell advertising to retail investors who are honest enough with themselves - or "gullible" to financial celebrity idolatry - to admit they want some media guru to help them through the scary game of investing.

Of course, there are some investments trends that one can key on for valid information, such as the Federal Reserve Board's current monetary and interest rate policy - or other identifiable bullish or bearish sentiment indicators such as a weakening dollar or rising oil prices.

As such, it is my professional responsibility to as early as possible (1) identify and follow where the big Wall Street money managers are investing their money and (2) to move money out of the currently unfavored investments of the big Wall Street money managers.

Finally, I will always choose to keep my own solidly multicultural and ethical business values active in the background. But I do understand that my primary job is to grow and protect your financial nest egg so you can enjoy your retirement - and sleep well without worrying about your money.

Thank you for your continued trust and faith in our increasingly informed, ethical and sanely practical money management services.

Rocky Boschert

"Racial, religious, LBGTQ, gender and xenophobic hate will have no place in our investment portfolios" 

Understanding Investment Technical Analysis

What is Technical Analysis?

Simply put, "Technical Analysis" is the forecasting of future investment price movements based on an examination of past price movements.

Like weather forecasting, investment technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time.

Technical analysis uses a wide variety of charts that show price over time.

Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of theoretical market supply and demand.

Current price movement (aka “market action”) refers to any combination of what happens between the market open or close, intraday highs and lows, and total trading volume for a given security over a chosen time frame.

The quantified time frame can be based on intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly price data and can be used as a prediction for a few hours or many years.

At Arrowhead Asset Management, we only watch daily, weekly, and monthly price data for our investment decisions.

Key Assumptions of Technical Analysis

Technical analysis is applicable to an investment where the price is only influenced by the forces of supply (sellers) and demand (buyers). In order to be successful, technical analysis makes three key assumptions about the "securities" that are being analyzed:

  • High Liquidity - Liquidity essentially means the combined buy and sell volume (# of shares). Heavily-traded stocks allow investors to trade quickly and easily, without a minority of investors dramatically changing the price of the stock.
  • Below Average Fees and Charges - We also only invest in ETFs or other investments that are easily bought or sold and do not have gain-eroding hidden fees or charges. 

  • No Extreme News (noise!) - To be sure, technical analysis cannot predict extreme events, including business events such as a company's CEO dying unexpectedly, and/or political events such as a terrorist act or some bully leader attacking a vulnerable nation for its oil. When the forces of “extreme news” are influencing the price, technicians usually need to have to wait patiently until the investment's chart settles down and starts to reflect the “new normal” that results from such extreme news.

The Basis of Technical Analysis

Modern technical analysis works on three quatifiable assumptions:

  • The Price of a Security Accounts for Everything Good and Bad About the Investment
  • Investment Price Movements Are Not Totally Random - They Generally Represent "Factual" Supply and Demand
  • The “What Is Happening" Is More Important than the “Why It's Happening”

Price of a Security Reflects Everything

Technical analysts believe that the current price fully reflects all known information. Because all information is already reflected in the price, it represents the fair value, and should form the basis for analysis.

The market price of an investment reflects the sum knowledge of all participants, including traders, investors, portfolio managers, analysts, market strategist, technical analysts, fundamental analysts and many others.

It would be folly to disagree with the price set by such an impressive array of people with such professional expertise.

Technical analysis utilizes the information captured by the price to interpret what the market is saying with the purpose of forming a view on the future.

Prices Movements are not "Random"

Most technicians agree that prices are always in an upward or downward trend.

However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis.

An investment technician believe that it is possible to identify an investment's trend, invest or trade based on the trend and make money as the trend unfolds.

Because technical analysis can be applied to many different time frames, it is possible to spot both short-term and long-term trends.

"What" is More Important than "Why"

The price of an investment is the end result of the battle between the forces of supply and demand for the company's stock (or the Fund's daily price). The objective of technical analysis is to forecast the direction of the future price. By focusing on price and only price, technical analysis represents a direct approach.

Fundamental analysis is concerned with why the price of an investment is what it is. For technical analysts, the why portion of the equation is too broad and many times the fundamental reasons given are highly suspect.

Technicians believe it is best to concentrate on what the price is and rarely on why the price is where it is. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any asset is only what someone is willing to pay for it. Who needs to know why?

General Steps to Technical Evaluation

Many market technicians employ a top-down approach that begins with broad-based macro analysis. The larger parts are then broken down to base the final step on a more focused/micro perspective. Such an analysis might involve one, two, or all three steps below:

  1. Broad market analysis through the major indices such as the S&P 500, Dow Industrials, NASDAQ and NYSE Composite.
  2. Sector analysis to identify the strongest and weakest groups within the broader market.
  3. Individual stock analysis to identify the strongest and weakest stocks within select groups.

The beauty of technical analysis lies in its versatility.

Because the principles of technical analysis are universally applicable, it does not matter if the time frame is 2 days or 2 years. It also does not matter if it involves a individual stock, an ETF, a market index or commodity. The technical principles of money flow, price support, price resistance, price trend, price trading range over time (and other aspects) can be applied to any chart analysis.

Technical analysis is by no means a panacea. But investment success requires serious study, dedication, and an open mind. Technical analysis expertise inceases our investment success rate substantially.

At Arrowhead Asset Management, we use technical analysis to try and take major risk out of our investment decisions. At least for our "buy" decision, It works 80% to 90% of the time.

"Sell" decisions are a little more complicated and beyond the scope of this article. Just know that "greed" can be a major problem for timely investment sell competence.

Financial Links

Fidelity

icom-logo

logo-igr

press-logo-depositaccounts

2zf3jlz

 cwlogo5c

0721-business-insider-logo full 600

cnnmoney

dollarsandsense

n220007811458 6322

CN Logo Main373x112

logo-consumerist-main