I was making a prime rib at my sister's home in Saratoga Springs, NY, a Lakian family tradition.
All I could hear on the TV in the background was news of the worst stock market selloff since December 1931, the worst month since August 1987, and more. I immediately went to change the channel and briefly and naively turned on CNBC. If you want to relax, don't turn on CNBC.
They had the former Wachovia CEO, Ken Thompson, from 1998-2007, talking about risk management...
Let that sink in for a second. The former Wachovia CEO, who bankrupted a company and nearly destroyed a nation with its subprime mortgages, is talking on TV about risk management.
I don't know what to tell you if your jaw doesn't drop in disbelief.
How did a CNBC producer think it appropriate to have Thompson talk about risk management? This leads me to another important point. When Jay Powell spoke about interest rates and the FED balance sheet in early December, a reporter asked him if he saw signs of stress in the financial system. His response was no.
That was the wrong answer!
Within a millisecond of that word, stocks sold at an unprecedented rate!
Algorithms are now programmed to react to words by specific important government figures, and they have accelerated this selling to a highly oversold level.
I believe that Raymond James Financial Services sent out its 2019 outlook the following day.
Raymond James' 2019 S&P 500 year-end price target is as follows: Bull case (best case scenario)= 3306
Base case = 2957
Bear case= 2415
The S&P 500 as I am writing this letter is 2370.
We have already exceeded the firm's worst-case scenario by 45 points, and the bull case for 2019 is 936 points above our current level, a percentage that's 39.49% higher.
Just like the last time we had a government shutdown under the Obama administration, the market rallied quickly once the shutdown was averted. I suspect we will have the same action.
I look forward to talking with everyone about how we can be positioned 2019 and ways to reduce volatility.
With that,
Happy New Year and warmest regards.
Christopher lakian
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