TWENTY FIVE PERCENT OF SURE THINGS NEVER OCCUR…FIFTEEN PERCENT OF THINGS SAID TO NEVER HAPPENING OCCURS?

The tech heavy NASDAQ fell 1.4% as many are on edge over the impending trade war. As noted many times 59% of technology sales are abroad and the majority of production facilities are domiciled in China. As also discussed the concentration of funds in the technology sector is around or at a historic proportion.

I believe it is against this backdrop is why some are voicing concerns, perhaps amplified by FANG falling in 12 of the past 15 sessions, a streak of losses not seen since 2016.  As widely noted the NASADQ is considerably below its pivotal 50 day moving average.

As noted many times, the world is radically changing. Donald Trump is a symptom of the change, not the cause. Last weekend the far right party in Australia shocked the political world with a convincing and overwhelming victory. Every poll had the far left party easily winning, a campaign based upon climate change, alternative energy and social justice.

And then there is the upcoming election in the EU where 35% of the chamber is expected to be filled by antiestablishment parties as well as continuing support for Brexit. This says nothing as compared to the surging support for the most moderate of the 24 Democratic presidential candidates.

Wow! Does this have implications for the US? What about future economic and social policy?

Yesterday I read an interesting article in The Atlantic about the miserable record of the “Experts.” According to the article 25% of “sure things to happen” never occur. Accordingly 15% of events forecasted “never to happen” do indeed occur.

All can remunerate events in the markets that were never expected to happen. For example, the subprime mortgage crisis is contained, to the massive 2009 stimulus will provide 4% growth to tax cuts will not generate 3% plus growth. And then there was the 2000 implosion of the NASDAQ that sent this average down almost 80%.

Can we make the argument that the NASDAQ is on the verge of another significant drop given the universal bullish outlook from the vast majority of “experts?”

Continuing with the same theme, the WSJ journal opined What if Green Energy is not the future? Based upon the over forty year low capitalization of oil of the S & P 500, buying an energy company is similar to buying a horse farm circa 1919.

The WSJ writes the “clean tech” energy exchanged traded fund outperformed the S & P 500 during the first quarter.

The prevailing wisdom has wind and solar paired with batteries adding 250% more energy to the world power over the next two decades than American shale has added over the past 15 years. Is this realistic?

Let’s just suggest a 50% haircut in much unprecedented growth in green tech. If this were too occur, the Journal writes global green tech output would have to increase by an amount equal to doubling the production of the Permian shale field, plus the world supply of LNG would need to increase by an amount equal to twice Qatar’s current exports and coal would have to almost double what the top global exporter, Australia, now ships.

Is this realistic?

A common sense solution to all of the above is making more electric cars. But even the most optimistic 100 fold growth in electric vehicles would not displace more than 5% of global oil demand in two decades according to the WSJ.

I rhetorically ask are the above reasons why Warren Buffet took a $10 billion stake in an oil company?

I am not doubting the impact of new technology but questioning some basic assumptions. All remember The Jetsons were the early 1960s consensus view of transportation by 2020.  Air travel has not radically changed since jets were introduced in 1945.  Jets were the result of 30 years of incredible technological change within the transportation industry, dating back to when horse farms ruled non-rail transportation options.

Last night the foreign markets were up. London was up 0.73%, Paris up 0.61% and Frankfurt up 1.0%. China was up 1.23%, Japan down 0.14% and Hang Sang down 0.47%.

The Dow should open nominally higher on slight trade optimism. The 10-year is off 2/32 to yield 2.43%.

kent
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.