Steve McDonald: Hi, everybody. I’m Steve McDonald. This is your Market Wake-Up Call. In focus this week: the seemingly endless negative reporting by the money media and how it’s affecting our wallets. This past week in the markets, we retreated to the usual tidal wave of negative reporting from a money media that can’t seem to find any good news out there. Despite a big upswing in market sentiment and stock prices in January, they’ve come out swinging with more predictions of a recession by the end of 2019.

But this month, it isn’t an inverted yield curve or the Fed’s activity that they claim, as they did last year, will push this economy into a correction. No. This month, their bogeyman is an earnings recession. I’ve never even heard of an earnings recession. Anyway, before the first company reported earnings last Monday, the fearmongers were on their high horses calling for an end to the 10-year bull again and a full-blown recession this year again. No, I take that back. Their market economy fear-driven delivery was, as always, cloaked in the form of questions so they never appear to be wrong. If, as was the case last fall and especially in December, the media’s predictions of financial ruin are as far off in 2019 as they were in 2018, we should expect a good year in the markets.

Here’s an example of how bad the reporting has gotten, even TheWall Street Journal. This was a subhead in the weekend “Market” section online: “U.S. Leading Economic Indicators Fell in December.” Really? The Conference Board Leading Economic Index was off one-tenth of a percent, from 111.8 to 111.7 – really. This kind of information warrants a headline?

Is it just me or has the negative bias in the media crossed the line into fantasy? Well, to answer that question, we have with us today – who, for my money, is the smartest guy in the money business – Alexander Green. He’s the Chief Investment Strategist at The Oxford Club. He’s been with us for years, and he’s one of the sole stable forces that I know of in the markets. I’d put him up there with market mentors like Jack Bogle and Jeremy Siegel. Alex, thank you for being who you are. Welcome back.

Alex Green: Thanks, Steve, and thanks for that generous introduction. I appreciate it.

Steve McDonald: It’s my pleasure. Please tell me you’re going to have some answers. Is the money media trying to push us into a recession, because they seem to be doing one heck of a good job in the fourth quarter, especially in December? What’s your take on this?

Alex Green: I’ll tell you. The truth of the matter is the financial media is persistently negative, and that’s actually a good thing, not a bad thing. Because think about this: The markets are competitive, all kinds of markets – markets for cars, markets for cosmetics, markets for computers, phones and whatnot. They’re all very competitive. The stock market is also very competitive. You have the world’s smartest, best-connected, most data-intensive people looking to maximize their returns. And when the media scares everybody off with talk about an impending recession, an inverted yield curve, dropping consumer confidence, etc., you know what that does? It causes a lot of people to just move to cash and not even try. Then what happens? Exactly what happened in December – the one negative leading indicator in December was the stock market itself. It drops down and hits a low. The S&P 500 dropped 19.8%. Some sticklers say that wasn’t a bear market, but if you do any rounding, that’s the definition of a bear market. And from that point, we saw stocks take a huge spring back upward again. So in many ways, I thank the financial media, not because I listen to them but because I don’t listen to them. And they’re actually making it easier for those of us who have a sense of how to make money in the market make money in the market.

Steve McDonald: You know what, Alex? There are days when I feel like you, I and the other Oxford Club Editors are shoveling against literally a landslide of misinformation, and we both know it weighs not just on our Members but on investors in general. Is there a way for our investors, our Members, out of this quagmire? You and I have 60 or 70 years total in the market, but our Members don’t see it the way you and I do. What’s the way out?

Alex Green: Well, I mean, we’re trying to guide them in a way that is actually profitable. And I do think that it’s not really that the media’s going to drive us into a recession. Since World War II, there has never been a recession that started without negative jobs growth, okay? And we’re experiencing 200,000 or 300,000 net new jobs a month. Hiring is a huge positive indicator because you don’t go out and hire new employees unless you feel like business is getting better, you need to staff up, and higher sales and higher earnings are around the corner. So things like hiring – unemployment is at a 50-year low – are telling you that the economy is healthy.

Think about this, Steve. Here’s the economic backdrop. We have low interest rates. We have rock-bottom inflation. We have cheap energy. We have rising corporate profits. We have record corporate profit margins. We have actually very negative sentiment toward the market, which is a positive, as you well know. That’s a contrarian indicator. When investors are very bearish, that means that most people who want out of the stock market are already out of the stock market. And of course, U.S. household net worth is at an all-time high.

So you look at this backdrop: low inflation, low interest rates, cheap energy, the economy growing at better than 3%, and rising corporate profits and margins. It’s an extremely positive picture. And the people on NBC, CNBC, ABC or CNN can say whatever they want. This economy is healthy. Profits are rising. Stocks are rising. And if you know anything about the stock market at all, the trend is your friend, and the trend is with us right now.

Steve McDonald: You know, until you finished that answer, I was going to say, “I know you’ve got some good news for us; please share it,” because I don’t think our Members, and especially the average person out there who’s not reading our stuff, hear these things. They don’t have the opportunity to see these things because the press certainly hasn’t been reporting it. But you’ve been working on a report – I got a sneak peek at it recently – about buying trends in the market that have predicted really big moves. And I think it’s some of the best news I’ve heard. Why hasn’t the press reported on this?

Alex Green: Well, again, there’s this negative bias, which I guess I could complain about, but I like the fact that it drives people out of the market and reduces the competition to find successful investment ideas. But there are two things that I’m seeing right now, in particular, that are very positive for stocks. One is significant insider buying. These are officers and directors who have material, nonpublic information about the future prospects for their business. They’re buying stocks with their own money at current market prices – very positive. Share buybacks are huge. That’s a very positive thing, because when you reduce the number of shares outstanding, that increases earnings per share, which is the primary driver of stock prices in the short term.

And we don’t want to forget that these dark pools are a very positive aspect too, because what a lot of big institutional investors do is, rather than do their buying openly on an exchange where everyone can see the volume, actually trade shares privately in dark pools. These are run by investment banks, they’re off the major exchanges and people don’t see it. So smart investors are often sneaking in the back door. People don’t see the volume. They don’t see what’s happening.

But, you asked, Steve, “What should investors do?” They should stop listening to the media and start looking at the tape and their portfolios. Our Oxford Club portfolios are doing extraordinarily well. They’ve taken a huge jump since the Christmas Eve lows. So the reality is right in front of you. Whatever the media says, it doesn’t really matter. What matters is what the market is doing. What is your portfolio doing? And there we have a lot to celebrate.

Steve McDonald: Alex, it’s always a pleasure to have you on. Thank you for the positive tone. I’ve got to be honest with you: I get up every morning, start reading and think to myself, “How in the name of God are we ever going to turn this around?” Sometimes I wonder if we’re going to be successful at it.

Alex Green: Well, you know, it’s funny. I was on a bulls versus bears panel in Baltimore yesterday with a couple of hedge fund managers and then-editors Steve Sjuggerud and Dan Ferris. We were having it back and forth about whether we should be bullish or whether we should be bearish. But Steve Sjuggerud, who’s expecting a melt up in the market – I don’t know if we’re going to see that but I think the trend is certainly positive – was talking about how you just don’t see a long bull market like this end without some kind of a speculative excess at the end. And that’s nowhere to be seen. There’s no euphoria about the market. And all this skepticism and all this negativity, it may seem counterintuitive, are contrarian signals that indicate higher, not lower, share prices ahead.

Steve McDonald: Yeah, I’m going on the record. I have been calling for new highs in 2019, not a recession. And I know you always want to make a prediction, don’t you?

Alex Green: Well, you know I’m not a market timer, but, Steve, the Dow is up almost 3,000 points from the Christmas Eve low.

Steve McDonald: Oh, I know.

Alex Green: So we’re not that far from a new all-time high anyway. We’re going to see some volatility and fluctuations along the way, but clearly markets make opinions in the end, and the market is doing quite well.

Steve McDonald: Alex, as always, thank you so much for being with us, and folks, the report is down. You want to read about these dark pools. The numbers are stunning. Make sure you take a look at it. We’ll see you down the road, Alex. Thank you again.

Alex Green: All right. Thanks for having me, Steve.

Steve McDonald: It’s my pleasure. And for everybody here at the Market Wake-Up Call, thank you so much for being a part of this. We’ll see you next week.

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