Officially, the Santa Claus rally has not even begun. And yet, almost every day over the last two weeks stocks have climbed higher. Unlike last year, there appears to be nothing stopping the market from continuing to make new highs at least into January.

 

Historically, the Santa rally begins on the day after Christmas and stretches through to the second day of January. The fact that last year he failed to make an appearance might mean that the jolly old elf could be making up for lost time by coming in early.

 

The markets action is especially impressive since this is the time of the year when investors usually sell their losers in order to establish a tax loss for the year. Large institutional investors and mutual funds do the same thing. But that selling pressure has been met with buyers, which is supporting the market.

 

There are two recent trends that are keeping things bullish. The first is the Phase One trade deal breakthrough. Despite its lack of substance, it does reduce some of the uncertainty in the markets even though the final deal has yet to be signed.

 

The second, and more important development, is the Federal Reserve Bank's injection of over $425 billion into what is called the "repo market." It is the market that provides critical short-term funding for banks in need of cash to settle certain end of year obligations in their day-to-day business. The Fed actually provides cash to financial institutions in exchange for some of their U.S. Treasury bond holdings.

 

Although the Fed won't say it, what they are doing is a form of quantitative easing or "QE" that reduces the cost of borrowing money as effectively as if they cut interest rates. In the past, the Fed has used QE in order to stimulate the economy. And every time the Fed eases monetary policy, the stock market responds positively.

 

On Monday alone, the New York Fed increased the amount of its bond buying by $86 billion. We could see a like amount on Dec. 30 through Jan. 1, 2020, according to Fed watchers. When all is said and done, the month of December central bank monetary stimulus could total $500 million. That is not chump change.

 

And before we forget, there is also the "January effect" just around the corner. Historically, January is the best performing month of the year. That's when folks on Wall Street usually receives their bonuses, and a lot of that money goes right into the stock market. In addition to the bonus play, a lot of those stocks I mentioned that are sold about now for tax losses are repurchased in January, especially in the small cap arena.

 

The likely results of all these beneficial trends this month and next should provide pretty good support for stocks.  I would like to see a bit of a pullback in stocks (30-50 points on the S&P 500 Index) between now and Christmas, however, just to relieve some of the overbought conditions. That could set us up for a sprint to the upside in the markets after Christmas through the end of the year.

 

There are some investors who raised cash a few weeks ago, betting that Trump would not sign a trade deal, more tariffs would be introduced on Dec. 15 and the markets would plunge. That was the wrong move. Now, they are waiting for a pullback to get back in.

 

Of course, markets usually do what is most inconvenient for the greatest number of investors, so we could conceivably just grind higher and higher forcing those on the sidelines to capitulate and buy back in.

 

You don't have that problem, readers, because you have been following my advice and remaining fully invested. That had paid off nicely. In my next column, I plan to throw the bones, (as I do every year), and see how 2020 will shapes up, so don't miss it.

 

In the meantime, have a Merry Christmas, Happy Hanukkah and for those who can, spend it with your families and loved ones.

 

As we approach that most joyous of holidays, the image of Santa Claus greets us in every nook and cranny. From television commercials to internet greeting cards, "Jolly Old St. Nick" is a ubiquitous figure. What you probably didn't know is without American business there probably wouldn't be the Santa Claus of today.

 

Santa and business go back a long way, but before you ask, the answer is no, Coca-Cola did not invent Santa Claus, although they will celebrate their 100-year anniversary in 2020. This modern-day, cherry-cheeked, fat elf of a figure has been best buds with the owners of many U.S. enterprises. Montgomery Ward, Macy's, F.W. Woolworth, General Electric and dozens, if not hundreds, of other businesses have made Santa the elf he is today.

 

Back in the day, "Sinterklaas," the Dutch name for a monk named Saint Nicholas, was the stuff of legends. His kindness and compassion were his claim to fame among the Christian faithful, and through the centuries he became known as the protector of children. His myth emigrated to America from Europe in the early 1800s.

 

Christmas at that time was a great big drunken party over here, especially in New York. Remember, it was the beginning of the Industrial Revolution, and the differences among the social classes in the U.S. was as large as it is today. Bands of tough, working-class young men, rowdy and often-times angry, would roam the city blocks, going from home to home, demanding

handouts from the rich. Often, these gangs would "wassail" (sing) bawdy tales at the top of their lungs in the process.

 

History credits a number of figures, from John Pintard of the New York Historical Society, to Washington Irving, to Clement Clarke Moore, who took it upon themselves to "tame" Christmas for the American masses. "A History of New York," published in 1809 by Irving introduced a more benevolent St. Nick, while the 1822 poem, "A Visit from St. Nicholas" ("Twas the Night before Christmas") by Moore attempted to hone in on the exact time and date of the modern-day legend we call Christmas.

 

The American version of Christmas continued to expand through penny press publications and women's home magazines. These publications were an early version of both marketing and advertising. The notion of Christmas trees, for example, can be traced back to Godey's Lady's Book that featured Queen Victoria and the royal family gathered around one such tree.

 

In 1841, a Philadelphia store created the first Christmas blimp of sorts (a life-sized model of Santa) as a marketing effort to draw kids and their parents into their store. In 1862, Macy's introduced the first "live" Santa. An army of Santas soon followed, creating an entirely new business in America. But Santa still lacked the vigor of today. He was most often depicted as a small, elf-like figure, grim and serious (sort of like the Grinch with a red suit and a white beard).

 

It took the marketing efforts of Coca-Cola to transform Claus into the Santa of today. He was first featured in Coke's advertising in 1920, and within a decade became a staple of their holiday advertising. The company hired an illustrator, Haddon Sundblom, to create a more "wholesome" image of the big guy that would sell in America. It worked so well that just about everyone adopted Coke's version of Santa Claus.

 

But Santa isn't the only figure that business created. Rudolph the Red-Nosed Reindeer was a marketing effort by the department store, Montgomery Ward. They used one of their own copywriters, Robert May, to write a children's book that the department store could give out to the children of their customers. Millions were given out in the first year, and many millions more have been published since then. In 1949, May's brother-in-law wrote a song, based on the book, that is now part of holiday history.

 

So, the next time you want to complain about all the bad things that big business does to this country, take heed. There are some things they do well. If it wasn't for business, Christmas in America — gift-giving, Christmas trees, ornaments, dinner, caroling, holiday cards and all that family love — would probably not exist.

 

And on that note, "Merry Christmas to all, and to all a good night!"

 

 

Where to begin? The China trade deal, the UK elections, the impeachment of the president? Let's not forget the agreement on a new North American trade deal as well. It was a heck of a week and Donald Trump flawlessly controlled the news flow.

 

Boris Johnson, the Conservative Party leader and prime minister of England, won the greatest majority since Margaret Thatcher on Thursday evening. That is good news for the United Kingdom. His victory also supercharges hopes that a Brexit deal can finally be accomplished in 2020. The British pound skyrocketed over 3 percent on the news, and the London stock market was up 2 percent as well. Good news.

 

The replacement for NAFTA, called the United States-Mexico-Canada Agreement, or USMCA, is also moving forward after over a year of negotiations between the Democrats and the White House. Environmental issues and U.S. safeguards concerning our labor force that worried the Democrats seemed to have been ironed out. Another good news development.

 

The next step will be for the Trump administration to submit ratifying legislation to Congress, so the new trade deal can finally be passed into law. After all the claims that NAFTA was the worst deal of the century by the president, the new deal is substantially the same as the old one. It may mean 50,000-75,000 additional jobs for the American auto sector over time, and some of our dairy producers will have a little more access to Canada. Overall, the deal, while positive, is simply another example of smoke and mirrors but should play well for both sides in the 2020 election campaign.

 

But the real news occurred simultaneously — the impeachment vote of the president and the on-again, off-again China trade deal. Announcements of both events occurred on Friday morning, almost at identical times. The Democratic-controlled House Judiciary Committee voted to proceed with the impeachment of President Donald Trump. He is only the third president in the history of our nation to be impeached. It was no accident that the House Judiciary Panel's vote was delayed until Friday morning when prime time television viewers were at their highest.

 

But the Apprentice was working behind the scenes. On Thursday afternoon, when the impeachment hearings at the House Judiciary Committee had reached a crescendo, Trump and his men met to ostensibly decide on whether to implement a new round of tariffs in the China trade war this weekend. Shortly thereafter, Trump once again announced (he did the same thing nine weeks ago) that a deal had been agreed to by both China and the U.S. The stock market exploded on the news and finished the day a percent higher. The event was pure theater.

 

Trump's strategy on Thursday, in my opinion, was to pre-empt the Judiciary Committee's televised vote on impeachment and switch the news focus back to him and to a trade deal, no matter how meaningless. But the Dems outsmarted him. They postponed the vote until Friday morning.

 

Wall Street (and the nation) has been snookered too many times by Trump and his tweets of misinformation and "fake" announcements on the trade deal to take anything at face value. At this point, Trump's words carry no weight, other than as a reason to move stocks up or down for a few hours. On Friday, investors were going to wait and see. There is no deal, they reasoned, until the Chinese agree, and the papers are signed.

 

Friday morning, the Chinese Ministry of Commerce in a press conference in Beijing, announced that there was a deal from their side. Trump confirmed the agreement a few minutes later in a tweet. Both sides said the U.S. would be rolling back the tariffs already in place over a period of time. The tariffs scheduled for Dec. 15 would also be canceled.

 

Investors were so busy following the trade news that hardly anyone noticed the House vote. Mission accomplished as far as the president was concerned. While the announcement is good news from a business sentiment point of view, the actual details will likely have little impact on the economy or earnings. The U.S. will still keep 25 percent tariffs on some imports and 7.5 percent on others. It does, however, give Trump another "victory" to run on in his 2020 campaign.

 

As for the markets, the final announcement proved to be less than bullish for the markets. Most investors saw right through the Phase One deal. As a result, markets reacted with a typical "sell on the news" event. By mid-day Friday, the markets were all down modestly. And so goes another day in this market. I still believe that we will continue to move higher into the New Year. Next year, however, may be another story.

 

The very people who were supposed to benefit from making America great again have become victims of the man who promised them so much but has delivered so little.

 

While the Rust Belt states of Michigan, Wisconsin, Indiana, Illinois, Ohio and Pennsylvania teeter on the edge of recession, those in the agricultural sector (also Wisconsin, as well as Georgia, Nebraska and Kansas) are already facing an increasing number of bankruptcies. These are the swing states that carried Donald Trump to a win three years ago. They are now feeling the brunt of his trade, tariff, and wholesale rejection of climate change.

 

Farm bankruptcies through September 2019 are up 24 percent versus last year. Suicide rates are rising among small farmers, and many towns that are dependent on the farming community are fast becoming ghost towns. Even Trump's own Agricultural Secretary, Sonny Purdue, said he wasn't sure that the family dairy farm could survive in the future. At least he has the courage to tell the truth.

 

Americans, especially those who live in urban/suburban areas of the country, have this mythical myopia when it comes to the nation's agricultural sector. Most think that the small family farm is what feeds us, and what surplus exist are sold overseas as exports. I am here to tell you that all of that claptrap no longer exists and hasn't for decades.

 

Global competition, Federal government policy, and big business has changed the fabric of the farming sector.  Back in the 1970s, Federal farm policy sent an unmistakable message to the nation's farmers to either get bigger or get out of agriculture. A decade later, we witnessed a quarter-million farm foreclosures. Overproduction, a grain embargo against the then-USSR, and high debt decimated the industry. Today, 80 percent of American farmland is owned by "Big Ag."

 

In the last two years things have gotten immeasurably worse. Trump's tariffs on China elicited a predictable response. Chinese tariffs were levied on U.S. agricultural imports like soybeans and corn. Since then, the Trump administration has given the industry $28 billion in financial assistance of which at least 80 percent of that is going to big conglomerates, not the small farmer.

 

At the same time, thanks to climate change, the last six years have produced increasingly unstable weather patterns resulting in floods, droughts and debilitating crop failures. The administration's continued denial of these huge risks to our food production have been ignored. In fact, recent policies, in my opinion, have actually made our climate far worse.

 

Given the facts of farm production in this country and throughout the world, the small farmer of old is heading into extinction. In its place have risen boutique farms that are producing crops and food stuffs for a large population of consumers who buy direct and live close by. There are no or limited exports from these establishments.

 

A similar trend is occurring in the nation's manufacturing sector. Countries such as Australia, China, South Korea, Argentina and Mexico produce steel, aluminum, cement and a host of other manufacturing products of the same quality (but at lower prices) than the U.S. can produce. This is not a new phenomenon, but Trump's trade wars have made it infinitely worse for our manufacturing workers. And no one is talking about government assistance to this sector.

 

Tariffs may have prevented the manufacturing sector from total extinction, but they haven't fixed what is wrong with the sector either, nor can they. It is the same story with farm subsidies. They won't and can't fix what is ailing the family farm. The tariff argument is an old one: we need these industries for our national defense in the event of war. While that argument does carry weight, it does little to help our manufacturing and farming sectors, which continues to face global overproduction of just about every product they make.

 

As in farming, some would like to think that Trump's policies will not only save but reverse the decline in manufacturing. That is as realistic as thinking of today's workers as burly-armed men and women (as in WW II posters), when the reality is that today's manufacturing workers are far more likely to be sitting behind a computer screen than toiling with sledge and hammer beside a belching furnace.

 

 Sometimes, the cruelest thing one can do is give a person (or in this case, an industry) false hope. Trump, it appears, has done just that. Most people realize you can't turn back the clock, no matter how hard you try. It is at the root of what Donald Trump promised and failed to deliver. The America he wants is an America that no longer exists, if it ever did.

 

The America I live in is always changing, growing morphing into something new and different. Sure, it has its problems, and even the nature of these challenges' changes over time, but by and large, I wouldn't want to live anywhere else.  Would you?

 

While it would appear that President Donald Trump left the London NATO Summit this week empty-handed, the truth is he has already achieved what several presidents before him could not. Unfortunately, it is a shallow victory at best.

 

Just a week ago, in preparation for President Trump's visit, the North Atlantic Treaty Organization announced a change in the funding of its budget. It agreed to reduce the United States' contribution to the alliance (now 22 percent) and redistribute the costs to other members. As a result, the U.S. and Germany will now pay the same amount. Each will contribute 16 percent of NATO's central budget.

 

The problem is that NATO's central budget, which only amounts to $2.5 billion annually, is just a drop in the bucket when thinking about the ongoing defense of Europe. The alliance was formed after World War II as a means to counter the Soviet Union's growing domination in Europe and the rest of the world.

 

The idea of a collective defense — "One for all and all for one" — was a good one at the time. The assumption was that each nation member would see to its own defense spending, while contributing to the direct budget of NATO, which was miniscule in comparison.

 

Over the decades since its founding, it became apparent that, with the exception of the United States, most of the 29 members of the alliance were not spending nearly enough on their own defense readiness. The issue came to a head by 2014 when the members agreed that they would increase their own defense spending to 2 percent of their Gross Domestic Product (GDP) no later than 2024. 

 

Therein lies the beef, since only nine members have reached that goal so far. In the meantime, the U.S. spends 3.4 percent of GDP on defense, which amounts to roughly 69 percent of overall defense spending among the NATO alliance. This year alone, the U.S. will spend $693 billion. That makes the amount members spend on the NATO budget mere peanuts in the grand scheme of things.

 

The 2014 agreement, however, is really a "paper tiger," since there is no penalty if a member fails to reach the 2 percent target. To be fair, most NATO members did increase defense spending this year, which makes it five years in a row. However, that was not nearly enough in President Trump's opinion.

 

"ALL NATO NATIONS must meet their 2 percent commitment, and that must ultimately go to 4 percent," was the tweeted message dictated to NATO by our commander-in-chief. That might be easier said than done, in my opinion. This week, the president has threatened additional tariffs on European imports if NATO members do not comply.

 

To be fair, our European allies are democracies and cannot simply up their defense spending without the agreement of their voters. At the same time, most Europeans have far less appetite for defense spending in general than Americans.

 

In addition, given Trump's overwhelming lack of popularity within European nations, it would be practically impossible for EU leaders to convince their citizens to increase defense spending based simply on Trump's demands. In fact, it is likely the opposite would occur.

 

That leaves one obvious avenue left to force a solution — threatened U.S. departure from NATO. The ramifications of such a move on Trump's part would go far beyond economics. I am sure that possibility is the stuff of nightmares that may keep our military establishment up at night. Many politicians on both sides of the aisle might also have a problem with such a move. And yet, I would not put it past this president to venture down that road, if only as a negotiating ploy to get some of what he wants.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.