September Disaster: How Bad Will it be for Stocks?

0:00All righty folks, did you know the worst trading months for stocks out of the last hundred years? Yes, folks, we're going to talk about a hundred years of history. And guess what? It's right now. The worst trading month of the year is September. We're going to talk to Dan Bird about when is it actually start? Because maybe it doesn't start at the beginning. He'll tell us. And of course, he'll give us his best guest when history says this ends. We will also talk inflation jobs war in the fed, but we're starting with September turmoil. Dan, what say you? Yes, that's correct. I've talked about it. I'm trying to see it a lot actually these days. A lot of articles coming out about it, but I've been talking about it for actually since the beginning of the year. September, first part of October, usually the worst part of the year. I've got some data to back it up going back to 19 or yeah, 1928. Almost 100 years. Almost 100 years, yeah.

1:0098 years. And it is a real thing. It's funny, because I remember, you know, when I was in school getting my degree, it was always selling May and go away. But maybe it should have been selling August and go away. Well, I did, I actually did a whole session, one of my YouTube channels about selling May and go away show seasonality. And it's actually not May. Yeah, actually, it actually, it just sounds good. Yeah, it rhymes. Yeah. The actual saying, by the way, is selling May and go away, come back on Ledger's Day. Ledger's Day is a race, a first race. Why didn't it happen? It's going to October. There you go. That's the actual saying. Well, thank you for that. Well, let's take a look at the day that you captured. 98 years of history, kind of important to understand. It's not a call on what this September will be, but certainly has 98 years of history. But I think this September is setting up for it, frankly.

2:03Okay. Yeah, let's get into it. I've got a few things to show. Let me share my screen. No, I'll show my website first. I'm actually going to use my newsletter, which I put out yesterday right here. This little button, you don't need to be a subscriber to the website. It's free for anybody. Nice. Click right there. You'll get the newsletter. Lots of interesting information on the website if you're interested in all of that. But let's take a look first at Stock Creators Almanac. So what does September look like? There's what it looks like. So we are right here here's Labor Day. So this is Tuesday right here. And you can see the dash lines are midterm election years that solid lines are right here. Years solid lines go back to 2005. So 20 years midterm years, which is only one every four years goes back to 1950.

3:08So roughly about 20 years for that too. So when we look at the midterm years, one day's like the peak. That's what that says to me. Yes, Tuesday actually Tuesday's the Tuesday. Sorry Tuesday. Yeah, Tuesday's the peak for midterm years. But the the regular years is the trough and they kind of meet right here. Interestingly look where they meet. I'll say. Right there. Fed meeting and CPI. CPI interestingly is on a Friday. Yeah, usually on Thursday's coming on Friday this week because of and it's after PPI. Yeah, that's weird, right? And PPI's Tuesday. Right. I think it's Tuesday. It's so they're flipped. Yeah, weird. So yeah, next week's going to be interesting. Could be a lot of volatility at the end of the next week, especially CPI. We'll talk about that in a minute or two. But this is what it usually looks like. And then from this point on from CPI to the Fed meeting right around there,

4:10it drops like a rock going right into October. Okay. This is roughly when that September month starts. Get options expiration right there right after that. It was down usually the first two weeks of October. It follows through this continues. Okay. The third week of October that the rally begins into the end of the year. Okay. And October is a it's called a recession. Curricut. It's seven of the last 14 recessions ended in October. Oh, wow. Or I I'll take that back. Not recessions, but crashes. Yeah, bear bear markets bear markets. Right. Seven of the last 14 bear markets ended in October. Okay. That's a third week of October, not the beginning. So that's in general what it looks like. So let me now show you. Let's come back over here and I'll show you this is directly from my newsletter.

5:12This is a. This is a guy that does a really good article. His newsletter is free too. So I put a link to it right here. If you want to be the whole thing and then I put an excerpt into my newsletter. So you're talking about September as well. It's got a losing record since 1928. The only month in the year that closes lower more often than higher. Yes. So that's not a good thing. That is not a good thing. Here is seasonality since 1928 all September is down 1% back half of September, which I just showed you. Down almost 1%. Midterm year September, which is what we're in right now. On 1.5%. The only month that is negative going back to 1928. So buyers who carried August are leaving the table. So all the buyers back here in August, their September, worst month right there.

6:12Directional skew and for sure of net national debt. Basically, it's the lowest one of all months. And then this is when it typically will start historically. So right around the 10, 12. It's actually the peak is the 12th. But that happens to be a Saturday next week. The 11th is CPI. Everything is lining up right now for the second half of September to probably be pretty negative. Painful. Yeah. This chart right here is basically the corporate bid. So these are buybacks that started companies authorized more than $1.1 trillion dollars and buybacks to August. But that buyer goes quiet as blackouts accelerate around September 12th. This basically is when all the buybacks stop. Yeah, I can then going into quarter end. That makes sense. That's right. They're going into quarter end. So that's one of the things that on top of everything else. This is one more thing.

7:12Buyers retreat. That makes sense. And then I mentioned notice that the peak below is one day after the inflation report and on a Saturday right there. September the 12th. CTAs. These are volatility control funds. These are just technical trading. So whenever they get to a peak, that's when they're algorithms kick in and they start selling. And they are again at a peak once again. So we've hit a peak twice on these. Let's see. Oh, I did something and oh, there we go. OK. All right. Who's left to buy? The August bid is fading. Earnings is behind us. Retail. Down day buying near half. It's 2019 paced. So by the dip is half? Oh, my goodness. Yeah. Buyers backs. I just talked about CTAs and wall control.

8:14I just talked about. And volatility compression tailwind largely is spent. So all of the catalysts are negative. OK. This from this point forward. So most common criticism hitting the boxes. Yes, but that season alley is just a statistic. Fair statement is indeed an average of returns. However, a statistic is exactly what it is. A statistic with five structural tailwinds draining out behind it, though, stops being a coin flip and starts being a setup. I like it. That's solid logic. All right. So that's September. Be careful. Yep. We'll see what happens. I mentioned before we started, but I'm going to be away the next two Sundays. So when I come back, we'll be the end of September. All right. We will certainly miss you. The audience loves when you and I get together. So thank you for that. So let's actually change up the order a little bit. Let's go to what is already happened. And that means Friday's jobs numbers.

9:17Friday's jobs numbers were about 3x. What was expected, the household survey added half a million jobs or half a million employed. So net net for any positive, but a lot of people are saying it's junk. It's to BLS. It'll be revised. Well, it already has been revised. And it was revised from last month. And I've talked about this many, many times here with you. The number itself is not what I track. The number last month was negative. It's now suddenly positive. Yeah, it's no longer negative. It jumped up to 44,000. It's no longer negative. Right. Not only did we have a great jobs number as far as number of jobs, but it was last one was revised. Upward. Yep. So that's the thing about that number that keeps getting revised. So you can't really just keep do all the revisions and then give me the number. Yeah, exactly. But you do look at the unemployment rate and that stayed solid at 401, correct? Right. The unemployment rate stayed the same at 401, which pretty much is what we should have

10:23expected to happen. Yeah. Right here, you can see continuing claims. And this is pretty amazing, actually. Yeah, look at that. This big, big line right here is continuing claims minus initial claims. So continuing claims are people that are filed for unemployment and continue to file keep extending. Yep. Right. Initial claims are the first first time filers. Correct. Right. So what this is saying is that not only are initial claims coming down, which is the blue line right here, but continuing claims are coming down to are falling out. Exactly. And look how low it is. I mean, the employment right now, there's no issue whatsoever with employment. Yeah. To call this full employment would be an accurate statement. Now again, people are getting laid off, Uber just announced 10% and all of that. So again, people who are unemployed looking for work at stuff out there, but when you zoom out and look at the forest, not a big problem.

11:25It's not a problem. I mean, it could at some point start accelerating, certainly. But right now, there is no issue. And the topic of my discussion on my YouTube channel on Friday was good news is bad news. Yeah. Yeah, I agree. So this just reinforces that the Fed will likely hike on September 16th. There you go. Well, let's go. The other thing that has happened, we've had what I will call a major escalation with Iran. Iran now is confirmed to send missiles at two of our warships, a battleship and an aircraft carrier. Neither made impact. Both were struck down. But the fact that our warships are now being attacked for the first time, I consider a major escalation. So I don't know if I don't think oil trades over the weekend, but has there been any move in oil or anything of that nature given this weekend's escalation? I don't know if it has over the weekend. I don't think it trades either, but I can look at see what oil was still in the surface. It certainly has been going up.

12:27Yeah. It's over 90 now. No question about that. Yeah, it's 95 I think. So there's what it looks like. It's 95.7. Yeah. It's heading up, but it's not accelerating. I mean, it is definitely heading up. So this is going to be interesting because you and I have a little side bet. We do. Or $125 by the end of the year. Yep. It's heading your direction. Yeah. I mean, again, the reason I consider this a major escalation is, you know, the fact that they took some shots, they weren't successful. A, that doesn't mean they won't try again. And B, that doesn't mean we'll shoot it down next time. I mean, can you, I mean, can you just imagine one of those missiles hit and there's loss of soldiers and, you know, aircraft carriers, you know, I don't know, neutralize whoever the right freaking word is. Well, that is going to be, that is definitely an escalation. And that's not I think Iran will be sorely sorry if that happens.

13:34We'll all be sorry, Dan, all of us oil will shoot up. We'll just right. Yeah. That's not a good thing. Not a good thing. Not a good thing. All right. Well, again, oil, oil jobs, all of that are knowns. Let's talk about inflation. We get an inflation print on Thursday, CPI. Although I did see PPI, PPI forecast is to go up. Did you see that is supposed to go from four to five percent? Yeah, I know. That is nuts. This is what I have so far. PPI from zero last month, the point four. This is the month over month. That is not good. I don't have a year over year for that. But CPI year over year is to stay the same. I don't think that's going to happen. I don't think so either because again, it doesn't, so right there it's forecast. Passing a point four. From point one. But that's the previous month. But if you're looking at the base effect, the base effect is negative. That's right.

14:35Base effect is negative, which is actually exactly what we're going to look at right now. Yeah. So if you take out a negative point one and you add a point four, that means it should go up point five. Right. Right. That's what you're saying. That's three point nine. I don't think it'll go to three point nine. No, I don't think it will either. But chances it stays even, that just doesn't make sense to me. Here's the base effect. Yeah, September is negative. You have it right there on the screen. Yeah, September is negative. That's someone that will drop out. Base effect essentially is a 12 month moving average window that keeps moving each. I'm a new one's added in. It just basically is just math. So if it moves and a negative one drops off, then add a point four. You add point four on the other end, then it will look like inflation is going much higher. So I would not be surprised to see this at three point six. I'm kind of surprised. I'm kind of surprised that the estimate is only three four. I thought the estimate would actually be higher.

15:35I did too. And it might be by the time we get there next Friday. Yeah. But if the number I had was three six as well. So we're in sync there. Yeah. But that's that's the second shoe. I mean, the first one was jobs last Friday. And the market didn't like that because jobs came in great, which means it gives the Fed covered it. Because I cover, yeah. But now if we get a higher CPI print, then they have no choice. And higher than what's estimated, then they have no choice that they definitely will hike. And in the odd, it's really fun. The odds have been all over the place. It started before Warsh spoke at 38%. After he spoke, it went to 62. Then Warsh spoke and it came down to 42. Then the jobs never came out. Now it's like 56 or something. Oh, you have it right here. 58.56 right now. And yeah, it has been trending higher.

16:40The next quarter point was actually closer in. It was actually like January at one point. It was January before, yeah. Now it's that's April. That's interesting. So, but there's a October 83%, which I don't think they'll do that. No chance of doing it for the election. No chance. No. And probably won't do 50, but they could do 50. I mean, there's zero probability here of 50. But yeah, I'm surprised. We talked about that last week, I think. And the fact that there's still zero is kind of shocking. Yeah. And just to be clear, because I noticed some of the comments last week, just to be clear about what we talked about, I said there might be a 25% chance of 50. Correct. That is not the same as saying it will be 50. No, absolutely. No, if somebody misunderstood that, yeah, no. I think I went from 10 to 15%. Yeah. Memory serve. So, so extremely low chance, but not zero.

17:45But not zero. Yeah, not zero. Yeah. So again, this is like, this is like a pretty common dumber. So you're saying there's a chance. So you're saying there's a chance. Well, this is all leading up to the Fed, right? The Fed. One more thing. Let's look at here. Oh, sure. Let's look at the compare comparison of the movements. Oh, okay. So this one, this bar right here was Friday, September the 4th. It's actually come down slightly. So that's a state even, yeah. Right. So Friday, no, no, this is. This is perfect. This is for right. Sorry. Even it's over here. Yeah, yeah, yeah. So for a raise, it was 59, almost 60%. And now it came down to 58. Just slight revision downward. Okay. And then staying the same went up slightly. But still, you know, it's still more than 50%. So it'll be interesting. If it's, let's just play the if game. If CBI comes in at 3 6, which we both think it will, it'll be interesting if 50 suddenly becomes an option.

18:51Well, I think you might start hearing talk about 50. I think you might start hearing some of the talking heads and it'll be interesting to see what the dot box looks like after the next meeting. Oh, is this an SOP? Are we going to get an SOP in September? No, I don't know. I don't know if we will have to check that. But it'll be interesting to see what the ratio. Yeah, I agree. So what, so this is all setting us up for Fed day since we won't be talking to you. We'll talk to you after the Fed has made to their decision. Are you still in the camp of they're going to raise? That's where you're betting right now. I think that will raise at least a quarter point. This is this is PPI, by the way. Yeah, PPI haven't been coming down, but it's going to it's going to go much higher to and PPI is going to be before CPI. Yeah, it's on. Oh, actually, I think it was, I think we actually had it on here. PPI is on Thursday. Oh, Thursday. Okay. Yeah, that makes more sense. Yeah, PPI Thursday, CPI Friday.

19:51So PPI might start the download. I was rolling. It really could. Yeah, if it comes in high, yeah. Which it's more cast to zero to point four. That's a big number. Right. And then CPI comes in hot. I mean, the market is just and then we got September, which starts basically at exactly the same time. Yeah, that's true. I mean, everything, everything is lining up for the historical trend to probably. Well, let's let's take a left turn real quick and look, go look at the 10 year note for me. Sure. Because again, the long end of the bond seems to just want to be peep screaming higher. Or I should say trending. Yeah, but we'll also look at the Japanese. Yeah. To. It is what it's back. It backed off a little bit. It went up. It gets. It's now just barely breaking out of this channel that it's been in. Mm hmm. All the way back to 2023 and 2023 is when it hit five. So likely will.

20:51I think get back up to five again. But it's just right basically sitting right at the top of this channel where it's been for a while. Yeah, well, we'll see if it's there by next Friday. Yeah, keep watching this because this this is what this is where the interpretation will come in with PPI and CPI. Yeah, is what the 10 year does after that. I agree. I agree. Well, let's take a look at the Japanese also since we're here. Yeah. It's very interesting. I just looked at it this morning very interesting. Here's the 30 year. Oh, crashing. Yeah. So somebody intervened. Somebody is intervening. And I've been saying since all the way back over here when we had the spike back here. I said whenever these spikes happen. The governments in the world will intervene.

21:53Most importantly, the US. But that will be still not broken. It's still going up behind the scenes, right? It's sitting at you're sitting right on for. Right now. But every time it gets up here, it pulls back. And this is Friday. So it's pulling back dramatically. We'll see what happens. I know it'll be interesting to see if. The Fed raises that this might actually come down more. We'll see what happens. I'm very interested to see the relationship between those two. Yeah. Okay. If we look at the. US dollar versus the end. It's not dropping. It went up above 160 very briefly. This is a. We found a lot of ways to get this out of the way. This is what we find. I think this is a. Yes, since. Yep, intervention right there. Yeah, and it looks like.

22:53It looks like there was some more intervention. This is a weekly chart. So this. Oh, yeah, definitely looks like more intervention. Right. So something, something is going on to keep this. Carried trade. Going. Very, very interesting. see it down here, but the spread between the US tenure and the Japanese tenure actually is starting to move up now. I'm going to go back higher, which is a good thing. If this spread kept going down, that would be a negative thing. Got it. But if, and this is the other reason that I don't hear talked about much, I hear a lot of talk about the fed raising because of inflation, which I think is what Worsh is talking about and one of the reasons that they will, but I think this is another reason that is not talked about very much. They cannot cut. If they cut, it'll make this whole thing look much worse. Oh, for sure. And even if they do nothing, if Japan keeps going up and we do nothing, it's going to get worse.

23:54It's worse. So we almost have to keep up with Japan just by raising. I agree. Yeah, very cool. Well, it's going to be fun. We are certainly going to miss you the next couple of weeks. Are you going to be able to do any shows on your channel during the week or here? I'm going to try, I'll be on a cruise ship. We're taking a cruise up the coast of Maine. That'll good for you. Next for a 10 day cruise. Nice. All right. But I will try. Yeah, I'll try to do one. We'll see what the internet connection looks like. You can always do when you're on land. We can record it and load it. Yeah, right. Yeah, that'll go over well. Janet. Good call. Wait, hey, it doesn't take for five seconds to up. What do you mean? We have, we have, we have a tourist plan. Well, you could do it on the bus. I mean, you can upload it. Yeah, that's right. Yeah, that'll go for real while. I can have everyone participate. Everyone on the bus can participate. No, no, no, no. I bet we're on the ship, but loaned it when you're on the bus. Oh, I got you. Yeah. Well, the ship center that might actually be better.

24:56Could be. But that would be funny though. If I did, I do like a little interview thing. Yeah, 10 questions from the bus. What do you think of the 10 year? What do you think of the Japanese carry trade? Yeah, you think the federal race? What do you think? Man on the street, man on the street interviews. There you go. All right, buddy, will you enjoy your time? Have some fun. We will see when you're back. All right, sounds good. Take it easy. Thanks.