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Katherine Ross [00:00:00]
Tim I want to ask you about crude because it's hitting the highest levels in three weeks, now what's going on with that?

Tim Anderson [00:00:06]
Well it was only three months ago that it was 80 dollars. And universally the traders and even a lot of investment professionals, everybody played the Iran sanctions trade as wrong as they possibly could because the consensus was it was going to 90, it was going to 100. And the exact opposite happened. President Trump started talking pretty aggressively about lower oil prices. They made some exemptions for countries that they had had some very favorable trade deals recently done with like South Korea where they said we'll give you an exemption they made five or six other exemptions and all of a sudden. The world was awash in oil again and we started it we broke 70, we broke 60, we got down to the low to mid 40s which was almost starting to get to a little bit of an inflection point where a lot of our frackers might come off line. And certainly the real deepwater drillers have a higher breakeven point than some of the shallow water drillers. And now crude has kind of like gathered itself a little bit. OPEC announces they're going to make some cuts. Russia's going to go along with that and now we're grinding a little bit higher for the next couple of weeks trying to find that hopefully try to find that sweet spot where it's good for the whole macro environment of consumers having a little bit extra money in their pocket. But also the energy industry you know not going through a tough economic time because of the price of oil.

Katherine Ross [00:01:44]
I wanna also talk about the the market in general because we're seeing rallies they go up 400, 500 points a day they go down 400, 500 points a day. What are you looking at in the market?

Tim Anderson [00:01:54]
Well I do think that the volatility is going to be with us for a while. Maybe not to the real extremes that we saw at right at the very end of the year and during some other periods of the fourth quarter. And I think that, look let's talk about the beginning of the year and let's contrast it to where we started at the beginning of 2018 when on the heels of a very positive 2017 everybody was bullish and everything was great and everyone was optimistic and they just expected that it was just going to be a bull market all year long that lasted for about a month. And then you had the trade stuff started to kick in. You had a number of other factors come into play and we had this big move to the downside. Tested it in March. Tested it in April. Grind it to new highs toward the end of the summer and then kind of a repeat of that in the fourth quarter combined with heightened tariff anxiety. Particularly with China and a lot of uncertainty in Europe. Some of it centered around how Brexit going to play out. And concern over how much of an economic slowdown we're going to get in 2019. Some people almost fear mongering talking about a recession which is I don't really believe it's going to happen. I think the smart people don't believe it's going to happen. So we're now entering this year. We had a lot of really, caution. Like almost excessive caution maybe even pessimism. Maybe a lot of people even talking about the potential for a recession. And I really don't believe that's going to happen. And I think that is helping to fuel the rally that we're seeing so far this year and today. Now just technically what's also helping fuel the market a lot Is the broad market away from the market averages, the advance decline line, the up volume down volume indicators. What we call the market internals have been much stronger than the market averages the last week, week and a half. OK. Now that being said. There's almost been like a stealth move where a lot of people would not realize the move we've had off the lows from December 24th. And the Russell 2000 is up about half a percent today so it's up close to 12 percent from its lows. The S&P 500 is up about 10 percent. The Nasdaq, which had sold off very heavily in the fourth quarter is up about 11 or 12 percent, from the lows December 24th. Now those aren't going to be year to date lows because you know we had the up thousand point day on the 26th. And then we had a big up day last Friday. Both of those days had just, massive, massively positive internal data. Ninety five percent up volume days which means that up volume was 20 times down volume and also advanced decline numbers that were 10 to 1 on Friday. Maybe a little bit less than that on the 26th of December. But that means there's a lot of people buying the secondary and tertiary stocks in the market. And they wouldn't be buying those if they thought there was serious concerns about the economy for this year. We're probably going to have slower growth than we had in 2018. Corporate profits are going to grow at a slower rate than they grew in 2018. But we had Three quarters in a row. We had corporate profits increasing at 25 percent on year over year comparisons. You just can't have that year year after year after year even if we had high single digits, growth for corporate profits, that would be very positive. But some people confuse a slowing growth rate with corporate profits declining.

Katherine Ross [00:06:25]
Now let's talk a little bit about earnings season because that's basically what you just brought up and I want to talk what you're looking at in earnings season as it comes.

Tim Anderson [00:06:34]
Well, look we're going to start to get into that later in the week and really next week. And we'll have to see what kind of guidance we get given the fact that there are, I think the key is what kind of guidance do we get on CapEx spending given the uncertainties that are still out there over trade issues particularly with China because that's the big kahuna really. And there will clearly be some companies that will say we are uncertain about our CapEx spending because we don't know what our trade with China is going to be. So there'll be a little bit and the market of course hates uncertainty. It can deal with bad news but hates uncertainty because it can't model it. So, the market will have to deal with that a lot and I think that's baked into the market. I think it's going to be a tremendous surprise. But, you know look we could get some negative guidance if there would be big earnings misses. Hopefully they would be preannounced, that's what the companies are supposed to do. But I think that expectations have been tamped down so much for the year that the earnings are going to be Okay. Of course that people will say well maybe they're backward looking they'll be for the fourth quarter of course. But the key will be guidance for 2019 and how concerned CEOs and CFOs are about trade and how the trade uncertainties might play into their planning for the year.

Katherine Ross [00:08:15]
In your experience, how does announcing a new executive change a stock or effect the stock.

Tim Anderson [00:08:25]
Well, it would most likely happen when a company has had bad performance. And or there is bad issues with an executive. Or he's had a bad record. Or there's an activist that's really making a lot of noise and putting a lot of pressure on the board. So if it's after a company has had bad performance obviously there's upside. Because the stock has probably underperformed for a while. Maybe the company has underperformed. And if they coincidentally replace a new executive with a new person at the same time, that's almost always a positive and less people say oh my god how could they hire that guy who screwed up last company that. But if they replace someone and then there's an interim person and there's some uncertainty, then the reaction would be probably a little bit more cautious or slower for the stock to react. But given the fact that it's usually with a company that's had under performance either in its financials or in its stock price, it is usually a positive.

Katherine Ross [00:09:44]
Now Sears is of course the biggest news of the of the week and I want to just look at the retail sector in general and get your post holidays take about the retail sector.

Tim Anderson [00:09:56]
I think retail expectations were tamped down quite a bit. There was a lot of fear out there that you know Amazon is everywhere in everything and how these retailers are going to compete with them. Now as it turns out, overall, retailers had a very good holiday season. Now it's a brutal space and if you miss you get punished badly. I think the Sears news other than it's a big iconic name for generations 100 years plus et cetera et cetera, is the company's been dead for years. I mean let's be realistic. OK. The good news is you can still get Craftsman tools at either Lowe's or Ace Hardware. And you know it's a similar story almost with J.C. Penney, two big American iconic retailers that are just you know not going to be players going forward. Retail is a brutal space. And not only do retailers have to compete with everybody, they've always had to compete where they now have to figure out how to compete with Amazon. A lot of them went through this with Wal-Mart 20 years ago. The ones that are that have good products and smart people running the show will figure out how to deal with it.

Katherine Ross [00:11:26]
All right. Thank you so much for your insight Tim it's been a pleasure. And check with TheStreet for all the latest news.

What should investors watch in the markets? 

Tim Anderson, managing director at TJM Investments, spoke to TheStreet about the markets, oil and what he expects from earnings season. 

When investors are seeing rallies that move 400 or 500 points in either direction, what should they be thinking?

"I do think that the volatility is going to be with us for a while," Anderson said. "Maybe not to the real extremes that we saw right at the end of the year."

Anderson backtracked, bringing up the markets in the beginning of 2018. "Let's look at the beginning of the year and let's contrast it to where we started in the beginning of 2018, when--on the heels of a very positive 2017--everybody was bullish and everything was great and everyone was optimistic and they just expected that it was going to be a bull market all year long," explained Anderson. "That lasted for about a month and then you had the trade stuff start to kick in, you had a number of other factors come into play and we have this big move to the downside."

Going into this year "we had a lot of...caution. Excessive caution. Maybe even pessimism," Anderson said. He continued, saying that there has been lots of talk about a potential recession.

Anderson said that he doesn't believe that there will be a recession in 2019.