This Is Nuts…Again. Reducing Risk As Tech Goes 1999
When looking at the acceleration in the price of the Nasdaq, and particularly within the small group of stocks driving that advance, you can begin to fathom our concerns. Furthermore, the divergence between the Nasdaq and the S&P 500 index is emulating the late 90’s.
The Death Of Fundamentals & The Future Of Low Returns
Over the last quarter, the “Death of Fundamentals” has become apparent as investors ignore earnings to chase market momentum. However, throughout history, such large divergences between fundamentals and price have resulted in low future returns. This time is unlikely to be different.
The Theory Of MMT Falls Flat When Faced With Reality (Part II)
If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.
The Theory Of MMT Falls Flat When Faced With Reality (Part I)
If you haven’t heard of Modern Monetary Theory, or “MMT,” you will soon. If you recently lost your job due to the economic shut down, and received a stimulus check, you are already a beneficiary. As we will discuss in Part-1 of this two-part series, MMT’s theory falls flat when faced with reality.
Unicorns, Rainbows, & Fully Invested Bears
With sentiment currently at very high levels, combined with low volatility, and a high degree of investor complacency, all the ingredients necessary for a market reversal are currently present. Am I sounding an “alarm bell” and calling for a massive correction? No.
Is It 1999 or 2007? Retail Investors Flood The Market
Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?
The Great Divide Between Stocks & The Economy
There are a tremendous number of things that can go wrong in the months ahead. Such is particularly the case of surging stocks against a depressionary economy.
Rationalizing High Valuations Won’t Improve Outcomes
Rationalizing high valuations won’t improve future return outcomes.
The Bull Is Back! Markets Charge As Economy Lags
On Friday, the Bureau Of Labor Statistics released the widely expected employment report for May. Despite continued weekly jobless claims over the last month exceeding more than 8-million, the BLS reported an increase of more than 2.5 million jobs in May.
CFNAI Economic Indicator Crashes Most On Record
In 2013, I wrote an article discussing comments made by Russ Koesterich, CFA, regarding the Chicago Fed National Activity Index (CFNAI). Given this economic indicator just crashed by the most on record, it is worth reviewing his comments.
Is The Fed Walking Into A Trap?
Currently, the Fed is injecting liquidity into the markets and economy at a record pace. While liquidity does have positive short-term benefits, is the Fed walking into a trap?
Did The Fed Over-React To A “Natural Disaster?”
Is it possible the Fed over-reacted to a natural disaster? There are two different types of “recessionary” events that occur throughout history. The first is a “business cycle” recession, which happens with some regularity as excesses build up in the economy. These cycles generally take 12-18 months to complete as those excesses are reversed.
Why Siegel Is Wrong About End Of Bond Bull Market
Jeremy Siegel, in time, will likely be proved wrong about the end of the “40-year bond bull” market. History suggests that not only is the “bond bull” alive and well, it likely has quite a long way as the U.S. will become more like Japan over time.
The Federal Reserve & It’s Ongoing Destruction Of The Bottom 90%
The Federal Reserve seemingly is an ongoing mission to destroy the bottom 90%.
Estimating The Earnings Crash
Whether its corporate profits, earnings, or GDP, no matter how you analyze the data, it suggests the outlook for stocks going into the summer is not favorable.
Market Rallies Into The “Resistance Zone”
This week’s newsletter will be somewhat condensed as the bulk of our current positioning is based upon the information contained in the two reports referenced herein. The goal of this week’s letter is simply to outline the market ranges which fall within the context of our current Macroview.
Market Completes A 50% “Bear Market” Retracement
If you are hoping the “bear market” is over, and have jumped “back in” with all your capital, you are in “good company,” as many others, judging by my twitter feed, have done the same. Just be prepared to be disappointed in the months ahead.
The 4-Phases Of A Full-Market Cycle
In the end, it does not matter IF you are “bullish” or “bearish.” What matters, in terms of achieving long-term investment success, is not necessarily being “right” during the first half of the cycle, but by not being “wrong” during the second half.
Aaand It’s Gone…The Biggest Support For Asset Prices
With the economy shut down, layoffs in the millions, and no clear visibility about the economic recovery post-pandemic, companies are going to become vastly more conservative on the use of their cash. Given that source of market liquidity is now gone, the market will have a much tougher time maintaining current levels, much less going higher.
Where “I Bought It For The Dividend” Went Wrong
The majority of the time, when you hear someone say “I bought it for the dividend,” they are trying to rationalize an investment mistake. However, it is in the rationalization that the “mistake” is compounded over time. One of the most important rules of successful investors is to “cut losers short and let winners run.”
The ONE Thing – Playing The “Bear Market” Rally
The “ONE Thing” you need to do TODAY, right now, is “accept” where you are. What you had, what was lost, and the mistakes you made, CAN NOT be corrected. They are in the past. However, by hanging on to those “emotions,” we lock ourselves out of the ability to take actions that will begin the corrective process.
Everyone Wanting To Buy Suggests The Bear Still Prowls
Given the magnitude, and multiple confirmations, of these signals, it is far too soon to assume the “bear market” is over. This is particularly the case, given the selloff is less than one-month old.
Margin Call: You Were Warned Of The Risk
While it is certainly hoped by many that we are closer to the end of the liquidation cycle, than the beginning, the dollar funding crisis, a blowout in debt yields, and forced selling of assets, suggests there is likely more pain to come before we are done.
Special Report: Panic Sets In As “Everything Must Go”
We highly suspect that we have seen the highs for the year. Most likely, we are moving into an environment where portfolio management will be more tactical in nature, versus buying and holding. In other words, it is quite probable that “passive investing” will give way to “active management.”
Fed’s “Emergency Rate Cut” Reveals Recession Risks
We are likely experiencing more than just a “soft patch” currently despite the mainstream analysts’ rhetoric to the contrary. There is clearly something amiss within the economic landscape, even before the impact of COVID-19, and the ongoing decline of inflationary pressures longer term was already telling us just that.
Market Crash & Navigating What Happens Next
While we remain optimistic about the markets currently, we are also taking precautionary steps of tightening up stops, adding non-correlated assets, raising some cash, and looking to hedge risk opportunistically on any rally.
Debt, Deficits & The Path To MMT
In September 2017, when the Trump Administration began promoting the idea of tax cut legislation, I wrote a series of articles discussing the fallacy that tax cuts would lead to higher tax collections, and a reduction in the deficit...
MacroView: The Next “Minsky Moment” Is Inevitable
In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a “Minsky Moment.” At that time, this idea fell on “deaf ears” as the markets, and economy, were in full swing. However, it wasn’t too long before the 2008 “Financial Crisis” brought the “Minsky Moment” thesis to the forefront.
SOTM 2020: State Of The Markets
In the President’s “State of the Union Address” on Tuesday, he used the podium to talk up the achievements in the economy and the markets. While it certainly is a laundry list of items he can claim credit for, it is the claim of record-high stock prices that undermines the rest of the story. Let me explain.
The Fed’s View Of Valuations May Be Misguided
On Wednesday, the Federal Reserve concluded their January “FOMC” meeting and released their statement. Overall, there was not much to get excited about, as it was virtually the same statement they released at the last meeting. However, Jerome Powell made a comment which caught our attention...
Yes, Rates Are Still Going To Zero
The trouble currently is that global short-term interest rates are still close to, or below zero, and cannot be cut much more, which has deprived central banks of their main lever if a recession strikes.
The Fed Won’t Avert The Next “Crisis,” They Will Cause It.
The problem with low interest rates for so long is they have encouraged the misallocation of capital. We see it everywhere throughout the entirety of the financial system from consumer debt, to subprime auto-loans, to corporate leverage, and speculative greed.
Comparison & The Role Your Advisor Should Play
Comparison-created unhappiness and insecurity is pervasive, judging from the amount of spam touting everything from weight-loss to plastic surgery. The basic principle seems to be that whatever we have is enough, until we see someone else who has more. Whatever the reason, comparison in financial markets can lead to remarkably bad decisions.
The Next Decade: Valuations & The Destiny Of Low Returns
The 2020 Decade: Valuations & The Destiny Of Low Returns. As we enter into a new decade, investors have become complacency with high rates of return on stocks. However, what is the likelihood the next decade will deliver the same.
7-Difficult Trading Rules To Follow In Bull Markets
As we wrap up the decade. it is a good time to review the 7-impossible trading rules to follow in a bull market. These rules are not new, or unique, but they are the foundation of long-term investing success.
Market & Investing Wisdoms For 2020
As we wave goodbye to the bull market of the 2010s, here are the rules for investing in whatever comes in the next decade.
The Stock Market Has Become A Private Club For The Elite
Despite Central Bank’s best efforts globally to stoke economic growth by pushing asset prices higher, the effect has been entirely consumed by those with actual savings, and discretionary income, available to invest.
“The Art Of The Deal” & How To Lose A “Trade War.”
Not only did the tariffs get delayed, but on Friday, it was reported that China and the U.S. reached “Phase One” of the trade deal, which included “some” tariff relief and agricultural purchases.
Democrats Stop Worrying & Learn To Love Deficits
The current path we are on is unsustainable. The remedies being applied today is akin to using aspirin to treat cancer. Sure, it may make you feel better for the moment, but it isn’t curing the problem.
The Myth Of The “Great Cash Hoard” Of 2019
While the bulls are certainly hoping the “cash hoard” will flow into U.S. equities, the reality may be quite different.
Earning Season’s Good, Bad & Ugly
With the third quarter of 2019 reporting season mostly behind us, we can take a look at what happened with earnings to see what’s real, what’s not, and what it will mean for the markets going forward.
The Most Important & Overlooked Economic Number
What's the most important economic number? GDP, Employment, claims....nope....those are all lagging indicators. If you want to know where you are headed look at the 85-component CFNAI. Here's why.
The Difference Between Investing & Speculation (10-Investing Rules)
In today’s market the majority of investors are simply chasing performance. However, why would you NOT expect this to be the case when financial advisers, the mainstream media, and WallStreet continually press the idea that investors “must beat” some random benchmark index from one year to the next.
Which Secular Bull Market Is It – 1950’s or 1920’s?
In a “secular bull’ market, the prevailing trend is “bullish” or upward-moving. In a “secular bear” the market tends to trend sideways with severe drawdowns and sharp rallies. However, what truly defines long-term secular markets are valuations, and whether those valuations are contracting or expanding.
A Correction Is Coming, Just Don’t Tell The Bulls…Yet.
A correction is coming, just don't tell the bulls just yet. A technical look at the rapid reversion of sentiment from bearish back to bullish. With more extreme extensions of technical indicators, it suggests a correction is likely over the next few weeks in the stockmarket.
The One Chart Every Millennial Should Ignore
The media is full of articles about the financial situation of Millennials in today’s economy. According to numerous surveys, they are saddled with too much debt, can’t secure higher wage-paying jobs, and are financially distressed on many fronts.
Corporate Profits Are Worse Than You Think
It isn’t just the deviation of asset prices from corporate profitability which is skewed, but also reported earnings per share. As I have discussed previously, the operating and reported earnings per share are heavily manipulated by accounting gimmicks, share buybacks, and cost suppression.
15-Extreme Risks & How You Can Navigate Them
A recent study revealed the top risks institutions are hedging for long-term. Here's what you can do.
Dow 650,000? We Are Already There!
DOW 650,000 - Just recently CNBC ran an article touting Ron Baron's call for the Dow to reach that astronomical level in just 50-years. Problem is that the INDU should ALREADY be at 650,000 - why isn't it?
Margin Debt Is Declining. Are The Bulls In The Clear?
In a recent weekly newsletter, I discussed the rather dramatic decline of short-interest in the S&P 500 which suggests a high degree of complacency by investors.
CEO Confidence Plunges, Consumers Won’t Like What Happens Next
Many conversations lately about negative CEO Confidence vs optimistic consumers Most of the bullish commentary centers around CEO's being wrong. But are they? We cover what historically happens next.
Bulls Get QE & Trade, Remain “Stuck In The Middle”
A review of the risks which keep the markets range-bound. Investors are b
Capitalism Is The Worst, Except For All The Rest – Part 3
Capitalism is the worst....except for all the rest. The final installment of our 3-part series on capitalism as we examine the fallacies of MMT, why deficits aren't self-financing, and why wealth inequality is actually a good thing.
This Is Nuts & The Reason To Focus On Risk
Since the lows of last December, the markets have climbed ignoring weakening economic growth, deteriorating earnings, weak revenue growth, and historically high valuations on “hopes” that more “Fed rate cuts” and “QE” will keep this current bull market, and economy, alive…indefinitely.
Dispelling The Myths Of Capitalism & The Value Of Prosperity – Part 1
Capitalism? Is it really broken? Or, has it just been distorted into an unrecognizable wealth transfer system? In the 1st of the 3-part series we discuss how we got here & why things seem to have gone awry.
Earnings Season & The Truth About Wall Street Analysis
When Carl Gugasian of Dewey, Cheatham & Howe rates Bianchi Corp. a “Strong Buy,” whose interest is that in? We dig into the conflict between WallStreet and You.
Peak Buybacks? Has Corporate Indulgence Hit Its Limits
Has the splurge in companies buying back their own shares to support asset prices and improve bottom-line EPS finally begin to lose its effectiveness? We dig into the data and what could cause buybacks to end altogether.
The Disconnect Between The Markets & Economy Has Grown
Since the 2009 lows the stock market has surged by more than 300% which should be representative of a surging economy. Yet, what we find is a market which has pulled from the future.
The Costs & Consequences Of $15/Hour – The Update
I first wrote about the consequences of hiking the minimum wage in 2016. A recent CBO study confirmed our previous take on the unintended consequences of hiking minimum wages.
8-Reasons To Hold Some Extra Cash
With the political, fundamental, and economic backdrop becoming much more hostile toward investors in the intermediate term, understanding the value of cash as a “hedge” against loss becomes much more important.
America’s Debt Burden Will Fuel The Next Crisis
Just recently, Rex Nutting penned an opinion piece for MarketWatch entitled “Consumer Debt Is Not A Ticking Time Bomb.” His primary point is that low per-capita debt ratios and debt-to-dpi ratios show the consumer is quite healthy and won’t be the primary subject of the next crisis.
Investors Dilemma: Pavlov’s Dogs & The Ringing Of The Bell
Inverted yield curves, Fed cutting rates, and more QE all seem to "the bell ringing" for investors to jump into stocks as markets rise. But, is this the bell ringing to buy stocks, or is it the bell ringing the top of the market?
This Is Still A “Sellable Rally”
In last Tuesday’s “Technical Update,” I wrote that on a very short-term basis the market had reversed the previously overbought condition, to oversold. This oversold condition is why we took on a leveraged long position on the S&P 500.
S&P 500 Plunges On Yield Curve Inversion
Yesterday, the financial media burst into flames as the yield on the 10-year Treasury fell below that of the 2-Year Treasury. In other words, the yield curve became negative, or “inverted.”
Technically Speaking: 5 Reasons To Be Bullish (or Not) On Stocks
Is the recent stock market correction just another "buy the dip" opportunity, or is there a greater risk than many investors realize?
When A Bond Bull Becomes A Raving Stock Bull
I have often been asked when I am going to become a raging stock bull again. As Treasury Rates approach our zero target the table is being set for value to return to the stock market.
Stocks In A Bloodbath, Look For A Sellable Rally
I have previously discussed the pending correction due to extreme deviations above long-term means. Trump's actions were simply the match that lit the fuse.
No Matter What The Fed Does, It’s Bullish?
We have repeatedly warned about the danger of the Fed hiking into a weak, highly leveraged economy. The Media said it was bullish. Now they are cutting and it's bullish. It can't be both.
Strongest Economy Ever? I Warned You About Negative Revisions
Over the last 18-months, there has been a continual drone of political punditry touting the success of “Trumponomics” as measured by various economic data points. Even the President himself has several times taken the opportunity to tweet about the “strongest economy ever.”
The 5-Mental Traps Investors Are Falling Into Right Now
I recently wrote about the “F.I.R.E.” movement and how it is a byproduct of late-stage bull market cycle. It isn’t just the “can’t lose” ideas which are symptomatic of bullish cycles, but also the actual activities of investors as well. Not surprisingly, the deviation of growth over value has become one of the largest in history.
The Lessons Poker Can Teach You About Investing
Over the last couple of weeks, I have laid out the bull and bear case for the S&P 500 rising to 3300, and the case for the Fed to cut rates. In summary, the basic driver of the “bull market thesis” has essentially come down to Central Bank policy.
F.I.R.E. – Ignited By The Bull, Extinguished By The Bear
The Etrade commercial aired during Super Bowl XLI in 2007. The following year, the financial crisis set in, markets plunged, and investors lost 50%, or more, of their wealth. However, this wasn’t the first time it happened.
Fed “Hopes” Spark Return Of Bullish Complacency
In this past weekend's newsletter we discussed the bull/bear case for S&P 3300. We now look at the #complacency behind it.
The One Lesson Investors Should Have Learned from Pension Funds
WIth a $5-7 Trillion shortfall in funding, it is a lesson that investors/savers also engage in which is simply a #math problem.
Everything You Are Being Told About Saving & Investing Is Wrong – Part 3
This final chapter is going to cover some concepts which will destroy the best laid financial plans if they are not accounted for properly.
1995 Rate Cut & The Case For The Final Leg Of The Bull Market
There have been many comparisons about the Fed using "insurance" #rate #cuts today versus 1995. We compare the financial and economic conditions of both periods to make the case.
Everything You Are Being Told About Saving & Investing Is Wrong – Part 2
While “Part One” focused on the amount savings required to sustain whatever level of lifestyle you choose in the future, we also need to discuss the issue of the investing side of the equation.
Everything You Are Being Told About Saving & Investing Is Wrong – Part I
Let me start out by saying that I am all for any piece of advice which suggest individuals should save more. Saving money is a huge problem for the bulk of American’s as noted by numerous statistics.
Socialism Rises Due To The Great American Economic Growth Myth
There is little denying the rise of “socialistic” ideas in the U.S. today. You can try and cover the stench by calling it “social democracy” but in the end, it’s still socialism.
Technically Speaking: Tops Are Processes, Bottoms Are Events
For the majority of investors, the recent rally has simply been a recovery of what was lost last year. In other words, while investors have made no return over the last 18-months, they have lost 18-months of their retirement saving time horizon. The decline was small last time. But what about next time?
Hope For The Best, Plan For The Worst
During very late stage bull markets, the financial press is lulled into a sense of complacency that markets will only rise. It is during these late stage advances you start seeing a plethora of articles suggesting simple ways to create wealth.
Powell Channels Bernanke: “Subprime Debt Is Contained”
Recent comments from Fed Chairman Powell with respect to corporate debt echoes what Bernanke said in 2007 about subprime mortgage debt.
Technically Speaking: Rothschild’s Investing Rule
Nathan Rothschild once quipped "You can have the top 20% and the bottom 20%. I will take the 80% in the middle." This is 80/20 rule of investing.
The 5-Laws Of Human Stupidity & How To Be A “Non-Stupid” Investor
This past weekend, I was digging through some old articles and ran across one that needed to be readdressed on“human stupidity” as it relates to investing.
Valuations, Returns & The Real Value Of Cash
Since the beginning of 2019, the market has risen sharply. That increase was not due to rising earnings and revenues, which have weakened, but rather from multiple expansion. In other words, investors are willing to pay higher prices for weaker earnings.
What Could Go Wrong? The Fed’s Warns On Corporate Debt
It is often said that no one saw the crash coming. Many did, but since it was “bearish” to discuss such things, the warnings were readily dismissed.
Technically Speaking: A Warning About Chasing This Bull Market
This past weekend, we discussed the breakout of the markets to all-time highs. The question I asked this past weekend was simply; “The bull market is back, but can it stay?”
Boomers Are Facing A Financial Crisis
A look at combined problems of pensions and lack of savings facing #babyboomers as they face retirement.
Auto Sales Aren’t Nearly As Strong As Reported
The previous recessionary warnings from autos was dismissed until far too late. It is likely not a good idea to dismiss it this time.
The Market’s Misread Of The Fed’s Minutes
Last week, the Federal Reserve released their March FOMC meeting minutes. Following the release, the markets surged higher as the initial reading by the markets was “the Fed is done hiking rates.”
The Message From The Jobs Report – The Economy Is Slowing
There is little argument the streak of employment growth is quite phenomenal and comes amid hopes the economy will continue to avoid a recessionary contraction.
Is The Stock Market As Confused As You Are About A Recession?
The market, and the yield curve, are trying to tell you something very important.
Are We Going To New Highs?
Let’s review the periods just prior to the onset of the last two bear markets to see if there are any similarities to today’s environment.
For The Average Investor, The Next Bear Market Will Likely Be The Last
The most critical aspect of the financial system is "trust" in it. After years of Wall Street "raping and pillaging" individuals to line their own pockets, the next bear market will likely destroy the remaining "trust."
Powell Keeps The Bond Bull Kicking
In a widely expected outcome, the Federal Reserve announced no change to the Fed funds rate but did leave open the possibility of a rate hike next year.
A Different Way To Look At Market Cycles
It is critically important to remain as theoretically sound as possible as a large majority of investors have built their portfolios on a foundation of false ideologies. The problem is when reality collides with widespread fantasy.
After Two Of The Greatest Bull Markets In U.S. History, Why Are Boomers So Broke?
There should be no one more concerned about YOUR money than you, and if you aren’t taking an active interest in your money – why should anyone else?
Stock Buybacks Aren’t Bad, Just Misused & Abused
There has been a lot of commentary as of late regarding the issue of corporate share repurchases. Even Washington D.C. has chimed into the rhetoric as of late discussing potential bills to limit or eliminate these repurchases. It is an interesting discussion because most people don’t remember that share repurchases were banned for decades prior to President Reagan in 1982.
Technically Speaking: Will The Next Decade Be As Good As The Last?
With the fundamental and technical backdrop no longer as supportive, valuations still near the most expensive 10% of starting valuations, and interest rates higher, the returns over the next decade will likely be disappointing.
Economic Theories & Debt Driven Realities
One of the most highly debated topics over the past few months has been the rise of Modern Monetary Theory (MMT). The economic theory has been around for quite some time but was shoved into prominence recently by Congressional Representative Alexandria Ocasio-Cortez’s “New Green Deal” which is heavily dependent on massive levels of Government funding.
The Fed Doesn’t Target The Market?
Earlier this month, I penned an article asking if we “really shouldn’t worry about the Fed’s balance sheet?” The question arose from a specific statement made by previous New York Federal Reserve President Bill Dudley...
Tax Cuts A Year Later – Did They Deliver As Promised?
Tax Cuts a Year Later - Did They Deliver as Promised? A look back at what we stated about #tax cuts prior to their enactment and where we are today. Did they lift up the average American? #GDP
Technically Speaking: Sell Today? Risk Vs. FOMO
The market is downright bullish. There is little reason to argue the point given the bullish trend since the December 24th lows. Of course, such is not surprising given the Fed’s dovish turn from tightening monetary policy to quietly putting the “punch bowl” back on the table.
The Fed Conundrum – Data Or Markets?
For the Fed, it is a choice between the lesser of two evils. The only question is did they make the right one?
Should We Really Not Worry About The Fed’s Balance Sheet?
Bill Dudley, who is now a senior research scholar at Princeton University’s Center for Economic Policy Studies and previously served as president of the New York Fed and was vice-chairman of the Federal Open Market Committee, recently penned an interesting piece from Bloomberg.
MMT Sounds Great In Theory…But
If you haven’t heard about Modern Monetary Theory, or “MMT” for short, by now, you will soon. It is highly likely that MMT will be increasingly touted by economists and politicians from both sides of the aisle, as the economic prescription, even panacea, to cure our economic ills.
Buffett, Shiller, Bogle & Tobin: Valuations, Forward Returns & Winning The Long-Game
Since the financial crisis, there has been much commentary written about the low forward returns on stocks over the subsequent 10-year period from high valuation levels. The chart below shows the forward 10-year returns from previously valuation levels.
10-Investing Axioms Every Investor Should Learn
The reality is that we can’t control outcomes; the most we can do is influence the probability of certain outcomes which is why the day to day management of risks and investing based on probabilities, rather than possibilities, is important not only to capital preservation but to investment success over time.
Fundamentally Speaking: 2019 Estimates Are Still Too High
Currently, there are few, if any, Wall Street analysts expecting a recession at any point in the future. Unfortunately, it is just a function of time until the recession occurs and earnings fall in tandem.
Should Retirees Worry About Bear Markets?
With debt levels rising globally, economic growth on the long-end of the cycle, interest rates rising, valuations high, and a potential risk of a recession, the uncertainty of retirement plans has risen markedly. This lends itself to the problem of individuals having to spend a bulk of their “retirement” continuing to work.
The Economy IS Slowing
In the “rush to be bullish” this a point often missed. When data is hitting “record levels” it is when investors get “the most bullish.” Conversely, they are the most “bearish” at the lows. But as investors, such is exactly the opposite of what we should do. It is just our human nature.
Understanding Market Cycles
I was digging through some old charts over the weekend and stumbled across this gem from AlphaTrends which explains the “best time to buy stocks.”
Are We In A Secular Bull Market?
Secular markets, bull or bear, are not defined by price movements.
The Problem With Wall Street’s Forecasts
Over the last few weeks, I have been asked repeatedly to publish my best guess as to where the market will wind up by the end of 2019. Here it is...
2019 Investing Resolutions
When the “bull is running” we believe we are smarter and better than we actually are. We take on substantially more risk than we realize as we continue to chase market returns and allow “greed” to displace our rational logic. Just as with gambling, success breeds overconfidence as the rising tide disguises our investment mistakes.
The Biggest Threat To The Market – Loss Of Confidence
From the previous peak in early December, the market has yet to even achieve a 38.2% retracement of that decline. It would not be surprising to see this rally try and recoup a full 61.8% of the decline over the next several weeks.
Why Gundlach Is Still Wrong About Higher Rates
Last Monday, Jeff Gundlach, famed bond fund manager and CIO of Doubleline, made an interesting comment during an interview with CNBC when he stated that the 10-year Treasury yield would top 6% by 2020 or 2021. 6% would be the highest yield since 2000.
You Have A “Trading” Problem – 10 Steps To Fix It
It is important to remember, that “Risk” is simply the function of how much you will lose when you are wrong in your assumptions. 2018 has been a year of predictions gone horribly wrong.
Technically Speaking: “Will Santa Visit Broad & Wall?”
IF “Santa” is going to visit “Broad & Wall” this year, it will most likely occur between the 10th through the 17th trading days of the month. Such would equate to Friday, December 14th through Wednesday, December 26th.
Why Another 50% Correction Is Possible
Now, I am not talking about a 20% correction type bear market. I am talking about a devastating, blood-letting, retirement crushing, “I am never investing again,” type decline of 40%, 50%, or more.
Misdiagnosing The Risk Of Margin Debt
By itself, margin debt is inert. Investors can leverage their existing portfolios and increase buying power to participate in rising markets. While “this time could certainly be different,” the reality is that leverage of this magnitude is “gasoline waiting on a match.”
The Fallacy Of The Positive Impact From Falling Oil Prices
Last week, I had a conversation with a friend of mine about the plunge in oil prices in recent weeks. One of the biggest fallacies about plunging oil prices, and subsequently lower gasoline prices, is that it is a huge windfall for consumers. Even President Trump stated as much last Wednesday morning.
The End Of The Tax Cut Boost
Last week, I touched on the issue of corporate profits and tax cuts. While the promise was that tax cuts were going to a massive boost to economic growth, the reality has been quite different.
The Economic Consequences Of Debt
As I have pointed out previously, the U.S. is currently running a nearly $1 Trillion dollar deficit during an economic expansion. This is completely contrary to the Keynesian economic theory.
GE – “Bringing Investment Mistakes To Life”
Last week, General Electric (GE) did something that many never thought would happen. They slashed their dividend to just $0.01 per share. We are talking about GE. A company which has been bringing “good things to life” for well over 100-years.
Why 80% Of Americans Face A Retirement Crisis
Fox Business recently discussed a new study showing that more Americans doubted they would be able to save enough for retirement than those confident of reaching their goals. There were some interesting stats from the study.
Is The Market Predicting A Recession?
Is the stock market a signaling a recession? A look at the historical performance of the S&P and #NBER recession announcements.
An Investor’s Desktop Guide To Trading
Throughout history, individuals have been drawn into the more speculative stages of the financial market under the assumption that “this time is different.” Of course, as we now know with the benefit of hindsight, 1929, 1972, 1999, 2007, and most likely 2019, were not different – they were just the peak of speculative investing frenzies.
Let’s Be Like Japan
There has been a lot of angst lately over the rise in interest rates and the question of whether the government will be able to continue to fund itself given the massive surge in the fiscal deficit since the beginning of the year.
Debts & Deficits: A Slow Motion Train Wreck
Without the passage of the C.R. the government was facing a “shut-down” just prior to the mid-term elections. So, rather than doing what is fiscally responsible for the long-term solvency and financial health of the country, not to mention the generations to come, they decided it was far more important to get re-elected into office.
The Risk Of An ETF Driven Liquidity Crash
Last week, James Rickards posted an interesting article discussing the risk to the financial markets from the rise in passive indexing.
The “Honey Badger” Market
There is a LOT of optimism in the markets currently. But why shouldn’t there be? Speaking at Davos, the head of world’s largest hedge fund says “If You’re Holding Cash, You’re Going to Feel Pretty Stupid”.
Technically Speaking: Revisiting Bob Farrell’s 10-Rules
As I noted this past weekend, 2017 was a year for the record books. Not surprisingly, the strong advance fostered a surge in investor optimism which pushed allocations to equities to the second highest level on record.
The “Exit” Problem
Market crashes are an “emotionally” driven imbalance in supply and demand. You will commonly hear that “for every buyer, there must be a seller.” This is absolutely true. The issue becomes at “what price.” What moves prices up and down, in a normal market environment, is the price level at which a buyer and seller complete a transaction.
Technically Speaking: This Is Nuts
The current market advance both looks, and feels, like the last leg of a market “melt up” as we previously witnessed at the end of 1999. How long it can last is anyone’s guess. However, importantly, it should be remembered that all good things do come to an end.
The “Fat Pitch” & Miss
While I remain long and invested in the markets on behalf of my clients, I focus and write about the significant risks that are currently present. I am fully aware a laissez-faire attitude towards these risks is ultimately likely to destroy large portions of my clients hard-earned, and irreplaceable, investment capital.
3-Myths About Tax Cuts
The Congressional Republicans rolled out an ambitious tax cut proposal last week promising a surge in economic growth, wages and employment without blowing out the deficit. Will that really be the outcome?
Investing Apathy & The Death Of Your Financial Goals
Over a long enough period, I agree, you will make money. But, simply making money is not the point of investing. We invest to ensure our current “hard-earned savings” adjust over time to provide the same purchasing power parity in the future. If we “lose” capital along the way, we extend the time horizon required to reach our goals.
10 Illustrated Truths About Investing & The Markets
This morning, as I was catching up on my reading, I stumbled onto this gem from Business Insider of an interview with the founder of Robinhood, a mobile app to let individuals trade stocks with no commissions.
13-Truths About How Money Really Works
There is an increasing amount of commentary which suggests this time is different. Active management of portfolios is no longer needed, as Central Banks continue to be supportive of the markets, so join in on the “passive indexing” sweeping the country.
Dalbar 2017: Investors Suck At Investing & Tips For Advisors
Several years ago, I began writing an annual update discussing Dalbar’s Quantitative Analysis Of Investor Behavior study. The study showed just how poorly investors perform relative to market benchmarks over time and the reasons for that underperformance.
The “Big Lie” Of Market Indexes
The “Big Lie” is that you can “beat an index” over an extended period of time. You can’t, ever. Let me explain.
Yes, Ms. Yellen…There Will Be Another Financial Crisis
That is a pretty bold statement to make considering that every one of her predecessors failed to predict the negative consequences of their actions. Will there will be another “Financial Crisis” in our lifetimes? Yes, it is virtually guaranteed.
The Illusion Of Declining Debt To Income Ratios
In some states, when a couple enters into divorce, the court may award “alimony,” or spousal support, to one of the former spouses for the express purpose of limiting any unfair economic effects by providing a continuing income to the spouse. The purpose is to help that spouse continue the “standard of living” they had during the marriage.
7-Trading Rules You Won’t Follow
As I discussed this past weekend, the current “bull market” seems unstoppable. Even on Twitter, investors have once again been lulled into the “complacency trap.”
The Unavoidable Pension Crisis
There is a really big crisis coming. Think about it this way. After 8 years and a 230% stock market advance the pension funds of Dallas, Chicago, and Houston are in severe trouble. But it isn’t just these municipalities that are in trouble, but also most of the public and private pensions that still operate in the country today.
Markets Overlooking A Clear & Present Danger?
There is in interesting dichotomy currently occurring within the economy. While consumer confidence, as reported by the Census Bureau, soared to some of the highest levels seen since the turn of the century, the hard economic data continues to remain quite weak.
The Long View – Rates, GDP & Challenges
There has been much debate about the current low levels of interest rates in the economy today. The primary argument is that the “30-year bull market in bonds”, due to consistently falling interest rates, must be near its end.
Markets Overlooking A Clear & Present Danger?
There is in interesting dichotomy currently occurring within the economy. While consumer confidence, as reported by the Census Bureau, soared to some of the highest levels seen since the turn of the century, the hard economic data continues to remain quite weak.
The World’s Second Most Deceptive Chart
Last week, I discussed the “World’s Most Deceptive Chart” which explored the deception of “percentage” versus actual “point” losses which has a much greater effect on both the real, and psychological, damage which occurs during a bear market.
The World’s Most Deceptive Chart
I received an email last week which I thought was worth discussing.
You Can’t Time The Market?
Since the markets were closed on Monday, there really isn’t much to update from this past weekend’s newsletter. The markets remain clearly and undeniably overbought and the risk of a short-term correction outweighs the potential for reward.
50% Correction Is Impossible! Really?
There is little doubt currently that complacency reigns in the financial markets. Nowhere is that complacency more evident than in the Market Greed/Fear Index which combines the 4-measures of investor sentiment (AAII, INVI, MarketVane, & NAAIM) with the inverse Volatility Index.
The Fatal Flaws In Your Financial Plan
Congratulations! If you are reading this article it is probably because you have money invested somewhere in the financial markets. That’s the good news. The bad news is the majority of you reading this article have probably NOT saved enough for retirement.
The Myth Of The “Passive Indexing” Revolution
There is little argument that Exchange Traded Funds, more commonly referred to as “ETF’s” have and will continue to change the landscape of investing.
The Real Value Of Cash
It’s the Fed’s fault. Over the past several years, the Federal Reserve has forced interest rates lower in an all-out assault on “cash.”
10-Steps To Curing The “Trading Addiction”
Those who’ve had any brush with addiction know an addict will go to any length to support the habit, including stealing, lies and deception. The addict is aided and abetted by co-dependent friends and family members who cover up for the addict’s bizarre behavior and pretend nothing’s wrong.
Why Trump’s 4% GDP Will Remain Elusive
For the umpteenth year in a row, mainstream economists and analysts are once again planting the seeds of hope for a return to stronger GDP growth. The White House has hoped for it for the last 8-years, and now President-elect Trump is all but promising a surge in economic growth.
Media Headlines Will Lead You To Ruin
Since investors are mostly individuals that have a “day job,” the majority of their “research” comes from a daily dose of media headlines. Therefore, since the media tends to “focus” their attention on “market moving headlines,” either bullish or bearish, investors tend to “react” accordingly.
Can Trumponomics Fix What’s Broken?
As you can imagine, I received quite a few comments from readers suggesting that each percentage of tax cuts will lead to surging corporate earnings and economic growth...
The Long-Term Investing Myth
During my morning routine of caffeine supported information injections, I ran across several articles that just contained generally bad investment advice and poorly formed analysis. Each argument was hinged on the belief that bull markets last indefinitely, bear markets are simply an opportunity to “buy” more, and investing for the long term always works.
Revisiting Why Benchmarking Is A Bad Strategy
Over the weekend, I was doing some research and stumbled across an article my friend Cullen Roche wrote a couple of years ago entitled “Can we All Agree to Stop Comparing Everything to the S&P 500”.
Correcting Some Misconceptions About A New Secular Bull Market
I recently penned a post discussing the idea of a “new secular bull market,” which, not surprisingly, garnered a good bit of push back from the “always bullish crowd.”
7 Impossible Trading Rules To Follow
Over the last two weeks, a lot of the bullish sentiment that was embedded in the market has now given way to fear.
The Bull Giveth, The Bear Taketh & You’re Not Passive
Over the last several months, in particular, the number of articles discussing the shift from “active management” to “passive indexing” have surged. I get it. The market seems to be immune to decline.
End Of The Bond Bull – Better Hope Not
It’s been really busy as of late to cover all of the topics I have wanted to address. One topic, in particular, is the bond market and the ongoing concerns of a “bond bubble” due to historically low interest rates...
Past Is Prologue: New Secular Bull Or A Repeat Of The 70’s
Last Monday, I discussed why you should be worried about corrections due to the damage inflicted upon your investment capital and the time required to “get back to even.” I received several emails stating we are in a new “secular bull market” and “indexing” is now the best approach.
Yes, You Should Worry About Market Corrections
One of the biggest reasons why investors consistently underperform over the long-term is primarily due to the extremely flawed advice promoted by Wall Street, because they have a product or service to sell you, and the media, because they don’t know better.
4-Tools Used To Win The “Beat The Estimate Game”
Over the weekend, I got a few tweets talking about some technical analysis currently being passed around the Internet suggesting the S&P 500 is about to make a significant move towards 2400.
Don’t Blame “Baby Boomers” For Not Retiring
In business, the 80/20 rule states that 80% of your business will come from 20% of your customers. In an economy where more than 2/3rds of the growth rate is driven by consumption, an even bigger imbalance of the “have” and “have not’s” presents a major headwind.