The Big Short Squeeze Is Coming
The latest rate hike announcement by the Fed sent stocks tumbling to the year’s lows. While last week’s market action was brutal, the good news is the markets are set up for a rather significant short squeeze higher.
Debt & Why The Fed Is Trapped
The massive debt levels provide the single most significant risk and challenge to the Federal Reserve. It is also why the Fed is desperate to return inflation to low levels, even if it means weaker economic growth.
Buffett Indicator Says Markets Are Going To Crash?
Stocks are far from cheap. Based on Buffett’s preferred valuation model and historical data, return expectations for the next ten years are as likely to be negative as they were for the ten years following the late ’90s.
Asset Bubbles & Forward Returns
Asset bubbles have been prevalent throughout history.
Deficit Reduction. Is It Reality Or A Mirage?
Recently, the Biden Administration started taking victory laps on deficit reduction.
Recession Signals Abound As Fed Hikes Rates
At the Jackson Hole Summit, Jerome Powell made it clear the Federal Reserve remains focused on combatting inflation despite recession signals rising in tandem.
Earnings Decline – Likely More To Go Before We Are Done
Last year, I wrote an article discussing that 2022 earnings estimates were too optimistic given the impending reversal of the economic “Sugar Rush” of massive liquidity injections.
Small Business Sales And The Running Of The Bull
Small business sales are the lifeblood of the economy.
The Rule Of 20 & Why The Bear Market Remains
The “Rule Of 20” says the “bear market” may just be resting despite much commentary to the contrary.
Buy Stocks Now? When It’s Time, You Won’t Want To.
Buy stocks in a bear market.
The Bear Market Is Over. Or, Is It Just Hibernating?
The bear market is over.
Paul Volker And 1982. Why Now Isn’t Then.
Jerome Powell isn’t Paul Volker, and this isn’t 1982.
Economic Slowdown Now, Recession Coming In 2023
Economic slowdown but no recession!
Pulling Forward Growth No Longer An Option
Pulling forward growth over the last decade remains the Federal Reserve’s primary tool for keeping financial markets stable while economic growth rates and inflation remained weak.
Investing Lesson Of Math Learned The Hard Way
Every investor must learn the one investing lesson in surviving the long game: how math works.
Wall Street Wins Again – SPAC Edition
As expected, Wall Street wins again.
No Recession? All Of A Sudden Yield Spreads Are Collapsing
ESG Underperformance Will Be Its Undoing
ESG underperformance will be the strategy’s eventual undoing.
MMT Policy Was Tried, And It Failed.
MMT Policy (Modern Monetary Theory), the grand experiment, was tried following the pandemic-driven shutdown of the economy.
Giant Corporations Are Causing Inflation?
Basic economics says that companies can only set prices at a level where the current supply will meet demand. Moreover, looking at prices in a vacuum is also very misleading because it doesn’t account for changes in the firm’s input or operating costs.
The “Bullwhip Effect” Will Frustrate The Fed
The “Bullwhip Effect” has gotten the media’s attention as of late. However, the causes, effects, and consequences to the market and monetary policy are not well discussed.
Fear Of Missing Out? Wall Street & Retail Hang On.
The “Fear Of Missing Out,” or “F.O.M.O.” is a centuries-old behavioral trait that began to get studied in 1996 by marketing strategist Dr. Dan Herman.
Earnings Recession Coming As Fed Hikes Rates
An earnings recession is coming as the Fed hikes rates which accelerates an economic recession.
“HODL” Finds Its Inevitable Flaw
“HODL,” an original misspelling taken on as a badge of courage by cryptocurrency investors, spread to “Meme stocks” during the runup in 2020 and 2021.
Oil Price Reversions – The Inevitable Outcome Of Recessions
An oil price and energy stock price reversion may be starting.
NFIB Signals A Recession Is Coming…Again
NFIB signals a recession is coming…again.
“Economic Hurricane” – Hyperbole Or Real Possibility?
An “economic hurricane” is coming.
Investors Are Terrified, So Why Aren’t They Selling?
Investors are terrified.
When Will This Bear Market End?
When will the bear market end?
Fed Pause? Markets Hope So, But Likely Not Yet.
Will the Fed pause its rate hikes as markets correct?
A “Lost Decade” Ahead For Markets?
Is a “lost decade” ahead for markets?
High Inflation May Already Be Behind Us
High inflation has captured the headlines as of late particularly as CPI recently hit the highest levels since 1981.
The Disinflationary Impact Of Fed Policy On Equities
The disinflationary impact of Fed policy on equities is coming.
The Right Strategy Is Critical When Investing During A Recession!
Investing during a recession can be a very difficult, and often dangerous, prospect.
Investor Sentiment Is So Bearish – It’s Bullish
Investor sentiment has become so bearish that it’s bullish.
“Don’t Be Bearish.” The Inevitable End Of Bad Advice
“Don’t be bearish.” That was the message delivered by a Wall Street Journal article in August 2021.
Bull Market In Bonds Set To Return With A Vengeance
A bull market in bonds is set to return with a vengeance as the Fed once again makes a policy mistake.
Buying Stocks Is Easy, Selling Is The Hard: 7 Rules to Manage Risk
Buying stocks is easy; the hard part is knowing when to sell.
Recession Warnings Rise, Limiting Fed’s Inflation Fight
Recession warnings are clearly on the rise. Much of the initial media fervor focuses on the inversion of the yield curve.
Is A Bear Market Lurking?
Is there a bear market lurking in the shadows?
Still A Bear Market Rally? Or, Is The Bull Back?
Is it still a “bear market rally?”
Wisdom Of Crowds Isn’t Always Wise To Follow
The “wisdom of the crowd” isn’t always wise to follow. A recent article by Scott Nations via MarketWatch made an excellent point.
Bear Market Anatomy – Revisiting Russell Napier’s Work (Annotated)
“Anatomy of a Bear Market” by Russell Napier is a “must-read” manuscript. Given current market dynamics, a review seems timely.
Yield Curve Inversions & Media’s Denial Of History
Yield curve inversion conversations are dominating the media to the point it almost sounds like the start of a bad joke.
Surge In Bond Yields Says It’s Time To Buy Bonds
The surge in bond yields suggests that we are nearing the ideal entry point to buy longer-duration bonds for capital appreciation and portfolio protection.
Bailouts And The Demise Of Capitalism And Free Markets
Bailouts are the root cause of the dysfunction of capitalism and the demise of free markets.
Is Cash Trash As Inflation Rages?
“Cash Is Trash” is a common theme as of late as inflation rages from the massive monetary interventions of 2020 and 2021.
Recession Risk: Rising Rapidly (Or, Could We Be In One Already?)
Recession risk is rising rapidly. In fact, it is possible that we may already be in one.
Fed’s QE Is Over (Until It Comes Back.)
The Fed’s QE is officially over.
An Earnings Reversion Is Coming
An earnings reversion is coming.
Hiking Rates Into Peak Valuations Is A Mistake
Hiking rates into a wildly overvalued market is potentially a mistake. So says Bank of America in a recent article.
No. Greedy Corporations Aren’t Causing Inflation
Greedy corporations are not causing inflation.
Geopolitical Risk Could Sideline The Fed
“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March.
March Stock Rally Doesn’t Negate The Risk Of A Bear Market
A March stock market rally is likely, but does that mean the risk of a bear market is over?
Market Pullback Or Bear Market?
Market pullback or bear market? Such seems to be the question on everyone’s mind as of late, given the rough start to 2022 so far.
Earnings Estimates Will Disappoint As Fed Tightens Policy
Earnings estimates are more deviated from long-term growth trends than at any point in history.
A 50-Percent Decline Will Only Be A Correction
A 50-percent decline will only be a correction and not a bear market.
Disinflation Is A Bigger Threat Than Inflation
Disinflation, and ultimately deflation, is a more significant threat than inflation over the next two years.
Potemkin Economy: Costs & Consequences
A Potemkin economy has lured the Fed, economists, and Wall Street analysts into a potentially dangerous assumption of economic normalcy.
Grantham: We’re In An Epic Bubble
Jeremy Grantham recently made headlines with his latest market outlook titled “Let The Wild Rumpus Begin.”
Fed Rate Hikes & Risks Of Financial Instability – Part II
What if the Fed can’t hike rates? It’s an interesting question and one we delved into in Part 1 – “Fed Won’t Hike Rates As Much As Expected.”
Rate Hikes: The Fed Won’t Hike Nearly As Much As Expected
Rate hikes will be far fewer than the markets currently expect.
“Don’t Fight The Fed”
“Don’t Fight The Fed.” But, unfortunately, that mantra has remained a “call to arms” of the financial markets and media “bullish tribes” over the last decade.
“Passive ETFs” Are Hiding The Bear Market
Passive ETFs are hiding a bear market in stocks.
Speculative Mania – Was 2021 The Peak?
“Speculative” is a word that aptly sums up the year 2021.
New Year “Investor” Resolutions For 2022
Here are my New Year “investor” resolutions for 2022.
Small Caps Could Be In Trouble In 2022
The reality is that despite media commentary to the contrary, debt-driven government spending programs have a dismal history of providing the economic growth promised. As a result, the disappointment of economic and earnings growth over the next year is almost a guarantee.
Bull Markets & Why We Repeat Our Mistakes
During bull markets, investors have a concise memory of previous bear markets. Such is why, throughout history, cycles repeat as lessons must get learned and relearned.
The Biggest Risk To Stocks Is Not The Fed
When the Fed initially starts hiking rates, it is usually during a strongly trending bull market. Much like a car rolling downhill in neutral, tapping the brakes initially doesn’t do much to curb the momentum. However, keep pushing on the brake pedal long enough, and the car will slow to stop. There are two things to take away from the chart below.
“Wipe Out” Below The Calm Surface Of The Bull Market
“Wipe Out” is an appropriate description of what is happening beneath the calm surface of the bull market.
Going To Cash Can Be As Costly As A Market Crash
Going to all cash in your portfolio to avoid a crash can be just as costly as the crash itself. A recent CNBC article quoted a $200 billion money manager suggesting “every stock market investor should be ready to go to cash.”
CNBC Index Of MoMo Stocks A Sign Of Exuberance
Financial history is littered with the remains of ideas that marked the peaks and troughs of markets over time. From magazine covers to the world’s tallest skyscrapers to new investment products and strategies. Most proved to be the result of the psychology at that time, whether it was excessive bullishness or overwhelming fear.
The Market Is Disconnected From Everything
The market is disconnected from everything. Throughout history, there are correlations you would expect to hold constant between the market, consumer confidence, and the economy.
The Fed’s Monetary Policy Has Screwed Americans
The Fed’s monetary policy has screwed Americans. Such is the basic premise of a recent Washington Times article discussing inflation.
Inflation vs. Deflation – Which Is The Bigger Threat In 2022?
Inflation vs. deflation – while headlines get filled with “inflation” concerns, historical data shows “deflation” remains a threat.
Could The Fed Trigger The Next “Financial Crisis”
Could the Fed trigger the next “financial crisis” as they begin to hike interest rates? Such is certainly a question worth asking as we look back at the Fed’s history of previous monetary actions.
Rising Interest Rates Matter To The Stock Market
Do rising interest rates matter to the stock market? Many in the financial media and advisory community are scrambling to locate periods where rates rose along with stocks. Has it happened? Absolutely. However, it was only a function of timing until it mattered.
Fed Issues Stock Market Warning As Valuations Surge
While the Fed notes valuations are elevated, the crucial message to investors gets obfuscated. From current valuation levels, the expected rate of return for investors over the next decade will be low.
Is Cash A Good “Risk” Hedge?
“Is cash a good hedge?” It’s a focus of a recent article discussing “fast” versus “slow” risk which examined the financial impact on equities and cash over long-term periods.
Charting The Stock Market “Melt Up,” & The Fed’s Naivety
Charting the stock market “melt-up” in prices, and the Fed’s naivety of the laws of physics may be of benefit to younger investors. After more than a decade of rising prices, accelerating markets seem entirely normal, detached from underlying fundamentals. As a result, new acronyms like “TINA” and “BTFD” get developed to rationalize surging prices.
2022 Earnings Estimates Still Too Bullish
Fundamentally speaking, there are more than a few indications that 2022 earnings estimates are still overly exuberant. However, the bullish optimism currently supports rising stock prices.
40% Of The Bull Market Is Due Solely To Buybacks
What If I told you that 40% of the bull market rally over the last decade was from buybacks alone? That may not be as crazy as it sounds.
The Bull & Bear Market Case – Part 2
While the promise of a continued bull market is very enticing, it is essential to remember that all markets ultimately complete a “full cycle.” Therefore, if your portfolio, and eventually your retirement, depends on the thesis of an indefinite bull market, you should at least consider the following charts.
Bob Farrell’s 10-Investing Rules For A “QE” Driven Market
Like all rules on Wall Street, Bob Farrell’s rules are not hard and fast. There are always exceptions to every rule, and while history never repeats exactly, it often “rhymes” closely.
The Bullish & Bearish Market Case
We dig into the bullish and bearish case for the market as we head into the end of the year. Currently, investors face a conundrum between year-end seasonality and the Fed starting to taper its bond-buying program.
Technically Speaking: Is The Risk Of A Bigger Correction Over?
Is the risk of a more significant correction over now that the expected 5% decline is complete? That was a hotly debated question after this past weekend’s newsletter supporting the idea of a reflexive rally into year-end.
Why We Aren’t Repeating The Roaring 20’s Analog
No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here?
The 5000-Year View Of Rates & The Economic Consequences
The fact we have the lowest interest rates in 5000-years is indicative of the economic challenges we face.
Technically Speaking: Stocks Bounce Off The Lows. Time To Buy?
On Monday, stocks solidly cracked below the 50-dma, but the bounce off the lows has investors asking if it’s “time to buy?”
Deficit Deniers & 40-Years Of Economic Erosion
After 40-years of economic erosion, there are still deficit deniers.
Wall Street Sets Its Sights On S&P 5000
We don’t disagree the S&P 500 could well hit a target of 5000. But, let us be honest about the reasons why...
What’s Wrong With Gold? Absolutely, Nothing.
Gold. What’s wrong with it? From spiking inflation, falling real interest rates, and massive money printing, it seems logical that gold, a touted inflation hedge, should be rising. Yet, so far this year, gold has done little.
Technically Speaking: The Bulls Warn The Fed Not To Taper
As the Fed started to talk about “taper,” the “bulls” sent a stern warning with a 2% “crash” they shouldn’t. After a couple of weeks of several Fed speakers discussing the need to reduce monetary accommodation, a quick sell-off brought had Powell singing a “dovish” tone at the recent Jackson Hole summit.
Japanization: The S&P 500 Is Tracking The Nikkei Of 1980
The question of Japanization in the U.S. continues as the S&P 500 tracks the Nikkei of 1980.
This Won’t End Well – Gen Z’ers Take On Debt To Invest
Young investors are taking on personal debt to invest in stocks.
Technically Speaking: “Pet Rocks” & Other Signs Of A Rich Market
“Pet Rocks” first appeared in the mid-70s as a novelty item. Just recently, digital NFT’s of “pet rocks” sold for over $100,000.
Fastest Bull Market In History As S&P 500 Doubles
In the fastest bull market in history, the S&P 500 doubled from its pandemic lows.
Did The Fed’s Monetary Policy Experiment Just Fail?
Did the Fed’s “monetary policy experiment” fail?
When Is The Next Bear Market? 3-Things Will Tell You
The question I get most often is “when is the next bear market?” There are three specific items that tend to predict bear markets and recessions with some accuracy.
The Data Shows The Fed Is Behind The Surging Wealth Gap
The data shows the Fed is behind the surging wealth gap.
Technically Speaking: Past Performance Is A Guarantee?
“Past Performance Is no guarantee of future of results.” Such is the disclaimer below every performance chart produce by the financial marketplace.
A Grossly Defective Product. How Strong Is The Economy Really?
A few years ago, Paul Wallace penned an article entitled: “GDP Is A Grossly Defective Product.” The recent release of the Q2-2020 report reminded me of it as the media fawned over the 7.6% print.
Technically Speaking: The Markets Next "Minsky Moment"
In this past weekend’s newsletter, I discussed the issue of the markets next “Minsky Moment.”
Shortest Recession In History Sets Up Next Recession
It’s now official that the recession of 2020 was the shortest in history.
Monetary Policy Is Not Expansionary
Monetary policy is not expansionary despite widespread belief otherwise.
Knowledge Vs. Experience: Why Most Investors Wind Up Losing
Knowledge vs. experience. When it comes to investing, such is what separates long-term success from failure.
Technically Speaking: Is The Retail Investor Rampage Over?
Is the retail investor rampage over?
MacroView: Bond Yields Send An Economic Warning
Bond yields are sending an economic warning as this past week 10-year Treasury yields dropped back to 1.3%.
Technically Speaking: Warnings From Behind The Curtain
“Warnings From Behind The Curtain” almost sounds like the title of a good “Cold War” fiction novel.
Capitalism Does Not Equal Corporatism - Pt. 2
In Part-2 of “Capitalism” does not equal “Corporatism,” we delve into why bailouts support corporatism and how to fix the system.
ESG Investing – The Great Wall Street Money Heist
Wall Street is once again in the midst of a “money heist” from naive investors.
Technically Speaking: COT Report Shows Stage Set For Volatility
A couple of weeks ago, in “Warning Signs A Correction Is Ahead,” we said quite a few indicators set the stage for a pick-up in volatility.
Technically Speaking: Slowly At First, Then All At Once
Bull markets always seem to end the same – slowly at first, then all at once.
You Can’t Create Permanent Inflation From Artificial Growth
Much like “Humpty Dumpty,” despite the Fed’s best efforts, you can’t create permanent inflation from artificial growth.
Technically Speaking: Warning Signs A Correction Is Ahead
After a decent rally from the recent lows, there are multiple warning signs a correction approaches.
Have Stocks Already Priced In The “Economic Boom?”
The media is buzzing with claims of an “Economic Boom” in 2021.
Bear Markets Matter More Than You Think (Part-2)
Bear markets matter, and they matter much more than you think.
Technically Speaking: Picking Up Pennies In Front Of A Steamroller
I can understand the confusion when this past week I discussed the issue of “If everyone sees it, is it still a bubble?”
Technically Speaking: Yardeni – The Market Will Soon Reach 4500
“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives
Confusing Market Crashes & Bear Markets. (Part-1)
Over the long term, confusing market crashes and bear markets can be detrimental to investor outcomes.
Technically Speaking: If Everyone Sees It, Is It Still A Bubble?
“If everyone sees it, is it still a bubble?” That was a great question I got over the weekend.
NFIB Data Says It’s Only An Economic Recovery
The recent NFIB survey suggests we are only in an economic recovery, not an expansion.
Technically Speaking: Forward Returns Continue To Fall
One of the interesting aspects of “bull markets” is the further they go, the lower forward returns fall.
#MacroView: No, Bonds Aren’t Overvalued. They’re A Warning Sign.
There has been much commentary suggesting bonds have gotten overvalued due to historically low rates.
Low Future Returns Requires A “Real” Bear Market
When there is a discussion of low future returns due to valuations, what gets missed is that such requires a bear market.
#MacroView: Siegel On Why Stocks Could Rise 30%
During a recent CNBC interview, Jeremy Siegel suggested stocks could rise another 30% before the boom ends.
There Is No Way This Bull Market Doesn’t End Very Badly
There is no way this bull market doesn’t end very badly.
#Fundamentally Speaking: Earnings Optimism Explodes
As markets surge to record highs, analysts are rushing to ratchet up earnings estimates as optimism explodes.
Survey Of Retail Investors Shows The Blind Lead The Blind
In retail investing, do the “blind lead the blind?” Such was a question I asked recently about young investors who are “Long Confidence And Short Experience.”
Biden’s Stimulus Will Cut Poverty By 40% – For One Year.
President Biden’s stimulus bill “will cut the number of children in poverty by 40%,” according to the Center on Budget and Policy Priorities.
#MacroView: Could A “Transaction Tax” Be A Good Thing?
I recently discussed why “Free, Isn’t Really Free” regarding the retail investor. While “free trades” have certainly reduced the transaction costs, the selling of data to the highest bidder has likely cost investors more than they saved.
The Fed Has Forced Investors To Take On Excess Risk
Since the “Financial Crisis,” the hope was that inflating asset prices would trickle down into economic growth.
Payment For Order Flow & The Fleecing Of The Retail Investor
The fleecing of retail investors continues as “payment for order flow” expands.
Retail Investors Are Long Confidence And Short Experience
In a “market mania,” retail investors are generally “long confidence” and “short experience” as the bubble inflates. While we often believe each “time” is different, it rarely is. It is only the outcomes that are inevitably the same.
Sugar Rush! Why The Economy Will Run Hot, Then Crash
The expected “sugar rush” from more stimulus is why the economy will “run hot” then crash. As every parent knows, giving a child too much “sugar” leads to a “rush” of energy. Then comes the crash, where you find them in some odd place taking a nap.
Powell Changes The Rules On QE
The markets took a tumble to start this week as rising interest rates and inflationary pressures begin to weigh on outlooks. Those worries quickly diminished as Jerome Powell changed the rules to reassure Wall Street that “QE” is here to stay.
The Only Reason To Be “Bearish” Is “No One Is Bearish”
More than 90% of investors believe the economy will be more robust in 2021, with a consensus it’s a V-shape recovery. For the first time since January 2020, chief investment officers want to increase capital spending rather than improve balance sheets.
Howard Marks On Speculative Manias
One of my favorite investing legends is Oaktree Management’s Howard Marks. His investing wisdom and in-depth knowledge of investor psychology and market dynamics are unparalleled. Given the “speculative mania” we continue to watch in the market, I thought a review of some of his previous thoughts is appropriate.
Powell Is Wrong. More Stimulus Won’t Create Employment
As discussed in Friday’s #Macroview, stimulus, mainly when it comes from debt, does not create organic economic growth. In the second part of this analysis, we delve into why Powell is wrong when he says more stimulus will solve the employment problem.
Bull Mania & The Charge Of The Light Brigade
2021 has certainly started off interesting. From Reddit readers chasing the most heavily shorted stocks, to the new Administration discussing more stimulus, investors have had plenty to deal with. A market review seems appropriate as the bulls seem to remain bulletproof even as the mania grows.
The Fed, Zombies, & The Pathway To Japanification
The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles. They are also aware that most policy tools are likely ineffective at mitigating financial risks in the future. Such leaves them being dependent on expanding their balance sheet as their primary weapon.
The Illusion Of Soaring Savings Amid Rising Economic Uncertainty
The illusion of surging savings rates or the decline in the debt-to-income ratios obfuscates the real economic problems and fosters the belief that monetary policies are working. They aren’t.
The Problem With Analysts Forecasts
We can’t predict the future. If we could, fortune tellers would all win the lottery. They don’t, we can’t, and we aren’t going to try. However, this doesn’t stop the annual parade of Wall Street analysts from putting out forecasts on the S&P 500.
NFIB Survey: Sends A Strong Warning About Small-Cap Stocks
In September 2019, I wrote “NFIB Survey Trips Economic Alarms,” Of course, it was just a few short months later the U.S. economy fell into the deepest recession since the “Great Depression.” The latest NFIB survey is sending a strong warning to investors piling into small-cap stocks.
Yes, Virginia. There Is A Stock Market Bubble.
As we enter 2021, there are two myths told to investors to support the bull market narrative. The first, as we debunked recently, is that low-interest rates justify high valuations. The second is that since valuations are not as high as the “dot.com” crisis, there is no “stock market bubble.”
Why There Is Literally No “Cash On The Sidelines.”
In the current bull market advance, few people are willing to sell, so buyers must keep bidding up prices to attract a seller to make a transaction. As long as this remains the case, and exuberance exceeds logic, buyers will continue to pay higher prices to get into the positions they want to own.
Why The Second Stimulus Won’t Have Much Economic Impact
In October, I discuss how the “2nd Derivative Effect” would mute the impact of future stimulus programs. With the passage of the $900 billion stimulus package, we can update the estimates for the economic impact heading into 2021.
Shades Of 1999 As “Market Mania” Returns In 2020
“Maybe this time is different. Those words, supposedly the most dangerous to utter in the investing realm, came to mind amid the frenzied pops in the highly anticipated initial public offerings recently.” That quote was from Randall Forsyth discussing why the current market mania reminds him of the “Shades of 1999.”
Yellen’s “Arranged Marriage” To The Fed
Recently, President-Elect Joe Biden named Janet Yellen to be his administration’s Treasury Secretary. Yellen quickly proclaimed the reason “I became an economist was because I was concerned about the toll of unemployment on people, families, and communities.” Such provides excellent commentary, but her track record as Federal Reserve Chairman shows she is more for the top 10% of the economy than the bottom. In reality, and what the markets already suspect, her appointment is an “arranged marriage” to the Fed.
A Major Support For Asset Prices Has Reversed
In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed.
Shiller: ECY & Justification For Sky-High Stock Prices
There is much to debate about the current level of interest rates and future stock market returns. However, what is clear is the 40-year decline in rates did not mitigate two extremely nasty bear markets since 1998, just as falling rates did not mitigate the crash in 1929 and the subsequent depression.
Earnings Growth Will Disappoint In 2021
It’s that time of year when Wall Street analysts started trotting out the predictions for earnings growth and stock market targets for the coming year. Unfortunately, each year these overly optimistic estimates are ground down as the year progresses. Next year will be no different as earnings growth will disappoint in 2021.
The Energy Rally Is Likely Premature
The rally in energy companies is likely premature. To understand why such may be the case, we have to review a bit of history.
The “Roaring 20’s” – The Fundamental Problem Of The Bullish View
Recently, Ed Yardeni discussed his view of why another “Roaring 20’s” may lie ahead. However, while I certainly can appreciate his always “bullish optimism,” there is a significant fundamental problem with his view.
Technically Speaking: Investors Go “All-In” Without A Net
We have recently written a couple of posts about the “exuberance” that has invaded the market since the election. Such is often seen near short- to intermediate-term peaks in markets as investors go “all-in” without a net.
#MacroView: A Vaccine And The “New New Normal”
Moderna and Pfizer recently announced they had potential vaccines for COVID-19 that are more than 90% effective. With that, the market surged, and a rotation into “economically sensitive” sectors occurred. While a “vaccine” will eventually come to the market, it will only ensure a return to the “New New Normal.”
Buffett Indicator: Why Investors Are Walking Into A Trap
“The stock market is not the economy.” Such has been the “Siren’s Song” of investors over the last couple of years as valuation expansion has been the sole driver of the market’s performance. However, given that corporations derive their revenue from economic activity, the “Buffett Indicator” suggests investors may be walking into a trap.
The Rescues Are Ruining Capitalism
I want to discuss a recent WallStreet Journal article by Ruchir Sharma entitled “The Rescues Ruining Capitalism.” We talk much about the bailouts and stimulus programs related to the economic shutdown and pandemic. However, the bailouts began back in 2008 when the Federal Reserve intervened with the insolvency of Bear Stearns.
3-Reasons Why There Really Is No Housing Shortage
One of the most recent mantras in the financial media is that housing prices rise because there is an inventory shortage. While it is an excellent headline for “getting clicks,” the are 3-reasons why there really is NO housing shortage.
Why Debt-To-Income Ratios Are Worse Than They Appear
I recently published an article discussing why “recessions” are a good thing by reverting debt buildups excesses during expansions. The argument against debt reversions is always the same in that “debt-to-income” ratios low.
Policies Over Politics. Whoever Wins, We All Lose
As we near the 2020 Presidential election, rhetoric from both sides is ramping up. Depending on your personal “echo chamber” of social media, you are likely confident why your candidate is the best choice, and the opposition is the worst. However, when it comes to economic prosperity and the financial markets, who is the best choice? To answer that question, we will focus on the “policies,” not the “politics.”
Neel Kashkari Is The Definition Of “Moral Hazard”
Neel Kashkari, in a recent CNBC interview, said, “I don’t see any moral hazard here“ when asked if the Fed’s massive liquidity injections have blown a bubble. What exactly is the definition of “moral hazard.”
Recessions Are A Good Thing, Let Them Happen
It is a given that you should never mention the “R” word. People immediately assume you mean the end of the world: death, disaster, and destruction. Unfortunately, the Federal Reserve and the Government also believe recessions “are bad.” As such, they have gone to great lengths to avoid them. However, what if “recessions are a good thing,” and we just let them happen?
More Stimulus And The 2nd Derivative Effect
There is currently much hope for another fiscal stimulus package to be delivered to the economy from Congress. While President Trump recently doused hopes of a quick passage, there a demand for more stimulus by both parties. While most hope more stimulus will cure the economy’s ills, it will likely disappoint due to the “2nd derivative effect.”
CBO – The “One-Way Trip” Of American Debt
The amount of outstanding debt, and the subsequent deficit, has long been a problem in the U.S. For the last two decades, policymakers have made annual promises for more substantial economic growth. Yet with each passing year, growth rates weaken, and economic prosperity worsens.
Tudor’s 10-Rules To Navigate Q4-2020
Whether it is Paul Tudor Jones or any other great investor throughout history, they all had one core philosophy in common; the management of the inherent risk of investing.
The Astonishing Lack Of Value In Value
We have recently been discussing the lack of performance in value versus growth. Such is historically the case during the late-stage, exuberance-driven, bull markets. However, not everything classified as a “value stock” is necessarily a value. The problem today, more so than at any point previously, is the astonishing lack of value in “value.”
Value, Margin Of Safety, & The Art Of Doing Nothing
Over the last several months, we have discussed the remarkable underperformance of value versus growth. While many investors quickly dismiss the performance gap under the guise of “this time is different,” it has important longer-term implications. In today’s missive, we want to discuss value, the margin of safety, and the real art of “doing nothing.”
Newton, Physics & The Market Bubble
I have previously discussed the importance of understanding how “physics” plays a crucial role in the stock market. As Sir Issac Newton once discovered, “what goes up, must come down.”
5-Reasons The Fed’s New Policy Won’t Get Inflation
At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.
#MacroView: 5-Reasons The Fed’s New Policy Won’t Get Inflation
At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.
A Tale Of Two Bull Markets
It’s a tale of two bull markets. One part of the market is trading as you would expect with near depressionary economic numbers. The only description for the other part is “insane.”
March Was A Correction, Bear Market Still Lurks
As we have been discussing, this past week, the S&P 500 index set an all-time high. Importantly, the breakout to all-time highs confirms the 35% decline in March was only a correction and not a bear market. The implications are important as the change of definition suggests a bear market still lurks for the full-market cycle to complete.
Earnings Don’t Support Bullish Thesis
With the second quarter of the 2020 reporting season mostly behind us, and with markets testing “all-time” highs, do earnings support the bullish thesis? Such is the fundamental question surrounding the debate over the record deviation between “momentum” and “growth.”
Why Soros Just Called The Market A Bubble
Soros’ view on the pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market, creating a feedback loop between the markets and fundamentals.
Fed Wants Inflation But Their Actions Are Deflationary
A recent CNBC article states the Fed will make a major commitment to ramping up inflation. How is this different than the past decade of promises for higher inflation? More importantly, while the Fed may want inflation, their very actions continue to be deflationary.
Universal Basic Income Is Not An Economic Savior
According to a new study by the left-leaning Roosevelt Institute, a universal basic income could permanently make U.S. economy trillions of dollars larger. While such socialistic policies sound great in theory, history, and data, show it isn’t the economic savior it is touted to be.
Retirement Confidence Declined Despite A Surging Market
Despite the surging stock market from the March lows, trillions in liquidity support from the Fed, retirement confidence declined.
Navigating The Tech Bubble & Living To Tell About It.
There has been a growing concern over Technology stocks as investors “Party Like It’s 1999.” While no two periods are the same, the outcomes often are. For longer-term investors, if we are amid another “Tech Bubble,” the biggest challenge is navigating it and “living to tell about it.”
Value Is Dead. Long Live Value Investing
Value (investing) is dead. Long live value investing. Such certainly seems to be the mantra as investors continue to pile into growth stocks while rationalizing valuations using methodologies which historically have not worked well.
Technically Speaking: “Golden Cross” Arrives, Are The Bulls Safe?
In this week’s “Technically Speaking,” the “Golden Cross” arrives, but are the bulls safe? As noted two weeks ago, is the 50/200 dma crossover is historically bullish for equities. However, with markets facing one of the worst earnings declines on record, could overly exuberant investors be walking into a trap?
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?
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%.
“Savings Mirage” Won’t Save The Economy
The fiscal and monetary responses to the “coronavirus” created a surge in savings. While many hope those savings will go back to work, the “savings mirage” won’t save the economy.
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.
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.
An Investor’s Desktop Guide To Trading – Part II
Once a year, I post a list of investing rules of great investors in history. Experience is a valuable commodity and these rules can keep you from learning the hard way.
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.”
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.
Debt & The Failure Of Monetary Policy To Stimulate Growth
Economists are stunned by why economic growth remains at low levels a decade after the last recession. Here's why.
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.
Has The Fed Done It? No More Recessions?
A recent comment from Chamrath Palihapitiya last week suggests that may be the case. An award to an aspiring economist who wants to study ending recessions. But are #recessions a bad thing?
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.
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.
A Monthly Signal Review For The Market
With the month of February now officially in the books, we can take a look at our long-term monthly indicators to see what they are telling us now. Is the bull market back?
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.
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.
The Rise Of Robots & The Risk To Passive
In Tuesday’s post, “A Shot Across The Bow,” I discussed the recent “Tech Wreck” and the warning sign that was delivered when trading algorithms begin to run in the same direction.
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.
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.