A bear market occurs when the major indices continue to go lower over time. They will hit new lows. More important, their highs will be lower than before as well. The average length of a bear market is 367 days. The conventional wisdom says it usually lasts 18 months. Bear markets occurred 32 times between 1900 and 2008, with an average duration of 367 days. They typically happened once every three years.
Last week, yields on the German 10-year Bund and 10-year U.S. Treasury notes hit record highs for 2015, rising 85 basis points and 72 basis points, respectively, since their lows this year. Rather than trying to deter the selloff, European Central Bank President Mario Draghi fanned the flames on June 3, saying that European bond investors should expect greater volatility amid a stronger economic outlook and higher inflation expectations. Credit Suisse equities analysts take things a step further, forecasting that bonds are entering a multi-year bear market.
Myriad changes to the financial structure have seemingly safeguarded the financial system from another 2008-style crisis. The big Wall Street financial institutions are these days better capitalized than a decade ago. There are "living wills," along with various regulatory constraints that have limited the most egregious lending and leveraging mistakes that brought down Bear Stearns, Lehman and others. There are central bank swap lines and such, the type of financial structures that breed optimism. Read More
We are barely out of the gates in 2018 and the S&P 500 is up over 4%. From just looking around me it is clear entrepreneurs and consumers are optimistic about the future. For much of the last decade the general public wouldn't touch equities with a ten foot pole. Now people are taking on debt to buy as much cryptoassets as possible. I don't share this optimism and primarily look for investments outside of the U.S. and in special situations and investments that may have low or negative correlation to the general direction of the market. Seven reasons why I want to be very careful going into 2018: Read More
It is human nature to allow emotions such as fear, greed and egotism get in the way. Overconfidence is one of the biggest killers of portfolios. Barber and Odean in a 2000 paper show that “after accounting for trading costs, individual investors underperform relevant benchmarks. Those who trade the most realize, by far, the worst performance. This is what the models of overconfident investors predict” (http://faculty.haas.berkeley.edu...)
In 2017 we absolutely shattered the all-time record for retail store closings in a single year, and this year it looks like we are going to shatter the record once again. In fact, there are some that are projecting that up to 9,000 retail stores could close by the time that we get to the end of this calendar year. Already, the amount of retail space that has shut down is simply jaw-dropping. If you total up all of the retail store closings that have been announced so far in 2018, it accounts for 77 million square feet of retail space. Let that number sink in for a bit. Many shopping centers and strip malls around the country already have a post-apocalyptic feel to them, and more “space available” signs are going up with each passing day. Read More
I live in San Diego and observed a very interesting phenomenon recently in the local real estate market. It looks like in early 2011, one or more banks sent out a small flood of properties on the market. And these properties sat there for a while and got a few price cuts as it became apparent that the demand was just not there. Eventually most of those properties have disappeared (presumably sold, or maybe delisted). And since then, NOTHING. I mean virtually NOTHING has hit the market recently. I assume that potential sellers and banks saw what happened and have decided not to shake loose any more shadow inventory.
Good short-term returns, moreover, increase egos, and complacency comes into play. One of the biggest reasons is that the information is all there transparently, so there is no such thing as a free lunch. Remember, all the information about companies is publicly available and there are people whose job it is to look at this information and weight the pros and cons of all that information.
Waverton Investment Management (Waverton) is an independent, owner-managed investment management firm based in London. The cornerstone of our business is the active management of investment portfolios for institutions, advisers, family offices, charities and high net worth individuals via segregated portfolios or through specialist funds. As of 31st December 2017, Waverton had approximately £5.5 billion of assets under management, employing over 120 staff.
Last week more than a handful of subscribers alerted me to Jim Rickards’ beliefthat China has pegged the SDR (an IMF reserve currency) Gold price from 850-950 SDR/oz and this is what is impacting the Gold price. Rickards writes that the peg is too cheap given the scarce supply of Gold and that the IMF will print trillions of SDRs during the next global financial crisis. Read More
The “curse of the seventh year” refers to how, in recent decades, Octobers in years ending with seven (1987, 1997, and 2007) have been negative for markets. The pre-financial crisis bull market ended this month 10 years ago, while the Dow dropped more than 12% over October 1997. “Black Monday,” which still stands as the biggest single-day percentage decline on record, occurred in October 1987.
The mirage that we are still in a strong bull market, and not on the brink of a bear one, has more to do with this year’s fast-rising earnings than a sharply falling stock market, which is typically what leads investors to run for safety. The classic definition of a bear market is when a stock market average such as the Dow or the S&P 500 has dropped 20 percent from its highs. But that’s probably not the best one. The more important factor to consider when gauging whether investors are feeling upbeat about stocks, and, by extension, the economy, is what they are willing to pay for the earnings that those companies generate.
Two important institutional changes since the late 1960s also have affected the composition of financial asset holdings of households. One is the growing prevalence of pension funds. Since 1960, the share of financial assets that pension funds comprise grew from a little under 7% to 27%. This growth has been due in part to the introduction of 401k, 403b, and Keogh accounts that have allowed households to make tax deductible contributions to retirement plans with significant control over the disposition of those investments. In addition, many large employers have switched from defined-benefit to defined-contribution retirement plans, again allowing households to decide how much of their retirement funds to invest in the stock market. These changes began to accelerate in the 1970s. Prior to these changes, many businesses either adopted “pay-as-you-go” pension plans with no significant contributions to the stock market, or restricted their investments to ultra-safe assets, such as government securities.
A Free-Thinker – someone whose mind is not bound by any chain, free to explore the great abyss unhindered by fear, emotion, or ideology. In reality, it is outside the box free-thinkers, who are the engines of social change and ingenuity, often leading society into new directions not yet seen before. They represent a voice of authenticity and uniqueness in a world that is all too filled with conformity and linear thinking. While the achievements are applauded by future generations, in the present they are often looked down upon, feared, laughed at, and even seen as crazy for their unique perspectives on life. It is often a lonely road for that of a truly unleashed free-thinker. Read More
The noose appears to be tightening further around the law-less behaviors of the Obama administration in their frantic efforts to protect former Secretary of State Hillary Clinton from lawsuits seeking information about former Secretary of State Hillary Clinton's private email server and her handling of the 2012 terrorist attack on the U.S. Consulate in Benghazi, Libya.
The fundamental drivers for Gold and the US Dollar are similar and that is why they typically trend together. Negative and/or falling real rates drive Gold and the same drives the greenback though with respect to differentials between the other competing currencies. When real rates are rising or strong in the US that is bearish for Gold and bullish for the US Dollar. The opposite is also true. And with the US Dollar being the global reserve currency, it naturally competes with Gold, which is an alternative. All being said, history as well as recent action suggests that weakness in the stock market is more crucial to Gold’s future than weakness in the US Dollar. Read More
During bear market periods, investing can be risky even for the most seasoned of investors. A bear market is a period marked with falling stock prices. In a bear market, investor confidence is extremely low. Many investors opt to sell off their stocks during a bear market for fear of further losses, thus fueling a vicious cycle of negativity. Although the financial implications of bear markets can vary, typically, bear markets are marked by a 20% downturn or more in stock prices over at least a two-month timeframe.
"We believe 2018 marks the beginning of a wide trading range (2400-3000) that could last several years. While the price damage may not be extreme at the index level, it may feel and look a lot like a bear market. We think this "rolling bear market" has already begun with peak valuations in December and peak sentiment in January. We have a mid-June 2019 target for the S&P 500 of 2,750," Wilson says.
High unemployment and high inflation will have negative impact on home prices IMO – it is coming. Will the fed fight Stagflation like Paul Volker fed did with high fed fund rates? Will supply and demand market forces wrest the shadow inventory from the bankers in the next 5 years or will the supply chain remained clogged with squatters and inflated balance sheets?
Add another nail into our society. Education isn’t to raise the cultural level of society, it’s ONLY to get a job. SAD. I suppose Taco Bell and MacDonalds should make prep “colleges” for thier future employees. That way they can work their “education” off and not receive wages. My good God, look at how enslaved we are as a people, yet we still vote against our own benefit. Sad. My $20,000 credit card that was used to try and stay in a over-priced home, I walked from, but if it was used to educate me, I would be bound forever. Anyone see a problem here?
Now, entrepreneurial creativity and innovations are not going to make it into any models that economists can concoct. Because we simply do not have the tools to model that kind of complexity. Let’s dive into George’s theory of “an economics of disorder and surprise that could measure the contributions of entrepreneurs,” and extrapolate out what it means for us.
It is difficult to find the words to describe just how serious America’s trade war with China is becoming. As you will see below, the two largest economies on the entire planet are on a self-destructive course that almost seems irreversible at this point. The only way that this trade war is going to come to a rapid conclusion is if one side is willing to totally submit and accept an extremely bitter and humiliating defeat on the global stage, and that is not likely to happen. Read More
The global financial crisis of 2008 was essentially caused by excessive leverage, a loss of confidence in real estate credit and a resulting sudden collapse of liquidity in the financial system. The central bank response was to lower interest rates and flood markets with liquidity. Since then, debt loads have increased more than 30% and the percentage of higher risk credit has also grown sharply. Many analysts believe that another crisis is possible due to a combination of enormous leverage and deteriorating credit standards. What will happen to gold if we have another financial crisis?
On Tuesday, March 10, Vikram Pandit the CEO of Citibank, said that his bank has been profitable the first two months of 2009 and was currently enjoying its best quarterly performance since 2007. On March 12, Ken Lewis, CEO of Bank of America, declared that bank had also been profitable in January and February, that he didn't foresee the bank needing further government funds, and that he expected to "see $50 billion in 2009 pre-tax revenue". The announcements caused multi-day rallies with double-digit percentage gains for a number of stocks both in and outside of the banking industry.
Having read Crash Proof and many other "Dollar is Doomed" books ..this give a great current synopsis on the happening events ... it is weird to read/hear Mr Schiff and is bolf predictions somehow come true. Even though flight to quality in the 'dollar' has hurt many of Mr. Schiffs investments ('currently') .. his insight on the future for our American way of life makes the book a must read.
RATE AND REVIEW this podcast on Facebook.https://www.facebook.com/PeterSchiff/reviews/Look Carefully at the Price IndexThe GDP number came out yesterday; 3/5% did slightly beat the consensus of 3.3%, but remember, for a while the Atlanta Fed was looking for a print in the 4's. But the New York Fed was at 2.2%, so the print was much higher than ...…
Dr. D: Well, all parts of the system rely on accurate record-keeping. Look at voting rights: we had a security company where 20% more people voted than there were shares. Think you could direct corporate, even national power that way? Without records of transfer, how do you know you own it? Morgan transferred a stock to Schwab but forgot to clear it. Doesn’t that mean it’s listed in both Morgan and Schwab? In fact, didn’t you just double-count and double-value that share? Suppose you fail to clear just a few each day. Before long, compounding the double ownership leads to pension funds owning 2% fake shares, then 5%, then 10%, until stock market and the national value itself becomes unreal. And how would you unwind it? Read More
In the beginning of 2017, you could buy 1 Bitcoin for around $700-$900. Throughout the summer, Bitcoins price started to soar and seemed to reach new highs on almost a daily basis. In the fall of 2017, Bitcoin continued its impressive run, doubling in price in a 30 day period while breaking through the much anticipated $10,000 USD mark. On December 7th, Bitcoin went parabolic and breached $19,000 USD before settling in the $15,000 – $17,000 range. Even long-term Bitcoin enthusiasts were shocked at this price movement. With these spectacular new highs, more people are discovering Bitcoin and it’s becoming increasingly difficult for media pundits to write Bitcoin off as some cypherpunk fad or anomaly. Make no mistake, for better or for worse, Bitcoin has arrived in a big way and it has officially put the financial world on notice. Read More
In the months ahead, knowing that you can depend on us to guide you through Market turbulence will be most reassuring. In this market, Buy & Hold can only lead to financial ruin. When stressed, we humans tend to fall back on strategies that worked in the past, despite a vastly differing market environment than any time since 1929. With Exceptional Bear, you choose which asset-class ETFs to employ, and which to exclude.
Nothing is going to be the same after this. On Friday, the United States hit China with 34 billion dollars in tariffs, and China immediately responded with similar tariffs. If it stopped there, this trade war between the United States and China would not be catastrophic for the global economy. But it isn’t going to stop there. Donald Trump is already talking about hitting China with an additional 500 billion dollars in tariffs, which would essentially cover pretty much everything that China exports to the U.S. in a typical year. The Chinese have accused Trump of starting “the biggest trade war in economic history”, and they are pledging to fight for as long as it takes. Read More
In the biggest move, the gauntlet has been cast by the Chinese as they challenge the U.S. petrodollar, with the formal announcement of a March 26th start for gold-backed-yuan oil futures trading. Asian secret society sources say the Year of the Dog, which is just starting, usually brings volatility (in this case presumably in the financial markets) before things settle down into a new normal as the year progresses. Read More
The next credit crisis poses a major challenge to China’s manufacturing-based economy, because higher global and yuan interest rates are bound to have a devastating effect on Chinese business models and foreign consumer demand. Dealing with it is likely to be the biggest challenge faced by the Chinese Government since the ending of the Maoist era. However, China does have an escape route by stabilising both interest rates and the yuan by linking it to gold.
In the days ahead, markets are awaiting potential announcements on the Trump administration's plan to curb Chinese investments in U.S. technology, although messaging on those measures from the White House has proven conflicting. The U.S. is also set to impose an additional 25 percent tariff on $34 billion in Chinese imports on July 6, with duties on a further $16 billion in Chinese goods in the works.
Monetary policy also continues to support economic growth because the real federal funds rate (after inflation) is zero, points out Darrell Riley, a strategist at T. Rowe Price. “The economy has a lot of momentum going into next year and monetary policy is still stimulative,” he says. “The economic cycle may go longer than we think. And a lot longer than we think.”
@PC — I love that people keep putting “my friend” in ironic quotes… 😉 What is more incredible/unbelievable — that someone who has written an investment blog for eight years suddenly buys a short ETF without knowing how it works and then compounds his embarrassment by writing a blog about it and THEN republishes it a few years later to relive his embarrassment, or a person who writes an investment blog for 8 years actually *having* a friend? 🙂
“Government has coddled, accepted, and ignored white collar crime for too long. It is time the nation woke up and realized that it’s not the armed robbers or drug dealers who cause the most economic harm, it’s the white collar criminals living in the most expensive homes who have the most impressive resumes who harm us the most. They steal our pensions, bankrupt our companies, and destroy thousands of jobs, ruining countless lives.” – Harry Markopolos Read More
The average pension fund assumes it can achieve a 7.6% rate of return on its assets in the future. As noted in Monday’s Wall Street Journal, the majority of these assets are invested in the stock market. The rest are invested in bonds, real estate and alternatives. An aggregate bond index fund yields 2.5% today. Real estate investment trusts, as a group, yield nearly 4%. Read More
A more intelligent approach is to have assets like U.S. Treasuries during a bear market for U.S. equities. Some short positions in the most popular funds are more aggressive and also will usually be profitable. In the first year of a bear market for U.S. equities, commodity producers and emerging markets often outperform as they have already been doing since January 20, 2016 and which will likely continue through some point in 2018.
I think you need to look at how the population is growing. Only 1 group is growing and if you look at the high school and college graduation rates of that group it spells real trouble for our future prosperity as a society. Hopefully at some point they assimilated into our culture, but if they continue with the culture they came from that doesn’t emphasize education then it will only increase our welfare state. These people aren’t going to buy a lot of homes if they can’t graduate from High School and in the end it will mean spend more money on prisons and there will be even less for housing. I’m also curious if they fiasco of the last 20 years has anything to do with why Japan’s birth rate has gotten so low. If you really feel that each generation is going to have to lower their standard of living and your kids would be worse off than you and your parents wouldn’t that impact your decision to have kids at all?
Before I get into my analysis and the reasons we are heading towards the Seneca Cliff, I wanted to share the following information. I haven’t posted much material over the past week because I decided to spend a bit of quality time with family. Furthermore, a good friend of mine past away which put me in a state of reflection. This close friend was also very knowledgeable about our current economic predicament and was a big believer in owning gold and silver. So, it was a quite a shame to lose someone close by who I could chat with about these issues. Read More
In the average correction, the market fully recovered its value within an average of 10 months, according to Azzad Asset Management. The average bear market lasts for 15 months, with stocks declining 32 percent. The most recent bear market lasted 17 months, from October 2007 to March 2009, and shaved 54 percent off of the Dow Jones Industrial Average.
The U.S. Supreme Court held in 1895 that the federal government had no power under the U.S. Constitution to tax interest on municipal bonds. But, in 1988, the Supreme Court stated the Congress could tax interest income on municipal bonds if it so desired on the basis that tax exemption of municipal bonds is not protected by the Constitution. In this case, the Supreme Court stated that the contrary decision of the Court 1895 in the case of Pollock v. Farmers' Loan & Trust Co. had been "effectively overruled by subsequent case law."
“These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.”—Thomas Paine, December 1776
In the following Nasdaq chart, as seen through the Powershares QQQ Trust QQQ, +2.32% you can recognize that market is much earlier in the process of a correction, but has begun nonetheless. The data here only goes as far back as 1997, so it is possible that the Nasdaq does retest its highs before continuing down. That's not a risk I am generally taking. In looking at the risk range, we see that the Nasdaq could be in line for another 40% to 50% correction. Again, I don't think that is the likeliest outcome, but it is possible. I do expect a significant correction and if I had to pick a number, I'd say about 30% off of its top.
I forget now exactly what the size of the interest expense of the public debt is, about $400 billion. The government is paying 2.2 or something on its debt. Doubling of yields to 4-something and doubling of gross interest expense to $800 billion or so would certainly be an inconvenience. It would require very painful political choices. But, no, it is not impossible.