The public pension fund system is approaching apocalypse. Earlier this week teachers who are part of the Colorado public pension system (PERA) staged a walk-out protest over proposed changes to the plan, including raising the percentage contribution to the fund by current payees and raising the retirement age. PERA backed off but ignoring the obvious problem will not make it go away.
There’s simply no single answer to the question: What causes a bear market? It might be monetary conditions, yield curve shifts, surpluses, a sector implosion, excess demand reverting or bad legislation impacting property rights. But it likely won’t be what it was last time. Two bear markets in a row rarely start with the same causes because most investors are always fighting the last war and are prepared for what took them down last time.
At first the effect on the broader economy is minimal, so consumers, companies and governments don’t let a slight uptick in financing costs interfere with their borrowing and spending. But eventually rising rates begin to bite and borrowers get skittish, throwing the leverage machine into reverse and producing an equities bear market and Main Street recession. Read More
Silver soared recently and white metal’s rally was accompanied by a huge volume. Those who are new to the precious metals market will probably immediately view this as bullish as that’s what the classic technical analysis would imply. Silver is not a classic asset, though, and classic measures often don’t apply to it. One way to check the real implications of a given development is to examine the previous cases and see what kind of action followed. That’s what we’re going to do in today’s free analysis. Let’s start with silver’s daily chart. Read More
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Interest rate rises remain a key reason for a bear market, though there is a greater danger when they are unexpected. In its analysis on U.S. bear markets since 1929, looking at 10 major bear markets since 1929, JP Morgan Asset Management offered three other potential causes for a bear market: recession, commodity spike and extreme valuations. Of these, recession and commodity prices are more influential than extreme valuations.
This study tends to support the general notion that now is the time for investors to be asking questions about the viability of the long term trend. It also supports the analysis that the bull market started in the 2011 time frame. It shows us consistently that it is the trend from 2011 that traders need to keep a watchful eye upon as well as the 50 week EMA. From a trading point of view, it's quite helpful to have some clear criteria for recognizing the end of a trend. In that light, while there is likely to be a rally in the primary indices, when that comes it is likely that some key sectors will not participate or will participate marginally. The same underperforming sectors are likely to break down first, giving advanced warning that the general market will be soon to follow.
Three of the four worst bear markets were preceded by high valuation. Among the four worst bear markets with over 40% losses, three of them including the Great Depression in 1929, dot-com bubble in 2000 and subprime crisis in 2007 started with somewhat extreme market valuation. The only exception is the 1973 bear market caused by Arab oil embargo and subsequent recession, but it had an above-average PE to start with as well.
“The distinction [between globalization and technology] is arbitrary. What distinguishes the technological revolution is precisely that things like iPhones could be designed in California but made in China. The paradox of the Liberal International Order is that it made a lot of technology affordable, while at the same time destroying manufacturing jobs.”
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 benchmark Shanghai composite closed officially in bear market — referring to a decline of at least 20 percent from recent highs — on Tuesday. The smaller Shenzhen composite moved into bear market territory in February this year. The Shanghai and Shenzhen composites were down around 22 percent and 26 percent, respectively, from their 52-week highs, as of Asia afternoon trade on Wednesday.
Sorry this is all over the place, but there are multiple converging streams here. And as DHB constantly reminds us, there is absolutely no reason to believe that in an economy built on gambling, scamming, and computer automated profit skimming, ANYTHING is going to accrue bubble-type benefits to just you and me, anytime soon. Least of all your house.
good article, Doc. It kind of reminds me of a point Mish made a while back about exponential functions and the dangers of apparently small imbalances over time. Basically, if wages are increase slightly slower than inflation (which is bound to happen when the CPI is as cooked as it has been for several decades), the effects will become massive over time. For instance, if real inflation was 4.5% while median wages increase, let’s say, 3.5% per year in the same time, most people will say it’s not a big deal. Just a penny on a dollar. But if this is consistently the case for 25 years running, that $25,000/year job would now be pulling in about $59,000 but the $75,000 house purchase back then would now be demanding about $225,000. The d-to-i ration to maintain the same household on the same job, then, moved from 2.4 to over 3.0. Another 5 years down the road and it’ll up to 3.2. But if those 5 years are between 2008 and 2013, the chances of maintaining any momentum in wages is slim. Adjusted for inflation, everyone I know working the private sector is actually losing ground versus inflation, even with the rare down year factored in. I won’t pronounce it dead just yet, but the American dream certainly is taking a pounding.
But I want to add some good news for the market. Fortunately, there are big technical differences between now and 1929. The market does not show the extremes signs of internal weakness that it showed back then, or in 1937, 1973, 2000 or 2008 when other tops were made. So talk of a huge Crash I would not take seriously. Still, a 20% decline seems much more likely than not. Will it stop there if the computers that dominate the market start doing what they did in October 1987? I would not count on it. I would not want to bet that Wall Street has learned the lessons from that year. It has been too profitable for Wall Street to forget all those lessons.
Editor's Note: It is unusual for "the Bear" to focus on non-financial issues. This story is revelant to your financial survival because of the depth of depravity that, not only Dees, but most, if not all of his associates participate. The Southern Poverty Law Center (SPLC) is a left wing control group that, in 2004, accused yours truely of running the only one man terrorist organization in the United States.
A bull market is one marked with strong investor confidence and optimism. It is the opposite of a bear market, during which negatively prevails. In a bull market, stock prices go up. Like the term "bear market," the term "bull market" is derived from the way a bull attacks its prey. Because bulls tend to charge with their horns thrusting upward into the air, periods of rising stock prices are called bull markets. Unfortunately for investors, bull market periods that last too long can give way to bear markets.
The market is not fair, but it also does not fail to show us what lies ahead if we look at its internal action very closely. This is because these market internals show us what “Big Money” is doing with their money, not what they are saying. Of course, their spokesmen and “talking heads” will try to soothe investors’ fears now. But we should vow to “follow the money”, I’d suggest. See what the Big Money is doing. We want to “anticipate the anticipations” of others (as Keynes said). But as Keynes also said, the market tends to go to extremes. At times, it is ruled by “animal spirits” rather than rationality. And as he would agree, capitalism by its very nature produces big disparities of wealth and therefore under-consumption and over-production. I would say, we are back in the 1920s again, at least in terms of Trump’s economic policies (de-regulation, tax cuts for the rich and tariffs). These are very similar to Coolidge’s main economic policies. The bull market back then lasted 8 years, August 1921 to August 1929. Our has lasted almost nine years, March 2009 to January 2018. So, a bear market is due….
Stock market downturn of 2002 9 Oct 2002 Downturn in stock prices during 2002 in stock exchanges across the United States, Canada, Asia, and Europe. After recovering from lows reached following the September 11 attacks, indices slid steadily starting in March 2002, with dramatic declines in July and September leading to lows last reached in 1997 and 1998. See stock market downturn of 2002.
The Gilt index is an important benchmark for most UK fixed income investors, whatever their risk appetite. 2017 was a year of modest returns (+2% for the iBoxx Gilt index) but the fact is that we are now well into a bear market which will last for many years. As at 11th January an investor in the 10 year Gilt index has suffered a period of losses of 370 days since the last peak in August 2016. That is already one of longest recovery periods in the last 40 years or so. In other words, the Gilt index has been in a drawdown phase for about 16 months. Most investors will not have noticed because the equity market has soared over the same period and in any case a drawdown of 4% below the peak doesn’t sound like a lot. But when the asset in question yields just 1.6%, it will take over 2 years to get back to those highs, unless we see another period of falling yields and rising prices.
Smokey's name and image are used for the Smokey Bear Awards, which are awarded by the U.S. Forest Service, the National Association of State Foresters (NASF), and the Ad Council, to "recognize outstanding service in the prevention of human-caused wildfires and to increase public recognition and awareness of the need for continuing fire prevention efforts." 
Misguided Tweet About PfizerAnother misguided tweet that came out today from the President had to do with drugs:Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other count ...…
There is considerable confusion between the verbs bear and bare. It may help to remember that the verb bare has only one meaning: "to uncover," as in "bare your shoulders" and "a dog baring its teeth." All other uses of the verb are for bear: "bearing children," "the right to bear arms," "bearing up under the stress/weight," "can't bear the thought," "bear south," "it bears repeating."
The above shows how Vanguard is just lucky to operate in the U.S. where the economic growth has been a bit stronger than in the Netherlands, and it enjoys the self-reinforcing effect of $2 billion coming into the market every day. However, the bulk of Vanguard’s success was made in the 1980s and 1990s, while the returns since 2000 have been minimal.
Water in faults vaporizes during an earthquake, depositing gold, according to a model published in the March 17 issue of the journal Nature Geoscience. The model provides a quantitative mechanism for the link between gold and quartz seen in many of the world's gold deposits, said Dion Weatherley, a geophysicist at the University of Queensland in Australia and lead author of the study. Read More
Most of us are aware of the inflationary pressures in the major economies, that so far are proving somewhat latent in the non-financial sector. But some central banks are on the alert as well, notably the Federal Reserve Board, which has taken the lead in trying to normalise interest rates. Others, such as the European Central Bank, the Bank of Japan and the Bank of England are yet to be convinced that price inflation is a potential problem.
Food programs are widely considered welfare to the people using them. In fact they are welfare to the food industry: it is a direct transfer of government (tax) bling to the pockets of General Mills, General Foods, Cargill, ADM, Monsanto, and the other Big Food/Big Pharma companies. It is tax bling to the grocers as well. These companies can keep marking up food for profit, squeezing those who pay money for it AND pay taxes so those who can’t afford the food can give Munchy Bucks to their local food vendor, and those dollars are credited to the food industry.
We have not seen Wall Street this jumpy since just before the great financial crisis of 2008. As I have explained so many times before, when the waters are calm and there is low volatility, markets tend to go up. And when the waters are choppy and volatility starts to spike, markets tend to go down. That is why the behavior that we have been witnessing from investors during the first two quarters of 2018 is so alarming. A high level of market turnover is often a sign of big trouble ahead, and according to Bloomberg our financial markets “are churning at the fastest rate since 2008″…Read More
Yet, Karen is only one of the brilliant minds that you’ll get exposed to and have the chance to meet at the SIC. It’s going to be an intellectually thrilling event, and I hope you can be there with me to experience it firsthand. To learn more about attending the SIC 2018, and about the other speakers who will be there, I encourage you to click here.
That definition does not appear in any media outlet before the 1990s, and there has been no indication of who established it. It may be rooted in the experience of October 19, 1987, when the stock market dropped by just over 20% in a single day. Attempts to tie the term to the “Black Monday” story may have resulted in the 20% definition, which journalists and editors probably simply copied from one another.
Silver prices peaked in 2011. The descent has been long and tedious. Perhaps silver prices made an important low on September 11, 2018, like they did on November 21, 2001 at $4.01. That long-term low was twenty cents below the price on September 11, 2001, the day the twin towers fell at free-fall acceleration, which marked the beginning of the silver bull market that launched prices upward by factor of 12.
Mild diversification is the ticket to making money. Have some concentration in your best ideas and avoid the worst spots of the economy. As you know, I have been buying the First Trust ISE-Revere Natural Gas ETF FCG, +0.56% on what I believe is value pricing that will not last much more than a year or two. I have been selling most high P/E stocks and mutual funds with the word "growth" in the title as new clients bring them to me. I don't like anything that relies on a weak dollar to succeed since I believe the dollar is likely in a new higher trading range compared to a decade ago. I talk more about what I like and don't like in my recent free quarterly investor report.
The most valuable bubble empirically for the purpose of our elucidation has to be the Mississippi bubble, whose central figure was John Law. Law, a Scotsman whose father’s profession was as a goldsmith and banker in Edinburgh, set up an inflation scheme in 1716 to rescue France’s finances. He proposed to the Regent for the infant Louis XIV a scheme that would be based on a new paper currency. Read More
A while ago, I asked a regular commenter at the Automatic Earth, who goes by the moniker Dr. D, to try and write an article for us. Not long after, I received no less than 31 pages, and an even 12345 words. Way too long for today’s digital attention spans. We decided to split it into 5 chapters. After we work through those 5, we’ll post it as one piece as well. Dr. D, who insists on sticking with his nom de plume, picked his own topic, and it’s -fittingly- bitcoin. A topic about which one can cover a lot of ground in 12345 words.
I might add that you might enjoy reading a 1984 science fiction that predicted our situation in a very amusing light (something I really needed) - Home Sweet Home 2010 A.D., by Mack Reynolds and Dean Ing. A little colorful language, but a deft and delightfully irreverent satire. Fortunately, I can still afford the occasional second-hand paperback. Published in 1984, the paperback originally sold for $2.95. I got it used for 50 cents at a going-out-of-business sale this year. New paperbacks run as much as $12 each. Could that be a hint of inflation?
Lost in the largely meaningless political Kabuki theatre being staged on Capitol Hill is the fact that the economy is deteriorating. Real average weekly earnings in July declined for production and non-supervisory workers. It was down 0.01% from June to July and down 0.22% from July 2017. For all employees, real average hourly earnings declined 0.20% from June to July but was flat year over year. Read More
Needless to say, we have reached the mane. What drove the US economy for the past three decades was debt expansion----private and public--- at rates far faster than GDP growth. But that entailed a steady ratcheting up of the national leverage ratio until we hit what amounts to the top of the tiger's back---that is, Peak Debt at 3.5X national income. Read More
Michael J. Panzner, author and 25-year Wall-Street veteran, says that "the real reasons behind the sell-off ... include the bursting of history's biggest housing bubble, which triggered a shockwave of wealth destruction that has wreaked widespread havoc throughout the economy, as well as the unraveling of a multi-trillion-dollar financial house of cards built on greed, ignorance, and fraud."
I’ve read all of Matt Kratter’s books. Why? I used the simple but powerful strategies in Covered Calls, Rubber Band Stocks, Monthly Cash Machine, and Rocket Stocks. The Options strategies realized an annual yield exceeding 12% coupled with Stock Equity strategies yielding an annualized 90%. I simply followed the strategies because I’m a novice, not the brightest bulb. These strategies were adequate for advancing stock markets but there are now signs of an approaching market in decline. The BEAR has been observed prowling so I read Matt’s newest selection Bear Market Trading Strategies. I’m now informed, ready for the declining markets and am enthused. Matt has again gifted his readers with his talent of deconstructing the complex so a rational novice may continue to conservatively place trades. He advises on how to avoid negative-carry and using Options cautiously, trading with the trend. Matt advises of the dangers and promotes rationality and caution. He tells you the best times to buy and sell using simple highest price/closing price indicators. Then Matt tells the reader how to determine when the Bear is returning to the den. He devotes a chapter on how to short momentum stocks using the simple 50 and 200 day moving averages and provides historical data as confirmation. Matt wraps up by providing a strategy of buying certain stocks that other investors are selling. There are strategies in this book that I would be uncomfortable with but there are other strategies that I am comfortable with. I’ll choose and carefully implement those comfortable strategies and, given my past profitable experiences with Matt’s books, I’ll make a few nickels. ...and be sure to view Matt's videos!
So we have concluded (perhaps) the bull market in bonds that began in 1981 and that maybe ended in the early days of July 2016 (I think). So it might just be that interest rates are going up because they are going up. It sounds a little bit mysterious and indeed fatalistic, but I’m a little bit less inclined than others to assign causation to people and policies.