Build America Bonds are a taxable municipal bond created under the American Recovery and Reinvestment Act of 2009 that carry special tax credits and federal subsidies for either the bond holder or the bond issuer. Many issuers have taken advantage of the Build America Bond provision to secure financing at a lower cost than issuing traditional tax-exempt bonds. The Build America Bond provision, which expired on January 1, 2011, was open to governmental agencies issuing bonds to fund capital expenditures.
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John Hussman wrote a must-read essay titled: “Three Delusions: Paper Wealth, A Booming Economy and Bitcoin (link).” The crypto/blockchain delusion has exceeded the absurdity of the dot.com and housing bubble eras. I was shorting fraud stocks happily in both eras. I’m short a company now called Riot Blockchain. If you look at its description in Yahoo Finance, it bills itself as a developer of technologies applied to animal (“non-human”) medicine. It recently changed its name to Riot Blockchain from Bioptix Inc. Prior to calling itself Bioptic Inc, it called itself Venaxis. Read More
Erik: Let’s go ahead and carry that forward to Treasury yields then. Because, obviously, this is the topic on everybody’s mind. We’ve seen this backing up in rates. And there’s every imaginable theory from this means inflation is coming… to this is a reflection of Powell being more hawkish, and it’s all about Powell… to this is about President Trump’s policies and deficit spending.
Suppose you have the opportunity and the means to create a gold mine, and decide to undertake the challenge; you invest in the building and installations of the gold mine, and in all the related salaries to carry out the building of the mine, by paying for all expenses in gold; finally the gold mine is selling the gold it produces, in exchange for dollars. So now you have an abundant income in dollars, because your mine has been a successful venture. Hurray!
At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush has suggested AMZN and GOOGL in his stock newsletter Brush Up on Stocks. Brush is a Manhattan-based financial writer who has covered business for the New York Times and The Economist Group, and he attended Columbia Business School in the Knight-Bagehot program.
It may seem counterintuitive, but there's plenty of support for the argument that investors are actually doing the right thing by moving into bonds. It is annual portfolio rebalancing season and, given the huge gains in all stock markets around the world last year, portfolio allocations between stocks and bonds would have moved well away from target weightings.
A common refrain was a preference for non-US assets, particularly in equities given the run-up in American stocks and the earlier stage of economic recovery in Europe. The Fed could exit from its days of stimulus too fast, choking off the economic recovery and crimping profit growth. A few worried about the possibility for an inverted US yield curve when short-term rates rise above long-term levels, which sometimes are seen as a precursor to a recession.
It is a false premise that you can know when you’re in a bear market. Market observers are fond of looking at a downward sloping historical stock index chart and saying “the market is going down” or “we are in a bear market.” The truth is, the only thing you can say with certainty is that the market has gone down and perhaps we were in a bear market. Where it is going next or whether we are in a bear market is anyone’s guess.
Every college publication on the market states your university meets about 95% of its student’s need, and we have seen award letters sent to high school seniors in our area substantiating this number. We would like to request that Anywhere University reward Heath, a current student with a 3.4 GPA, an award package equal to, or better than, an incoming freshman. It will be financially difficult for us to continue to send Heath to Anywhere University without an increase in financial aid.
Repayment schedules differ with the type of bond issued. Municipal bonds typically pay interest semi-annually. Shorter term bonds generally pay interest only until maturity; longer term bonds generally are amortized through annual principal payments. Longer and shorter term bonds are often combined together in a single issue that requires the issuer to make approximately level annual payments of interest and principal. Certain bonds, known as zero coupon or capital appreciation bonds, accrue interest until maturity at which time both interest and principal become due.
The world of finance and investment, as always, faces many uncertainties. The US economy is booming, say some, and others warn that money supply growth has slowed, raising fears of impending deflation. We fret about the banks, with a well-known systemically-important European name in difficulties. We worry about the disintegration of the Eurozone, with record imbalances and a significant member, Italy, digging in its heels. China’s stock market, we are told, is now officially in bear market territory. Will others follow? But there is one thing that’s so far been widely ignored and that’s inflation. Read More
I think the above answers the question, the real economy is gone. Everything, including services can be done abroad or in-shored into cheaper markets (see N Carolina, Texas, etc). Thus, this mile high RE market, Boston to DC or San Fran to LA/SD, is simply not sustainable w/o a lot of foreign investors catching the knife in these post-bubble years.
If there doesn't seem to be many viable investments in uptrends, other options for more growth-oriented investors might include inverse Exchange Traded Funds (ETFs). The way these generally work is, when you invest in them and the market in question is declining, they actually make money. Now, you'd rarely make +10% if the market is down -10% becuase there are fees and other complicated variables in these funds.
I’ll admit I was somewhat skeptical when you claimed it was the “best conference,” but after last year, I couldn’t praise the SIC enough to my colleagues. (I think they actually got tired of me talking about it.) As a principle, I try NOT to attend the same events but rather experience new and different forums. However, I couldn’t resist returning for the SIC and have once again talked the ears off my fellow traders on the desk.
A bull market is the opposite of a bear market. It's when asset prices rise over time. "Bulls" are investors who buy assets because they believe the market will rise. "Bears" sell because they believe the market will drop over time. Whenever sentiment is "bullish," it's because there are more bulls than bears. When they overpower the bears, they create a new bull market. These two opposing forces are always at play in any asset class. In fact, a bull market will tend to peak, and seem like it will never end, right before a bear market is about to begin.
It often happens that gold and silver prices hit low points in June and December, before rallying sharply. The reason is not hard to understand: traders at the bullion banks close their books at the year and half-year ends and are almost certainly instructed by their superiors to reduce their trading positions to as low a level as possible. This is because the banks wish to report balance sheets that reflect low risk exposure for the purpose of making regulatory returns. Read More
While that’s not the highest level of P/E ratio ever compared to the late 1990s, the median price-to- sales ratio is at the highest level ever at 2.5 times. That’s about three standard deviations above the norm. You don’t have to be a math whiz to know that three standard deviations are way outside of normal bounds. Bad things happen when the rubber band is stretched that far.
The phrases were first published in the 18th-century book, "Every Man His Own Broker," by Thomas Mortimer. Two 19th century artists made the terms even more popular. Thomas Nast published cartoons about the slaughter of the bulls on Wall Street in Harper's Bazaar. In 1873, William Holbrook Beard painted the stock market crash using bulls and bears. (Sources: "Symbolism of the Bull and Bear," Federal Reserve Banks of New York. "Origin of Bulls and Bears," Motley Fool. "Bulls and Bears," Valentine Capital Asset Management.
In closing, EvG says, “. . . At some point, all hell will break loose. There is no question about it. It could be something very serious coming this autumn. The whole political system is fighting against Trump, and that is going to be tough, very tough. . . . The markets are giving me the signal that things are going to turn in the autumn, and you can easily find a number of catalysts for this to happen.” Read More
No, it is invariably the bears who are blamed for the post-bubble crises and are the main objects of anti- speculative legislation. Yet during the bubble periods it is the bears who are generally the lone voice of reason, warning people of the folly of investing in overpriced markets. In the aftermath of a bubble, they continue their forensic work of exposing unsound securities and bringing prices back in line with intrinsic values, a point which must be reached before the recovery can start.
But if you get to the point where it cannot be repaid in real terms, where it becomes a guarantee when you buy a US Treasury bond that you will never get your purchasing power back – you may get positive yield in nominal terms, but you’re always going to get a negative yield in real terms because the debt has gotten to such a level that they can’t possibly service it in real terms.
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning– Strauss & Howe Read More
Americans are now so polarized that they “no longer share basic sympathies and trust, because they no longer regard each other as worthy of equal consideration.” Codevilla blames the progressives and their attitude of moral superiority, but his explanation is independent of who is to blame. I blame both sides. The Constitution and our civil liberties took a major hit from the “conservative” Republican regime of George W. Bush. Read More
With the massive net short position in both gold and silver Comex paper precious metals, offset by the historic net long position of the “commercials” (banks, mining companies, users, hedgers), numerous rumors are swirling around the precious metals market. For certain, the availability of physical gold bars in London that can be delivered to the large eastern hemisphere buyers who demand delivery is growing tight. Apparently the retail silver coin/bar market is starting to feel supply strains. Read More
Long term, total returns come from 3 places: changes to mcap to gdp ratio, gdp growth rates (including inflation), and dividend yields. Assuming GDP grows at 2.5% a year, inflation comes in a 2% a year, and dividends stay at 2% (any dividend growth comes from GDP growth, no double counting allowed), it would take 8 years of flat market growth (ie stocks be goin nowhere) for the GDP ratio (also known as the “Buffet Indicator”) to return to normal. How likely is that, when a much easier path would be for an immediate 40% drop and some slow growth after that?
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
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5. Historically, housing has generally kept up with inflation (whereas stocks have generally performed negatively in real terms—which takes into account inflation). For example, look at the negative real returns on stocks during the 70’s; compare that to real value of housing that stayed flat during the 70’s (housing prices moved up in line with inflation).
BTW, in this, the VA with its 0 downpayment loans has 1 (yep 1) REO, FHA with its 3 1/2% down had 1 (yep 1 REO), Freddie has 4 REOs and Fannie has 14. The other 50 or 60 REOs are the product of Wall St and securitization. Here it is NOT the government-backed 0 -3 1/2% down loans that are defaulting. Not is it the loans by the community banks – they have only 2 or 3 between the 3 -4 community banks here. What is defaulting are the loans written by the Big Banksters and sahdy otufits like OptionOne, Countrywide etc – most of which those lenders kept and a smaller number they peddled to Fannie/Freddie who are making them take them back.
Or perhaps more accurately these blogs are the counterpoint. The Conservative “bias” (perspective) is clearly stated up front. The so-called “main stream media” feigns objectivity but is a propaganda tool of the Left/Democrat Party/Communists/Socialists. I don’t know if there is a source that is truly “objective” (everyone has a point of view). At least here at TCTH facts are laid out & source material is provided & one can dig as deeply as they want into the rabbit hole. We are not spoon fed drivel like the “MSM” provide for the useful idiots who believe they get the straight story from straight shooters.
RATE AND REVIEW this podcast wherever you listen.Turkey is the Epicenter of Emerging Market ConcernsRight now, the epicenter of the concerns about the emerging markets is coming from Turkey. What is the problem with the Turkish lira? Turkish President Erdogan is veering off into some very dangerous territory with his stance with the Central Ban ...…
It isn’t going to be a surprise when U.S. stock prices fall 50, 60 or 70 percent from where they are today. The only real surprise is that it took this long for it to happen. Even after falling 362 points on Tuesday, the Dow Jones industrial average is still ridiculously high. In fact, the only two times in our entire history when stocks have been this overvalued were right before the stock market crash of 1929 and right before the dotcom bubble burst. Not even before the financial crisis of 2008 were stock valuations as absurd as they are right now. Read More
The drastically slowing economy is threatening both corporate earnings growth and the bull market. If GDP grows at an anemic 2% average annual rate through 2019 and a 1.8% rate longer term, as forecasted by the Federal Reserve (per the Wall Street Journal), stock prices are likely to lose steam and tumble. Five famed investors see a bear market around the corner, and recently gave their views on how the downturn will begin and how low it might go, as reported by Money.com, a division of Time Inc. The five include Tom Forester, Jim Rogers, Marc Faber, Bill Gross and Rob Arnott.
What I love most about this book is that I was able to read it in its entirety in one sitting and I actually feel like I learned something. The book discusses several strategies that can be used during a bear market to help the individual investor profit. I do wish there was more discussion on the type of accounts you would need along with financial requirements to actually take advantage of the methods presented. Some of the methods seem to require a good bit of cash on hand which most individual investors might not have. Then again, bear market trading can be more risky. Overall, I thought it was a fantastic book and Great addition to the Trading book shelf! Definitely recommend
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As this stock market correction progresses, it is natural to consider what levels may be effectivein halting the decline. We have recently taken a stab at a couple potential “support” levels in the U.S. market with excellent success, so far. Those posts include Monday’s The Mother Of All Support Levels on the broad Value Line Geometric Composite which held precisely, as well as a few Premium Posts at The Lyons Share covering key sectors, which also held on cue: Market Leaders At Must-Hold Levels and Finally Some Support To Bank On (if you’d like to see these posts, shoot us an email at [email protected] and we’d be happy to share). Read More
The Accountable Capitalism ActElizabeth Warren unveiled her new idea in an op-ed in the Wall Street Journal. It is her new bill, called the Accountable Capitalism Act. Of course, I have said this before, there is no truth in advertising when it comes to legislation. Whenever Congress passes a bill, the name of the bill is generally the opposite ...…
This week we saw the beginning of the implosion of one of the most crowded trades in the world. We’re talking, of course, about the short VIX trade. I say “the beginning” because the short VIX trade is multi-faceted and has deep roots in the business cycle that we’re in. Like most stories in the market, you need to back up from the tree-line in order to get a view of the forest rather than the trees.
In the last BullBear Market Report we took an in depth look at the very long term index charts and considered the possibility that a secular market shift could be approaching. This examination was prompted by the parabolic action in the major US market indices, Dow Jones 30 and S&P 500, from November 2016 through January 2018. During that parabolic run, upper trendline resistance was continually broken while lower trendlines increased their angles of ascent following each minor pullback. On the Dow monthly and quarterly charts, the major long term trend channels going back to the 1932 or 1949 market price lows were either breached to the upside or nearly approached from below, depending on the charting of the channel. Investor expectations ran hot in anticipation of the tax reform bill and even hotter after it was enacted. The Dow ran nearly 50% higher and SPX leapt almost 40% in that time and was followed, as parabolic runs always are, with a dramatic collapse in February of this year. Since all of this occurred in the context of a very long term Elliott Wave (V) count (the fifth wave of a move considered to be its final), it seemed appropriate to crack open the discussion on the potential for an eventual (though not immediate) epic bear market turn. Price and technical action since that time has continued to beg the question, and a current consideration of the technical evidence would, on balance, lead to the conclusion that the current bull market is in its latter stages. Given that the setup is for an either long term bear market (correcting the bull market that began in 2011) or very long term bear market (correcting the entire secular period from 1949), it's more likely that the topping process has only just begun and that the bull wave has yet to fully complete. Having said that, the probability is that upside will be relatively limited and that any further rallies will be subjected to selling distribution on an ongoing basis. The charts tend to suggest that bull market conditions may drag out another 10-24 months before shifting into a bear market. Supporting these conclusions are significant developments in other areas of the financial markets and the domestic and global economies, including:
“If you pay peanuts, you get monkeys” is the perfect way to describe the current market. Investors are all playing the same game and reinforcing the passive investing trend by constantly plowing more money into passively managed funds. The management fee of the iShares Core S&P 500 ETF (NYSE: IVV) is just 0.04% which is extremely low and positive for investors. However the low fees, mindless investment strategies, and extremely high valuations will lead to a catastrophe when the same mindless buying reverts to panicked, mindless selling.
Of these four potential causes, tightening by the Federal Reserve remains the key risk. Bond markets clearly believe this, as seen in the flattening of the yield curve (where long-dated bonds move lower, until they achieve a similar level to short-dated bonds). An inversion of the yield curve has generally been a sign of recession and usually pre-dates a bear market by around six months. We’re not there yet, but we are edging closer.
Earlier this year the total U.S. stock market cap surpassed $30 trillion. It then lost more than $1 trillion in a single month. Apple might very well become the first company worth over $1 trillion in the modern era. The U.S. national debt surpassed $21 trillion, and the deficit for next year is expected to add another $1 trillion. But just how big are these numbers? Can we get some perspective? Read More
After the Brexit vote, in early July 2016, ten-year treasury bonds were yielding 1.37%. Today, they’re yielding 2.85% with an annualized return over that period of approximately negative 4.5% annualized. Ray Dalio, the founder of the hedge fund Bridgewater Associates and author of “Principles,” explains, “A 1% rise in bond yields will produce the largest bear market in bonds that we have seen since 1980-1981.” Investors around the globe are asking big questions about what these changes in interest rates mean, and David does a great job of explaining the issues on this episode of Money For the Rest of Us.