As of early March 2009, the Dow Jones Industrial Average had fallen 20% since the inauguration of President Barack Obama (less than two months earlier), the fastest drop under a newly elected president in at least 90 years. Editorials in the Wall Street Journal by the editorial staff and Michael Boskin, one of George H.W. Bush's Council of Economic Advisors, blamed this on Obama's economic policies.
What happened? Bank of America keeps a running tally of so-called “signposts” that signal a bear market coming ’round the bend. This month, the analysts checked two more off the list, bringing the total to 14 out of 19 indicators. The latest signals include the VIX volatility index climbing above 20, and surveys of investors showing that many think they will continue to go up, a classic contrarian indicator.
Trump Driver is Suing the Trump OrganizationOn thing I talked about on the Joe Rogan podcast was a story that broke the same day of my last podcast, which I thought was very interesting. It was about Donald Trump being sued by his former personal driver, who still works for the Trump organization, by the way, he's worked there for over 25 years ...…
Last week, we shined a spotlight on a crack in the monetary system that few people outside of Switzerland (and not many inside either) were aware of. There is permanent gold backwardation measured in Swiss francs. Everyone knows that the Swiss franc has a negative interest rate, but so far as we know, Keith is the only one who predicted this would lead to its collapse (and he was quite early, having written that in January 2015).
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A few weeks ago the DJI became over-bought, but not by as much as we normally expect to see at tops, while at the same time showing very bearish volume and Accumulation Index divergences. Immediately afterwards, we started seeing day-after-day weakness at the close following earlier intra-day strength. This first cluster of technical conditions set up the decline. Now the sell-off has been confirmed by (1) the Hourly OBV Line on the DJI making new lows ahead of the DJI itself , (2) by the increase in down-day volume above the previous day’s volume and (3) the steady 10 day streak of red “candle-sticks” on the daily SPY (SP-500) chart.
The rise in European yields is to some degree a reversal of the bizarre situation in which bond markets found themselves several weeks ago. The European Central Bank's quantitative easing program created a supply shortage for bonds, and in some cases yields fell deep into negative territory. They remained negative even as the Eurozone economy was showing signs of recovery and inflation expectations were rising. The sharp increase in yields in recent days could be seen as an overdue correction.
Two thirds of Americans get at least some of their news on social media. Google and Facebook receive well over 70% of US digital advertising revenues. The average daily time spent on social media is 2 hours. Just a few factoids that have at least one thing in common: nothing like them was around 10 years ago, let alone 20. And they depict a change, or set of changes, in our world that will take a long time yet to understand and absorb. Some things just move too fast for us to keep track of, let alone process. Read More
One new factor in today's market is that there is a constant inflow of incremental money from pension and individual retirement plans well in excess of whatever may have existed in the past. Also, in past rising markets, new equity supply would be forthcoming through equity offerings and equity mergers when prices started to indicate a rich valuation.
"A downtick in bonds is not same as a downtick in equities," said Mike Loewengart, vice president of investment strategy at E-Trade Financial. He said even in previous rate increase environments, when bond income is received and reinvested, that can keep returns in positive territory and help investors get through fixed-income volatility. "Maybe it is the end of a 30-year bull run in bonds, but I still think if rates rise gradually, most diversified fixed income portfolios should fair OK."
“What a difference a day makes”! Well we didn’t get the sun and the flowers like in Dinah Washington’s song but more like storm and showers. For the ones who don’t remember Dinah, Amy Winehouse made a more recent version of the song. Last week I warned investors again, in the strongest tone possible, of the risks in markets. So what triggered it? Was it the Fed’s interest rise? Or was it the trade war with China? Or maybe it was Kavanaugh?
Forester is the founder and chief investment officer of the firm that bears his name. He finds nearly every S&P industry sector to be overvalued, and points out that the last two market crashes were sparked by the bottom falling out of a single sector. In the year 2000 it was technology, and in 2008 it was financials. In 2008, he radically reduced his exposure to bank stocks to 5 percent of his portfolio ahead of the crash at a time when financial stocks made up 20% of the S&P 500 index. His prescient move allowed his fund to become "the sole long-only mutual fund in the U.S. to gain in 2008," per Institutional Investor as quoted by Money.
The secret battle for the planet earth is entering a critical phase over the coming weeks, especially in the realm of finance, where an epic three-way battle is raging, multiple sources agree. In this battle, cryptocurrencies and the Chinese yuan are fighting each other, as well as fighting to replace the current privately-owned Western central bank petrodollar, Euro, and Japanese yen-based system.
There is increasing awareness that another financial crisis is in the offing, and, of course, everyone has an opinion as to what will trigger it and what form it will take. But there is broad agreement that since the Lehman crisis ten years ago, instead of resolving the problems that led to that crisis, governments and their monetary authorities have allowed the underlying position to deteriorate. 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 the 1500s, bull and bear baiting was a betting sport where dogs would attack a chained bull or bear and bets would be placed on the outcome. Although the sport is now illegal in all but one state (South Carolina), it was the first dual association of the bull and bear. In the 17th century, hunting terms began to further the association with the market, and in the 18th and 19th centuries, the terms were first used in reference to the stock market.
In the US the thing most people think of as inflation is the consumer price index, or CPI, which is now running comfortably above the Fed’s target. But the Fed prefers the personal consumption expenditures (PCE) price index, which tends to paint a less inflationary picture. And within the PCE universe, core PCE, which strips out energy and food, is the data series that actually motivates Fed action. 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.
In fact, there is remarkably little evidence of organized bear raiding on the U.S. market following the October Crash. In order to dispel the myths, the economist of the New York Stock Exchange, Edward Meeker, published a book, entitled Short-Selling, in 1932. Meeker claimed that bears had not precipitated the crash. In November 1929, the NYSE found that around one hundredth of one percent of outstanding shares had been sold short. A later study in May 1931 found the short interest had risen to 3/5 of one percent of the total market value. More than ten times as many shares were held on margin. Nor could the stock exchange identify any bear raids in the subsequent market decline.
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.
Presidential Tweets Express Anger at the FedThe catalyst today was more tweets from President Trump where he is expressing anger, not only at the Federal Reserve, and at the ECB and at the Bank of China, because he is accusing both Europe and China of being currency manipulators; taking advantage of us by weakening their currencies. He's saying ...…
On this episode of Money For the Rest of Us, David Stein walks you through the complex idea of a bond bear market. He explains that a market consisting of losses of 20% or more are considered a bear market type loss and that this type of loss is possible even in the bond market. David states that “It’s important to understand what drives interest rates, how high they could get, and what the ramifications of that are.” Be sure to listen to this full episode to fully understand this idea and to hear some of David’s suggestions for investing in a rising interest rate environment.