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Leuthold Group chief investment strategist and economist Jim Paulsen was cautious about stocks ahead of the January-February rout. And he remained steadfastly cautious in front of the recent sell-off. He’s made a lot of good market calls like these in the 20-plus years I’ve tracked his work and known him. Now in the current weakness, he’s turning more bullish on stocks.
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The Pecora hearings, as they became known (after their lead counsel, Ferdinand Pecora), revealed the seamier side of Wall Street during the bull market: the involvement of leading firms and bankers in the manipulation of share prices, the dumping of unseasoned securities on an innocent public, the fleecing of the firms’ own clients, the preferential distribution of shares to favored friends, and so on.
Why has real estate been such a drag on the overall Japanese economy? First, Japan’s unemployment rate stabilized after these bubbles burst but it shifted to a large temporary or contract based employment economy. One third of Japanese workers operate under this new world. Relatively low security with employers and this has spiraled into lower income and money to finance home purchases. The fact that the U.S. has such a large number of part-time workers and many of the new jobs being added are coming in lower paying sectors signifies that our economy is not supportive of the reasons that gave us solid home prices for many decades. I think this is a key point many in the real estate industry fail to emphasize. How can home prices remain inflated if incomes are moving lower?
Once a municipal advisor and bond counsel have been established, they will work together to identify an underwriter that will manage the distribution of the bonds. The underwriter is a broker-dealer that publicly administers the issuance and distributes the bonds. As such, they serve as the bridge between the buy and sell side of the bond issuance process. Underwriters connect issuers with potential bond buyers, and determine the price at which to offer the bonds. In doing so, most underwriters will assume full risk and responsibility for the distribution and sale of the bonds issued by the issuing agency. As such, underwriters play a central role in deciding the return and span of maturities, typically collect fees in exchange for their services. If the price is wrong, the underwriter is left holding the bonds.
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
Jay Powell at least has worked in private equity. He knows a little bit about the business of buying low and selling high. Also he’s a native English speaker. If you listen to him, he speaks in everyday colloquial American English, unlike some of his predecessors. So I’m hopeful. But not so hopeful as to expect a radical departure from the policies we have seen.
Debt, my man, debt. In the rush to FIRE economy how could anything be better than DEBT? Particularly if you get the debtors to re-contract for that debt, and more, every so many months, resetting the terms of their interest payback to the beginning of the curve each time? As Ron said, this was all Monopoly money…that people agreed to pretend was real. The problem with speculation is that once you have more than a few people dancing atop the Milk the Suckers ponzi pyramid, it ceases to be a pyramid shape….
It’s important to remember that a bull market is characterized by a general sense of optimism and positive growth which tends to catalyze greed. A bear market is associated with a general sense of decline which tends to instill fear in the hearts of stockholders. As Rule #1 investors, we act opposite of the investing public – when it comes to bull vs bear markets – and capitalize on their emotions by finding quality stocks at low prices during bear markets and selling during bull markets when they’ve regained their value.
Maybe you suspect a bear market will start because the bull market has run on too long. Question One—is there a “right” time a bull market needs to last? No! There is no “right” length for a bull market. As bull markets run longer than average in duration, there is normally a steady stream of folks who say a bull market must end because it’s too old. (Read more on this phenomenon in Markets Never Forget.) That isn’t right. They all end for their own reasons and will end eventually—but age isn’t among them. People started saying the 1990s bull market was too old in 1994, only about six years too soon. “Irrational exuberance” was first uttered in 1996—again, way too early. Bull markets can die at any age.
We are nearly a year into Donald Trump’s presidency, and the economic numbers continue to look quite good. On Monday, we learned that U.S. retail sales during the holiday season are projected to be way up compared to 2016. Yes, there are all sorts of economic red flags popping up all over the place, and I write about them regularly. And without a doubt, 2017 has been one of the worst years for brick and mortar retail stores in a very long time. But when something good happens we should acknowledge that too, and many are giving President Trump credit for the fact that retail sales are projected to be up 4.9 percent this holiday season compared to last year... Read More
The bigger they come, the harder they fall. Currently, we are in the terminal phase of an “everything bubble” which has had ten years to grow. It is the biggest financial bubble that our country has ever seen, and experts are warning that when it finally bursts we will experience an economic downturn that is even worse than the Great Depression of the 1930s. Of course many of us in the alternative media have been warning about what is coming for quite some time, but now even many in the mainstream media have jumped on the bandwagon. Read More
In the S&P 500 chart below, you will see the long-term patterns going back to 1970. The "strategic number" is an algorithmic measure comprised of multiple factors which measure risk. When it is close to 100, risk is very high. When it is close to 0, risk is very low. In between, risk is about normal, and trend following can be employed. The "strategic risk range" shows the rough range that the market is likely to be in during the intermediate term.
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
That's how bears and bulls first became linked in people's minds. In the 17th century, hunters would sell a bearskin before catching a bear. In the stock market, short sellers did the same thing. They sold shares of stock before they owned them. They bought the shares they day they were to deliver them. If share prices dropped, they would make a profit. They only made money in a bear market.
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As contentious as the US midterm elections were, there was never a scenario in which they mattered. Any possible configuration of Republicans and Democrats in the House and Senate would have yielded pretty much the same economy going forward: Ever-higher debt, upward trending interest rates and (through the combination of those two) rising volatility.
How is today's CAPE impacted by the oversized contribution of the large tech firms to the index? Is there merit in excluding the FAANG companies from the measure to determine a more traditional measure. With the exception of Alphabet and Apple, the other of the large tech companies would have very lofty valuations with very little historical earnings and thus would attract astronomical CAPE ratios; and given their relative size, would have a disproportionate impact on the overall CAPE measure. I guess the question is whether the CAPE measure is appropriate given the composition of the index these days, or whether the actual valuations for these companies is appropriate. Would be interested in others' views on this.
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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.
With the U.S. stock market going through a volatile phase, investing in big-brand companies seems judicious. These stocks will offer some respite as they boast stable cash flows. Needless to say, the value of brands is that they instantly convey information on quality, durability and consistency to consumers. These traits help stocks counter market gyrations. And if the market pulls itself up in the near term, such companies will make the most of the positive trend as their products and services are widely accepted.
But this strategy requires knowing when to sell, and bear markets can be very difficult to predict. As Ryan Miyamoto, a CFP® in Pasadena, CA, explains, “Selling at a loss is your biggest threat. A bear market will test your emotions and patience…The best strategy to control your emotions is to have a game plan. Start by creating a safety net that is not invested in the market. Seeing your accounts go down will be a lot easier if you know you have adequate cash on hand.”
Jim: It can certainly continue. Things do. I guess that people would perhaps be looking at real rates of interest rather than nominal ones. Perhaps the learned people in the bond market would be saying: In its history over the past 50 years, the average real interest rate, the average real yield, on the ten-year US Treasury is on the order of 2.1% or so (I think).