Extreme valuations in equity markets look less of an issue than they were a few months ago. The S&P 500 still looks over-stretched, with a P/E of 24.3x earnings – well above its 30-year average. The Shiller P/E, which adjusts for the cyclicality of earnings looks even worse. However, these figures are still not wildly excessive and earnings have kept pace so far. The upcoming earnings season will be an important indicator of whether there is good support for prices at these levels.
Dr. Schiller has been an invaluable contributor to financial market dialogue for many years. He will eventually be right as investment psychology has a habit of going off the deep end from time to time. I offer the above only to try to analyze why we are where we are now. What will eventually put pressure on equity prices are competitive returns from debt instruments (higher interest rates) and that is not likely to happen soon since the power structure appears to favor the current status quo.

Jim:      The depression of 1920–21 was a brutal one. Macroeconomic data were not so available then, so we can’t exactly measure it as we do measure things now. But unemployment was certainly in the teens. There was a vicious liquidation of stocks and bonds. Bond prices fell as stock prices fell. The real rate of interest on money markets was certainly in the teens.

One thing that turns a correction into a bear market can be investor psychology. Since much of investing, especially in the short term, is about trying to guess what other investors may be thinking and react accordingly, selling can breed more selling. That is, people who think other people are selling may try to get out of positions before they lose more value, depressing stock prices in the short term.
Central banks may tweak a few rates here and there, announce some tapering due to “economic growth”, or deflect attention to fiscal policy, but the entire financial and capital markets system rests on the strategies, co-dependencies and cheap money policies of central banks.  The bond markets will feel the heat of any tightening shift or fears of one, while the stock market will continue to rush ahead on the reality of cheap money supply until debt problems tug at the equity markets and take them down.Read More
Outside the United States, many other countries in the world also issue similar bonds, sometimes called local authority bonds or other names. The key defining feature of such bonds is that they are issued by a public-use entity at a lower level of government than the sovereign. Such bonds follow similar market patterns as U.S. bonds. That said, the U.S. municipal bond market is unique for its size, liquidity, legal and tax structure and bankruptcy protection afforded by the U.S. Constitution.
As the blame game over the alleged chemical attack in Syria escalates ahead of what is expected to be an imminent, if contained, air strike campaign by the US, UK and/or France against Syria, on Friday morning, Russia’s foreign minister Sergey Lavrov said Moscow had “irrefutable evidence” that the attack – which allegedly killed more than 40 people in an April 7 chemical weapons strike on the former rebel outpost of Douma  -was staged with the help of a foreign secret service.
2> Huge pressure on domestic jobs due to 20 years of offshoring (wage arbitration anyone?), outsourcing (many stateside with H1B/L1 Visa treason), out-of-control immigration policies, hostile tax policies et al. — A smart person would want to be mobile, to chase business/employment opportunities, no tied to a boat anchor/deflating asset aka a home.
This system, defined as the Liberal International Order, is the framework of rules, alliances, and institutions that is credited with the relative peace and prosperity the world has enjoyed since 1945. So, if the order has lost support, will the world plunge into beggar-thy-neighbor protectionism? Worse, without the threat of military intervention by the US and its allies, will regional powers start to challenge one another?

Robert Mueller is supposed to be investigating Russiagate, which has been shown to be a hoax concocted by former CIA director John Brennan, former FBI director James Comey, and current deputy Attorney General Rod Rosenstein. As Russiagate is a hoax, Mueller has not been able to produce a shred of evidence of the alleged Trump/Putin plot to hack Hillary’s emails and influence the last presidential election. Read More
Joining the likes of Bill Gross and Jeffrey Gundlach, and echoing his ominous DV01-crash warning to the NY Fed from October 2016, Bridgewater's billionaire founder and CEO Ray Dalio told Bloomberg  TV that the bond market has "slipped into a bear phase" and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years.
Thank you for visiting the homepage of this five-part series on the individuals and ideas shaping my worldview. I have gained a lot of knowledge from these truly great minds, and the purpose of this series is to share what I have learned with you, my readers. I’m confident that the writings that follow will help you better understand the trends shaping the future of financial markets, and our economy.
The indicator I use to get a broader, real-time measure of inflation is the New York Fed’s Underlying Inflation Gauge (UIG). This gauge captures sustained movements in inflation from information contained in a broad set of price, real activity, and financial data. In December, the UIG hit its highest level since August 2006, as the below chart shows.

Municipal bonds provide tax exemption from federal taxes and many state and local taxes, depending on the laws of each state. Municipal securities consist of both short-term issues (often called notes, which typically mature in one year or less) and long-term issues (commonly known as bonds, which mature in more than one year). Short-term notes are used by an issuer to raise money for a variety of reasons: in anticipation of future revenues such as taxes, state or federal aid payments, and future bond issuances; to cover irregular cash flows; meet unanticipated deficits; and raise immediate capital for projects until long-term financing can be arranged. Bonds are usually sold to finance capital projects over the longer term.

I think that paper money is in a secular bear market and that the institution of managed currency will be seen to be a species of pretense, if not outright intellectual fraud. And I use that word advisedly. And I think that come the dropping of the scales from the eyes of the money holders of the world, gold will do better against almost every currency.
A funny thing happened in the middle of one of Mike Maloney's deep-research sessions recently. As you know, he just released a brand new presentation, but while analyzing the stock market he wasn't satisfied with the way most valuation measures were calculated. With all due respect to Warren Buffet, even his indicator fell short in Mike’s view. It was time for something new, something more insightful, something more accurate.
I think the bottom line is that the hot market is Trump Bashing stories. Pursuing a story that might vindicate him or show him to be the victim of an abusive Obama Administration would bring down the thunder of the entire Left and it would mean basically having to admit that they’ve been butt kissing enablers for the past 2 presidential terms, and that their defenses of Obama and Hillary were really just the soft bigotry of lowered expectations because they were so focused on ‘first woman’ and ‘first black man’ without bothering to listen to what either of them actually said. The cognitive dissonance would then cause the entire left side of the political spectrum of the US to collapse under it’s own weight. Think Inception.

Bear markets can occur in any asset class. In stocks, a bear market is measured by the Dow, the S&P 500, and the NASDAQ. In bonds, a bear market could occur in U.S. Treasurys, municipals bonds, or corporate bonds. Bear markets also happen currencies, gold, and commodities such as oil. Price drops in consumer goods, such as computers, automobiles, or TVs, are not bear markets. Instead, that's called deflation.

If you’re doing well right now, what else really matters? The stock market seems to be on a bizarro perpetual escalator to neverending prosperity, despite rafts of economic fundamentals that paint a portrait of debt-bloated, weak economy, oceans of free debt have been available for years on end to fund lifestyles well beyond earned means, and so long as one has sufficient exposure to risk assets, why bother worrying about big-picture insolvencies that are still years away? Read More


1. Assume I am paying a good (not overpaying) “fee for service” (mortgage payment = rent proxy) on day one. Every day we will use the house “service” at the FIXED loan payment amount (cost)—for the next 30 years. But, the government will conveniently print money and inflate its way out of debt—allowing me to gain the increasing nominal value for my house service as it goes up, while I continue to pay the same fixed monthly fee (cost). Over the years, the value compared to my fixed cost sky rockets (and in this case, the nominal value for the service is what matters). NOTE: I’m assuming I have to pay a fee for my living accommodations no matter what, so am not taking the stream of fees (mortgage payments) into account in the previous investment NPV/FV calculations.
This article considers the juxtaposition of colliding worldviews and the unified message that voters across the political spectrum are sending. While many investors are aware of the political change afoot, it seems that very few have considered how said changes might affect the economy and financial markets. In this article, we share some of our thoughts and encourage you to give the topic more consideration going forward. Read More

Dr. D: The money, the unaccountable, uninhibited release of tokens can do more than just buy centuries of hard labor in seconds, it‘s also a method of control. Banks, our present issuers of money, can approve or destroy businesses by denying loans. They can do this to individuals, like denying loans to unpopular figures, or to whole sectors, like gun shops. They can also offer money for free to Amazon, Facebook, and Tesla, which have no profitable business model or any hope of getting one, and deny loans to power plants, railroads, farms, and bridges as they fall into the Mississippi. 

Looking for a home, first time buyer and loan approved but feel a bit nervous about it all. Should we wait a while knowing the market may continue to worsen? Will prices lower enough to buy us something a little better/closer to the city we currently live? Low interest rates now, will they go lower? These concerns/worries and more. Is it just first time buyer jitters? Appreciate your input.
The pattern of boom and bust has continued in the post- war years. Inevitably the bears have been blamed during every major downturn…Japanese authorities complain[ed] that mysterious foreign interests were responsible for the decline in their stock market, following the great boom of the bubble economy. (In 1998, the Japanese imposed restrictions on short-selling in an attempt to shore up their market).
A lot of people are shocked by how rapidly things are beginning to move.  The U.S. economy is slowing down at a pace that we haven’t seen since the last recession, and this is something that I have been tracking extensively.  But now the slowdown is so obvious that even some of the biggest names in the mainstream media are talking about it.  For example, just take a look at what Jim Cramer of CNBC is saying.  For a long time, he was touting how well the U.S. economy was doing, but now his tune has completely changed.  According to Cramer, a lot of corporate executives have “told me about how quickly things have cooled”, and he says that many of them are shocked because this “wasn’t supposed to occur so soon”… Read More
Berkshire Hathaway Inc. (BRK.B - Free Report)	, through its subsidiaries, engages in insurance, freight rail transportation, and utility businesses. The company has a Zacks Rank #2. In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings increased 12.5% in the same period. The company’s expected earnings growth rate for the current quarter and year is 76.4% and 68.9%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Thank you for visiting the homepage of this five-part series on the individuals and ideas shaping my worldview. I have gained a lot of knowledge from these truly great minds, and the purpose of this series is to share what I have learned with you, my readers. I’m confident that the writings that follow will help you better understand the trends shaping the future of financial markets, and our economy.
In practice, a combination of these factors will often be at work. Investors tolerate high valuations in a benign economic environment. Bear markets will often begin after a period where investors have suspended their disbelief – the technology bubble being the notable example – but there often needs to be a catalyst for investors to recognise that over-valuation. This might be a political crisis, a currency devaluation – or a trade war?
In order for innovation to thrive, and living standards to rise over the coming decades, we must return to a “low-entropy" legal, regulatory, tax, and monetary policy. Too much noisy interference from governments and central banks distorts market signals. They also increase the hassles of doing business, which stifles innovation and discourages entrepreneurship. Ultimately, this makes the country less wealthy and prosperous.

@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? 🙂
That is the purpose of this article. It can be bewildering when a casual observer tries to follow global events, something made more difficult by editorial policies at news outlets, and the commentary from most analysts, who are, frankly, ill-informed. Accordingly, this article addresses the topic that dominates our future. The most important players in the great game of geopolitics are America and China. Read More
*** Since the attacks, we at the Daily Reckoning – as stunned as the next group of conspirators – have been asking a question similar to one I’m sure has crossed your mind at least once: “Why?” The Sovereign Society’s John Pugsley offers one point of view: “It is not hatred for freedom or materialism that caused terrorists to sacrifice their lives.” Pugsley quotes Joseph Sobran: “You delude and flatter yourself if you think someone hates you for your virtues.”
Also, matter can neither be created or distroyed. Is the same true with wealth? Do we have a finite “pie” of wealth that moves from “family” to “family” over time? Let’s consider a given “life cycle” of family wealth. 2 to 3 generations work to build wealth. 2 to 3 generations maintain that wealth. 2 to 3 generations blow the family fortune…. in general. All of this happening when other “families” are building, some other “family” is blowing it.
Hard science, like physics, has rules you can’t break. The law of gravity makes for very specific physical behavior that can be mathematically modeled. Economists want us to believe that their own models are as reliable as the law of gravity. But the real world is a complex, dynamic, out-of-balance mess that doesn’t fit inside anyone’s model. You can’t model a system that is as chaotic and unpredictable as an economy in an Excel spreadsheet or even in the latest and greatest statistical software.
One of the complaints I have against books that offer advice on using derivatives like futures is that the advice always starts with "If you believe the underlying stock will..." The the author then tells you, with varying degrees of clarity how to place trades to take advantage of the trend you believe in. In this book, Matt Kratter actually gives you an objective criteria for determining whether a stock falls into the bear category. He uses moving averages, which are readily available on a variety of websites and data services. Then he proceeds in a very readable fashion to explain how to make the trades based on the determination. Good for him.
Yes, first-quarter gross domestic product projections have fallen after weak readings on retail sales and other key data, but the Fed is confident that any slowdown will be temporary, stating simply that "the economic outlook has strengthened recently". With that, the Fed is acknowledging the strength of the prior three quarters, as well as the likely benefits from the recently enacted tax reform and massive deficit spending.
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