Real Investment Advice

The market defies more negative news because retail investors continue to step in and “buy the dip.” In our recent Bull Bear reports, we discussed the push by retail investors, but looking at retail sentiment is quite remarkable.

The Federal Reserve’s record of forecasting has frequently led it to respond too late to changes in economic and financial conditions. In the most recent FOMC meeting, the Federal Reserve changed its statement to support a pause in the current interest rate-cutting cycle.

Over the weekend, President Trump announced tariffs of 25% on both Canada and Mexico, as well as a 10% tariff on China.

Bullish exuberance is returning to the markets and the economy in a big way following the Presidential election.

On Monday, markets were rocked by news that a Chinese Artificial Intelligence model, DeepSeek, performed better than expected at a lower development cost.

In today’s post, we will examine the money supply represented by M2, the Federal budget deficit, the Fed’s previous adventures with QE, and the correlation to inflation.

Retail investors are the most optimistic about higher stock prices in 2025 by the most on record. Unsurprisingly, that sentiment resulted in the psychological rush to overpay for assets, pushing forward 1-year valuations sharply higher.

As we head into 2025, investors are giddy over the market returns of the last two years. As shown, the annual returns, while elevated, have come with only average volatility along the way.

In last week’s discussion with Thoughtful Money, I noted that we are becoming more “tactically bearish” as we progress into 2025. While we have remained primarily bullish in equity positioning over the last two years, several risks are now worth considering.

I publish an updated version of my New Year “investor” resolutions yearly. The purpose of the process is to take an annual inventory of what I did and did not do over the last year to improve my portfolio management practices.

As we enter 2025, the financial markets are optimistic. That optimism is fueled by strong market performance over the last two years and analyst’s projections for continued growth. However, as “Curb Your Enthusiasm” often demonstrates, even the best-laid plans can unravel when overlooked details come to light. Here are five reasons why a more cautious approach to investing might be warranted in 2025.

In a recent discussion on TheRealInvestmentShow, Bob Farrell and his 10 investment rules were discussed, which elicited several email questions asking, “Who is Bob Farrell, and where are these rules?”.

I never thought someone would label me a “Permabull.” This is particularly true of the numerous articles I wrote over the years about the risks of excess valuations, monetary interventions, and artificially suppressed interest rates.

It’s that time of year when Wall Street polishes up its crystal balls and predicts next year’s market returns. Since Wall Street never predicts a down year, these forecasts are often wrong and sometimes very wrong.

Understanding the trajectory of corporate earnings is crucial for investors, as these earnings significantly influence stock valuations and market performance.

While analysts are currently very optimistic about the market, the combined risk of high valuations and the need to rebalance portfolios in the short term may pose an unanticipated threat.

Corporations are currently producing the highest level of profitability, as a percentage of GDP, in history.

Financial markets often move in cycles where enthusiasm drives prices higher, sometimes far beyond what fundamentals justify.

Credit spreads are critical to understanding market sentiment and predicting potential stock market downturns.

Following President Trump’s re-election, the S&P 500 has seen an impressive surge, climbing past 6,000 and sparking significant optimism in the financial markets. Unsurprisingly, the rush by perma-bulls to make long-term predictions is remarkable.

With the re-election of President Donald Trump, the worries about tariffs and pro-business policies sparked concerns of “Trumpflation.” Inflation has been a top concern for policymakers, businesses, and everyday consumers, especially following the sharp price increases experienced over the past few years.

Paul Tudor Jones recently voiced concerns that rising U.S. deficits and debt and increasing interest rates could lead to a fiscal crisis. His perspective reflects the long-standing fear that sustained borrowing will trigger inflation, raise interest rates, and eventually overwhelm the government’s ability to manage its debt obligations.

Investor exuberance has rarely been so optimistic. In a recent post, we discussed investor expectations of returns over the next year, according to the Conference Board’s Sentiment Index.

The prospect of a Trump presidency has led to much debate and speculation about how markets might react. Depending on what policies are eventually passed, there are potential risks and opportunities in both the stock and bond markets.

Corporate buybacks have become a hot topic, drawing criticism from regulators and policymakers. In recent years, Washington, D.C., has considered proposals to tax or limit them.

Key market indicators for November 2024 present a complex but opportunity-filled environment for traders and investors. Following the first phase of Federal Reserve rate cuts and growing global uncertainties, the technical landscape suggests several notable shifts. Let’s explore the key market indicators to watch.

I was emailed several times about a recent Morningstar article about J.P. Morgan’s warning of lower forward returns over the next decade. That was followed up by numerous emails about Goldman Sachs’ recent warnings of 3% annualized returns over the next decade.

Seasonality has long influenced stock market trends, offering insights into predictable cycles of strength and weakness throughout the year. Yale Hirsch, the creator of the Stock Trader’s Almanac, is one of the most well-known contributors to studying these patterns.

Recent events, particularly the devastation caused by Hurricanes Helene and Milton in 2024, provide a clear example of why destruction does not create long-term economic prosperity. Despite the short-term boost in economic activity from rebuilding efforts, the broader economic implications are far more detrimental.

While greed is necessary to build wealth, excessive greed often has far more terrible consequences when investing.

The Bureau of Economic Analysis (BEA) recently released its second-quarter GDP report for 2024, showcasing a 2.96% growth rate. This number has sparked discussions among investors and analysts, particularly those predicting an imminent recession.

When most people hear the word “risk,” they think about wild market swings, scary headlines, and losing money overnight, but Howard Marks, Co-Chairman and Co-Founder of Oaktree Capital Management, takes a different approach. In his new video series How to Think About Risk, Marks digs deep into what risk is and how investors should handle it. Spoiler alert: It’s not just about volatility.

As the November 2024 election draws near, the election outcome will profoundly affect the financial markets. Whether Donald Trump or Kamala Harris wins the presidency, each administration will bring distinct policies creating investment opportunities and potential risks for investors. With a divisive political landscape, it is crucial to understand how these potential outcomes can shape the stock market and your portfolio strategy.

We are currently in the “everything market.” It doesn’t matter what you have probably invested in; it is currently increasing in value. However, it isn’t likely for the reasons you think. A recent Marketwatch interview with the always bullish Jim Paulson got his reasoning for the rally.

An analysis of Presidential Candidate Trump’s policy proposals recently suggests that tax cuts will increase the deficit. While the raw analysis is correct, as it subtracts the potential for reduced tax collections from the tariff revenue, it ignores the impact on economic growth.

Last week, the Federal Reserve made a significant move by cutting its overnight lending rate by 50 basis points. This marks the first rate cut since 2020, signaling the Fed is aggressively supporting the economy amid a backdrop of softening economic data. For investors, understanding how similar rate cuts have historically impacted markets and which sectors tend to benefit is key to navigating the months ahead.

When stock markets rise, the bullish narrative tends to dominate, overlooking the potential impact of market declines. This oversight stems from two main problems: a basic misunderstanding of math and time’s critical role in investing.

Since 2020, momentum investing has generated significantly better returns than other strategies. Such is not surprising, given the massive amounts of stimulus injected into the financial system. However, Brett Arends for Marketwatch noted in 2021 that momentum investing can give you an edge.

The August jobs report highlighted a critical reality: the labor market is cooling off. While the headline figures seemed decent, the underlying data reveals clear warning signs that worker demand is slowing.

The S&P 500 index is a critical benchmark for the U.S. equity market, and its performance often dictates investor sentiment and decision-making. Between November 1, 2022, and September 6, 2024, the S&P 500 experienced a significant rally but not without volatility. Currently, investors have very mixed views about where markets are heading next as concerns of a recession linger or what changes to monetary policy will cause.

While technology is a powerful driver of economic growth, it also presents challenges that can negatively impact productivity, equality, mental health, and societal cohesion. Addressing these issues ensures that technological advancements promote sustainable and inclusive economic growth.

Since the end of the “Yen Carry Trade” correction in August, bullish positioning has returned with a vengeance, yet two key risks face investors as September begins. While bullish positioning and optimism are ingredients for a rising market, there is more to this story.

In a recent discussion with Adam Taggart via Thoughtful Money, we quickly touched on the similarities between the U.S. and Japanese monetary policies around the 11-minute mark. However, that discussion warrants a deeper dive. As we will review, Japan has much to tell us about the future of the U.S. economically.

As noted in this past weekend’s newsletter, following the “Yen Carry Trade” blowup just three weeks ago, the market has quickly reverted to more extreme short-term overbought conditions.

The latest retail sales report seems to have given Wall Street something to cheer about. Headlines touting resilience in consumer spending increased hopes of a “soft landing” boosting the stock market.

The market’s 8.5% decline during August sent shockwaves through the media and investors. The drop raised concerns about whether this was the start of a larger correction or a temporary pullback. However, a powerful reversal, driven by investor buying and corporate share repurchases, halted the decline, leading many to wonder if the worst is behind us.

Since the end of the financial crisis, economists, analysts, and the Federal Reserve have continued to predict a return to higher levels of economic growth. The hope remains that the Trillions of dollars spent during the pandemic-driven economic shutdown will turn into lasting organic economic growth.

Are the “Mega-Cap” stocks dead? Maybe. But there are four reasons why they could be staged for a comeback. The recent market correction from the July peak certainly got investors’ attention and rattled the more extreme complacency.

A Universal Basic Income (UBI) sounds great in theory. According to a previous study by the Roosevelt Institute, it could permanently increase the U.S. economy by trillions of dollars. While such socialistic policies sound great in theory, history, and data, they aren’t the economic saviors they are touted to be.

On Monday morning, investors woke up to plunging stock markets as the “Yen Carry Trade” blew up. While media headlines suggested the sell-off was due to fears of a recession, slowing employment growth, or fears over Israel and Iran, such is not the case.

Economist Claudia Sahm developed the “Sahm Rule,” which states that the economy is in recession when the unemployment rate’s three-month average is a half percentage point above its 12-month low.

In bullish years, markets often have corrections. Yet, after a lengthy bullish run, it always surprises me how quickly investors and the media panic with the slightest hint of a market pullback.

Overly optimistic investor expectations of market returns may be a problem.

Yes, the market could continue to rotate massively from large-cap to small and mid-capitalization companies. However, given the current levels of bullish sentiment and allocations against a backdrop of weakening economic data and widening spreads, this suggests the current rotation may be nothing more than a significant short-covering rally.

Over the last few years, a handful of “Mega-Capitalization” (mega-market capitalization) stocks have dominated market returns. The question is whether that dominance will continue and if the same companies remain the leaders.

With both economic and inflation data continuing to weaken, expectations of Fed rate cuts are rising. Notably, following the latest consumer price index (CPI) report, which was weaker than expected, the odds of Fed rate cuts by September rose sharply. According to the CME, the odds of a 0.25% cut to the Fed rate are now 90%.

Some state that “bears are like a ‘broken clock,’ they are right twice a day.” While it may seem true during a rising bull market, the reality is that both “bulls” and “bears” are owned by the “broken clock syndrome.”

Lately, I have been getting many questions about investing in private equity. Such is common during raging bull markets, as individuals seek higher rates of return than the market generates.

Wall Street analysts continue significantly lowering the earnings bar as we enter the Q2 reporting period. Even as analysts lower that earnings bar, stocks have rallied sharply over the last few months.

Financial advisors get a bad rap. Some deserve it; most don’t. The problem for the entire investment advisory and portfolio management community stems from the “career risk” they inevitably face.

Goldman Sachs recently upped its price target to S&P 6300 for the end of this year, along with Evercore ISI upping its year-end target to 6000. Such is not surprising given the strong run in the markets this year.

Over the last decade, there has been an ongoing fundamental debate about markets and valuations. The bulls have long rationalized that low rates and increased liquidity justify overpaying for the underlying fundamentals.

The latest consumer survey data from the New York Federal Reserve had interesting data.

Recently, James Grant, editor of the Interest Rate Observer, was asked about his outlook for interest rates. He sees interest rates moving in a cyclical pattern, potentially rising for another multi-decade period.

More than a few individuals were active in the markets in 1999-2000, but many participants today were not. I remember looking at charts and writing about the craziness in markets as the fears of “Y2K” and the boom of “internet” filled media headlines.

It is always interesting when commodity prices rise. The market produces various narratives to suggest why prices will keep growing indefinitely. Such applies to all commodities, from oil to orange juice or cocoa beans. For example, Michael Hartnett of BofA recently noted.

In 2022, we discussed the market’s deviations from long-term growth trends. That discussion centered on Jeremy Grantham’s commentary about market bubbles.

The future of electricity demand for everything from electric cars to Bitcoin mining to artificial intelligence may also be the cure for our debt concerns.

Corporate greed is not causing inflation, despite the claims of many on the political left who failed to understand the very basics of economic supply and demand.

As we discussed recently, Wall Street economists increasingly believe the risk of recession has fallen sharply.

During ripping bull markets, investors often start benchmarking. That is comparing their portfolio’s performance against a major index—most often, the S&P 500 index. While that activity is heavily encouraged by Wall Street and the media, funded by Wall Street, is benchmarking the right for you?

Every year, investors anxiously await the release of Warren Buffett’s annual letter to see what the “Oracle of Omaha” says about the markets, the economy, and where he is placing his money.

While there is much debate over whether another bear market is imminent, weekly moving average crossovers suggest a different outcome for now. There are many current concerns, from geopolitical risk to still inverted yield curves, slowing economic growth, high interest rates, and inflation. Yet, despite those concerns, markets are flirting with all-time highs.

When it comes to the financial markets, investors have a litany of investment vehicles to choose from. The choices are nearly unlimited, from brokered certificates of deposit to complex derivative instruments.

The latest FOMC meeting caused a stock rally as Jerome Powell turned more “dovish” than expected. While Powell did note that progress on inflation has been lackluster, the announcement of the reversal of “Quantitative Tightening” (QT) excited the bulls.

Over the last two weeks, the bullish sentiment index has reversed from extreme greed to fear. The composite net bullish sentiment index, comprised of professional and retail investors, fell from 38.15 to 9.9 in two weeks.

Behavioral traits and cognitive biases are anathemas to portfolio management as they impair our ability to remain emotionally disconnected from our money. As history all too clearly shows, investors always do the “opposite” of what they should when it comes to investing their own money.

Is this just a correction after a strong bullish advance from November, or is the bull market ending?

The latest National Federation of Independent Business (NFIB) survey was an economic warning that departed widely from more robust governmental reports.

Economic “reflation” is becoming the next bullish narrative as equity valuation increases continue to outpace earnings gains, at least according to Gold Sachs and Tony Pasquariello.

While immigration has positively impacted economic growth and disinflation, this story has a dark side.

In the most recent report from FINRA, margin debt levels have surged as bullish investors leverage their bets in the equity market. The increase in leverage is not surprising, as it represents increased risk-taking by investors in the stock market.

Your mother likely imparted valuable investing lessons you may not have known. With Mother’s Day approaching and bullish market exuberance present, such is an excellent time to revisit the investing lessons she taught me.

During running bull markets, much commentary is written on why this time is different and why investors should not worry about market corrections.

Technical measures and valuations all suggest the market is expensive, overbought, and exuberant. However, none of it seems to matter as investors pile into equities to chase risk assets higher. A recent BofA report shows that the increase in risk appetite has been the largest since March 2021.

One of the most interesting conundrums is the surging wealth gap in America. Despite two of the largest bull markets in history since 1980, most Americans struggle with making ends meet and are unprepared for retirement. Such a reality starkly differs from the belief that rising asset prices benefit the masses.

It is long past the time that we face the fact that “Social Security” is facing a retirement crisis. In June 2022, we touched on this issue, discussing the stark realities confronting Social Security.

With the last half of March upon us, the blackout of stock buybacks threatens to reduce one of the liquidity sources supporting the bullish run this year.

Household equity allocations are again sharply rising, as the “Fear Of Missing Out” or “F.O.M.O.” fuels a near panic mentality to chase markets higher.

Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite.

Presidential elections and market corrections have a long history of companionship. Given the rampant rhetoric between the right and left, such is not surprising. Such is particularly the case over the last two Presidential elections, where polarizing candidates trumped policies.

Valuation metrics have little to do with what the market will do over the next few days or months. However, they are essential to future outcomes and shouldn’t be dismissed during the surge in bullish sentiment.

After over two years, retail investors, also known as the “dumb money,” are almost back to breakeven.

I revisited that original post a couple of weeks ago as the market approached its 5000 psychological milestone. Since then, the entire market has surged higher following last week’s earnings report from Nvidia (NVDA).

Recently, retail investors have started chasing small-cap stocks in hopes of both a rate-cutting cycle by the Federal Reserve and avoiding a recession.

Don’t fear all-time highs in the market. Such is a natural response for investors who are concerned about market risk. However, rather than fearing market exuberance, we must understand what drives it.

Regarding the surprisingly strong employment data, Fed Chair Powell said the quiet part out loud. The media hopes you didn’t hear it as we head into a contentious election in November.

While the bulls remain entirely in control of the market narrative, divergences and other technical warnings suggest becoming more cautious may be prudent.

The cost of housing remains a hot-button topic with both Millennials and Gen-Z. Plenty of articles and commentaries address the concern of supply and affordability, with the younger generations getting hit the hardest.

Of course, the market peaked in January 2022, just four months later, at 4796.56. Fast forward 2-full years of returning investors to breakeven, and the market is again approaching that magical round number of 5000.

I received an email this past week concerning George Soros’ “Theory Of Reflexivity.” It’s an interesting question, and I have previously written about the “Theory of Reflexivity.” Notably, this theory begins to resurface whenever markets become exuberant.

As the financial markets grind higher, retirement savers have consciously decided to add more to equity risk. Such was the result of a recent Bloomberg survey.

As money market account balances soar, the mainstream media again proclaims, “There is $6 trillion of cash on the sidelines just waiting to come into the market.”

As the stock market hit all-time highs this past week, there remains an interesting disconnect from the more dour economic concerns of the average American. A recent survey by Axios, a left-leaning website that supports the current Administration, addressed this issue.

As we get ready to review the Q4 earnings report, stocks have rallied sharply over the last two months

Economic growth continues to defy expectations of a slowdown and recession due to continued increases in deficit spending.

A stunning post from VisualCapitalist showed a poll of 8550 investors and 2700 advisors and the gap between the two of future portfolio return expectations. The poll was global; however, I will focus on this post’s domestic portfolio return expectations.

A recent warning by YahooFinance warns investors to sell their cash and buy bonds and stocks now as the Fed pauses.

What is the “wealth effect,” and why is it important? It is a great question and reminded me of “A Funny Thing Happened on the Way to the Colosseum.“

In October, the markets were down 10% from the July high, bond yields were touching 5%, and talk of a coming recession was rampant. What happened?

It’s that time of the year where Wall Street polishes up their crystal balls and pin targets on the S&P index for the upcoming year. As is often the case, while Wall Street is always optimistic, the forecasts prove pretty wrong.

Is a stock market correction coming before the Santa Claus rally at the end of the year?

I previously discussed a slate of recessionary indicators with high correlations to recessionary onsets. However, as we head into 2024, many Wall Street economists predict a “soft landing” or “no recession” outcome for the economy.

As I wrote this blog, the S&P 500 index is up roughly 17% year-to-date. Most likely, your portfolio isn’t. This is a common frustration among many investors in the market this year in particular.

Are you an “investor” or a “speculator?”

The Chicago Fed National Activity Index (CFNAI) is arguably one of the most important and overlooked economic indicators.

Is the bond bear market finally over? That is the question everyone is asking now that bond prices rallied sharply following the November FOMC policy meeting.

Despite substantially tighter monetary policy, the strength of jobs and retail sales stumped expectations of a recessionary downturn in 2022.

While often difficult, investing rules can help us maintain our focus and investment discipline in volatile or uncertain markets.

Economists no longer expect a recession. Such was according to a recent WSJ survey of Wall Street economists.

The “pain trade” continues to be higher into year-end.

While the article focuses mainly on the rise in bond yields, it applies to several current market events.

Restrictive monetary conditions, from higher yields and tighter lending conditions, are the Fed’s “Waterloo.”

As the “soft landing” narrative grows, the risk of a “crisis” event in the economy increases. Will the Fed trigger another crisis event? While unknown, the risk seems likely as the Fed’s “higher for longer” narrative is compromised by lagging economic data.

Psychology in markets is always fascinating. In February 2009, I wrote “8 Reasons For A Bull Market.” While in hindsight, it is easy to see that was the right call, overall, psychology was highly negative at the time.

While bond yields have risen sharply lately, fund flows into bonds tell two very different stories.

Once again, due to the ongoing lack of fiscal responsibility in Washington, the markets and the economy faced a Government shutdown.

“Compound market returns.” During bullish markets, there is inevitably a regurgitation of this myth that was contrived to extract capital from retail investors and place it in the hands of Wall Street.

While September has been a bit sloppy so far, will further weakness in October weigh on investor sentiment before the seasonally strong period begins?

The hit TV series “That 70s Show” aired from 1998 to 2006 and focused on six teenage friends living in Wisconsin in the late 70s.

The term “Bond Vigilantes” is a nostalgic twist on an old-west theme. In the nineteenth century, the American West formed self-appointed groups, or committees, to seize the duties of law enforcement and judicial authority in situations when citizens found law enforcement lacking or inadequate.

Okay, I took a little poetic license, but the point is that while we try, predictions of the future are difficult at best and impossible at worst.

Since the beginning of the year, economic data has continued to defy the recession calls of 2022.

Mega-cap stocks continue to dominate the market in 2023. The question is, why? After all, many other great companies have arguably much better valuations and fundamentals.

Powell’s recent Jackson Hole Summit speech was mainly as expected. Well, except for the part where Powell obfuscated the truth behind the surge in inflation.

About once a year, I have to address the issue of chasing the “10 Best Days” of the year.

Fitch’s recent downgrade of the U.S. debt rating alarmed investors as the deficit and debt steadily increased. The downgrade sent 10-year Treasury bond yields above 4%, causing concern about America’s deteriorating financial condition.

Since the beginning of 2022, the media has regularly warned a recession is coming.

Government bonds or stocks? If you were picking an asset class to outperform over the next 18-24 months, which would you choose?

Tax receipts are falling, which has historically preceded economic recessions.

There is a rhythm to the markets, and market cycle lows support bull market recoveries. Recently, Ed Yardeni made a bold prediction that the S&P 500 index could hit a high of 5400 in 2024.

Such is the latest rationalization to support the “bull market” narrative.

Of course, hindsight is always 20/20. Last year there were many reasons to be bearish. Things were seemingly so bad, with everyone expecting a recession, that there was nowhere to go but up.

While Washington continues a seemingly unbridled spending spree under the assumption “more spending” is better, debts and deficits matter. To better understand the impact of debt and deficits on economic growth, we must know where we came from.

No matter what happens, financially or economically, there is always a high number of companies regularly beating Wall Street estimates.

ESG scoring and mandates remain a subject we have contested since it sprang to life in 2020. The push of “woke activism” on, and by companies, to meet nebulous or artificial standards has led to various bad outcomes.

The volatility index is so low it has to go higher eventually. Such seems obvious, but this year, despite the banking crisis, higher interest rates, and slowing economic data, investors continue to abandon hedges amid bullish optimism.

There is much debate as of late on the current market cycle. Is it a bear market? Maybe. But what if this is just a correction within a 40-year-long secular bull market cycle?

Does stock risk decline the longer the holding period is? It’s a great question and something I received a comment about.

Millions of young Americans will face the end of the student loan payment moratorium this summer. Why is this happening now, after a three-year break from payments?

Is the recent rally a “bull trap,” or are we in a new “bull market?” Such was a question I recently received on Twitter. Of course, understanding the term “bull trap” is needed for those not deep into technical analysis.

“Signs” was a song by the Five Man Electrical Band in 1970 about the hippie movement. The song came to mind as I was looking at the economic data recently.

The current market speculation surrounding artificial intelligence (A.I.) has garnered everyone’s attention.

“It’s a ‘New Bull Market’!” Over the past few days, the call of a new bull market has plastered headlines and media commentary.

Bullish sentiment has surged as the “Fear Of Missing Out,” or FOMO, kicked in in recent weeks. It is somewhat interesting to write this blog, given that we discussed the exact opposite roughly one year ago.

The Eurozone just entered a recession as the region posted two consecutive quarters of negative economic growth. The manner in which it entered a recession is a bit quirky.

In several recent blog posts and weekly Bull Bear Reports, we discussed our concern over the narrow breadth of the rally in 2023.

Lately, we discussed macro-related market issues such as the” A.I., chase,” but a technical review can help manage shorter-term risks. Currently, the debate is about the market rally from the October lows. Is it a resumption of the 2009 bull market trend or an extended bear market rally?

Could monetary conditions be supportive of the “soft landing” scenario? While the “recession” versus “no recession” debate rages, there is a precedent for a “soft landing” scenario. Such is where the economy slows substantially but avoids a deeper contraction.

I received many emails and questions on “why” we are adding the U.S. Treasury bond to our portfolios. The question is understandable, given its dire performance in 2022, where bonds had the biggest drawdown since 1786.

The A.I. chase is making for a very narrow market.

The artificial intelligence, or “AI,” revolution is upon us. The financial media and headlines are abuzz with stories of generative “AI” and the subsequent “industrial revolution.”

Could massive monetary support have softened the deep bear market many expected? It is an interesting question. Particularly given the Fed has hiked rates at one of the most aggressive paces in history.

What if I told you that future returns could approach zero? Such seems hard to believe, considering young investors piling back into the markets since the beginning of the year

The COT (Commitment Of Traders) data, which is exceptionally important, is the sole source of the actual holdings of the three critical commodity-trading groups, namely: Commercial Traders, Non-Commercial Traders and Small Traders.

The financial media is rife with misinformation on the debt ceiling and the jump in interest rates. However, a history review shows that the “debt-ceiling” issue is not only a non-crisis, but the recent rise in rates is likely an opportunity to buy bonds.

Taking risks is no longer necessary to make a return on your savings.

In life, there are things that we should be convicted and committed to. For example, the love for our families, spouses, and religious beliefs. We can also be convicted about other things, such as political ideologies, social issues, and environmental causes.

The vast “cash hoard of 2023” has the bullish media salivating about what it means for the future of equities. That cash hoard in money market funds now exceeds $5.2 trillion.

What can breakeven inflation rates tell us about oil prices, energy stocks, and market direction? It turns out it’s a lot more than you think.

Despite media headlines, podcasts, and broadcasts suggesting “doom and gloom” lurks around the corner, investor bullishness has increased markedly since the October lows. This isn’t the first time we have discussed investor sentiment, which is often wrong at the extremes.

Recession odds have climbed considerably since Jerome Powell’s testimony before Congress and the latest FOMC meeting. However, the recent failures of Silicon Valley Bank (SVB) and Credit Suisse (CS), as higher rates impact regional bank liquidity, also added to the risks.

The market bottomed last October despite ongoing concerns about inflation, higher rates, recessionary risks, and a banking crisis. While the media headlines and youtube podcasts are filled with “crisis” headlines, as noted in “Analysts Raise Estimates,” expectations for growth and earnings are rising.

Despite an ongoing “banking crisis,” investors continue to chase stocks triggering several bullish buy signals.

Recession indicators are ringing loudly.

“QE” or “Quantitative Easing” has been the bull’s “siren song” of the last decade, but will “Not QE” be the same?

“QE” or “Quantitative Easing” has been the bull’s “siren song” of the last decade, but will “Not QE” be the same?

With the collapse of Silicon Valley Bank, questions of potential “bank runs” spread among regional banks.

Could the consensus view of a “no recession” scenario be wrong? As portfolio managers, this is the question we ask ourselves daily.

Warren Buffett defended stock buybacks in Berkshire Hathaway’s annual letter, pushing back on those railing against the practice he believes benefits all shareholders.

Gen Zers, according to a recent Magnify Money survey, are overly optimistic about being wealthy.

While there are certainly many complaints that “capitalism” is broken, such is not the case.

A recent Wall Street Journal article discussed how retail traders that made millions during the pandemic trading the market are now mostly wiped out.

Economically speaking, bullish bets are mounting on a “no landing” scenario, which suggests the economy will avoid a recession entirely.

Last week, we discussed why the more bullish technical formations were at odds with the many recession forecasts.

The market correction has started.

Last week, we discussed why the more bullish technical formations were at odds with the many recession forecasts.

Bullish investors continue to “Fight the Fed,” hoping that a change to monetary policy will reignite the 12-year-long bull market.

Despite mounting evidence supporting recession forecasts, the stock market remains at odds with that outlook.

The most recent NFIB (National Federation Of Independent Business) is sending a strong signal of an economic recession.

From a contrarian investing view, everyone remains bearish despite a market that corrected all of last year.

Optimism is increasing on Wall Street, with investors hoping for a “soft landing” in the economy.

The “pain trade” is likely higher over the next few weeks.

Is the Fed trying to wean the markets off monetary policy?

The lag effect of monetary policy changes will surprise the Fed as the fiscal “pig” of stimulus begins to exit the economic “python.”

Home prices have started to correct as interest rates rose sharply in 2022.

For many investors who started their investing journey following the financial crisis, forward returns will be disappointing compared to the last decade.

Just recently, James Bullard, President of the St. Louis Federal Reserve, suggested the central bank might need to employ the “7% solution” to ensure the complete destruction of inflation.

With 2022 finally over, and not soon enough, such is an excellent time to review our “investor resolutions.”

Much ink has been spilled over the death of the 60/40 portfolio.

Extremely harsh weather conditions from winter storm Elliot resulted in thousands of flight cancellations last weekend.

Managing your portfolio has more to do with gardening than you might imagine.

The big question heading into 2023 is the dreaded “R” word.

Capital represents the resources and labor used to produce goods and services.

In 2023, the math of valuations suggests returns will likely be challenging as markets remain difficult to navigate.

The key takeaway from Wednesday’s FOMC meeting: despite encouraging inflation news, the Fed believes they have a long inflation fight ahead.

Will a dollar decline be good for stocks? It is an interesting question, given that during 2022 there was a significant non-correlation between the dollar and the stock market.

Since the beginning of October, the market has performed better as a “Fed Pivot” bull case pushed investors into the market

Recently, Bank of America discussed the “5-Lessons From The Nifty Fifty.”

After 12 years of a liquidity-fueled, Fed-induced bull market, are the markets set to start another “secular” bear market?

Following the weaker-than-expected October inflation report, stocks surged on hopes the Fed will “pivot” sooner than later. As we discussed recently, a “policy pivot” is not necessarily bullish but instead suggests more bearish market action will come first.

Is a “hard landing” coming, economically speaking, as the Fed continues its most aggressive rate hike campaign in 40 years?

With the midterm elections behind us, does the market outlook improve given a now gridlocked Congress? Historically speaking, such is the case.

There was a time when a large portion of Americans belonged to the “middle class.”

Since June, the market rallied on hopes of a “policy pivot” by the Federal Reserve.

Are the FANG stocks dead?

October started strong and then slid to new lows but managed to rally back toward the month’s end.

The Fed’s next crisis is already brewing.

Is a “lost decade” ahead for markets? Stanly Druckenmiller believes that could be the case.

Last week, the FOMC published its minutes from the September meeting, confirming its recent stance that Fed rate hikes will continue until inflation is vanquished.

“Recession Fatigue” is setting in as consumers struggle under rising interest rates, high inflation, and a declining stock market.

While the Fed continues to hike rates to combat high inflation levels aggressively, history shows that deflation will become a more significant threat when something “breaks” in the financial or credit markets.

Is this the “Superbubble’s Final Act?” Such was a fascinating piece of commentary recently from Jeremy Grantham, famed investor and co-founder of GMO.

The strong dollar remains a risk to corporate profits and asset prices as the impact on the global economies grows.

“Market instability” remains the most significant risk to central banks globally.

A recent MarketWatch article discussed JPMorgan’s Chief Operating Officer, Daniel Pinto, views about a coming mild recession.

The latest rate hike announcement by the Fed sent stocks tumbling to the year’s lows. While last week’s market action was brutal, the good news is the markets are set up for a rather significant short squeeze higher.

The massive debt levels provide the single most significant risk and challenge to the Federal Reserve. It is also why the Fed is desperate to return inflation to low levels, even if it means weaker economic growth.

Stocks are far from cheap. Based on Buffett’s preferred valuation model and historical data, return expectations for the next ten years are as likely to be negative as they were for the ten years following the late ’90s.

Asset bubbles have been prevalent throughout history.

Recently, the Biden Administration started taking victory laps on deficit reduction.

At the Jackson Hole Summit, Jerome Powell made it clear the Federal Reserve remains focused on combatting inflation despite recession signals rising in tandem.

Last year, I wrote an article discussing that 2022 earnings estimates were too optimistic given the impending reversal of the economic “Sugar Rush” of massive liquidity injections.

Small business sales are the lifeblood of the economy.

The “Rule Of 20” says the “bear market” may just be resting despite much commentary to the contrary.

Buy stocks in a bear market.

The bear market is over.

Jerome Powell isn’t Paul Volker, and this isn’t 1982.

Economic slowdown but no recession!

Pulling forward growth over the last decade remains the Federal Reserve’s primary tool for keeping financial markets stable while economic growth rates and inflation remained weak.

Jim Cramer recently stated it will be time to buy stocks when the Fed pivots.

Every investor must learn the one investing lesson in surviving the long game: how math works.

As expected, Wall Street wins again.

No recession. 

ESG underperformance will be the strategy’s eventual undoing.

MMT Policy (Modern Monetary Theory), the grand experiment, was tried following the pandemic-driven shutdown of the economy.

Basic economics says that companies can only set prices at a level where the current supply will meet demand. Moreover, looking at prices in a vacuum is also very misleading because it doesn’t account for changes in the firm’s input or operating costs.

The “Bullwhip Effect” has gotten the media’s attention as of late. However, the causes, effects, and consequences to the market and monetary policy are not well discussed.

The “Fear Of Missing Out,” or “F.O.M.O.” is a centuries-old behavioral trait that began to get studied in 1996 by marketing strategist Dr. Dan Herman.

An earnings recession is coming as the Fed hikes rates which accelerates an economic recession.

“HODL,” an original misspelling taken on as a badge of courage by cryptocurrency investors, spread to “Meme stocks” during the runup in 2020 and 2021.

An oil price and energy stock price reversion may be starting.

NFIB signals a recession is coming…again.

An “economic hurricane” is coming.

Investors are terrified.

Social Security has a problem.

When will the bear market end?

Will the Fed pause its rate hikes as markets correct?

Is a “lost decade” ahead for markets?

High inflation has captured the headlines as of late particularly as CPI recently hit the highest levels since 1981.

The disinflationary impact of Fed policy on equities is coming.

Investing during a recession can be a very difficult, and often dangerous, prospect.

Investor sentiment has become so bearish that it’s bullish.

“Don’t be bearish.” That was the message delivered by a Wall Street Journal article in August 2021.

A bull market in bonds is set to return with a vengeance as the Fed once again makes a policy mistake.

Buying stocks is easy; the hard part is knowing when to sell.

Recession warnings are clearly on the rise. Much of the initial media fervor focuses on the inversion of the yield curve.

Is there a bear market lurking in the shadows?

Is it still a “bear market rally?”

The “wisdom of the crowd” isn’t always wise to follow. A recent article by Scott Nations via MarketWatch made an excellent point.

Did Goldman Sachs destroy a persistent myth about investing in stocks? Sam Ro recently suggested such was the case for the “sacred CAPE ratio.”

“Anatomy of a Bear Market” by Russell Napier is a “must-read” manuscript. Given current market dynamics, a review seems timely.

Yield curve inversion conversations are dominating the media to the point it almost sounds like the start of a bad joke.

The surge in bond yields suggests that we are nearing the ideal entry point to buy longer-duration bonds for capital appreciation and portfolio protection.

Bailouts are the root cause of the dysfunction of capitalism and the demise of free markets.

“Cash Is Trash” is a common theme as of late as inflation rages from the massive monetary interventions of 2020 and 2021.

Recession risk is rising rapidly. In fact, it is possible that we may already be in one.

The Fed’s QE is officially over.

An earnings reversion is coming.

Hiking rates into a wildly overvalued market is potentially a mistake. So says Bank of America in a recent article.

Greedy corporations are not causing inflation.

“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March.

A March stock market rally is likely, but does that mean the risk of a bear market is over?

Market pullback or bear market? Such seems to be the question on everyone’s mind as of late, given the rough start to 2022 so far.

Earnings estimates are more deviated from long-term growth trends than at any point in history.

Economic stagnation arrives as expected as the “Sugar Rush" of liquidity continues to fade from the system.

A 50-percent decline will only be a correction and not a bear market.

Disinflation, and ultimately deflation, is a more significant threat than inflation over the next two years.

A Potemkin economy has lured the Fed, economists, and Wall Street analysts into a potentially dangerous assumption of economic normalcy.

Jeremy Grantham recently made headlines with his latest market outlook titled “Let The Wild Rumpus Begin.”

What if the Fed can’t hike rates? It’s an interesting question and one we delved into in Part 1 – “Fed Won’t Hike Rates As Much As Expected.”

Rate hikes will be far fewer than the markets currently expect.

“Don’t Fight The Fed.” But, unfortunately, that mantra has remained a “call to arms” of the financial markets and media “bullish tribes” over the last decade.

Passive ETFs are hiding a bear market in stocks.

“Speculative” is a word that aptly sums up the year 2021.

Here are my New Year “investor” resolutions for 2022.

The reality is that despite media commentary to the contrary, debt-driven government spending programs have a dismal history of providing the economic growth promised. As a result, the disappointment of economic and earnings growth over the next year is almost a guarantee.

During bull markets, investors have a concise memory of previous bear markets. Such is why, throughout history, cycles repeat as lessons must get learned and relearned.

When the Fed initially starts hiking rates, it is usually during a strongly trending bull market. Much like a car rolling downhill in neutral, tapping the brakes initially doesn’t do much to curb the momentum. However, keep pushing on the brake pedal long enough, and the car will slow to stop. There are two things to take away from the chart below.

“Wipe Out” is an appropriate description of what is happening beneath the calm surface of the bull market.

Going to all cash in your portfolio to avoid a crash can be just as costly as the crash itself. A recent CNBC article quoted a $200 billion money manager suggesting “every stock market investor should be ready to go to cash.”

Financial history is littered with the remains of ideas that marked the peaks and troughs of markets over time. From magazine covers to the world’s tallest skyscrapers to new investment products and strategies. Most proved to be the result of the psychology at that time, whether it was excessive bullishness or overwhelming fear.

The market is disconnected from everything. Throughout history, there are correlations you would expect to hold constant between the market, consumer confidence, and the economy.

The Fed’s monetary policy has screwed Americans. Such is the basic premise of a recent Washington Times article discussing inflation.

Inflation vs. deflation – while headlines get filled with “inflation” concerns, historical data shows “deflation” remains a threat.

Could the Fed trigger the next “financial crisis” as they begin to hike interest rates? Such is certainly a question worth asking as we look back at the Fed’s history of previous monetary actions.

Do rising interest rates matter to the stock market? Many in the financial media and advisory community are scrambling to locate periods where rates rose along with stocks. Has it happened? Absolutely. However, it was only a function of timing until it mattered.

While the Fed notes valuations are elevated, the crucial message to investors gets obfuscated. From current valuation levels, the expected rate of return for investors over the next decade will be low.

“Is cash a good hedge?” It’s a focus of a recent article discussing “fast” versus “slow” risk which examined the financial impact on equities and cash over long-term periods.

Charting the stock market “melt-up” in prices, and the Fed’s naivety of the laws of physics may be of benefit to younger investors. After more than a decade of rising prices, accelerating markets seem entirely normal, detached from underlying fundamentals. As a result, new acronyms like “TINA” and “BTFD” get developed to rationalize surging prices.

Fundamentally speaking, there are more than a few indications that 2022 earnings estimates are still overly exuberant. However, the bullish optimism currently supports rising stock prices.

What If I told you that 40% of the bull market rally over the last decade was from buybacks alone? That may not be as crazy as it sounds.

While the promise of a continued bull market is very enticing, it is essential to remember that all markets ultimately complete a “full cycle.” Therefore, if your portfolio, and eventually your retirement, depends on the thesis of an indefinite bull market, you should at least consider the following charts.

Like all rules on Wall Street, Bob Farrell’s rules are not hard and fast. There are always exceptions to every rule, and while history never repeats exactly, it often “rhymes” closely.

We dig into the bullish and bearish case for the market as we head into the end of the year. Currently, investors face a conundrum between year-end seasonality and the Fed starting to taper its bond-buying program.

Is the risk of a more significant correction over now that the expected 5% decline is complete? That was a hotly debated question after this past weekend’s newsletter supporting the idea of a reflexive rally into year-end.

No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here?

The fact we have the lowest interest rates in 5000-years is indicative of the economic challenges we face.

On Monday, stocks solidly cracked below the 50-dma, but the bounce off the lows has investors asking if it’s “time to buy?”

After 40-years of economic erosion, there are still deficit deniers.

We don’t disagree the S&P 500 could well hit a target of 5000. But, let us be honest about the reasons why...

Gold. What’s wrong with it? From spiking inflation, falling real interest rates, and massive money printing, it seems logical that gold, a touted inflation hedge, should be rising. Yet, so far this year, gold has done little.

As the Fed started to talk about “taper,” the “bulls” sent a stern warning with a 2% “crash” they shouldn’t. After a couple of weeks of several Fed speakers discussing the need to reduce monetary accommodation, a quick sell-off brought had Powell singing a “dovish” tone at the recent Jackson Hole summit.

The question of Japanization in the U.S. continues as the S&P 500 tracks the Nikkei of 1980.

Young investors are taking on personal debt to invest in stocks.

“Pet Rocks” first appeared in the mid-70s as a novelty item. Just recently, digital NFT’s of “pet rocks” sold for over $100,000.

In the fastest bull market in history, the S&P 500 doubled from its pandemic lows.

Did the Fed’s “monetary policy experiment” fail?

The question I get most often is “when is the next bear market?” There are three specific items that tend to predict bear markets and recessions with some accuracy.

The data shows the Fed is behind the surging wealth gap.

Was the second quarter the peak of economic growth and earnings?

“Past Performance Is no guarantee of future of results.” Such is the disclaimer below every performance chart produce by the financial marketplace.

A few years ago, Paul Wallace penned an article entitled: “GDP Is A Grossly Defective Product.” The recent release of the Q2-2020 report reminded me of it as the media fawned over the 7.6% print.

In this past weekend’s newsletter, I discussed the issue of the markets next “Minsky Moment.”

It’s now official that the recession of 2020 was the shortest in history.

Monetary policy is not expansionary despite widespread belief otherwise.

Knowledge vs. experience. When it comes to investing, such is what separates long-term success from failure.

Is the retail investor rampage over?

Bond yields are sending an economic warning as this past week 10-year Treasury yields dropped back to 1.3%.

“Warnings From Behind The Curtain” almost sounds like the title of a good “Cold War” fiction novel.

In Part-2 of “Capitalism” does not equal “Corporatism,” we delve into why bailouts support corporatism and how to fix the system.

Wall Street is once again in the midst of a “money heist” from naive investors.

A couple of weeks ago, in “Warning Signs A Correction Is Ahead,” we said quite a few indicators set the stage for a pick-up in volatility.

Bull markets always seem to end the same – slowly at first, then all at once.

Much like “Humpty Dumpty,” despite the Fed’s best efforts, you can’t create permanent inflation from artificial growth.

Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases.

After a decent rally from the recent lows, there are multiple warning signs a correction approaches.

The media is buzzing with claims of an “Economic Boom” in 2021.

Bear markets matter, and they matter much more than you think.

I can understand the confusion when this past week I discussed the issue of “If everyone sees it, is it still a bubble?”

“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives

Over the long term, confusing market crashes and bear markets can be detrimental to investor outcomes.

“If everyone sees it, is it still a bubble?” That was a great question I got over the weekend.

The recent NFIB survey suggests we are only in an economic recovery, not an expansion.

One of the interesting aspects of “bull markets” is the further they go, the lower forward returns fall.

There has been much commentary suggesting bonds have gotten overvalued due to historically low rates.

When there is a discussion of low future returns due to valuations, what gets missed is that such requires a bear market.

During a recent CNBC interview, Jeremy Siegel suggested stocks could rise another 30% before the boom ends.

There is no way this bull market doesn’t end very badly.

As markets surge to record highs, analysts are rushing to ratchet up earnings estimates as optimism explodes.

Recently, the March jobs report showed a whopping 916,000 new jobs.

In retail investing, do the “blind lead the blind?” Such was a question I asked recently about young investors who are “Long Confidence And Short Experience.”

I recently discussed why “Free, Isn’t Really Free” regarding the retail investor. While “free trades” have certainly reduced the transaction costs, the selling of data to the highest bidder has likely cost investors more than they saved.

Since the “Financial Crisis,” the hope was that inflating asset prices would trickle down into economic growth.

The fleecing of retail investors continues as “payment for order flow” expands.

In a “market mania,” retail investors are generally “long confidence” and “short experience” as the bubble inflates. While we often believe each “time” is different, it rarely is. It is only the outcomes that are inevitably the same.

The expected “sugar rush” from more stimulus is why the economy will “run hot” then crash. As every parent knows, giving a child too much “sugar” leads to a “rush” of energy. Then comes the crash, where you find them in some odd place taking a nap.

The markets took a tumble to start this week as rising interest rates and inflationary pressures begin to weigh on outlooks. Those worries quickly diminished as Jerome Powell changed the rules to reassure Wall Street that “QE” is here to stay.

More than 90% of investors believe the economy will be more robust in 2021, with a consensus it’s a V-shape recovery. For the first time since January 2020, chief investment officers want to increase capital spending rather than improve balance sheets.

One of my favorite investing legends is Oaktree Management’s Howard Marks. His investing wisdom and in-depth knowledge of investor psychology and market dynamics are unparalleled. Given the “speculative mania” we continue to watch in the market, I thought a review of some of his previous thoughts is appropriate.

As discussed in Friday’s #Macroview, stimulus, mainly when it comes from debt, does not create organic economic growth. In the second part of this analysis, we delve into why Powell is wrong when he says more stimulus will solve the employment problem.

2021 has certainly started off interesting. From Reddit readers chasing the most heavily shorted stocks, to the new Administration discussing more stimulus, investors have had plenty to deal with. A market review seems appropriate as the bulls seem to remain bulletproof even as the mania grows.

The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles. They are also aware that most policy tools are likely ineffective at mitigating financial risks in the future. Such leaves them being dependent on expanding their balance sheet as their primary weapon.

The illusion of surging savings rates or the decline in the debt-to-income ratios obfuscates the real economic problems and fosters the belief that monetary policies are working. They aren’t.

We can’t predict the future. If we could, fortune tellers would all win the lottery. They don’t, we can’t, and we aren’t going to try. However, this doesn’t stop the annual parade of Wall Street analysts from putting out forecasts on the S&P 500.

In September 2019, I wrote “NFIB Survey Trips Economic Alarms,” Of course, it was just a few short months later the U.S. economy fell into the deepest recession since the “Great Depression.” The latest NFIB survey is sending a strong warning to investors piling into small-cap stocks.

As we enter 2021, there are two myths told to investors to support the bull market narrative. The first, as we debunked recently, is that low-interest rates justify high valuations. The second is that since valuations are not as high as the “dot.com” crisis, there is no “stock market bubble.”

In the current bull market advance, few people are willing to sell, so buyers must keep bidding up prices to attract a seller to make a transaction. As long as this remains the case, and exuberance exceeds logic, buyers will continue to pay higher prices to get into the positions they want to own.

In October, I discuss how the “2nd Derivative Effect” would mute the impact of future stimulus programs. With the passage of the $900 billion stimulus package, we can update the estimates for the economic impact heading into 2021.

“Maybe this time is different. Those words, supposedly the most dangerous to utter in the investing realm, came to mind amid the frenzied pops in the highly anticipated initial public offerings recently.” That quote was from Randall Forsyth discussing why the current market mania reminds him of the “Shades of 1999.”

Recently, President-Elect Joe Biden named Janet Yellen to be his administration’s Treasury Secretary. Yellen quickly proclaimed the reason “I became an economist was because I was concerned about the toll of unemployment on people, families, and communities.” Such provides excellent commentary, but her track record as Federal Reserve Chairman shows she is more for the top 10% of the economy than the bottom. In reality, and what the markets already suspect, her appointment is an “arranged marriage” to the Fed.

In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed.

There is much to debate about the current level of interest rates and future stock market returns. However, what is clear is the 40-year decline in rates did not mitigate two extremely nasty bear markets since 1998, just as falling rates did not mitigate the crash in 1929 and the subsequent depression.

It’s that time of year when Wall Street analysts started trotting out the predictions for earnings growth and stock market targets for the coming year. Unfortunately, each year these overly optimistic estimates are ground down as the year progresses. Next year will be no different as earnings growth will disappoint in 2021.

The rally in energy companies is likely premature. To understand why such may be the case, we have to review a bit of history.

Recently, Ed Yardeni discussed his view of why another “Roaring 20’s” may lie ahead. However, while I certainly can appreciate his always “bullish optimism,” there is a significant fundamental problem with his view.

We have recently written a couple of posts about the “exuberance” that has invaded the market since the election. Such is often seen near short- to intermediate-term peaks in markets as investors go “all-in” without a net.

“The stock market is not the economy.” Such has been the “Siren’s Song” of investors over the last couple of years as valuation expansion has been the sole driver of the market’s performance. However, given that corporations derive their revenue from economic activity, the “Buffett Indicator” suggests investors may be walking into a trap.

I want to discuss a recent WallStreet Journal article by Ruchir Sharma entitled “The Rescues Ruining Capitalism.” We talk much about the bailouts and stimulus programs related to the economic shutdown and pandemic. However, the bailouts began back in 2008 when the Federal Reserve intervened with the insolvency of Bear Stearns.

One of the most recent mantras in the financial media is that housing prices rise because there is an inventory shortage. While it is an excellent headline for “getting clicks,” the are 3-reasons why there really is NO housing shortage.

I recently published an article discussing why “recessions” are a good thing by reverting debt buildups excesses during expansions. The argument against debt reversions is always the same in that “debt-to-income” ratios low.

As we near the 2020 Presidential election, rhetoric from both sides is ramping up. Depending on your personal “echo chamber” of social media, you are likely confident why your candidate is the best choice, and the opposition is the worst. However, when it comes to economic prosperity and the financial markets, who is the best choice? To answer that question, we will focus on the “policies,” not the “politics.”

Neel Kashkari, in a recent CNBC interview, said, “I don’t see any moral hazard here“ when asked if the Fed’s massive liquidity injections have blown a bubble. What exactly is the definition of “moral hazard.”

It is a given that you should never mention the “R” word. People immediately assume you mean the end of the world: death, disaster, and destruction. Unfortunately, the Federal Reserve and the Government also believe recessions “are bad.” As such, they have gone to great lengths to avoid them. However, what if “recessions are a good thing,” and we just let them happen?

There is currently much hope for another fiscal stimulus package to be delivered to the economy from Congress. While President Trump recently doused hopes of a quick passage, there a demand for more stimulus by both parties. While most hope more stimulus will cure the economy’s ills, it will likely disappoint due to the “2nd derivative effect.”

The amount of outstanding debt, and the subsequent deficit, has long been a problem in the U.S. For the last two decades, policymakers have made annual promises for more substantial economic growth. Yet with each passing year, growth rates weaken, and economic prosperity worsens.

Whether it is Paul Tudor Jones or any other great investor throughout history, they all had one core philosophy in common; the management of the inherent risk of investing.

We have recently been discussing the lack of performance in value versus growth. Such is historically the case during the late-stage, exuberance-driven, bull markets. However, not everything classified as a “value stock” is necessarily a value. The problem today, more so than at any point previously, is the astonishing lack of value in “value.”

Over the last several months, we have discussed the remarkable underperformance of value versus growth. While many investors quickly dismiss the performance gap under the guise of “this time is different,” it has important longer-term implications. In today’s missive, we want to discuss value, the margin of safety, and the real art of “doing nothing.”

I have previously discussed the importance of understanding how “physics” plays a crucial role in the stock market. As Sir Issac Newton once discovered, “what goes up, must come down.”

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

It’s a tale of two bull markets. One part of the market is trading as you would expect with near depressionary economic numbers. The only description for the other part is “insane.”

As we have been discussing, this past week, the S&P 500 index set an all-time high. Importantly, the breakout to all-time highs confirms the 35% decline in March was only a correction and not a bear market. The implications are important as the change of definition suggests a bear market still lurks for the full-market cycle to complete.

With the second quarter of the 2020 reporting season mostly behind us, and with markets testing “all-time” highs, do earnings support the bullish thesis? Such is the fundamental question surrounding the debate over the record deviation between “momentum” and “growth.”

Soros’ view on the pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market, creating a feedback loop between the markets and fundamentals.

A recent CNBC article states the Fed will make a major commitment to ramping up inflation. How is this different than the past decade of promises for higher inflation? More importantly, while the Fed may want inflation, their very actions continue to be deflationary.

According to a new study by the left-leaning Roosevelt Institute, a universal basic income could permanently make U.S. economy trillions of dollars larger. While such socialistic policies sound great in theory, history, and data, show it isn’t the economic savior it is touted to be.

Despite the surging stock market from the March lows, trillions in liquidity support from the Fed, retirement confidence declined.

There has been a growing concern over Technology stocks as investors “Party Like It’s 1999.” While no two periods are the same, the outcomes often are. For longer-term investors, if we are amid another “Tech Bubble,” the biggest challenge is navigating it and “living to tell about it.”

Value (investing) is dead. Long live value investing. Such certainly seems to be the mantra as investors continue to pile into growth stocks while rationalizing valuations using methodologies which historically have not worked well.

In this week’s “Technically Speaking,” the “Golden Cross” arrives, but are the bulls safe? As noted two weeks ago, is the 50/200 dma crossover is historically bullish for equities. However, with markets facing one of the worst earnings declines on record, could overly exuberant investors be walking into a trap?

When looking at the acceleration in the price of the Nasdaq, and particularly within the small group of stocks driving that advance, you can begin to fathom our concerns. Furthermore, the divergence between the Nasdaq and the S&P 500 index is emulating the late 90’s.

Over the last quarter, the “Death of Fundamentals” has become apparent as investors ignore earnings to chase market momentum. However, throughout history, such large divergences between fundamentals and price have resulted in low future returns. This time is unlikely to be different.

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.

If you haven’t heard of Modern Monetary Theory, or “MMT,” you will soon. If you recently lost your job due to the economic shut down, and received a stimulus check, you are already a beneficiary. As we will discuss in Part-1 of this two-part series, MMT’s theory falls flat when faced with reality.

With sentiment currently at very high levels, combined with low volatility, and a high degree of investor complacency, all the ingredients necessary for a market reversal are currently present. Am I sounding an “alarm bell” and calling for a massive correction? No.

Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?

There are a tremendous number of things that can go wrong in the months ahead. Such is particularly the case of surging stocks against a depressionary economy.

Rationalizing high valuations won’t improve future return outcomes.

On Friday, the Bureau Of Labor Statistics released the widely expected employment report for May. Despite continued weekly jobless claims over the last month exceeding more than 8-million, the BLS reported an increase of more than 2.5 million jobs in May.

In 2013, I wrote an article discussing comments made by Russ Koesterich, CFA, regarding the Chicago Fed National Activity Index (CFNAI). Given this economic indicator just crashed by the most on record, it is worth reviewing his comments.

Currently, the Fed is injecting liquidity into the markets and economy at a record pace. While liquidity does have positive short-term benefits, is the Fed walking into a trap?

Is it possible the Fed over-reacted to a natural disaster? There are two different types of “recessionary” events that occur throughout history. The first is a “business cycle” recession, which happens with some regularity as excesses build up in the economy. These cycles generally take 12-18 months to complete as those excesses are reversed.

Jeremy Siegel, in time, will likely be proved wrong about the end of the “40-year bond bull” market. History suggests that not only is the “bond bull” alive and well, it likely has quite a long way as the U.S. will become more like Japan over time.

The Federal Reserve seemingly is an ongoing mission to destroy the bottom 90%.

The fiscal and monetary responses to the “coronavirus” created a surge in savings. While many hope those savings will go back to work, the “savings mirage” won’t save the economy.

Whether its corporate profits, earnings, or GDP, no matter how you analyze the data, it suggests the outlook for stocks going into the summer is not favorable.

This week’s newsletter will be somewhat condensed as the bulk of our current positioning is based upon the information contained in the two reports referenced herein. The goal of this week’s letter is simply to outline the market ranges which fall within the context of our current Macroview.

If you are hoping the “bear market” is over, and have jumped “back in” with all your capital, you are in “good company,” as many others, judging by my twitter feed, have done the same. Just be prepared to be disappointed in the months ahead.

In the end, it does not matter IF you are “bullish” or “bearish.” What matters, in terms of achieving long-term investment success, is not necessarily being “right” during the first half of the cycle, but by not being “wrong” during the second half.

With the economy shut down, layoffs in the millions, and no clear visibility about the economic recovery post-pandemic, companies are going to become vastly more conservative on the use of their cash. Given that source of market liquidity is now gone, the market will have a much tougher time maintaining current levels, much less going higher.

The majority of the time, when you hear someone say “I bought it for the dividend,” they are trying to rationalize an investment mistake. However, it is in the rationalization that the “mistake” is compounded over time. One of the most important rules of successful investors is to “cut losers short and let winners run.”

The “ONE Thing” you need to do TODAY, right now, is “accept” where you are. What you had, what was lost, and the mistakes you made, CAN NOT be corrected. They are in the past. However, by hanging on to those “emotions,” we lock ourselves out of the ability to take actions that will begin the corrective process.

Given the magnitude, and multiple confirmations, of these signals, it is far too soon to assume the “bear market” is over. This is particularly the case, given the selloff is less than one-month old.

While it is certainly hoped by many that we are closer to the end of the liquidation cycle, than the beginning, the dollar funding crisis, a blowout in debt yields, and forced selling of assets, suggests there is likely more pain to come before we are done.

We highly suspect that we have seen the highs for the year. Most likely, we are moving into an environment where portfolio management will be more tactical in nature, versus buying and holding. In other words, it is quite probable that “passive investing” will give way to “active management.”

We are likely experiencing more than just a “soft patch” currently despite the mainstream analysts’ rhetoric to the contrary. There is clearly something amiss within the economic landscape, even before the impact of COVID-19, and the ongoing decline of inflationary pressures longer term was already telling us just that.

While we remain optimistic about the markets currently, we are also taking precautionary steps of tightening up stops, adding non-correlated assets, raising some cash, and looking to hedge risk opportunistically on any rally.

In September 2017, when the Trump Administration began promoting the idea of tax cut legislation, I wrote a series of articles discussing the fallacy that tax cuts would lead to higher tax collections, and a reduction in the deficit...

In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a “Minsky Moment.” At that time, this idea fell on “deaf ears” as the markets, and economy, were in full swing. However, it wasn’t too long before the 2008 “Financial Crisis” brought the “Minsky Moment” thesis to the forefront.

In the President’s “State of the Union Address” on Tuesday, he used the podium to talk up the achievements in the economy and the markets. While it certainly is a laundry list of items he can claim credit for, it is the claim of record-high stock prices that undermines the rest of the story. Let me explain.

On Wednesday, the Federal Reserve concluded their January “FOMC” meeting and released their statement. Overall, there was not much to get excited about, as it was virtually the same statement they released at the last meeting. However, Jerome Powell made a comment which caught our attention...

The trouble currently is that global short-term interest rates are still close to, or below zero, and cannot be cut much more, which has deprived central banks of their main lever if a recession strikes.

The problem with low interest rates for so long is they have encouraged the misallocation of capital. We see it everywhere throughout the entirety of the financial system from consumer debt, to subprime auto-loans, to corporate leverage, and speculative greed.

Comparison-created unhappiness and insecurity is pervasive, judging from the amount of spam touting everything from weight-loss to plastic surgery. The basic principle seems to be that whatever we have is enough, until we see someone else who has more. Whatever the reason, comparison in financial markets can lead to remarkably bad decisions.

The 2020 Decade: Valuations & The Destiny Of Low Returns. As we enter into a new decade, investors have become complacency with high rates of return on stocks. However, what is the likelihood the next decade will deliver the same.

As we wrap up the decade. it is a good time to review the 7-impossible trading rules to follow in a bull market. These rules are not new, or unique, but they are the foundation of long-term investing success.

As we wave goodbye to the bull market of the 2010s, here are the rules for investing in whatever comes in the next decade.

Despite Central Bank’s best efforts globally to stoke economic growth by pushing asset prices higher, the effect has been entirely consumed by those with actual savings, and discretionary income, available to invest.

Not only did the tariffs get delayed, but on Friday, it was reported that China and the U.S. reached “Phase One” of the trade deal, which included “some” tariff relief and agricultural purchases.

The current path we are on is unsustainable. The remedies being applied today is akin to using aspirin to treat cancer. Sure, it may make you feel better for the moment, but it isn’t curing the problem.

While the bulls are certainly hoping the “cash hoard” will flow into U.S. equities, the reality may be quite different.

With the third quarter of 2019 reporting season mostly behind us, we can take a look at what happened with earnings to see what’s real, what’s not, and what it will mean for the markets going forward.

What's the most important economic number? GDP, Employment, claims....nope....those are all lagging indicators. If you want to know where you are headed look at the 85-component CFNAI. Here's why.

In today’s market the majority of investors are simply chasing performance. However, why would you NOT expect this to be the case when financial advisers, the mainstream media, and WallStreet continually press the idea that investors “must beat” some random benchmark index from one year to the next.

In a “secular bull’ market, the prevailing trend is “bullish” or upward-moving. In a “secular bear” the market tends to trend sideways with severe drawdowns and sharp rallies. However, what truly defines long-term secular markets are valuations, and whether those valuations are contracting or expanding.

A correction is coming, just don't tell the bulls just yet. A technical look at the rapid reversion of sentiment from bearish back to bullish. With more extreme extensions of technical indicators, it suggests a correction is likely over the next few weeks in the stockmarket.

The media is full of articles about the financial situation of Millennials in today’s economy. According to numerous surveys, they are saddled with too much debt, can’t secure higher wage-paying jobs, and are financially distressed on many fronts.

It isn’t just the deviation of asset prices from corporate profitability which is skewed, but also reported earnings per share. As I have discussed previously, the operating and reported earnings per share are heavily manipulated by accounting gimmicks, share buybacks, and cost suppression.

A recent study revealed the top risks institutions are hedging for long-term. Here's what you can do.

DOW 650,000 - Just recently CNBC ran an article touting Ron Baron's call for the Dow to reach that astronomical level in just 50-years. Problem is that the INDU should ALREADY be at 650,000 - why isn't it?

In a recent weekly newsletter, I discussed the rather dramatic decline of short-interest in the S&P 500 which suggests a high degree of complacency by investors.

Many conversations lately about negative CEO Confidence vs optimistic consumers Most of the bullish commentary centers around CEO's being wrong. But are they? We cover what historically happens next.

A review of the risks which keep the markets range-bound. Investors are bearish, but remain aggressively allocated.

Capitalism is the worst....except for all the rest. The final installment of our 3-part series on capitalism as we examine the fallacies of MMT, why deficits aren't self-financing, and why wealth inequality is actually a good thing.

Since the lows of last December, the markets have climbed ignoring weakening economic growth, deteriorating earnings, weak revenue growth, and historically high valuations on “hopes” that more “Fed rate cuts” and “QE” will keep this current bull market, and economy, alive…indefinitely.

Capitalism? Is it really broken? Or, has it just been distorted into an unrecognizable wealth transfer system? In the 1st of the 3-part series we discuss how we got here & why things seem to have gone awry.

When Carl Gugasian of Dewey, Cheatham & Howe rates Bianchi Corp. a “Strong Buy,” whose interest is that in? We dig into the conflict between WallStreet and You.

Has the splurge in companies buying back their own shares to support asset prices and improve bottom-line EPS finally begin to lose its effectiveness? We dig into the data and what could cause buybacks to end altogether.

Since the 2009 lows the stock market has surged by more than 300% which should be representative of a surging economy. Yet, what we find is a market which has pulled from the future.

Once a year, I post a list of investing rules of great investors in history. Experience is a valuable commodity and these rules can keep you from learning the hard way.

I first wrote about the consequences of hiking the minimum wage in 2016. A recent CBO study confirmed our previous take on the unintended consequences of hiking minimum wages.

With the political, fundamental, and economic backdrop becoming much more hostile toward investors in the intermediate term, understanding the value of cash as a “hedge” against loss becomes much more important.

Just recently, Rex Nutting penned an opinion piece for MarketWatch entitled “Consumer Debt Is Not A Ticking Time Bomb.” His primary point is that low per-capita debt ratios and debt-to-dpi ratios show the consumer is quite healthy and won’t be the primary subject of the next crisis.

Inverted yield curves, Fed cutting rates, and more QE all seem to "the bell ringing" for investors to jump into stocks as markets rise. But, is this the bell ringing to buy stocks, or is it the bell ringing the top of the market?

In last Tuesday’s “Technical Update,” I wrote that on a very short-term basis the market had reversed the previously overbought condition, to oversold. This oversold condition is why we took on a leveraged long position on the S&P 500.

Yesterday, the financial media burst into flames as the yield on the 10-year Treasury fell below that of the 2-Year Treasury. In other words, the yield curve became negative, or “inverted.”

Is the recent stock market correction just another "buy the dip" opportunity, or is there a greater risk than many investors realize?

I have often been asked when I am going to become a raging stock bull again. As Treasury Rates approach our zero target the table is being set for value to return to the stock market.

I have previously discussed the pending correction due to extreme deviations above long-term means. Trump's actions were simply the match that lit the fuse.

We have repeatedly warned about the danger of the Fed hiking into a weak, highly leveraged economy. The Media said it was bullish. Now they are cutting and it's bullish. It can't be both.

Over the last 18-months, there has been a continual drone of political punditry touting the success of “Trumponomics” as measured by various economic data points. Even the President himself has several times taken the opportunity to tweet about the “strongest economy ever.”

I recently wrote about the “F.I.R.E.” movement and how it is a byproduct of late-stage bull market cycle. It isn’t just the “can’t lose” ideas which are symptomatic of bullish cycles, but also the actual activities of investors as well. Not surprisingly, the deviation of growth over value has become one of the largest in history.

Over the last couple of weeks, I have laid out the bull and bear case for the S&P 500 rising to 3300, and the case for the Fed to cut rates. In summary, the basic driver of the “bull market thesis” has essentially come down to Central Bank policy.

The Etrade commercial aired during Super Bowl XLI in 2007. The following year, the financial crisis set in, markets plunged, and investors lost 50%, or more, of their wealth. However, this wasn’t the first time it happened.

Economists are stunned by why economic growth remains at low levels a decade after the last recession. Here's why.

In this past weekend's newsletter we discussed the bull/bear case for S&P 3300. We now look at the #complacency behind it.

WIth a $5-7 Trillion shortfall in funding, it is a lesson that investors/savers also engage in which is simply a #math problem.

This final chapter is going to cover some concepts which will destroy the best laid financial plans if they are not accounted for properly.

There have been many comparisons about the Fed using "insurance" #rate #cuts today versus 1995. We compare the financial and economic conditions of both periods to make the case.

While “Part One” focused on the amount savings required to sustain whatever level of lifestyle you choose in the future, we also need to discuss the issue of the investing side of the equation.

Let me start out by saying that I am all for any piece of advice which suggest individuals should save more. Saving money is a huge problem for the bulk of American’s as noted by numerous statistics.

There is little denying the rise of “socialistic” ideas in the U.S. today. You can try and cover the stench by calling it “social democracy” but in the end, it’s still socialism.

For the majority of investors, the recent rally has simply been a recovery of what was lost last year. In other words, while investors have made no return over the last 18-months, they have lost 18-months of their retirement saving time horizon. The decline was small last time. But what about next time?

During very late stage bull markets, the financial press is lulled into a sense of complacency that markets will only rise. It is during these late stage advances you start seeing a plethora of articles suggesting simple ways to create wealth.

Recent comments from Fed Chairman Powell with respect to corporate debt echoes what Bernanke said in 2007 about subprime mortgage debt.

Nathan Rothschild once quipped "You can have the top 20% and the bottom 20%. I will take the 80% in the middle." This is 80/20 rule of investing.

This past weekend, I was digging through some old articles and ran across one that needed to be readdressed on“human stupidity” as it relates to investing.

Since the beginning of 2019, the market has risen sharply. That increase was not due to rising earnings and revenues, which have weakened, but rather from multiple expansion. In other words, investors are willing to pay higher prices for weaker earnings.

It is often said that no one saw the crash coming. Many did, but since it was “bearish” to discuss such things, the warnings were readily dismissed.

A recent comment from Chamrath Palihapitiya last week suggests that may be the case. An award to an aspiring economist who wants to study ending recessions. But are #recessions a bad thing?

This past weekend, we discussed the breakout of the markets to all-time highs. The question I asked this past weekend was simply; “The bull market is back, but can it stay?”

A look at combined problems of pensions and lack of savings facing #babyboomers as they face retirement.

The previous recessionary warnings from autos was dismissed until far too late. It is likely not a good idea to dismiss it this time.

Last week, the Federal Reserve released their March FOMC meeting minutes. Following the release, the markets surged higher as the initial reading by the markets was “the Fed is done hiking rates.”

There is little argument the streak of employment growth is quite phenomenal and comes amid hopes the economy will continue to avoid a recessionary contraction.

The market, and the yield curve, are trying to tell you something very important.

Let’s review the periods just prior to the onset of the last two bear markets to see if there are any similarities to today’s environment.

The most critical aspect of the financial system is "trust" in it. After years of Wall Street "raping and pillaging" individuals to line their own pockets, the next bear market will likely destroy the remaining "trust."

In a widely expected outcome, the Federal Reserve announced no change to the Fed funds rate but did leave open the possibility of a rate hike next year.

It is critically important to remain as theoretically sound as possible as a large majority of investors have built their portfolios on a foundation of false ideologies. The problem is when reality collides with widespread fantasy.

There should be no one more concerned about YOUR money than you, and if you aren’t taking an active interest in your money – why should anyone else?

There has been a lot of commentary as of late regarding the issue of corporate share repurchases. Even Washington D.C. has chimed into the rhetoric as of late discussing potential bills to limit or eliminate these repurchases. It is an interesting discussion because most people don’t remember that share repurchases were banned for decades prior to President Reagan in 1982.

With the fundamental and technical backdrop no longer as supportive, valuations still near the most expensive 10% of starting valuations, and interest rates higher, the returns over the next decade will likely be disappointing.

One of the most highly debated topics over the past few months has been the rise of Modern Monetary Theory (MMT). The economic theory has been around for quite some time but was shoved into prominence recently by Congressional Representative Alexandria Ocasio-Cortez’s “New Green Deal” which is heavily dependent on massive levels of Government funding.

With the month of February now officially in the books, we can take a look at our long-term monthly indicators to see what they are telling us now. Is the bull market back?

Earlier this month, I penned an article asking if we “really shouldn’t worry about the Fed’s balance sheet?” The question arose from a specific statement made by previous New York Federal Reserve President Bill Dudley...

Tax Cuts a Year Later - Did They Deliver as Promised? A look back at what we stated about #tax cuts prior to their enactment and where we are today. Did they lift up the average American? #GDP

The market is downright bullish. There is little reason to argue the point given the bullish trend since the December 24th lows. Of course, such is not surprising given the Fed’s dovish turn from tightening monetary policy to quietly putting the “punch bowl” back on the table.

For the Fed, it is a choice between the lesser of two evils. The only question is did they make the right one?

Bill Dudley, who is now a senior research scholar at Princeton University’s Center for Economic Policy Studies and previously served as president of the New York Fed and was vice-chairman of the Federal Open Market Committee, recently penned an interesting piece from Bloomberg.

If you haven’t heard about Modern Monetary Theory, or “MMT” for short, by now, you will soon. It is highly likely that MMT will be increasingly touted by economists and politicians from both sides of the aisle, as the economic prescription, even panacea, to cure our economic ills.

Since the financial crisis, there has been much commentary written about the low forward returns on stocks over the subsequent 10-year period from high valuation levels. The chart below shows the forward 10-year returns from previously valuation levels.

The reality is that we can’t control outcomes; the most we can do is influence the probability of certain outcomes which is why the day to day management of risks and investing based on probabilities, rather than possibilities, is important not only to capital preservation but to investment success over time.

Currently, there are few, if any, Wall Street analysts expecting a recession at any point in the future. Unfortunately, it is just a function of time until the recession occurs and earnings fall in tandem.

With debt levels rising globally, economic growth on the long-end of the cycle, interest rates rising, valuations high, and a potential risk of a recession, the uncertainty of retirement plans has risen markedly. This lends itself to the problem of individuals having to spend a bulk of their “retirement” continuing to work.

In the “rush to be bullish” this a point often missed. When data is hitting “record levels” it is when investors get “the most bullish.” Conversely, they are the most “bearish” at the lows. But as investors, such is exactly the opposite of what we should do. It is just our human nature.

I was digging through some old charts over the weekend and stumbled across this gem from AlphaTrends which explains the “best time to buy stocks.”

Secular markets, bull or bear, are not defined by price movements.

Over the last few weeks, I have been asked repeatedly to publish my best guess as to where the market will wind up by the end of 2019. Here it is...

When the “bull is running” we believe we are smarter and better than we actually are. We take on substantially more risk than we realize as we continue to chase market returns and allow “greed” to displace our rational logic. Just as with gambling, success breeds overconfidence as the rising tide disguises our investment mistakes.

From the previous peak in early December, the market has yet to even achieve a 38.2% retracement of that decline. It would not be surprising to see this rally try and recoup a full 61.8% of the decline over the next several weeks.

Last Monday, Jeff Gundlach, famed bond fund manager and CIO of Doubleline, made an interesting comment during an interview with CNBC when he stated that the 10-year Treasury yield would top 6% by 2020 or 2021. 6% would be the highest yield since 2000.

It is important to remember, that “Risk” is simply the function of how much you will lose when you are wrong in your assumptions. 2018 has been a year of predictions gone horribly wrong.

IF “Santa” is going to visit “Broad & Wall” this year, it will most likely occur between the 10^th through the 17^th trading days of the month. Such would equate to Friday, December 14^th through Wednesday, December 26^th.

Now, I am not talking about a 20% correction type bear market. I am talking about a devastating, blood-letting, retirement crushing, “I am never investing again,” type decline of 40%, 50%, or more.

By itself, margin debt is inert. Investors can leverage their existing portfolios and increase buying power to participate in rising markets. While “this time could certainly be different,” the reality is that leverage of this magnitude is “gasoline waiting on a match.”

Last week, I had a conversation with a friend of mine about the plunge in oil prices in recent weeks. One of the biggest fallacies about plunging oil prices, and subsequently lower gasoline prices, is that it is a huge windfall for consumers. Even President Trump stated as much last Wednesday morning.

Last week, I touched on the issue of corporate profits and tax cuts. While the promise was that tax cuts were going to a massive boost to economic growth, the reality has been quite different.

As I have pointed out previously, the U.S. is currently running a nearly $1 Trillion dollar deficit during an economic expansion. This is completely contrary to the Keynesian economic theory.

Last week, General Electric (GE) did something that many never thought would happen. They slashed their dividend to just $0.01 per share. We are talking about GE. A company which has been bringing “good things to life” for well over 100-years.

Fox Business recently discussed a new study showing that more Americans doubted they would be able to save enough for retirement than those confident of reaching their goals. There were some interesting stats from the study.

Is the stock market a signaling a recession? A look at the historical performance of the S&P and #NBER recession announcements.

Throughout history, individuals have been drawn into the more speculative stages of the financial market under the assumption that “this time is different.” Of course, as we now know with the benefit of hindsight, 1929, 1972, 1999, 2007, and most likely 2019, were not different – they were just the peak of speculative investing frenzies.

There has been a lot of angst lately over the rise in interest rates and the question of whether the government will be able to continue to fund itself given the massive surge in the fiscal deficit since the beginning of the year.

Without the passage of the C.R. the government was facing a “shut-down” just prior to the mid-term elections. So, rather than doing what is fiscally responsible for the long-term solvency and financial health of the country, not to mention the generations to come, they decided it was far more important to get re-elected into office.

Last week, James Rickards posted an interesting article discussing the risk to the financial markets from the rise in passive indexing.

There is a LOT of optimism in the markets currently. But why shouldn’t there be? Speaking at Davos, the head of world’s largest hedge fund says “If You’re Holding Cash, You’re Going to Feel Pretty Stupid”.

As I noted this past weekend, 2017 was a year for the record books. Not surprisingly, the strong advance fostered a surge in investor optimism which pushed allocations to equities to the second highest level on record.

Market crashes are an “emotionally” driven imbalance in supply and demand. You will commonly hear that “for every buyer, there must be a seller.” This is absolutely true. The issue becomes at “what price.” What moves prices up and down, in a normal market environment, is the price level at which a buyer and seller complete a transaction.

The current market advance both looks, and feels, like the last leg of a market “melt up” as we previously witnessed at the end of 1999. How long it can last is anyone’s guess. However, importantly, it should be remembered that all good things do come to an end.

While I remain long and invested in the markets on behalf of my clients, I focus and write about the significant risks that are currently present. I am fully aware a laissez-faire attitude towards these risks is ultimately likely to destroy large portions of my clients hard-earned, and irreplaceable, investment capital.

The Congressional Republicans rolled out an ambitious tax cut proposal last week promising a surge in economic growth, wages and employment without blowing out the deficit. Will that really be the outcome?

Over a long enough period, I agree, you will make money. But, simply making money is not the point of investing. We invest to ensure our current “hard-earned savings” adjust over time to provide the same purchasing power parity in the future. If we “lose” capital along the way, we extend the time horizon required to reach our goals.

This morning, as I was catching up on my reading, I stumbled onto this gem from Business Insider of an interview with the founder of Robinhood, a mobile app to let individuals trade stocks with no commissions.

There is an increasing amount of commentary which suggests this time is different. Active management of portfolios is no longer needed, as Central Banks continue to be supportive of the markets, so join in on the “passive indexing” sweeping the country.

Several years ago, I began writing an annual update discussing Dalbar’s Quantitative Analysis Of Investor Behavior study. The study showed just how poorly investors perform relative to market benchmarks over time and the reasons for that underperformance.

The “Big Lie” is that you can “beat an index” over an extended period of time. You can’t, ever. Let me explain.

That is a pretty bold statement to make considering that every one of her predecessors failed to predict the negative consequences of their actions. Will there will be another “Financial Crisis” in our lifetimes? Yes, it is virtually guaranteed.

In some states, when a couple enters into divorce, the court may award “alimony,” or spousal support, to one of the former spouses for the express purpose of limiting any unfair economic effects by providing a continuing income to the spouse. The purpose is to help that spouse continue the “standard of living” they had during the marriage.

In Tuesday’s post, “A Shot Across The Bow,” I discussed the recent “Tech Wreck” and the warning sign that was delivered when trading algorithms begin to run in the same direction.

As I discussed this past weekend, the current “bull market” seems unstoppable. Even on Twitter, investors have once again been lulled into the “complacency trap.”

There is a really big crisis coming. Think about it this way. After 8 years and a 230% stock market advance the pension funds of Dallas, Chicago, and Houston are in severe trouble. But it isn’t just these municipalities that are in trouble, but also most of the public and private pensions that still operate in the country today.

There is in interesting dichotomy currently occurring within the economy. While consumer confidence, as reported by the Census Bureau, soared to some of the highest levels seen since the turn of the century, the hard economic data continues to remain quite weak.

There has been much debate about the current low levels of interest rates in the economy today. The primary argument is that the “30-year bull market in bonds”, due to consistently falling interest rates, must be near its end.

There is in interesting dichotomy currently occurring within the economy. While consumer confidence, as reported by the Census Bureau, soared to some of the highest levels seen since the turn of the century, the hard economic data continues to remain quite weak.

Last week, I discussed the “World’s Most Deceptive Chart” which explored the deception of “percentage” versus actual “point” losses which has a much greater effect on both the real, and psychological, damage which occurs during a bear market.

I received an email last week which I thought was worth discussing.

Since the markets were closed on Monday, there really isn’t much to update from this past weekend’s newsletter. The markets remain clearly and undeniably overbought and the risk of a short-term correction outweighs the potential for reward.

There is little doubt currently that complacency reigns in the financial markets. Nowhere is that complacency more evident than in the Market Greed/Fear Index which combines the 4-measures of investor sentiment (AAII, INVI, MarketVane, & NAAIM) with the inverse Volatility Index.

Congratulations! If you are reading this article it is probably because you have money invested somewhere in the financial markets. That’s the good news. The bad news is the majority of you reading this article have probably NOT saved enough for retirement.

There is little argument that Exchange Traded Funds, more commonly referred to as “ETF’s” have and will continue to change the landscape of investing.

It’s the Fed’s fault. Over the past several years, the Federal Reserve has forced interest rates lower in an all-out assault on “cash.”

Those who’ve had any brush with addiction know an addict will go to any length to support the habit, including stealing, lies and deception. The addict is aided and abetted by co-dependent friends and family members who cover up for the addict’s bizarre behavior and pretend nothing’s wrong.

For the umpteenth year in a row, mainstream economists and analysts are once again planting the seeds of hope for a return to stronger GDP growth. The White House has hoped for it for the last 8-years, and now President-elect Trump is all but promising a surge in economic growth.

Since investors are mostly individuals that have a “day job,” the majority of their “research” comes from a daily dose of media headlines. Therefore, since the media tends to “focus” their attention on “market moving headlines,” either bullish or bearish, investors tend to “react” accordingly.

As you can imagine, I received quite a few comments from readers suggesting that each percentage of tax cuts will lead to surging corporate earnings and economic growth...

During my morning routine of caffeine supported information injections, I ran across several articles that just contained generally bad investment advice and poorly formed analysis. Each argument was hinged on the belief that bull markets last indefinitely, bear markets are simply an opportunity to “buy” more, and investing for the long term always works.

Over the weekend, I was doing some research and stumbled across an article my friend Cullen Roche wrote a couple of years ago entitled “Can we All Agree to Stop Comparing Everything to the S&P 500”.

I recently penned a post discussing the idea of a “new secular bull market,” which, not surprisingly, garnered a good bit of push back from the “always bullish crowd.”

Over the last two weeks, a lot of the bullish sentiment that was embedded in the market has now given way to fear.

Over the last several months, in particular, the number of articles discussing the shift from “active management” to “passive indexing” have surged. I get it. The market seems to be immune to decline.

It’s been really busy as of late to cover all of the topics I have wanted to address. One topic, in particular, is the bond market and the ongoing concerns of a “bond bubble” due to historically low interest rates...

Last Monday, I discussed why you should be worried about corrections due to the damage inflicted upon your investment capital and the time required to “get back to even.” I received several emails stating we are in a new “secular bull market” and “indexing” is now the best approach.

One of the biggest reasons why investors consistently underperform over the long-term is primarily due to the extremely flawed advice promoted by Wall Street, because they have a product or service to sell you, and the media, because they don’t know better.

Over the weekend, I got a few tweets talking about some technical analysis currently being passed around the Internet suggesting the S&P 500 is about to make a significant move towards 2400.

In business, the 80/20 rule states that 80% of your business will come from 20% of your customers. In an economy where more than 2/3rds of the growth rate is driven by consumption, an even bigger imbalance of the “have” and “have not’s” presents a major headwind.