Stocks have broken above critical resistance on a weekly basis. Historically, this has lead to several months’ worth of gains. As I write this, the S&P 500 is backtesting the breakout.
High yield credit, which typically leads stocks is showing no signs of slowing down. It has turned up again and anticipates the S&P 500 breaking above 5,750 in the near future.
Breadth is also strengthening. This bull market rally is getting broader, NOT narrower. And here again, there are no signs of a collapse about to begin. This is a “buy the dip” moment for stocks.
I bring all of this up because a LOT of analysts have gotten bearish. Their clients have MISSED out on these gains! Don’t be one of them!
To avoid making the mistake of panicking during a garden variety pullback, I’d refer you to our special investment report, How to Predict a Crash which details a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
Normally, I’d charge $499 for this report as a standalone item. But I’m giving it away FREE to anyone who joins our daily market commentary Gains Pains & Capital.
To pick up your copy now (it doesn’t cost a dime)…
You are going to hear a LOT of people talking about this, saying it’s a sign that the economy is in recession.
It’s not.
This business cycle, is unlike any other. If you’re comparing what’s happening now to what happened in 2000 or 2007, then you’re comparing apples to oranges.
Was the economy shut down prior to the Fed cutting rates by 0.5% in 2000 or 2007?
No.
Did the Fed and Federal Government pump $11 trillion into the financial system in the years preceding the Fed’s decision to cut rates by 0.5% in 2000 or 2007?
No.
Did the U.S. experience an inflationary storm prior to the Fed cutting rates by 0.5% in 2000 or 2007?
No.
Comparing the Fed rate cuts and their implications today to the last two times the Fed cut rates by 0.5% without accounting for these differences is not just bad thinking… it’s actually BAD for your portfolio.
Why?
Because in 2024, the economy is NOT rolling over into recession, nor is the financial system showing any signs of duress. GDP growth is clocking in at 2%+.
As far as the financial system is concerned, stocks are outperforming junk bonds in dramatic fashion. Every time the financial system has been under duress during the last 17 years, this ratio has gone UP, breaking above its 10 month moving average (blue line in the chart below). Today there are ZERO signs of duress in this ratio.
As far as the financial system is concerned, stocks are outperforming junk bonds in dramatic fashion. Every time the financial system has been under duress during the last 17 years, this ratio has gone UP, breaking above its 10 month moving average (blue line in the chart below). Today there are ZERO signs of duress in this ratio.
Again, what’s happening today is NOTHING like what happened in 2000 or 2007. If your guru or strategist is telling you to sell the farm and prepare for a crisis, you need to FIRE THEM and get a copy of my How to Predict a Crash investment report, instead.
How to Predict a Crash uses a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
Normally, I’d charge $499 for this report as a standalone item. But I’m giving it away FREE to anyone who joins our daily market commentary Gains Pains & Capital.
To pick up your copy now (it doesn’t cost a dime)…
Why isn’t the economy rolling over into recession?
Every other week, an economic metric that has historically predicted multiple recessions goes off. Between this and the stock market’s volatility, stock market bears have plenty of ammunition for arguments that a crash or bear market is about to hit.
On the flip-side of this, stocks simply refuse to break down. Every time the market appears to be on the verge of a significant collapse, stocks erupt higher. And other economic data appears to be quite strong.
As a result of this, analysts trying to make sense of this situation end up either flip flopping on their forecasts… or appearing to be perma-bears or perma-bulls: investors who simply maintain the same perspective no matter what is happening.
What’s the deal here?
The deal is that this economic cycle is unlike any other in history. In the last five years the U.S. has experienced…
1) A voluntary economic shut down (2020-2021).
2) The Federal Reserve printing and funneling $5 trillion into the financial system in the span of 20 months (2020-2022).
3) The Federal Government spending $6 trillion in stimulus/ interventions in the span of two years (2020-2022).
4) The Federal Government running the largest deficit as a percentage of GDP outside of World War II (2020-today).
This is why everything feels so messy: investors are trying to navigate not just one Black Swan (a previously never seen before phenomenon), but FOUR Black Swans. The end result is a business cycle that is truly unlike any other.
So what are investors to do?
The answer is actually simple: invest in those stocks that will benefit from this unique environment, until a quantitative market trigger signals that a bear market is about to begin.
I’m not talking about a trigger that ONLY works during normal business cycles. I’m talking about a trigger that can in fact predict Black Swan events.
And I’ve developed PRECISELY such a tool.
It signaled before legitimate Black Swans: it fired before the 1987 Crash, the Tech Crash, and the Great Financial Crisis.
I detail this investing tool, how it works, and what it’s saying about the markets today in a special investment report How to Predict a Crash.
Normally, I’d sell this report as a standalone item for $499. But I’m giving it away for FREE for the next 30 days, to anyone who joins our daily investment commentary Gains Pains & Capital.
Again, this report will ONLY be available to the general public for the next 30 days.
Economically sensitive commodities like copper and oil have erased all of their 2024 gains and are now declining rapidly.
Defensive sectors like utilities are soaring… while growth-oriented sectors like Tech are struggling to move higher.
And worst of all, the ratio between stocks and long-term Treasuries has broken its 40-week moving average (the same as the 200-day moving average) for the first time since the pandemic crash!
All of this is EXTREMELY bearish and poses a major warning sign that additional downside could be here soon. Indeed, my proprietary Crash trigger is on the verge of registering a “SELL” for the first time in four years.
This signal went off before the 1987 Crash, the Tech Crash, and even the Great Financial Crisis. And right now, it’s flashing its first MAJOR warning sign in years.
To find out about this trigger, and what it’s saying about stocks today…
The crash callers and bears just got a major lesson.
It’s a lesson that all investors have to learn at some point. Indeed, the only investors who actually make money from the markets are those who have learned that lesson and integrated its outcomes to their investing strategies.
The lesson?
Bears don’t make money.
The reality is that being a bear provides you with endless material to write or complain about. After all, at any point in time there are a million things that can go wrong in the markets. But most of the time, as in over 95% of the time, those terrible things don’t actually play out.
Even when bad things do play out, few if any investors actually make money from them.
Consider the Great Financial Crisis of 2008: arguably the greatest bear market/ crisis of our lifetimes.
In 2008, there were roughly 216 million American adults over the age of 18. Roughly 60% of them had exposure to the stock market via brokerage accounts or retirements accounts (401Ks, IRAs, etc.) So, we’re talking about roughly 130 MILLION people who were involved in the stock market in one way or another.
The number of investors who got rich betting on a crash at that time is under 30. So, we’re talking about 30 people out of 130 MILLION succeeding. That’s roughly one ten millionth of one percent (0.00001%).
To put that into perspective, you are TEN TIMES more likely to be struck by lightning (the odds of that happening are one in one million).
Moreover, those few investors who DID get rich from the Great Financial Crises were all in highly unusual circumstances, none of which apply to the typical trader/ individual investor.
John Paulson is a famous hedge fund manager who became a billionaire betting on the housing crash. What you might not know is that the only reason this happened was because he personally had Goldman Sachs build securities that were chock full of garbage mortgages, which Goldman Sachs then sold to other clients… so Paulson could bet against them.
This was unethical and borderline illegal. And individual investors like you or I would NEVER have this opportunity (when was the last time you told Goldman Sachs to create something for you to bet against?)
Michael Burry is another hedge fund manager who got rich from betting on the housing crash. He had to LOSE money for two years before his bets worked out. And even once things went in his favor, the investment banks who sold him the securities he used to bet against the housing market refused to value his trades as profitable. Then his investors tried to withdraw their funds. When Burry refused to give the money back, they sued him. What followed was years of legal hell as well as an investigation by the FBI.
So let us consider this…
The odds of making a fortune betting on a crisis or some other Black Swan even are less than those of being struck by lightning.
The small handful of people who DO get rich from these situations do so either because they have A) a ridiculously unethical set up like John Paulson B) are willing to experience a nightmarish scenario for months, or even years like Michael Burry.
Again, being a bear is great if you want something to complain about… but it’s terrible if you want to make money from the markets.
If you’re tired of listening to bears who do nothing but lose you money, come join our daily market commentary Gains Pains & Capital. It focuses on proven investment strategies that can boost you portfolio returns.
Indeed, we just published a special investment report that details proprietary triggers that register before every bear market or crash. Unless these triggers go off, we’re putting our money to work, profiting from the markets.
I detail them, along with what they’re currently saying about the market today in our Special Investment Report How to Predict a Crash.
The Crash Callers are out in full force once again.
The problem with calling for a Crash is that you’re wrong 99% of the time. Then, once every few years, you’re correct. The whole process reminds me of a broken clock which is “correct” two times a day… but wrong the other 23 hours 58 minutes.
Remember, the purpose of investing is to make money. The easiest way to do that is to ride bull markets for as long as possible… and then get out before a bear market/ crash hits.
But what about the investors who make huge fortunes during Crashes like the Great Financial Crisis of 2008?
Let me bring you in on a dirty little secret…
Almost NO ONE made money during the market crashing in 2008. And the people who did were in situations that you or I will NEVER be in.
In 2008, there were roughly 216 million American adults over the age of 18. Roughly 60% of them had exposure to the stock market via brokerage accounts or retirements accounts (401Ks, IRAs, etc.) So, we’re talking about roughly 130 MILLION people who were involved in the stock market in one way or another.
The number of investors who got rich betting on a crash at that time is under 30. So, we’re talking about 30 people out of 130 MILLION succeeding. That’s roughly one ten millionth of one percent (0.00001%).
To put that into perspective, you are TEN TIMES more likely to be struck by lightning (the odds of that happening are one in one million).
Moreover, those few investors who DID get rich from the Great Financial Crises were all in highly unusual circumstances, none of which apply to the typical trader/ individual investor.
John Paulson is a famous hedge fund manager who became a billionaire betting on the housing crash. What you might not know is that the only reason he succeeded was because he personally had Goldman Sachs build securities that were chock full of garbage mortgages, which Goldman Sachs then sold to other clients… so Paulson could bet against them.
This was unethical and borderline illegal. And individual investors like you or I would NEVER have this opportunity (when was the last time you told Goldman Sachs to create something for you to bet against?)
Michael Burry is another hedge fund manager who got rich from betting on the housing crash. He had to LOSE money for two years before his bets worked out. And even once things went in his favor, the investment banks who sold him the securities he used to bet against the housing market refused to value his trades as profitable.
To top it off, his investors tried to withdraw their funds. When Burry refused to give the money back, they sued him. What followed was years of legal hell as well as an investigation by the FBI.
So, let us consider this…
The odds of making a fortune betting on a crisis or some other Black Swan are less than those of being struck by lightning.
The small handful of people who DO get rich from these situations do so either because they have A) a ridiculously unethical set up like John Paulson B) are willing to experience a nightmarish scenario for months, or even years like Michael Burry.
Which brings me back to my original point: the purpose of investing is to make money. The easiest way to do that is to ride bull markets for as long as possible… and then get out before a bear market/ crash hits.
Put another way, the Crash Callers have investing totally backwards: you need to focus on the 99% of times stocks don’t Crash, NOT the 1% of the time they do.
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
This mini-crisis was triggered by the BoJ raising rates for the first time since 2007, which in turn, blew up the Yen carry trade.
I realize that sounds as if I’m speaking in code, so let me break this down.
As I outlined in my most recent bestseller, Into The Abyss, Japan is the grandfather of monetary insanity. The Fed first introduced Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE) in 2008. Japan’s central bank, the Bank of Japan, or BoJ for short, introduced ZIRP in 1999 and QE in 2001, respectively.
Over the course of the last 20+ years, the BoJ has engaged in a slow-motion nationalization of Japan’s financial system. Today it owns over 50% of all Japanese Government bonds and is the single largest shareholder of Japanese stocks in the world.
All of this worked relatively well until inflation entered the financial system in 2020-2021 and the BoJ refused to address the situation.
The Fed and the European Central Bank (ECB) started raising rates and shrinking their balance sheets in early/ mid-2022. The BoJ only started tightening monetary policy in 2023. And it finally started raising rates at the end of July (as in a week ago).
That’s when all hell broke loose.
The Japanese Yen has been in a free-fall for the last four years as the BoJ refused to tighten monetary policy while every other major central bank was raising rates and draining liquidity. Indeed, going into the BoJ’s rate hike decision a week ago, the Yen was trading at levels not seen since the late 1980s.
Once the BoJ started talking about raising rates, the Yen started moving higher. And last week, when the BoJ actually raised rates, the Yen EXPLODED higher.
This is a globally systemic issue because the Yen is one of the largest carry trades in the world. If you’re unfamiliar with a carry trade, it consists of borrowing money in one currency (at a low interest rate) to invest in other assets.
Since the Yen has been yielding more or less ZERO for the last 20+ years, hedge funds and other institutional investors have been borrowing hundreds of billions of dollars’ worth of Yen to invest in other assets with EXTREME leverage.
The problem with this is that leverage works both positively and negatively.
Imagine you have $1 million to invest and you borrow $10 million in Yen at 0.1%. Your annual interest payments on the Yen are ~$10,000. Meanwhile, you invest that $10 million in stocks, which then rally 10%.
You’ve just made $1.1 million in profits (10% of your $11 million). And since your actual capital is just $1 million, you’ve more than doubled your money with this trade courtesy of leverage.
However, this process ALSO works to the downside when things go wrong. If the currency you are borrowing in (the Yen) skyrockets relative to the currency in which the assets you are buying are denominated (the $USD), your trade will BLOW up quite badly.
In the last month, the Yen/ $USD pair has ripped 12% higher. This, combined with the higher interest rate on the Yen (the BoJ raised rates from 0.1% to 2.5% last week) is BLOWING UP hundreds of billions of dollars’ worth of the Yen carry trade.
When a carry trade blows up, investors are forced to panic liquidate their holdings. That is why the market melted down over the last few weeks with companies like Apple and Nvidia collapsing in share price despite being OBSCENELY profitable.
Which brings us to today.
The BoJ announced a previously unscheduled meeting with Japan’s Ministry of Finance and its Financial Services Agency on Tuesday. This was a signal to the markets that an intervention of sorts was coming.
Soon after that, the deputy head of the BoJ, Shinichi Uchida announced that the BoJ won’t “raise rates if the markets are unstable.” This is akin to the BoJ telling the markets, “we got the message and are standing down.”
The big question now is if the lows are in… or is another round of selling coming? Put another way, was this simply a correction in the context of a bull market… or is a legitimate crash/ bear market is about to unfold.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Stocks have broken down in a big way, leading investors to ask…
Is this a garden variety correction… or the start of a REAL crash?
The S&P 500 sliced through its 50-SMA and plunged down to its 200-SMA in a matter of days. We haven’t seen a collapse like this since the regional bank crisis of March 2023.
First and foremost, you should know that market dips/ pullbacks are quite common.
Consider that stocks will typically pull back 5%+ three or four times every year. Larger drops aren’t that uncommon either: the market corrected 10% or more in HALF of the 20 years from 2002-2021.
Anyone who panicked and sold the farm when that happened ended up missing out in a big way!
Having said that, this correction has been quite violent. Many of the market’s leaders are down 20%+ which technically would be considered “bear market” territory.
Moreover, the Volatility Index (VIX) has spiked to levels that are typically associated with crises. See for yourself in the chart below.
Thus, investors are in a quandary.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
A month ago, everyone on the planet was talking about new all-time highs for the stock market and big tech was the only game in town.
Fast forward to today, and Nvidia (NVDA) is down 20%, and I see gurus calling for a new bear market in stocks. And bear in mind… the S&P 500 is down just ~5%… after rallying 40% in just eight months!
This is the problem with being bearish. Sure, you will be right once a decade or so… but, 99% of the time, panicking is a colossal mistake.
Why?
Because over the long-term, stocks go up and go up a LOT. As in 1,000s of percentage points.
Moreover, market dips/ pullbacks are quite common.
Consider that stocks will typically pull back 5%+ three or four times every year. Larger drops aren’t that uncommon either: the market corrected 10% or more in HALF of the 20 years from 2002-2021.
Anyone who panicked and sold the farm when that happened ended up missing out in a big way!
As Charles Schwab notes, since 1974, the S&P 500 has risen an average of more than 8% one month after a market correction bottom and more than 24% one year later.
Put simply, panicking or getting overly bearish simply because stocks are correcting is a MASSIVE mistake for the simple reason that pullbacks/ dips are quite common even during raging bull markets!
Thus, investors are in a quandary.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
I ask because everywhere I look, I see analysts and gurus proclaiming that yesterday’s “bearish” action was the start of a major collapse.
There’s just one problem with this… MOST of the market rallied yesterday.
I’m not making this up… over 400 of the 500 companies in the S&P 500 finished the day UP yesterday. The reason the market fell at all is because big tech, which comprises 30% of the market’s weight, dropped hard.
In fact, the overall market breadth (a measure of internal market strength) actually erupted to new all time highs yesterday.
Does this look like the start of a major collapse to you?
This is why you have to be so careful when someone starts spouting off bearish arguments based on stocks dropping. It’s so easy to panic and sell… when the dip might in fact be a MAJOR buying opportunity.
Case in point, a LOT of people sold in April when the market corrected just ~5% (a totally healthy correction in the context of a bull market). The S&P 500 has since rallied over 600 points. Anyone who sold in April MISSED OUT on making some serious money!
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
As I outlined yesterday, as an individual investor, there are two things you NEED to focus on:
1) Ride bull markets for as long as possible.
2) Get out of stocks once a bear market hits.
If you do this, you WILL get wealthy from investing over time.
I bring this up, because I’m seeing more and more analysts arguing that the bull market is about to end and that a raging recession will crater stocks.
I don’t see what they are seeing. If anything, stocks look ready to go to new highs of 5,800 or even higher by year end. Please note, I’m not saying there won’t be dips and corrections along the way… I mean that this is a bull market, and if anything it’s getting stronger.
One of the primary criticisms of this bull market is that it’s being driven by just a handful of stocks: the big tech plays like Amazon, Alphabet, Nvidia, etc. Meanwhile, the other 495 stocks that comprise the S&P 500 are trailing behind.
This actually makes perfect sense. The big tech companies are the most profitable companies in history. Collectively, Amazon, Nvidia, Microsoft, Meta, and Alphabet generated $116 BILLION in cash flow in 1Q24.
That’s roughly $1.28 BILLION in cash flow… per day.
Again, there’s a reason by the big tech companies lead the market: they’re the largest, most profitable companies in history. They should lead the market!
The key item is whether the rest of the market plays “catch up” or if big tech rolls over. And throughout this bull market begun in October 2022, the rest of the market has played “catch up.”
Take a look at the first leg higher from October 2022 to June 2023. At that time, the regular S&P 500 which is heavily weighted towards tech and is represented by the black line in the chart below dramatically outperformed the equal weighted S&P 500: a version of the S&P 500 in which each company receives 1/500th weighting as represented by the blue line in the chart below.
Then, just like now, stock market bears and misguided gurus were out proclaiming that the stock market was about to collapse because it was “held up by only a handful of stocks.”
Then the rest of the market played “catch up” and the market roared to over 5,000 within eight months.
So again, the fact that big tech is leading the market… and makes up the bulk of its gains isn’t necessarily a BAD thing. If the rest of the market plays catch up… as it tends to do… the bull market will continue MUCH LONGER than most analysts expect.
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
As an individual investor, there are two things you NEED to focus on:
1) Ride bull markets for as long as possible.
2) Get out of stocks once a bear market hits.
If you do this, you WILL get wealthy from investing over time.
Consider the last 35 years. The investor who simply bought stocks regardless of whether they were in a bull or bear market experienced a 17 year period in which he or she made NO money from their investments.
The reason?
The bear markets from 2000-2003 and 2007-2009. The losses generated by those five years’ worth of bear markets resulted in 17 years of ZERO gains from the markets.
See for yourself… from 1996 through 2013/2014, stocks went nowhere. Anyone who invested during this time grew his or her portfolio via contributions NOT market gains.
Again, as an individual investor you can’t just ride bull markets. You also need to avoid bear markets.
If you did that over the last 35 years, you achieved the gains from the green rectangles, and didn’t give back those gains during the bear markets in between. And you got rich in the process.
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Yesterday, I noted that Uncle Sam effectively is the economy… for now.
What I meant by this is that the government is hiring so many people and spending so much money, that it is stopping the economy from rolling over into a recession.
By quick way of review…
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
It is VERY difficult for the U.S. economy to roll over into a recession with this going on. But this economic “prop” is coming at a cost.
The U.S. is issuing a staggering amount of debt to hire all these people and pay out all this money. The Biden administration has already added $7 trillion in new debt and is adding a new $1 trillion in debt every 100 days.
Put simply, assuming President Biden completes his first term, he will have presided over the largest debt expansion in U.S. history: a jaw dropping $9 trillion.
At some point, this is going to be a REAL problem, particularly when you consider that a massive amount of debt that was issued when rates were around zero will come due in the next 24 months.
With rates now over 5%, the U.S. will be forced to pay a lot more money in interest payments when it goes to roll over this old debt.
How much more money?
Interest payments on the national debt are expected to clear $870 billion this year and $1 trillion in 2025. That would make interest payments the single largest government outlay.
In very simple terms, starting next year, Uncle Sam’s will be paying his debtors MORE than he pays Americans via social security.
How will this play out? That remains to be seen. But one thing is clear: all this money printing is stopping the U.S. from rolling over into recession. And this is boosting stocks.
To whit, the stock market has hit a new all-time highs in four of the last five weeks. This is a RAGING BULL of a market, and investors NEED to ride it for as long as possible until the music stops.
Why?
Because when the next recession hits, the market will lose 20%-30% and be DEAD money for at least nine months.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
In the coming weeks, you’re going to hear a LOT about the Sahm Rule.
The Sahm Rule is an indicator that has accurately predicted every recession since the 1960s. In its simplest form, the Sahm Rule compares 3-Month Moving Average for the unemployment rate to the lowest unemployment rate in the prior 12 months.
If the difference between the two numbers is 0.5% or greater, it indicates a recession has begun.
As I mentioned a moment ago, this indicator has predicted every recession since 1960. The below chart shows the Sahm Rule measure (blue line) as well as historic recessions (gray bars). You can see its accuracy for yourself.
I bring all of this up, because the current Sahm Rule reading is 0.37%. And it is HIGHLY likely this metric will hit 0.4%, if not 0.5% some time this summer.
When this happens nearly every guru and strategist on the planet is going to start proclaiming that a recession is here. And they are going to start telling their clients to “sell the farm” on their stock portfolios.
However, for those of us who are interested in making REAL MONEY from our portfolios, it’s important to note that there is a BIG difference between the U.S. today and the U.S. during prior periods in which the Sahm Rule triggered a recession warning.
That difference?
Claudia Sahm, the creator of the Sahm Rule, notes that the U.S. has added 3.3 million people in net immigration in 2023. To provide some context, the U.S. added just 900,000 on average every year from 2010-2019.
As Sahm noted to Business Insider, the immigration process is time consuming. As a result, many immigrants are unable to legally find work after entering the labor force.
The end result?
The number of unemployed people jumps rapidly, resulting in a higher unemployment rate, which will trigger a Sahm Rule recession warning. But this jump in unemployment rate is due to immigration not people who were working losing their jobs.
Put simply, the coming Sahm Rule signal (or at the very least warning) is likely to be a false positive, meaning that it is NOT actually signaling a recession has arrived.
This will make it the EIGHTH false positive for a recession indicator during this business cycle. You’d think after seven false positives that people would begin to catch on that things are different this time.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Stocks hit new all-time highs last week… but you wouldn’t know it from the mood on social media and financial TV!
It’s truly incredible to watch… the markets have been on a historic run, with the S&P 500 rallying 1,400 points since the November 2023 lows. And yet, throughout this period, the overall mood amongst market participants seems anxious if not outright worried.
Everywhere you look, there’s talk of a potential recession… or concerns about geopolitics… or claims that Artificial Intelligence (AI) stocks are in a massive bubble that is about to burst.
And yet, the markets keeps charging higher, with every dip being bought. Those who fretted about the countless number of things that could go wrong have made nothing. Those who focused on making money and stayed invested in stocks have seen their entire portfolios increase by over 33%!
Which brings us to #2: trying to calling a top.
Please understand, I’m not trying to make fun of people who are cautious or conservative with their investments. But at some point, if you’re looking to make real money with your investing, you need to focus on what works and ignore feelings/ worries that don’t contribute anything to your net worth.
I’m talking about thoughts like…
1) This stock has gone up a lot, so it must be in a bubble.
2) This is the top!
3) The market is rigged!
NO ONE got rich from any of those three concepts. If your goal is to make money from your investments, you should remove all three of them from your investing vocabulary.
Let’s break down all three.
Regarding #1, since going public Apple (AAPL) has looked “bubbly” countless times. Heck, it was up 20,000% in 2018. And yet, if you focused on the fact AAPL had gone up so much, you missed out on the run to 200,000% gains!
Which brings us to #2: trying to calling a top.
No one… I repeat, NO ONE has ever gotten rich from calling a top. A small handful of people have gotten rich from crashes or bear markets… but most if not ALL of investors (including the legends) got rich from riding bull markets or bull moves in individual stocks.
Indeed, every bull market is nothing more than a series of “tops” which are then taken out by new highs. If you’re obsessed with calling a top and getting out of stocks, you’re guaranteeingyou won’t see future gains. Put another way, your obsession is limiting your profits.
Which brings us to #3 in our list: claiming that the market is rigged.
The reason people claim this is because time and again it looks as if stocks are going to break down only to reverse and ramp higher. But if you dig a little deeper into this way of thinking, you quickly realize that it means the person who is angry that the markets refuse to collapse secretly wants something bad to happen to the markets.
Understand, I’m not saying that the markets aren’t manipulated. Anything that involves a lot of money or power breeds corruption and manipulation. But getting angry because stocks refuse to break down badly is bad for your physical health, your mental health, and your portfolio.
As investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
As an investment strategist, I get asked this question all the time. On the surface, it sounds as if the person is interested in making money from the stock market.
Having worked in finance for over 20 years, I’ve come to realize that when someone asks me this, what he or she is really saying is that they believe stocks are too risky for investing. After all, during the course of my career the markets have experienced three MAJOR crises. And who wants to put his or her money into an asset class that can lose 30% in a matter of weeks?
Let’s start with the basics of stock market investing.
Stocks are essentially a means of investing in human innovation. Nearly every stock trading on the stock market represents someone’s life work to build a better product/service. Sure, there is the occasional fraud or company that manages to go public without actually producing anything of value, but for the most part, the stock market is the closest thing to betting on human ingenuity/ innovation.
Now, humanity gets a lot of things wrong. But when it comes to inventing/ creating/ developing things, it’s RARELY a good idea to bet against us. For this reason, over the long-term, stocks tend to go up a LOT.
See for yourself.
So why not simply buy stocks ALL THE TIME?!?
Because, during the occasional periods in which stocks DON’T go up… they either A) lose a LOT of money or B) go nowhere for ~20 years.
See for yourself. I’ve illustrated those periods in which stocks didn’t do well with red rectangles in the chart below.
Thus, investors are in a quandary.
One the one hand, stocks tend to go up a LOT over the long-term. But on the other hand, there are periods in which stocks do NOTHING for ~20 years.
Thus, the focus for ANYONE looking to invest in stocks is to determine whether stocks are in a strong bull market… or if they are about to enter a prolonged period of ZERO returns.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Everywhere I look on social media, the defining narrative is that the stock market is in a massive bubble that is about to burst, triggering a devastating crash.
The dirty little secret about the people pushing these narratives is that they have never actually called a crash. Instead, they’ve been bearish for years and years, and like a broken clock, they’ve been right once or twice. And I can guarantee you they didn’t make ANY MONEY from a market crash when it DID happen.
Let’s start with the basics here.
Crashes, DO happen, but they are RARE. There have been THREE in the last 35 years:
1) 2000-2003
2) 2007-2009
3) February-April 2020
Bear in mind, I’m talking about REAL crashes here or full-scale crises, not garden variety corrections of 10%. I’ve illustrated the crashes of note in the chart below.
Again, there were just THREE major financial catastrophes in a 35 year period, or roughly one every 10 years or so. That’s quite rare. Name another “1 in 10 years” event that people obsess about to this degree. I can’t. People get worked up about buying new homes or changing careers, both of which are “1 in 10 years”-type events… but I don’t see entire Youtube Channels and social media accounts that talk non-stop about those events the same way I see people obsessing about market crashes.
Again, when we talk about crashes, we’re talking about “1 in 10 years” events!
Even if we were to include EVERY time the market dropped more than 10% in rapid fashion, the number of “events” in the stock market is less than 10. Even if I missed a few here, you’re still talking about a “1 in 3 years” event.
Meanwhile, throughout this 35 year period, in spite of these crashes/ events, stocks rose nearly 2,000%. Anyone who obsessed about crashes to the point of avoiding stocks completely, or even worse, betting on a collapse non-stop, missed one of the greatest periods of wealth generation in human history.
So why not simply buy stocks non-stop and hold for the long-term?
Because when crashes DO happen, stocks can take YEARS before they hit new highs.
Consider the period from 1996-2013. There were several MAJOR bull markets that saw stocks generate huge returns. Unfortunately, the subsequent bear markets/ crashes ERASED most if not all of those gains. As a result of this, stocks didn’t make a cent for 17 years!
Thus, investors are in a quandary.
One the one hand, crashes are rare events. And obsessing over them can lead to missing out on creating generational wealth from your investments.
However, on the other hand, when crashes DO happen, they can lead to 10+ years of ZERO returns for long-term, buy and hold investors. What are the odds that a REAL person would be willing to sit through a period like that and not despair?
Likely ZERO.
So obviously, investors need a tool of avoiding crashes, while riding bull markets for as long as possible.
I’ve developed PRECISELY such a tool. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
The stock market is setting up to offer a buying opportunity in the next week or two.
The S&P 500 hit a new all-time high last week. Every dip was bought as the markets finished the week in a solid “risk on” framework.
However, beneath the surface, several market leading indicators show a dip is coming…
High yield credit, which has led every turn for stocks in the last four months, has rolled over. As I write this Monday morning, it suggests the S&P 500 will fall to 5,300 in the near future. This is just a “dip” and we see it as a buying opportunity.
Breadth, another market leading indicator, is saying the same thing direction-wise. But it suggests the dip will be slightly deeper with the S&P 500 dropped to the 5,200s . The fact both breadth and high yield credit are saying the same thing, adds weight to the forecast for a risk off move.
Will this risk off move open the door to something worse? Could stocks crash some time in the near future?
To answer those questions, I rely on certain key signals that flash before every market crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
The S&P 500 looks primed for a correction of sorts.
As I’ve noted previously, the S&P 500 is quite extended above both its 10-week moving average (same as the 50-DMA) as well as the 40-week moving average (same as the 200-DMA). Historically, this degree of extension above both trendlines has marked a temporary top as the below chart illustrates.
Beyond this, NO sector is outperforming the S&P 500 at this time (maybe with the exception of Communication Services).
Below are three charts showing the ratio performance between each sector in the S&P 500 and the broader index. When the individual sector outperforms, the line rises. When the individual sector underperforms, the line falls. As you’ll note, NO SECTOR is leading the market higher right now.
Tech, Healthcare, Consumer Discretionary and Financials:
Communication Services, Industrials, Consumer Staples, and Energy.
Utilities, Real Estate and Materials:
Looking at the above ratios, we note that Tech, Consumer Discretionary, Financials and Real Estate lead the market higher during the rally from early November until the end of 2023. However, today, not one single sector is leading the overall market higher (maybe with the exception of Communication Services). Even the Tech sector, which usually is a market leader has been underperforming the broader index since January.
So how has the market held up despite every sector underperforming?
A handful of stocks have pulled the overall market higher. Specifically, Nvidia (NVDA), Amazon (AMZN), Meta (META), and Eli Lilly & CO (LLY). Remove those companies from the S&P 500 and stocks are effectively flat.
Add it all up, and the above analysis suggests that “under the surface” the S&P 500 could see a decent correction of 5% or more in the coming weeks. Only a small handful of stocks are holding everything up. This combined with our overbought and overextended the market is suggests the momentum for the next market move will be DOWN.
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The yield on the 2-Year U.S. Treasury hit a new high yesterday.
Why does this matter?
Because…
1) It indicates the Fed’s fight to tame inflation is NOT done.
2) Stocks are in for a world of hurt in the coming months.
Regarding #1, back in May 2023, the 2-Year U.S. Treasury was anticipating that the Fed would have rates at 3.75% in May of 2025. At the time, this meant the Fed would cut rates at least two times before May of 2025 (rates were at 5.25% in May 2023).
Fast forward to today, and the 2-Year U.S. Treasury has just broken out to new highs of 5.20%. This means the market is now anticipating that the Fed will have cut rates possibly ONCE by October of 2025. Moreover, the idea that rates will be ABOVE 5% instead of BELOW 4% in late 2025 is a HECK of a shift.
Put simply, the bond market is figuring out that the Fed will need to keep rates MUCH higher for MUCH longer. And this brings us to #2 in our list above.
Stocks are in for a world of hurt.
Stocks are priced based on Treasury yields. This is one of the primary reasons why stocks remain down almost 10% from their all-time highs despite the fact the economy is growing. After all, if you can earn 5.25% risk free in bonds for two years, why risk putting your money into much riskier stocks where both the earnings yield AND the dividend yield are lower (4.07% and 1.62%, respectively).
The great crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The long term U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
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