Category: Invest with Alex

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Little Known Way To Save Your Net Worth

Bloomberg Writes: Value Fund Managers Go on a Buyer’s Strike

 overpriced

Wally Weitz beat 90 percent of his rivals in the past five years by buying stocks he deemed cheap. Now he says bargains are so scarce that he’s letting his cash pile up. “It’s more fun to be finding great new ideas,” says Weitz, whose $1.1 billion Weitz Value Fund (WVALX) had 29 percent of its assets in cash and Treasury bills as of Sept. 30. “But we take what the market gives us, and right now it is not giving us anything.”

 “We are having a more difficult time finding bargains,” Yacktman wrote in an e-mail.

Romick, managing partner of First Pacific Advisors, took a similar stance in his second-quarter letter to shareholders of the $14.1 billion FPA Crescent Fund. “We find it difficult to invest in an environment that seems manipulated to engineer higher asset prices regardless of business fundamentals,” he wrote.

Read The Rest Of The Article Here

I have mentioned this a number of times before, but  we are now getting confirmations from some of the top money managers in the world.

Given current market environment, there isn’t that much to buy out there.  Most stocks and markets are overpriced. Bullish sentiment is approaching all time highs and the situation is starting to get dangerous. Why dangerous? Well, this market is artificially maintained by massive infusions of cheap credit (QE) and speculation. Basically, there is no fundamental reason for most asset classes to be where they are today.  It is all artificial. All assets are grossly mispriced to the upside and that will have to be corrected, sooner rather than later.

While I do not provide financial advice directly, I would suggest that  people might want to look at the situation from the following vantage point. The market is providing you with an excellent opportunity to start selling and building your cash reserve for the next round of the bull/bear swing.

Can the market go even higher here? Sure, but the probability of a severe bear move in the near future is very high. Well, certain as per my mathematical work. 

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Stock Market Update, November 8, 2013

daily chart Nov 8, 2013

Summary: Continue to maintain a LONG/HOLD position

Not much has changed since the last market update to alter my opinion. The market continue to push through its daily highs as it marches forward.

While everything I have mentioned before is still in play (Please Click Here To View Previous Market Update), …..here is the difference. 

Since early September of this year I have maintained that the market is topping and will resume its bear market shortly. As of now there is categorically no adjustment to that view.  Yet, I have also mentioned that there were two possible time frames for the bear to begin. September -November of 2013 or March of 2014.  I have argued that if we are too see the bear market now (from September of 2013 top) the market must start its down move in October or early November of this year.  As of now, that window has basically closed.

That leads me to believe that March of 2014 will be the final top (even if its lower than where we are today) before a prolonged BEAR MARKET into the 2016-17 bottom.  My timing work doesn’t show any serious turning points between now and the end of the year.  That means the market is unlikely to experience severe volatility between now and December 31st.  The next inflection point I see is January 1st, 2014. I will discuss that later.

As such, I recommend holding a LONG position until the market tells us otherwise. 

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What Everyone Is Ought To Know About This Bull Market

 CNBC Writes: Smart Money: Smart money? Looks like it’s mom and pop

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For the most recent leg of the rally, it seems like the so-called smart money may not be so smart after all.

If that’s true, the smart money has been losing.

Employing even more conventional wisdom, that might suggest the market is forming a top and ready to fall, as retail investors are often thought of as the last ones to a rally.

That thinking, though, is getting challenged.

There’s no doubt the retail investor has warmed up to the market in 2013 after sitting out much of the gains since the March 2009 lows. The mom-and-pop crowd ripped just short of $300 billion out of mutual funds from the 2009 low point through the end of 2012 even as the market gained more than 110 percent during the span.

Read The Rest Of The Article

As I have mentioned in my previous posts, the overall BULLISH psychological backdrop is now at the extreme and flashing warning signs.

Various metrics aside, I see very few bears.  Even people who used to be bears and now bulls.  All popular media is overwhelmingly BULLISH. Even if the article mentions “a possible drop” such argument is immediately counter attacked by stating something to the tune of “If the market drops it would be a wonderful buying opportunity to add more stocks”.

The article above is no different. It clearly illustrates how bullish everyone is. It’s a well known fact that Retail investors are the last ones on/off and as such could not be considered as “smart money”. Over 200 years of market data teaches us that. Yet, somehow the article twists it to be so.  Simply put, neither the market nor investors can do wrong in this market.

Will this continue? I do remember seeing similar type of prevailing BULLISH psychology before, at 2000 and 2007 tops. We all know how that ended. 

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Are You A Genius -Or- A Delusional Fool? Find Out Here

Yahoo Finance Writes: 3 Reasons to Re-Think Bailing On Stocks at All-Time Highs: Belski

denial - investwithalex

Uncharted territory is always scary. Whether you’re trekking the nether reaches of the Amazon jungle, or simply trying to time the top of a stock market that is trading at levels never seen before, it’s nerve wracking to be someplace you’ve never been before.

1) Quality, Transparency, Consistency

Belski says he follows the investment axiom of “buying scarcity and selling capacity,” and right now, he thinks the U.S. alone offers what investors want most. In particular, while jokes that Europe may have great coffee, he argues that the structural reforms of the past ten to twelve years have left American companies in a unique – and investable – position of strength. “That’s the U.S.” he says.

2) Way More Bull Market Ahead of Us

“Fundamentally the U.S. is in very sound position, and we think it will continue to lead for the next three to five years,” he says. Broadly speaking, he thinks a lot of new investors fail to appreciate what a bull market really is, reiterating his belief that we are “in the midst of an 18 to 20 year equity bull market cycle.”

3) The Coming CAPEX Cycle

Belski says people not only forget that the U.S. is still the world’s largest economy, and as a result, “is poised to continue to take business away from Europe and the emerging markets as manufacturing capacity comes back here.”

Read The Full Article Here

No offence, but I think even bulls are starting to run out of legitimate reasons of why the market should continue going up. While it could be viewed as a good thing, reasoning presented here clearly shows how delusional most investors are.  Let’s just take a quick look at 3 reasons above.

1. Quality, Transparency, Consistency?  Is this guy being serious. What about looking at the fundamentals and investing in undervalued companies that make sense. Do you buy a $500 pair of jeans that was made in the USA or do you just buy an identical pair of jeans for $50.  His analogy makes no sense. Well, that is unless you like losing money.

2. Way More Bull Market Ahead Of Us? As I have mentioned here before, what bull market? If they are talking about the bull market from 2009 bottom they are talking about a bear market rally. The market has topped in 2000 and has barely moved since.  While the Dow and the S&P are up a little bit, NASDAQ is still down. One should understand where  they are in the economic cycle before saying that the bull market has already started. If you haven’t figured it out yet, we are still in the bear market that will only end in 2017. Read my timing work to find out why.

3.  The coming CAPEX cycle? What CAPEX cycle? He might as well have said that the US Economy will prosper because aliens will land soon and make the USA their home base. Bringing new technologies and prosperity for all along with them. I am sick of this crap. What kind of stupidity is this. What about the fact that the US Economy and its Financial Markets being artificially maintained by huge credit infusions and the largest credit bubble in the history of mankind. What about massive speculation in all asset classes and overwhelmingly bullish stance. No, I guess those things do not matter.

Anyway, if you believe in this nonsense your money and you shall soon be separated. I guarantee you that. 

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Are You A Bear Hater?

bear market investwithalex

It’s hard to be a bear. No one likes bears.  Here are the top 10 signs that you might be a bear hater as well. 

  1. You define a bear who got it wrong simply as “An idiot”.
  2. You define a bear who got it right as “An idiot who got lucky.”
  3. Short squeezes give you a hard on.
  4. When you go to Russia you always order a Grilled Bear Steak.
  5. You can’t stop laughing when Mr. Market mauls all the bears.
  6. You secretly wish that Mr. Bernanke would round up all the bears and ship them to where they belong….. Siberia.
  7. You think that throwing bears out of airplanes should be an Olympic sport. 
  8. When up in the mountains you steal “Slow Down For Bears” signs and replace them with “No Speed Limit” signs. 
  9. You believe all bears are communists. 
  10. You believe bear mafia controls the toilet paper market.

This goes to all the bears out there. 

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Are All Economists Retarded?

Bloomberg Writes: Why Germany’s Export Machine Is Under Attack

 EconomistsMessedUp

Imagine someone who runs a thriving luxury car dealership, yet does the weekly shopping at a no-frills discount store. That pretty much describes the Germans. The global No. 3 exporter is famously thrifty at home, so Germany runs a trade surplus equaling nearly 7 percent of its economy.

Now, imagine telling the Germans that this is bad. That’s what is happening as a growing chorus of international critics warns that Germany’s trade surplus is endangering global growth, and putting Germany’s own future at risk.

On Nov. 5, the European Union threatened to probe Germany’s trade surplus, which since 2007 has exceeded EU guidelines of a maximum 6 percent of gross domestic product. Germany must boost consumption and raise wages “to open the bottlenecks to the growth of domestic demand,” EU Economic and Monetary Affairs Commissioner Olli Rehn said.

Rehn’s comments follow recent criticism from the International Monetary Fund, which says German export policy is hindering Europe’s economic recovery. A “significantly smaller current account [surplus] would be useful,” David Lipton, the IMF’s first deputy managing director, said in Berlin last week.

The U.S. has weighed in, too, with a recent Treasury Department report (PDF) warning that German policies were placing “severe pressure” on troubled European economies and creating “deflationary bias for the euro area, as well as for the world economy.”

Not surprisingly, the Germans are furious. Trade surpluses “are a sign of the competitiveness of the German economy and global demand for quality products from Germany,” the country’s Economy Ministry said on Oct. 31. “There are no imbalances in Germany which require a correction of our growth-friendly economic and fiscal policy,” spokesman Martin Kotthaus told reporters in Berlin. An article in the magazine Spiegel 

The critics, though, aren’t really asking Germany to export less—although that certainly would help such EU trading partners as Spain and Italy, which are struggling to export more of their own goods. The Germans are mainly being asked to spend more money on themselves. Over the past decade, Germany has dramatically lowered labor costs and reduced unemployment by creating a large number of low-wage and part-time jobs.

Read The Rest Of The Article Here

Sometimes I feel like I live in the parallel universe where only stupidity is rewarded.

Germany is running its economy as any responsible country should (well, besides being a part of the European Union) and IMF/USA have the balls to tell Germany to that it is doing everyone a disservice by not spending more.  I have never heard anything more ridiculous.

While I understand the reason behind such a statement, this is equivalent to having a friend who has already maxed out all of his/her credit cards telling you that you should live it up a little and instead of saving money should blow it all on coke and hookers.

It is terrifying, but that is the state of our economic leadership today.   It leads to nothing more than an eventual  decline in economic standard or worse…..an economic collapse that is just around the corner.  

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How To Tell If You Live In The Bubble

CNBC Writes: Hong Kong luxury home buyers queue amid talk of last hurrah

hong kong investwithalex 

People often tell me that it is impossible to spot the bubbles in financial markets. They claim that if Mr. Greenspan or Mr. Bernanke can’t spot the bubble, then neither can they. Well, understand something. Mr. Greenspan and Mr. Bernanke are responsible for creating bubbles that will hurt the US Economy for decades to come, not spotting them.

With that said, bubbles are incredibly easy to spot.  Case and point, the Hong Kong real estate market.

In a shopping mall in one of Hong Kong’s prime retail districts, more than 100 people wait patiently to take a lift to the sales floors – not to buy luxury bags or clothes, but high-end apartments with price tags of up to $4.4 million.

Foster Lee, a 30-year-old banker, was among the lucky ones who won the chance to buy a unit after a ballot in which more than 1,600 people signed up for just 80 luxury units on offer.

Wow, 1,600 applicants and 100 people fighting over $4.4 million apartments. Most likely a very small “luxury” apartment.  Do I even need to say anything else?

Signs on the ground point to a clear pick-up in demand from local and Chinese buyers, thanks in part to steep discounts offered by developers to offset higher stamp duties imposed a year ago to cool prices that have jumped 120 percent since 2008.

“You see that people who earn less than you have caught up with you because they bought then. It’s like a girl you liked got married,” Lee said.

Greed and “if everyone is doing it so should I” psychology has set it. This happens during last stages of a bubble. Everyone knows the prices are unsustainable and most people can’t afford it, yet prices keep going up and people keep buying based on psychological factors alone. Yet, when the fuel of psychology runs out, the drop is always sharp.

Last weekend, long queues at one project prompted developer Hang Lung Properties to postpone pre-sales and change the first-come, first-serve rule to a ballot system, in which more than 400 buyers competed for just 80 units priced from HK$8 million to HK$15 million ($1.93 million). Read The Rest Of The Article Here

Bottom line is, bubbles are easy to spot.  The hardest part comes when one has to open their eyes and see things for what they truly are. 

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What Does The Bear Say?

friendly bear investwithalex

People keep asking me why I don’t short the market right now if I am such a bear and believe in my forecast.  I believe this is a very good question that requires an explanation.

First,  I am not a bull or a bear. I am a money manager and an investor. My job requirements are fairly straight forward. To make money in both bull and bear markets.  My current bearish stance does not come from a position of being a “Permabear” (as some people out there), but from a very well researched and analyzed position of being a money manager.  Further,  I often shift gears but only when the time is right.

For example,  I was a BIG bear starting in 2006 warning anyone who would listen that our credit markets, real estate, the stock market and the overall economy would blow up shortly. Not many people have listened to my advice. Then in early 2009 as everyone was freaking out I came out and said that the bear leg is almost over and the time to buy will come in March of 2009. I was an all out Bull when everyone was crying and shorting the market.

Now, with the market approaching all time highs and fundamental picture deteriorating significantly, I am once again a bear.  Both my fundamental and my mathematical timing work clearly indicate that the stock market and the overall economy are about to implode again.  As I discuss on this blog I have no doubt about that.

However, I am not the dumbest bear in the woods.  That means you have to follow the market and only short when the time is right. The timing is not right…… just yet.  As I have mentioned many times before on this blog it is highly probable that the bull leg that started in March of 2009 will complete in March of 2014. Once it does, the market should roll over and head down hard.

Until that happens and until we get the confirmation that the bear market is in full swing there is no reason to go short.  Quite the opposite. The market is still trending up and smart investors should continue to HOLD their LONG positions if they have any.  Just as my advice indicates. (Although I wouldn’t buy any more right now).

I hope this helps with the understanding. 

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Secret Government Calculation Guarantees Full Employment By 2017

BusinessWeek Writes: The U.S. Job Market Won’t Be Normal Until 2017, Says Goldman

 labor market inveswithalex

Two economists at the Federal Reserve Bank of Kansas City concluded recently that at the current rate of progress, the U.S. labor market won’t get back to normal until the summer of 2015. That’s bad enough. But Goldman Sachs (GS) economists, examining the same data, conclude in a report today that normal might not arrive until the beginning of 2017.

Either way it’s pretty depressing, considering that the recession began in December 2007. The financial markets are betting that the Federal Reserve’s rate-setting Federal Open Market Committee will start tapering purchases of long-term bonds sometime in early 2014. But the FOMC has said that the purchases will continue“until the outlook for the labor market has improved substantially in a context of price stability.” If the FOMC sticks to that commitment, bond purchases could continue longer than many people expect.

I really have no idea how they come up with these numbers. Maybe they have a supercomputer in their office churning out billions of calculations per second or maybe they just throw darts at the calendar. I think the latter is more plausible.

The problem with their analysis is they are discounting continual economic growth over the next 5 years. Well, let me ask you something. What if instead of economic growth our financial markets and our overall economy go through another severe contraction as I constantly argue? Are we going to normalize by 2017 or will the chart above take another dive? I think you know the answer to that.

The labor market in the US is facing strong headwinds. I think the situation we have today is the new norm and even that will continue to deteriorate.  With our economy, financial markets, Obama care, outsourcing, robotics and higher productivity rates all putting negative pressures on full time employment, the labor market picture going forward is not pretty. 

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Rich Families Are Hoarding Cash, Should You?

CNBC Writes: Rich families are hoarding cash: Citi

 hoarding-cash-investwithalex

A new survey of family offices by Citi finds that the wealthy are cash heavy-meaning they may fall short of the investment returns they’re expecting.

Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.

Most of the families surveyed expected interest rates to rise. About 60 percent projected long-term market rates to rise 50 basis points and 17 percent said they would increase 100 basis points or more. Just 2 percent expected U.S. rates to fall.

Read The Rest Of The Article Here

While not always the case, the rich are typically more savvy when it comes to investing and/or managing money. They typically have a better understanding of the economy and the financial markets.  So, why are they hoarding so much cash?

Maybe they are following my advice (to accumulate as much cash as possible) or maybe they are simply aware of what is going on in our economy and our financial markets. They look around and they realize that all major asset prices (stocks, bonds and real estate) are way overpriced.  Maybe they have a hunch that the only direction interest rates can go is up. Maybe they have a clear understanding that when the interest rates do go higher, it will have a severe negative impact on the overall economy.  As such, they hoard as much cash as possible to A. Prevent downside and to B. Have it available when lower prices present themselves.

Don’t believe me? Find the richest person you know and ask them. 

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