How to Hold & Carry $80 Billion

It is good to be back.

While every analyst and investor stressed out over what Janet Yellen would say, a truly golden piece of advice slipped by almost unnoticed. Ray Dalio, billionaire founder of $160 billion hedge-fund behemoth Bridgewater Associates, shared his secret to investment success.

Ray Dalio: More than anything else, I attribute my success to one thing

“When I look back at my life, I am happy to have had what most people would consider a successful life, not only in terms of business, but in my relationships and in lots of ways.  More than anything else, I attribute it to meditation—partially because of the creativity, partly because of the centeredness.  TM has given me an ability to put things in perspective, which has helped a lot.  I think meditation has been the single biggest influence on my life.”

I highly recommend reading the article above in full. If you recall, I have written about this topic before How Meditation Can Improve Your Investment Returns

In short, I have made meditation a part of my daily routine and I swear by it. Investors and traders deal with incredible psychological pressures throughout the day, and mediation is the only positive tool available to lessen the burden.

And if Ray Dalio believes that mediation is the key to his success, it might be time to consider it.

On April 18th, we sold short the Aussie Dollar at 0.7733 AUD/USD.  Over the month, it has been the weakest major currency of the six we follow.  We covered the position at 0.7198 today, May 19, for a 7% gain (84% annualized).

To learn more about Demeter Research and Matt’s trading/analytical framework please Click Here.

5/19/2016 – A negative day with the Dow Jones down 92 points (-0.52%) and the Nasdaq down 27 points (-0.57%) 

Open any financial terminal today, without looking at where the market is, and you are surely to assume, on the sentiment basis alone, that we are getting close to a multi year low. An environment similar to what had happened at 2002/2003 and 2009 bottoms.

Consider the following news flow over the last few days.

• This time full of peril may herald the beginning of ‘the liquidation’
• This S&P 500 Death Cross Could Be The Real Deal
• Soros Fund Management outlines new allocations
• The S&P 500 could plummet to 1,573 this year
• The stock market is behaving the way it did back in 2000
• Gundlach Says Fed Ready to Raise Unless Economic Data Weakening

WOW….and people think I am bearish.

And there lies the problem. Considering where the market is today, just a few % points away from all time highs, we are left with two possibilities. Well, maybe three.

1. A major and violent drop on all indices. To allow the market to catch up to rotten fundamentals and to correct various overvaluation excesses.
2. A powerful rally into some sort of a blow off top. To destroy most of the bears one more time, to shift sentiment reading and finally, well, why the hell not.
3. A range bound market for many years to come.

Obviously, at the present moment both bulls and bears can make a nearly bulletproof case (fundamentally or technically), to support their points of view. But that doesn’t necessarily answer the question.

To understand what the market will do next investors must dismiss traditional analytical tools for the benefit of the tools one of the best hedge fund managers of all time discusses here. Jim Simons Gives Away His Secret To Market Timing

And what do these mathematical and timing tools tell us about the market?

Quite a bit. First, they tell us exactly what the stock market will do next. Rally, breakdown or remain within a trading range. Most importantly, this work yields exact time frames associated with all of the above. So, if you would like to find out exactly what the market will do next, please Click Here. 

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. May 19th, 2016  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!

5/18/2016 – A mixed day with the Dow Jones down 5 points (-0.03%) and the Nasdaq up 23 points (+0.50%) 

The Dow topped out on October 11th, 2007 at 14,280. By March 6th, 2009 it was sitting at 6,460 or with a 55% loss. But here is what’s interesting. The imbalances we are witnessing today are exponentially greater than what we saw in 2007-2009. Consider the following……

2007 Imbalances: 

• U.S. government debt (as narrowly defined) stood about $8 trillion.

• The Federal Reserve’s balance sheet was under $800 billion.

• 10-year Treasuries yielded approximating 4.5%, giving the Fed had some leeway to cut interest rates if necessary to fight a crisis or business downturn.

• The subprime-mortgage bubble peaked at about $1.3 trillion.

• Aggregate government debt was under $10 trillion.

• The derivatives market’s notional value was $182 trillion.

• A homeless man named Johnny Moon was reportedly able to get some $600,000 of mortgages to speculate in the U.S. housing market.

As bad as all of that was, consider Today’s Imbalances:

• U.S. government debt totals about $19 trillion, or some $11 trillion more than it was in 2008.

• The Fed’s balance sheet is approaching $5 trillion vs. $800 billion in 2008.

• Short-term interest rates are 0.25% compared to 4.5% back in the day.  With interest rates at near-record lows, there’s little opportunity for the Fed to further expand its balance sheet.

• The derivatives market is currently larger than $500 trillion vs. $182 trillion in 2008.

• Central-bank capital has dropped to 0.8% of assets from 4.5%.

• The size of the subprime bubble was $1.3 trillion, but the size of sovereign borrowing is $7 trillion today.

• Our government has to borrow money to simply pay interest, and monetary policy is hamstrung by near-zero interest rates.

• There are no more homeless people getting mortgages to buy homes, but there’s a Danish sex therapist whose bank is paying her interest (instead of the other way around) on a loan that’s financing her matchmaking Web site.

Not a big deal???

I would certainly disagree. The imbalances above will have to be addressed one way or another. They will not simply go away. We do not live in a magical world where the FED geniuses have created a perpetual money machine.

If anything, it is highly probable, especially if you consider today’s general overvaluation levels, that the imbalances above will be addressed in a violent fashion. And I would say sooner rather than later.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years.  If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. May 18th, 2016  InvestWithAlex.com

Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!