Today’s 5 Minute Podcast Covers The Following Topics: Shocking Truth Wall Street Doesn’t Want You To Know
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Today’s 5 Minute Podcast Covers The Following Topics and is in direct response to one of my readers questions, “What should I do to prepare for and make money in the upcoming bear market? Assuming your forecast is correct.” – Alex West
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Summary: Continue to maintain a LONG/HOLD position.
1/14/2014 – Just a normal day and nothing to write home about. After yesterday’s sell off the market opened with a gap up and kept going up. The day ended with the DOW being up +116 or (+0.71%). From our long term perspective there has been no change. I continue to advice to hold your long position for the time being. While over the short term the market might go down even further, my mathematical work indicates that the Bull market that started in March of 2009 has a LITTLE bit longer to go. Either way, we have to wait for a confirmation before reversing position.
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Today’s 5 Minute Podcast Covers The Following Topics. Why The Bear Market Will Start In 2014?
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Bloomberg Writes: Bull Market Has Years Left for Shaoul on S&P 500 Values
Valuations in the Standard & Poor’s 500 Index increased by the most since the financial crisis last year as 460 stocks rose, more than any year since at least 1990. Neither are reasons to bet against equities now.
While Wall Street strategists are the most cautious in almost a decade after the broadest U.S. rally on record sent price-earnings ratios up 19 percent, expanding multiples have preceded advances twice as often as they have retreats, data compiled by Bloomberg show. Since 1936, the S&P 500 (SPX)has risen 69 percent of the time following quarters when valuations widened, the data show. The average return is 14 percent in years after more than 400 constituents climbed, according to data compiled by Strategas Research Partners.
“One sign that things are becoming more popular is they’re more expensive,” Michael Shaoul, the chief executive officer of Marketfield Asset Management LLC, which oversees about $19 billion, said in a Jan. 2 interview in New York. “I would be quite surprised if this bull market didn’t continue for another two to three years.”
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Most people, smart money, dumb money, institutions and money managers are panicking into stocks. I didn’t think it was possible, but as surely as night follows day, human psychology doesn’t change.
This is particularly true just a little under 5 years after everyone got their head handed to them during the 2007-2009 decline. A fascinating thing to watch from the psychological perspective particularly because we know, based on my mathematical timing work, that the last phase of the bear market is about to start. When we look at the market from such a perspective a number of things become apparent. First, even though the “real” fundamentals are terrible, if you are to listen to most people in the financial media the fundamentals have never been better. Then you have everyone predicting the continuation of the bull market for at least a few more years. To infinity and beyond.
Finally, there is a tremendous amount of psychological pressure on everyone to be back in the market. It seems like everyone is making money hand over fist and only the real BIG IDIOTS remain on the sidelines. Yet, we know the opposite is true. What we are witnessing now is the blow off phase of the bull market that is about to complete. Please do not forget that.
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Why You Shouldn’t Be “Panic Buying Stocks” Right Now
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.
This goes to all the bears out there.
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Why Do You Hate Me?
Commodities investor Jim Rogers tells The Daily Ticker that gold, having lost its luster as a safe haven, could drop to $900 or $1,000 in the next 1-2 years. Longer term, he has a very different forecast. Gold will soar to “well beyond $1,900 an ounce,” topping its record $1,920 high reached in September 2011, says Rogers, author of Street Smarts: Adventures on the Road and in the Markets. The reason: “massive currency debasement” around the world. “Every major central bank in the world is printing a lot of money plus war, chaos, riots in the street, governments failing,” says Rogers.
Despite that forecast, Rogers warns investments not to consider gold – or any other investment — safe. “I would never use the word ‘safe’ when I’m speaking about investing.”
There are only a few investors that I listen to when they speak. Jim Rogers is one of them. A brilliant and very interesting guy. So, when he says something you better listen. I highly recommend that you click on the link and listen what he has to say. The video is just 2 minutes long.
My stock market timing work kind of confirms his thesis on gold. I already talked about gold in one of my previous posts CLICK HERE and the fact that I don’t really understand it or know how to value it properly.
Jim mentions that he anticipates gold to decline further over the next few years to shake out the bulls before resuming its bull market due to currency debasement and inflation. My work confirms this as a highly probably scenario.
As the markets and the economy decline over the next few years in a deflationary environment, so should the gold. As we bottom in 2016 and begin the inflation cycle I talked about before, gold should start appreciating. Perhaps significantly. Just my two cents.
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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.
This goes to all the bears out there.
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If you have spent any time in financial markets, you probably already know what Value Investing is. If you are new to investing, Value Investing is probably the easiest investment style to understand and apply towards your own investment purposes. Also, while debatable, some very successful investors have proven that Value Investing is one of the best ways to approach financial markets over the long term. Let me first illustrate what Value Investing is with a real world example.
Imagine that you are strolling through your local mall in the middle of July. The sun is scorching hot and you are just trying to stay cool. After your 3rd Caramel Frappuccino you decide to check out a nearby sports superstore. Shortly after you walk in you see something and you can’t believe your eyes. The snowboarding jacket you have always wanted, but were never able to afford is on sale. And not just any kind of a sale. It is a seasonal liquidation sale. Typically selling at close to $250 during the winter season it is now just $19.99.
You can’t believe how lucky you are. You check the jacket to make sure there is no big gaping hole in the back of it. Nope, everything looks fine. The size is just right. All zippers work and it’s the color you want. You are beyond excited. You found exactly what you wanted at over 90% discount to what it is really worth. The timing is not perfect and you can’t use it for the next 6 months, but you know with 100% confidence that you have found a deal of a life time. In 6 months this jacket will be selling at $200-250 again. Without a second of hesitation you take out your wallet and head towards the register.
Value Investing is just like that.
Except, instead of a jacket you are buying shares (or other financial instruments) in publicly traded companies. Basically, you do a lot of fundamental research to find companies that are selling well below their intrinsic or real value and then proceed to buy them at a significant discount. Typically 50-99% discount. The bigger the discount you can obtain the bigger your margin of safety is. In fact, margin of safety is one of the most important concepts when it comes to Value Investing.
Margin of safety is there to protect your capital. The theory suggest that if you buy stocks at deep enough discounts to their intrinsic value you have an automatic safety net built in. After all, no fundamental research can be 100% accurate and you need something to limit your downside risk. In such a case you are unlikely to lose a lot of money on your stock trade/investment because your investment is unlikely do decline that much further. Remember, it is already very cheap.
In essences you are buying $1 bills for $0.50 cents or less. Over time these assets “should” appreciate back to $1 to reflect their true value. Providing you with a large return on your investment while minimizing risk. Yet, as with anything, there are numerous issues associated with value investing. I will cover them in greater detail over the next few chapters.
For now, let me quickly summarize value investing in a five easy steps.
That about covers it.
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Business Week Writes: Investors are buying high, yet again.
Sell low, buy high. Wash, rinse, repeat.
Investors have indulged that predilection time and again—most recently piling into the stock market just ahead of collapses in 2008 and 2001. Now it seems as if everyone again wants in big, even as the Standard & Poor’s 500-stock index has rallied 150 percent from its lows, corporate profits and cash hoards are at records, and the Federal Reserve has expanded its balance sheet to nearly $4 trillion. Equity funds drew $26 billion in the week ended September 18, breaking the previous record set six years ago, according to EPFR Global, which tracks investor flows. Domestic stock funds notably took in just under $17 billion of that total.
FED balance sheet at $4 Trillion is downright scary. This is how market tops are set.
And with such timing: U.S. shares hit record highs on Wednesday, the last day of EPFR’s reporting period, after the Fed said it would hold off from tapering its bond purchases. The market is up 20 percent this year and has jumped by a third just since last summer, having gone without a correction since 2011. The tech-laden Nasdaq is up 25 percent in 2013, visiting highs unseen since the starry-eyed turn of the century.
In a show of “you buy/we sell,” companies are racing to go public (Chrysler, anyone?). At least 200 firms are gearing to have their IPOs this year, the most since 2007. Meanwhile, in the interest of full and fair disclosure, buyout shops might want to rebrand as sellout shops, so eager have they been to cash out.
If history teaches us anything, this is a clear indication that the market is close to a top. Insiders realize that the market is overpriced and are trying to cash out.
Similarly, some legendary pros say they are in no rush to join the recent buying stampede. “Stocks were very cheap five years ago, ridiculously cheap,” Warren Buffett last week said. “That’s been corrected . . . . We’re having a hard time finding things to buy.”
I confirm this. Everything is too expensive. I cannot find anything to buy outside of a few special situations (here and there) and technically driven plays.
“Right now,” remarked Carl Icahn, “the market is giving you a false picture. The market tells you that you are doing well, but I don’t think a lot of companies are doing that well. They are taking advantage of very low interest rates. So, obviously, you don’t have to be a financial genius to understand if I can borrow at 3 percent or 4 percent and buy assets maybe my own stock that is yielding 9 percent, 10 percent, or 11 percent, I am going to make a lot of money. In one sense or another that is what is going on . . . I do think at [the market’s price-to-earnings ratio] of 17 that you have to be pretty well hedged.”
Bingo Mr. Icahn. That is exactly what is going on. Everyone is playing this stupid carry trade financial shell game. As of right now the music is still playing, the question is….when will it stop. I assure you there won’t be enough chairs.
“If you tell me quantitative easing is going to be removed over nine or 12 months,”said Stanley Druckenmiller, “that’s a big deal because it’s my belief that QE has subsidized all asset prices. And you remove that subsidization, the market will go down . . . The minute you have this phony buying stop, [stocks] can go down on no volume and just reprice immediately.”
Exactly. The only thing that is keeping this markets up, artificially I might add, in an insane amount of credit infusion through QE and low interest rates. When it stops, most asset classes WILL collapse. The only thing I would disagree with is the fact that the FED has control. The FED has only “perceived” control and the market might take that away at any moment.
In the meantime, keep your eyes on the tidy sum of $1.4 trillion. That’s how much investors have crammed into bond funds between the January 2009 and May 2013, according to Bank of America Merrill Lynch. In the just the past four months, however, they have unwound $173 billion from that mega-trade—an enormous redemption but still just a sliver of $1.4 trillion.
How much of that unwind makes its way to equities, especially when the Fed’s taper starts in earnest? For the market—loved once again, after so long—it’s a question that could trump all others.
At least for now, the paper shuffling game continues. However, be careful here. We are at the 12th inning of the bull run that has started in March of 2009. The bear market should resume soon.
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