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David M Glassman, President

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Email: Stockmarketdoc@comcast.net

August 15, 2018

This ‘prophet of doom’ predicts stock market will plunge more than 50%


Published: July 30, 2018 5:37 p.m. ET









































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Schiff: "The Next Crisis Is Not Going To Look At All Like 2008"

by Tyler Durden

Sun, 08/05/2018 - 14:05

154

SHARES

Peter Schiff is an economist who served as an advisor to Ron Paul in 2008 and even made a run for Senate on his own at one point. He’s well-known in the "Austrian" as well as the libertarian economic community, but is perhaps best known for his belief that our next coming crisis is going to be "an order of magnitude larger than the crisis in 2008", only this one, the Federal Reserve is not going to be able to print their way out of, Schiff predicts in his most recent interview.

"What the Fed is worried about is a repeat of the 2008 financial crisis. What they don't realize is the next crisis is not going to look like the 2008 crisis," Schiff said.

He makes the why the dollar going up in 2008 helped the Fed bail everyone out, and why it's going to be impossible for the Fed to do the same thing when the dollar collapses during the next recession. Schiff also explains that a loss of confidence in the dollar as the world's reserve currency could see interest rates move much higher, resulting in the U.S. defaulting on its debt.


Despite getting the 2008 housing crisis right, Schiff's appearances in the mainstream financial media have declined precipitously due to his bearish outlook. As an alternative, he has created a substantial voice for himself on his YouTube channel, which boasts hundreds of thousands of subscribers.

On Saturday, August 4, Peter Schiff appeared on the Quoth the Raven podcast to talk about a multitude of topics, including:

  1. Why the mainstream media doesn’t have him on anymore, despite predicting the 2008 financial crisis production dead-on

  2. Why the government should have let more banks fail in 2008

  3. Why he believes that a socialist will be elected in 2020 and why a libertarian may actually have a chance in 2024

  4. Why he believes the price of gold will be appreciating drastically in the years to come

  5. Why people are going to want to own commodities and emerging markets and get out of dollar denominated assets in the United States

  6. Why the Fed "stress tests" are rigged

  7. Why macroeconomic data shouldn't be relied upon

  8. How inflation will hit when newly printed money finally exits the capital markets

On the podcast, Schiff also notes how wrong the media and economists were in 2008, an accusation he himself has been the target of in recent years:

"It's a total double standard because it shows you their way of thinking. If you look at all of these experts that were completely wrong now that we're 10 years from the financial crisis...by 2007, the bubble had burst...even after it was so completely obvious. I was predicting it. They didn't figure it out until everything imploded..."

"I was going on television in mid 2008 saying 'we're in recession' and they were saying 'you're crazy, there's no recession in sight...'"

You can listen to the full podcast here:



<div class="player-unavailable"><h1 class="message">An error occurred.</h1><div class="submessage"><a href="http://www.youtube.com/watch?v=axyylJoZiBU" target="_blank">Try watching this video on www.youtube.com</a>, or enable JavaScript if it is disabled in your browser.</div></div>


In the podcast, Schiff also talks how Keynesian and Austrian economic theory differ, how inflation has an effect on the middle class, the politics of Trump's economic policy, and the recent volatility in tech stocks and tons more.

Peter's YouTube channel can be found here, meanwhile for those looking for some of the best alternative podcasts around, check out QTR's work at the following link.Schiff: "The Next Crisis Is Not Going To Look At All Like 2008"


by Tyler Durden

Sun, 08/05/2018 - 14:05

154

SHARES

Peter Schiff is an economist who served as an advisor to Ron Paul in 2008 and even made a run for Senate on his own at one point. He’s well-known in the "Austrian" as well as the libertarian economic community, but is perhaps best known for his belief that our next coming crisis is going to be "an order of magnitude larger than the crisis in 2008", only this one, the Federal Reserve is not going to be able to print their way out of, Schiff predicts in his most recent interview.

"What the Fed is worried about is a repeat of the 2008 financial crisis. What they don't realize is the next crisis is not going to look like the 2008 crisis," Schiff said.

He makes the why the dollar going up in 2008 helped the Fed bail everyone out, and why it's going to be impossible for the Fed to do the same thing when the dollar collapses during the next recession. Schiff also explains that a loss of confidence in the dollar as the world's reserve currency could see interest rates move much higher, resulting in the U.S. defaulting on its debt.


Despite getting the 2008 housing crisis right, Schiff's appearances in the mainstream financial media have declined precipitously due to his bearish outlook. As an alternative, he has created a substantial voice for himself on his YouTube channel, which boasts hundreds of thousands of subscribers.

On Saturday, August 4, Peter Schiff appeared on the Quoth the Raven podcast to talk about a multitude of topics, including:

  1. Why the mainstream media doesn’t have him on anymore, despite predicting the 2008 financial crisis production dead-on

  2. Why the government should have let more banks fail in 2008

  3. Why he believes that a socialist will be elected in 2020 and why a libertarian may actually have a chance in 2024

  4. Why he believes the price of gold will be appreciating drastically in the years to come

  5. Why people are going to want to own commodities and emerging markets and get out of dollar denominated assets in the United States

  6. Why the Fed "stress tests" are rigged

  7. Why macroeconomic data shouldn't be relied upon

  8. How inflation will hit when newly printed money finally exits the capital markets

On the podcast, Schiff also notes how wrong the media and economists were in 2008, an accusation he himself has been the target of in recent years:

"It's a total double standard because it shows you their way of thinking. If you look at all of these experts that were completely wrong now that we're 10 years from the financial crisis...by 2007, the bubble had burst...even after it was so completely obvious. I was predicting it. They didn't figure it out until everything imploded..."

"I was going on television in mid 2008 saying 'we're in recession' and they were saying 'you're crazy, there's no recession in sight...'"

You can listen to the full podcast here:



<div class="player-unavailable"><h1 class="message">An error occurred.</h1><div class="submessage"><a href="http://www.youtube.com/watch?v=axyylJoZiBU" target="_blank">Try watching this video on www.youtube.com</a>, or enable JavaScript if it is disabled in your browser.</div></div>


In the podcast, Schiff also talks how Keynesian and Austrian economic theory differ, how inflation has an effect on the middle class, the politics of Trump's economic policy, and the recent volatility in tech stocks and tons more.

Peter's YouTube channel can be found here, meanwhile for those looking for some of the best alternative podcasts around, check out QTR's work at the following link.Schiff: "The Next Crisis Is Not Going To Look At All Like 2008"


by Tyler Durden

Sun, 08/05/2018 - 14:05

154

SHARES

Peter Schiff is an economist who served as an advisor to Ron Paul in 2008 and even made a run for Senate on his own at one point. He’s well-known in the "Austrian" as well as the libertarian economic community, but is perhaps best known for his belief that our next coming crisis is going to be "an order of magnitude larger than the crisis in 2008", only this one, the Federal Reserve is not going to be able to print their way out of, Schiff predicts in his most recent interview.

"What the Fed is worried about is a repeat of the 2008 financial crisis. What they don't realize is the next crisis is not going to look like the 2008 crisis," Schiff said.

He makes the why the dollar going up in 2008 helped the Fed bail everyone out, and why it's going to be impossible for the Fed to do the same thing when the dollar collapses during the next recession. Schiff also explains that a loss of confidence in the dollar as the world's reserve currency could see interest rates move much higher, resulting in the U.S. defaulting on its debt.


Despite getting the 2008 housing crisis right, Schiff's appearances in the mainstream financial media have declined precipitously due to his bearish outlook. As an alternative, he has created a substantial voice for himself on his YouTube channel, which boasts hundreds of thousands of subscribers.

On Saturday, August 4, Peter Schiff appeared on the Quoth the Raven podcast to talk about a multitude of topics, including:

  1. Why the mainstream media doesn’t have him on anymore, despite predicting the 2008 financial crisis production dead-on

  2. Why the government should have let more banks fail in 2008

  3. Why he believes that a socialist will be elected in 2020 and why a libertarian may actually have a chance in 2024

  4. Why he believes the price of gold will be appreciating drastically in the years to come

  5. Why people are going to want to own commodities and emerging markets and get out of dollar denominated assets in the United States

  6. Why the Fed "stress tests" are rigged

  7. Why macroeconomic data shouldn't be relied upon

  8. How inflation will hit when newly printed money finally exits the capital markets

On the podcast, Schiff also notes how wrong the media and economists were in 2008, an accusation he himself has been the target of in recent years:

"It's a total double standard because it shows you their way of thinking. If you look at all of these experts that were completely wrong now that we're 10 years from the financial crisis...by 2007, the bubble had burst...even after it was so completely obvious. I was predicting it. They didn't figure it out until everything imploded..."

"I was going on television in mid 2008 saying 'we're in recession' and they were saying 'you're crazy, there's no recession in sight...'"

You can listen to the full podcast here:



<div class="player-unavailable"><h1 class="message">An error occurred.</h1><div class="submessage"><a href="http://www.youtube.com/watch?v=axyylJoZiBU" target="_blank">Try watching this video on www.youtube.com</a>, or enable JavaScript if it is disabled in your browser.</div></div>


In the podcast, Schiff also talks how Keynesian and Austrian economic theory differ, how inflation has an effect on the middle class, the politics of Trump's economic policy, and the recent volatility in tech stocks and tons more.

Peter's YouTube channel can be found here, meanwhile for those looking for some of the best alternative podcasts around, check out QTR's work at the following link.Schiff: "The Next Crisis Is Not Going To Look At All Like 2008"


by Tyler Durden

Sun, 08/05/2018 - 14:05

154

SHARES

Peter Schiff is an economist who served as an advisor to Ron Paul in 2008 and even made a run for Senate on his own at one point. He’s well-known in the "Austrian" as well as the libertarian economic community, but is perhaps best known for his belief that our next coming crisis is going to be "an order of magnitude larger than the crisis in 2008", only this one, the Federal Reserve is not going to be able to print their way out of, Schiff predicts in his most recent interview.

"What the Fed is worried about is a repeat of the 2008 financial crisis. What they don't realize is the next crisis is not going to look like the 2008 crisis," Schiff said.

He makes the why the dollar going up in 2008 helped the Fed bail everyone out, and why it's going to be impossible for the Fed to do the same thing when the dollar collapses during the next recession. Schiff also explains that a loss of confidence in the dollar as the world's reserve currency could see interest rates move much higher, resulting in the U.S. defaulting on its debt.


Despite getting the 2008 housing crisis right, Schiff's appearances in the mainstream financial media have declined precipitously due to his bearish outlook. As an alternative, he has created a substantial voice for himself on his YouTube channel, which boasts hundreds of thousands of subscribers.

On Saturday, August 4, Peter Schiff appeared on the Quoth the Raven podcast to talk about a multitude of topics, including:

  1. Why the mainstream media doesn’t have him on anymore, despite predicting the 2008 financial crisis production dead-on

  2. Why the government should have let more banks fail in 2008

  3. Why he believes that a socialist will be elected in 2020 and why a libertarian may actually have a chance in 2024

  4. Why he believes the price of gold will be appreciating drastically in the years to come

  5. Why people are going to want to own commodities and emerging markets and get out of dollar denominated assets in the United States

  6. Why the Fed "stress tests" are rigged

  7. Why macroeconomic data shouldn't be relied upon

  8. How inflation will hit when newly printed money finally exits the capital markets

On the podcast, Schiff also notes how wrong the media and economists were in 2008, an accusation he himself has been the target of in recent years:

"It's a total double standard because it shows you their way of thinking. If you look at all of these experts that were completely wrong now that we're 10 years from the financial crisis...by 2007, the bubble had burst...even after it was so completely obvious. I was predicting it. They didn't figure it out until everything imploded..."

"I was going on television in mid 2008 saying 'we're in recession' and they were saying 'you're crazy, there's no recession in sight...'"

You can listen to the full podcast here:



<div class="player-unavailable"><h1 class="message">An error occurred.</h1><div class="submessage"><a href="http://www.youtube.com/watch?v=axyylJoZiBU" target="_blank">Try watching this video on www.youtube.com</a>, or enable JavaScript if it is disabled in your browser.</div></div>


In the podcast, Schiff also talks how Keynesian and Austrian economic theory differ, how inflation has an effect on the middle class, the politics of Trump's economic policy, and the recent volatility in tech stocks and tons more.

Peter's YouTube channel can be found here, meanwhile for those looking for some of the best alternative podcasts around, check out QTR's work at the following link.Schiff: "The Next Crisis Is Not Going To Look At All Like 2008"


by Tyler Durden

Sun, 08/05/2018 - 14:05

154

SHARES

Peter Schiff is an economist who served as an advisor to Ron Paul in 2008 and even made a run for Senate on his own at one point. He’s well-known in the "Austrian" as well as the libertarian economic community, but is perhaps best known for his belief that our next coming crisis is going to be "an order of magnitude larger than the crisis in 2008", only this one, the Federal Reserve is not going to be able to print their way out of, Schiff predicts in his most recent interview.

"What the Fed is worried about is a repeat of the 2008 financial crisis. What they don't realize is the next crisis is not going to look like the 2008 crisis," Schiff said.

He makes the why the dollar going up in 2008 helped the Fed bail everyone out, and why it's going to be impossible for the Fed to do the same thing when the dollar collapses during the next recession. Schiff also explains that a loss of confidence in the dollar as the world's reserve currency could see interest rates move much higher, resulting in the U.S. defaulting on its debt.


Despite getting the 2008 housing crisis right, Schiff's appearances in the mainstream financial media have declined precipitously due to his bearish outlook. As an alternative, he has created a substantial voice for himself on his YouTube channel, which boasts hundreds of thousands of subscribers.

On Saturday, August 4, Peter Schiff appeared on the Quoth the Raven podcast to talk about a multitude of topics, including:

  1. Why the mainstream media doesn’t have him on anymore, despite predicting the 2008 financial crisis production dead-on

  2. Why the government should have let more banks fail in 2008

  3. Why he believes that a socialist will be elected in 2020 and why a libertarian may actually have a chance in 2024

  4. Why he believes the price of gold will be appreciating drastically in the years to come

  5. Why people are going to want to own commodities and emerging markets and get out of dollar denominated assets in the United States

  6. Why the Fed "stress tests" are rigged

  7. Why macroeconomic data shouldn't be relied upon

  8. How inflation will hit when newly printed money finally exits the capital markets

On the podcast, Schiff also notes how wrong the media and economists were in 2008, an accusation he himself has been the target of in recent years:

"It's a total double standard because it shows you their way of thinking. If you look at all of these experts that were completely wrong now that we're 10 years from the financial crisis...by 2007, the bubble had burst...even after it was so completely obvious. I was predicting it. They didn't figure it out until everything imploded..."

"I was going on television in mid 2008 saying 'we're in recession' and they were saying 'you're crazy, there's no recession in sight...'"

You can listen to the full podcast here:



<div class="player-unavailable"><h1 class="message">An error occurred.</h1><div class="submessage"><a href="http://www.youtube.com/watch?v=axyylJoZiBU" target="_blank">Try watching this video on www.youtube.com</a>, or enable JavaScript if it is disabled in your browser.</div></div>


In the podcast, Schiff also talks how Keynesian and Austrian economic theory differ, how inflation has an effect on the middle class, the politics of Trump's economic policy, and the recent volatility in tech stocks and tons more.

Peter's YouTube channel can be found here, meanwhile for those looking for some of the best alternative podcasts around, check out QTR's work at the following link.

 

"It's a F**king Bloodbath" - Emerging Markets Collapse As Turkey Tantrum Spread


Throughout July, many sell-side analysts saw the 'stability' in EM assets as a sign that the worst was over and urged investors to pile back in to take advantage of 'blood on the streets' in EM at these cheap levels.


But, as one veteran EM trader in Brazil exclaimed to us this morning "this is a fucking bloodbath," adding that "liquidity has disappeared" and as spooked retail investors pile out of ETFs (that their advisers said were no brainers), the pressure in real markets is explosive.

Emerging Market FX is indeed a bloodbath...


While Turkey's Lira is the biggest loser on the week (and day), no matter where you look, it's carnage...



The moves are massive but dwarved by Lira...


How much longer can "they" support Emerging Market stocks? Debt and FX have already got the message...


And how long before US stocks catch down to the global stress?


For now Globally Systemic Banks are seeing risk pressures once again...


Offshore yuan is starting to crack again...


And EURUSD has broken the 1.15 shoulder...



 



by Sprott Money

Fri, 08/10/2018 - 07:00

25

SHARES

The Digital Dark Age is Here

Written by Nathan McDonald, Sprott Money News

For years I have warned about this, for years I have stated that these companies are not to be trusted, that they are listening to your every movement and tracking you in real time, selling your information to the highest bidder.

For years, people scoffed at this idea, they laughed it off, until recently.

People were outraged to hear that Facebook and other social media giants were indeed selling your information, they were gathering, collecting and packaging it to ad sponsors, but why were they shocked? Why couldn't they see the reality that was clearly in front of their eyes?

Because ignorance is bliss.

We live in interesting times indeed, times that are both exciting and precarious. We stand on a precipice of either great change, innovation and new levels of achievement, or we stand on the edge of complete and utter darkness.

Sadly, people are not standing up, they are not voting with their dollars and they are blissfully ignoring the ensnaring net that is slowly being drawn around them.

The digital dark age is here, and the elite few tech giants that are ushering it in are beginning their attack on anyone, anything that does not agree with their echo chamber of thought.

A small handful of companies, you know their names well, virtually control a massive part of our society now. They have near complete control over many aspects of your lives, and don't for a second think that they don't.

The vast majority of people in the West use some form of social media on a regular basis, whether it be Facebook, Instagram, Twitter, Google plus or Youtube. Yet these companies all hail from one small, pocket of the world, resulting in an incredibly narrow train of thought, and diversity.

These companies executives know each other, they meet socially and undoubtedly they discuss the future of the internet and how they can best shape it moving forward in their vision.

This is an incredibly frightening occurrence of events, as we the people have literally handed them dominance over our virtual social lives, an aspect of society that can now dictate whether or not you get a job, are successful, or fail in a key aspect of our lives.

Like it or not, the internet is a massive part of society and will likely become increasingly more so as we move forward into the future.

Over this past week, we have witnessed the first virtual execution of our times.

Alex Jones, the controversial, yet very popular conspiracy theorist and owner of Infowars, was their target and the verdict was absolute . He had to be, and he was destroyed.

Don't for a second think that I agree with all of his nonsense, nor do I like him, but what I do like is the free market, free speech and a free society. This week we lost that.

Collectively, they banned and deleted all of his accounts, all of his pages, in which he had millions of followers, in a series of virtual head-shots, wiping him off the internet, stating that he violated their "terms of service".

Linkedin, a platform where he posted no content, also deleted his account, even though he violated no terms of service, completing his wipe out and truly showing Silicon Valleys true intentions.

Alex Jones, was an easy target for them, but don't for a second think he will be the last. This week also saw a number of social media accounts banned linked to Ron Paul, libertarians and other major conservatives.

Now, rumors are swirling, that one of the largest sites on the internet, the Drudge Report will be next. Then, will it be Zero Hedge, and any other alt media website that doesn't agree absolutely with their train of thought? Who knows, but this should startle and alarm people.

Absolute power corrupts absolutely, and we are now seeing this in real time, once again, as we have many times previously throughout history.

This new found digital power over our lives is something new, and something that has to be resisted. Alternative social media websites, that support free speech and freedom of expression need to be supported, such as Minds and Gab.

This absolute digital power is exactly why I have been railing against the idea of a 100% digital fiat currency for years. The power that this would allow governments over our EVERYDAY lives, not just virtual, would be something out of a Orwellian nightmare and would make what we are seeing today via the social media tech giants look like child's play.

Get out of your comfort zone, stand up for what is right and vote both with your feet and your dollars. No company is too big to fail and no tide too big that it can't be resisted. The fight goes on for liberty, for freedom, as it always has and as it always will from now, until the end of time.

8 Measures Say A Crash Is Coming, Here's How To Time It


Authored by Lance Roberts via RealInvestmentAdvice.com,

Mark Hulbert recently penned a very good article discussing the “Eight Best Predictors Of The Stock Market,” to wit:

“The stock market’s return over the next decade is likely to be well below historical norms.

That is the unanimous conclusion of eight stock-market indicators with what I consider the most impressive track records over the past six decades. The only real difference between them is the extent of their bearishness.

To illustrate the bearish story told by each of these indicators, consider the projected 10-year returns to which these indicators’ current levels translate. The most bearish projection of any of them was that the S&P 500 would produce a 10-year total return of 3.9 percentage points annualized below inflation. The most bullish was 3.6 points above inflation.

The most accurate of the indicators I studied was created by the anonymous author of the blog Philosophical Economics. It is now as bearish as it was right before the 2008 financial crisis, projecting an inflation-adjusted S&P 500 total return of just 0.8 percentage point above inflation. Ten-year Treasuries can promise you that return with far less risk.”

Here is one of the eight indicators, a chart of Livermore’s Equity-Q Ratio which is essentially household’s equity allocation to net worth:


The other seven are as follows:


As Hulbert states:

“According to various tests of statistical significance, each of these indicators’ track records is significant at the 95% confidence level that statisticians often use when assessing whether a pattern is genuine.

However, the differences between the R-squared of the top four or five indicators I studied probably aren’t statistically significant, I was told by Prof. Shiller. That means you’re overreaching if you argue that you should pay more attention to, say, the average household equity allocation than the price/sales ratio.”

As I discussed in “Valuation Measures and Forward Returns:”

“No matter, how many valuation measures I use, the message remains the same. From current valuation levels, the expected rate of return for investors over the next decade will be low.”

This is shown in the chart below, courtesy of Michael Lebowitz, which shows the standard deviation from the long-term mean of the “Buffett Indicator,” or market capitalization to GDP, Tobin’s Q, and Shiller’s CAPE compared to forward real total returns over the next 10-years. Michael will go into more detail on this graph and what it means for asset allocation in the coming weeks.


The Problem With Valuation Measures

First, let me explain what “low forward returns” does and does not mean.

  1. It does NOT mean the stock market will have annual rates of return of sub-3% each year over the next 10-years.

  2. It DOES mean the stock market will have stellar gains in some years, a big crash somewhere in between, or several smaller ones, and the average return over the decade will be low.

This is shown in the table and chart below which compares a 7% annual return (as often promised) to a series of positive returns with a loss, or two, along the way. (Note: the annual average return without the crashes is 7% annually also.)


From current valuation levels, two-percent forward rates of return are a real possibility. As shown, all it takes is a correction, or crash, along the way to make it a reality.

The problem with using valuation measures, as Mark Hulbert discusses, is that there can be a long period between a valuation warning and a market correction. This was a point made by Eddy Elfenbein from Crossing Wall Street:

“For the record, I’m a bit skeptical of these metrics. Sure, they’re interesting to look at, but I try to place them within a larger framework.

It’s not terribly hard to find a measure that shows an overvalued market and then use a long time period to show the market has performed below average during your defined overvalued period. That’s easy.

The difficulty is in timing the market.

Even if you know the market is overpriced, that doesn’t tell you much about how to invest today.”

He is correct.

So, if valuation measures tell you a problem is coming, but don’t tell you what to do, then Wall Street’s answer is simply to “do nothing.” After all, you will eventually recover the losses….right?

However, getting back to even and actually reaching your financial goals are two entirely different things as we discussed recently in “Crashes Matter.”


There is an important point to be made here. The old axioms of “time in the market” and the “power of compounding” are true, but they are only true as long as the principal value is not destroyed along the way. The destruction of the principal destroys both “time” and “the magic of compounding.”

Or more simply put – “getting back to even” is not the same as “growing.”

Is there a solution?

Linking Fundamentals To Technicals

I have often discussed an important point in reference to our portfolio management process:

“Fundamentals tell us ‘what’ to buy or sell, technicals tell us the ‘when.'”

Fundamentals are a long-term view on an investment. From these fundamental underpinnings, we can assess and assign a “valuation” to an investment to determine whether it is over or undervalued. Of course, in the famous words of Warren Buffett:

“Price is what you pay. Value is what you get.”

In the financial markets, however, psychology can drive prices farther, and further, than logic would dictate. But such is the nature of every stage of a bull market cycle where the “momentum” chase, or rather the physical manifestation of “greed,” comes to life. This is also the point where statements such as “this time is different,” “fundamentals have changed,” or a variety of other excuses, are used to justify rampant speculation in the markets.

Despite the detachment from valuations, as markets continue to escalate higher, the fundamental warnings are readily dismissed in exchange for any data point which supports the bullish bias.

Eventually, it has always come to a rather ignominious ending.

But why does it have to be one or the other?

Currently, the Equity Q-ratio, as graphed above, is at levels that have historically denoted very poor future returns for investors. In other words, if you went to cash today, it is quite likely that over the next 10-years the value of your portfolio would be roughly the same.

However, before that “mean reverting event” occurs the market will most likely continue to advance. So, there you are, sitting on the sidelines waiting for the crash.

“Damn it, I am missing out. I should have just stayed in.”

The feeling of “missing out” can be overpowering as the momentum driven market rises. Like gravity, the more the market rises, the greater the pull to “jump back in” becomes. Eventually, and typically near the peak of the market cycle, investors capitulate to the pressure.

Understanding that price is a reflection of short-term market psychology, the trend of prices can give us some clue as to the direction of the market. As the old saying goes:

“The trend is your friend, until it isn’t.”

While the Equity Q-ratio implies low forward returns, technical analysis can give us the “timing” as to when “psychology” has begun to align with the underlying “fundamentals.”.

In the chart below we have added vertical “gold” bars which denote when negative price changes warrant reducing equity risk in portfolios. (The chart uses quarterly data and triggers a signal when the 6-month moving average crosses the 2-year moving average.)


Since 1951, this “equity reduction” signal has only occurred 17-times. Yes, since these are long-term quarterly moving averages, investors would not have necessarily “top ticked” and sold at the peak, nor would they have bought the absolute bottoms. However, they would have succeeded in avoiding much of the capital destruction of the declines and garnered most of the gains.

The last time the Equity-Q ratio was above 40% was during the late 2015/2016 correction and the technical signal warned that a reduction of risk was warranted.

The mistake most investors make is not getting “back in” when the signal reverses. The value of technical analysis is providing a glimpse into the “stampede of the herd.” When the psychology is overwhelmingly bullish, investors should be primarily allocated towards equity risk. When its not, equity risk should be greatly reduced.

Unfortunately, investors tend to not heed signals at market peaks because the belief is that stocks can only go up from here. At bottoms, investors fail to “buy” as the overriding belief is the market is heading towards zero.

In a recent post, It’s Not Too Early To Be Late, Michael Lebowitz showed the historical pain investors suffered by exiting a raging bull market too early. However, he also showed that those who exited markets three years prior to peaks, when valuations were similar to today’s, profited in the long-run.

While technical analysis can provide timely and useful information for investors, it is our “behavioral issues” which lead to underperformance over time.

Currently, with the Equity Q-ratio pushing the 3rd highest level in history, investors should be very concerned about forward returns. However, with the technical trends currently “bullish,” equity exposure should remain near target levels for now.

That is until the trend changes.

When the next long-term technical “sell signal” is registered, investors should consider heeding the warnings.

Yes, even with this, you may still “leave the party” a little early.

But such is always better than getting trapped in rush for the exits when the cops arrive.

This hedge-fund manager invests only 0.1% of his billion-dollar portfolio in the U.S. — here’s what he does instead


Published: Aug 9, 2018 1:52 p.m. ET







1


Mohnish Pabrai has $400 million invested in India, compared to $1 million in U.S. stocks


Getty

Taj Mahal at sunrise


By

SHAWN

LANGLOIS

SOCIAL-MEDIA EDITOR

 

Mohnish Pabrai once paid six figures to have lunch and pick the brain of with Berkshire Hathaway’s BRK.A, -0.06% BRK.B, +0.08%  Warren Buffett. Fast forward about 10 years, and it just may be Pabrai’s brain that needs picking.

As managing partner of Pabrai Funds, he‘s had a stellar run. Pabrai has generated a return of nearly 1,000% for investors since starting the fund almost 20 years ago, according to Jody Chudley of the Daily Reckoning blog,

Must be riding those FAANGs to glory, eh? Nope. In fact, he’s essentially avoided U.S. stocks altogether. As it stands now, Pabrai, born in India and living in California, says he has $1 million of his billion-dollar fund allocated to the U.S. stock market, while putting a whopping $400 million to work in India.

He explained his the rationale behind his position back in June.

“I am bullish on the U.S. in general. It’s just that things are not heavily mispriced and under priced,” he told the Economic Times in an interview. “At the same time, India has increased quite dramatically. It has gone from basically less than $100 million two-three years ago, to over $400 million.”

Chudley says he has been a big fan of Pabrai’s for 20 years and particularly appreciates how he runs a concentrated portfolio.


“Because Pabrai owns only a small number of positions at any given time, he can’t afford to make major mistakes. One big error would ruin his overall performance,” he explained. “That means that each and every investment is heavily scrutinized.”

Chudley took a deep dive into exactly where Pabrai is putting his money in India and found the housing finance sector to be his favorite.

“His logic is sound,” Chudley wrote. “Indian mortgages as a percentage of owned home value is ludicrously low. Just 6% of the value of Indian homes has been pledged as collateral for mortgages. The norm in other emerging economies is almost 20%, and in the United States it is closer to 40%.”

Chudley’s pick to gain exposure to Pabrai’s approach: Fairfax India FFXDF, -0.08%FIH.U, -0.06% which was formed to take advantage of the growth in India. The company was founded by Prem Watsa, who is often referred to as the “Canadian Warren Buffett.”

The Canadian shares, denominated in U.S. dollars are up about 46% over three years, including a gain of nearly 7% so far this year.




Chudley points out that 30% of Fairfax’s investments have direct exposure to the home finance sector that Pabrai is so bullish about. The other investments include India’s third largest airport, a soda producer and an ag finance business.

“All of those investments are going to benefit from India’s rapidly expanding middle class,” Chudley wrote in his blog post.

The S&P 500 SPX, -0.14%  is up about 38% over the past three years, including a gain of 7% this year, while India’s S&P BSE Sensex 1, +0.36%  has gained 35% over three years, including 12% this year.

A Bearish Market Warning From The Tech Bubble Is Back


Stocks are moving out of step with each other the most they have since just before the end of the tech bubble, and with stock valuations at a high, that could be a warning.


In January 2001, before tech went bust, stocks diverged as growth flourished. Everything named dotcom boomed, but old line industries puttered.

There hasn’t been such a divergence between stocks in the overall market since then, not even during the Great Recession.

The current market’s low correlation comes as valuations soar. At 22, as measured by the trailing price-to-earnings multiple, valuations are higher than they’ve been 84 percent of the time since 1952.

“Correlation is at one of the lowest levels in the post-War era,” said James Paulsen, chief investment strategist at Leuthold Group. “The combination is damaging. We now have record low correlation at the same time we have high valuations, and the combination is bad for the market.”

“When you have this situation of the lowest quintile correlation against the highest quintile valuation since 1952, you have 10 percent declines on average,” said Paulsen.

The aging bull market, Fed policy changes and the trade wars, which have resulted in weakness in stocks of multinational companies and strength in domestic-oriented names, are all potential factors behind the fall in correlations.

He said that, alone, low correlations and high valuations do not necessarily spell trouble, but the combination has been a negative warning for the market. While the bull market could even continue for a few more years, the correlation and valuation extremes suggest a period of turbulence, he said.

Paulsen studied correlation, using 48 sectors that include a broad universe of stocks that went well beyond the S&P 500. He charted the past 24-month rolling-average correlation of returns from the 48 industry sectors to the return of the overall stock market since 1952.


Paulsen said correlation may reflect Fed policy actions, like now. During periods of easy money, liquidity increases and interest rates fall, sending stocks higher across the board. But when the Fed is tightening, liquidity is restricted, yields rise and more stocks are left “impaired,” as correlation declines. For instance, Fed rate hikes might be bad for some sectors, like housing, but good for others, like banking.

“Trade wars have played a role,” he also said. Basic materials, industrials and emerging markets have all taken a hit in recent months, but tech has not been as affected, and small caps have been boosted because of their domestic focus.

Paulsen said correlation is also a proxy for market breadth. High correlation implies all stocks are moving in tandem, with broad participation. Low correlation means more stocks are falling behind. Correlations often decline, or become looser, as a bull market matures and investors are more confident and able to discriminate between names and sectors.

Correlation can become high again during periods of investor panic or bear markets, when all stocks get sold. When investors get fearful, they shift focus from individual stocks to asset classes, pushing correlations higher.

Sudden Emerging Market Bloodbath



Slowly at first, then all at once - Emerging Market currencies are crashing across the board...


The dead cat bounce is over for EM FX...



The plunge is led by Turkey's Lira (not helped by Fitch warnings of further downgrades)



The Rand, Peso (Argentina and Mexican), Ruble, and Real are all getting clubbed by a baby seal...


Meanwhile, offshore Yuan is flat..






Behold the ‘scariest chart’ for the stock market


Published: Aug 8, 2018 5:43 p.m. ET







69


By one measure, the stock market’s valuation is twice as high as 2000


By

SUE

CHANG

MARKETS REPORTER



IStockphoto

Too scary for words.

A lot has changed since the stock market crash of 2000. Apple Inc. has gone from being just another computer brand to becoming the most valuable company in the world, Amazon.com Inc. went from being an e-book retailer to a byword for online shopping and Tesla’s Elon Musk has risen from obscurity to Twitter stardom.

Yet some things never change and Doug Ramsey, chief investment officer at Leuthold Group, has been on a mini-campaign highlighting the parallels between 2000 and 2018.

Among the numerous similarities is the elevated valuation of the S&P 500 then and now, which Ramsey illustrates in a chart that he has dubbed as the “scariest chart in our database.”


Leuthold Group


“Recall that the initial visit to present levels was followed by the S&P 500’s first-ever negative total return decade,” he said in a recent blog post.

Price-to-sales ratio is one measure of a stocks value. It isn’t as popular as the price-to-earnings ratio, or P/E, but is viewed as less susceptible to manipulation since it is based on revenue.

He also shared a chart which he claims is “unfit for a family-friendly publication” that shows how in terms of median price to sales ratio, the S&P 500 is twice as expensive as it was in 2000.



Leuthold Group


“Overvaluation in 2000 was highly concentrated; today it is pervasive, with the median S&P 500 Price/Sales ratio of 2.63 times more than double the 1.23 times prevailing in February 2000.

In a follow-up post, he then reiterates how 2018 is starting to increasingly look like 2000.

“The statistical similarities between the two bulls are on the rise, and the wonderment surrounding the disruptive technology of today’s market leaders seems to have swelled to maybe 1998-ish levels,” he writes.

That upward trajectory of the market isn’t sustainable, he warns. Ramsey admits that history isn’t the best guide for the future but the S&P 500’s performance since it touched its peak on Jan. 26 is closely mirroring what happened 18 years ago.

“In the earlier case, a volatile five-month upswing that began in mid-April ultimately fell just a half-percent short of the March 24th high by early September. This year, a similarly choppy, six-month rebound has taken the S&P 500 to within 1% of its January 26th high,” Ramsey said.


Leuthold Group


There are other resemblances such as healthy breadth as denoted by the uptrend in the daily NYSE Advance/Decline Line while corporate profits, measured by Leuthold’s internal earnings indicator, are extremely robust, according to Ramsey.

But even without 2018 mimicking 2000, the persistent trade clash between the U.S. and its trading partners that in the worst case scenario could derail global trade looms as a huge threat to stocks.

China is expected to levy tariffs on $60 billion of U.S. goods if the Trump administration proceeds with its plan to impose 25% tariffs on $16 billion in Chinese imports later this month.

On Aug. 22, the market will officially become the longest bull market in history. Coincidentally, the previous titleholder is the decadelong one that gave up the ghost when the tech bubble burst in 2000.


 

This Websight is only for Educational and Teaching. No recommendations to Buy or to Sell Securities or Assets in any form.




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