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I wish that policymakers hadn’t behaved so recklessly in the past half-decade, flooding the world with epic amounts of easy money in order to “fix” two previous crashes caused, largely, by too much easy money.
I wish that high-risk auto lending hadn’t gotten as out of control recently as high-risk mortgage lending did a decade ago.
And I wish that corporations put all their cheap-and-easy money to better use — hiring more workers, building more factories, or heavily investing in R&D, rather than just buying each other and their own shares.
That way, I wouldn’t have had to issue all of the dire forecasts I did over the past year: On how junk bonds were signaling a stock meltdown … on how we would likely see an M&A and IPO bust … on how an auto sector disaster was looming and on how a new bear market was underway.
But apparently, I didn’t throw the right penny in the right pond, or rub the right genie’s lamp. I say that because none of those wishes came true. Instead, more and more developments suggest those forecasts are panning out.
Take the ongoing meltdown in high-yield bonds. The weakness that started there in late 2014 and early 2015 definitely foreshadowed weakness in stocks. And junk bonds remain in deeply depressed territory, with the SPDR Barclays High Yield Bond ETF (JNK) down more than 12% in the last year.
Or how about M&As and IPOs? FactSet Research just reported that U.S. M&A announcements fell more than 7% between December and January, while total deal volume plunged 40%. We didn’t see a single initial public offering in January, the first time that has happened in any month since September 2011 … and February isn’t looking much better.
As for autos, delinquency and default rates on subprime auto loans are surging to their highest levels since 2010. I blame ridiculously aggressive lending and a slowing economy, and I have every expectation that delinquencies, defaults, and lender losses will rise higher and higher in the next two years.
How about stocks? The Dow Jones Transportation Average is down 18.5% from its high, even after its recent bounce. The Russell 2000 Index is off 19.6%, and trading around its lowest level since summer 2013.
The Dow Industrials are down 3.7% and desperately trying to cling to support in the 15,500-16,500 area. Plus, key sectors like financials are trading as poorly as they have since the last major bear market. That sure makes last year’s stock warnings look prescient.
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| The troubling trends I started highlighting almost a year ago haven’t gone away. |
I bring this all up for a simple reason: None of the troubling trends I first started highlighting almost a year ago have gone away. If anything, those trends are getting worse with time. So that means the cautious, prudent, protective steps I recommended back then in my Safe Money Report are even more important for you to follow now. Specifically …
- Maintain very high levels of cash. I have personally been recommending holding the highest cash levels since the last bear market.
- For your remaining equity exposure, invest almost entirely in stocks that have generous, trustworthy yields … relatively high Weiss Ratings … lower volatility … and that operate in non-economically sensitive businesses.
- Hedge your risk, or go for profits, with inverse ETFs or put options that rise in value as vulnerable stocks and sectors fall.
- Most importantly, make sure you receive each and every update I send to my Safe Money subscribers. Market trends and economic conditions are constantly evolving. The issues help keep subscribers one step ahead of those changes, and let them know when it’s time to get more aggressive or conservative with your investing strategies.
Take these steps, and I believe your portfolio will be stronger for it. Avoid them, and you could fall victim to the same kinds of bear market losses that have devastated portfolios twice since the turn of the century. At the very least, you should sleep easier knowing you have some portfolio protection in place against any more uncertainty and volatility that could be coming down the pike.
(Editor’s note: Click here — for more information on the Safe Money Report, including a special discount offer.)
Until next time,
Mike Larson
P.S. The two trades Boris and Kathy are most excited about for 2016 could come at ANY MOMENT!
The last time they saw this trade at these levels, if you played it right, you could have grabbed a 925% gain in a matter of months.
That’s enough to turn $10,000 into $102,500 … $25,000 into $256,250 … and $50,000 into $512,500!
But the only way to get these all-important recos is to be a member of their Global Currency Investor service.
Click this link to join now, before you miss out!
Recommended Articles by Mike Larson:
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 65 comments }
Larry, mostly what I see you mention are symptoms. What you say for recommendations “specifically” are not very specific. I wish you had mentioned something about gold; or is that an unmentioned part of the cash you refer to? What about puts? This is a bear market you know.
Mike do you still think the ETF SRO is still a good bet?
Thanks
It’s too bad the “easy money” of which you speak cannot be directed into the hands of community banks, credit unions, to individuals, and to co-ops where real economic growth takes place–instead of into the hands of large corporate bankers where the mischief begins. Also, we need to break up mega-corporations into smaller units, and supervise them, in order to begin leveling the playing field so that everyone can participate in this thing we call free enterprise.
If “we” break up corporations and “supervise” them (?)…..we no longer have free enterprise.
BTW….we have been losing C Corps at a rate of about 60,000 per year and now down to about 1,000,000.
According to several books, ‘The Beast from Jekyll Island’ by Griffin being one, the Fed was created by the big bankers to control the banking industry and keep power in the hands of the big Wall Street banks. If this is true the Fed is doing its job. The principals included people connected to Morgan (who may have been the US agent for the Rothschilds), Republican “whip” in the Senate, the Rockefellers, Kuhn, Loeb & co. (Rothschilds and Warburgs in Europe), and and assistant secretary of the treasury and also a Rockefeller father-in-law. About one fourth the wealth in the world. This comment is what it is worth and I’m just passing it along for the fun of it
Ted,
That was the Republican Majority Initiative called Gramm/Leach/Blyley that removed the Glass-Steagall Act from Law in 1999 and heralded in a return to the 1920’s…. For those not aware, Glass-Steagall was brought to keep 1929 (90% loss) from ever happening again….. If you think 2007-2009 (60% loss) was something, just wait until the next one comes…. Until Glass-Steagall is back on the books our markets are incredibly endangered!….
Well, here we go again. Let us refresh your dim memory. It was wonder boy, Bill Clinton, who signed these bills into law. Listen up Eagle, he is a liberal, Roosevelt democrat. If your progressive democrats are so pure, then why did he not veto these bills? He was extremely popular and could even commit #### in his oval office and never face any consequences. He also fired one of this appointees, who also testified before congress that “CDS” were an accident waiting to happen. Let me repeat just in case Eagle you cannot hear me. Clinton was one of your beloved democrats and HE signed Gramm-Leach-Blyley into law instead of vetoing it and all the following amendments. I am sorry if the truth makes you uncomfortable. I am sure you will vote for hillery who has blood on her hands for not authorizing a military rapid deployment response to calls of help at Bengaze.
Eagle495, you need to do alittle more reading on Gramm, Leach & Bliley Act.
This bill was written and sponsored by both republican & democrats and was signed into law by William Jeffereson Clinton in the year 2000.
It is both sides of the isle stop blaming Bush alone & the republicans our complete system has been corrupted.
Robert Reich was the behind the scenes man that fostered the gutting. Hillary and Bill were on the payroll of the big Wall Street Banks.
Thanks for passing it on Ted. Sadly it is serious stuff and the truth. The groundwork for the mess we the lowly people are in today was laid back then. The same happened in Mexico called the meeting of the Robber Barons and I think if you dig deep enough these clandestine meetings took place all over the globe. If you also look back in history you will see that the ancestor of the Bush family Prescott Bush was involved in a plot to overthrow Roosevelt. Its all there including how they tried to convince General Smedly to do the soldiering but he refused. As today none of the perps were punished or hung. The world is being fashioned as a playground for the rich and famous and we are just bystanders that are summoned to do their bidding like at election time.
Ted and Gordon definitely have their History correct. Jim
there’s a time to make money, and there’s a time not to lose money. you’re right, mr larson, this is a time not to lose money.
you’ve been right for a long time, mike. thanks for the good work.
mike,
click here:
https://research.stlouisfed.org/fred2/graph/?g=3Bu5
this is a chart of the the crude oil vix vs the dow. expand the chart to maximum and you can easily see how volatility in oil reeks havoc with the dow. we’ve all used the words, oil is in control of the markets, we just don’t listen to ourselves. we can take all the other parameters out of the equation and just by watching the oil vix we can be “prescient,” to use one of your words. you don’t need to post this link, but i thought you might like to see it. stocks will go up when the oil vix goes down. my eyeballs are super glued to the oil vix.
Cash is king, followed perhaps by blue chips in excellent financial positions that also have a excellent history of paying dividends. Buy only what you really need, and save the remaining cash rather than spending it on “like to have” products and services. Collectible gold coins will always increase in value, however, the age/quality must be thoroughly understood and the purchase has to be well executed. Lastly, corporate America boards and indeed shareholders must stop providing mega bonuses to corporate executives who do not provide a documentable increase in the bottom line without layoffs, changing country of incorporation, and providing their shareholders with improved investment results.
Al great idea but it will never happen. We have passed the point of no return in corporate greed culture the fix is in. The corporates have played “chicken” with the governments for a few years now they have poked the hornets nest but none came out to attack them and they now realize that they hold all the cards. They are out in the open now with their thievery no longer lurking in the background. They have prodded people to the limit and now realize the general populous will not physically fight back. The government to put on a good show catches a few of them from time to time and levies big fines but its tax deductible and peanuts for these guys. Even so called modern countries now have media controls and if you slander the government or their police bullies its jail or big fines for you its all part of the control system. One of the Nordic countries comes to mind where this is now law with huge fines attached. The next step is the cashless society to “control drug money” but it is really a plan to control your money and mine and it will give the government finger tip control over everything we own. We are loosing it all folks giving up without a yelp.
the civilized world revolves around oil. without it, we revert back to cavemen overnight. i’ve been watching the crude oil vix for years. i’ve studied every recession in my lifetime since the 1950s each was preceded by a spike in oil prices, which was caused by full employment, which caused the fed to invert the yield curve. so, it’s not hard to predict recessions when these three elements are involved. but predicting corrections has always eluded me. we’re missing one element right now; the yield curve is flat. so, no recession, just a correction? we’ll see. if so, we now have the knowledge to also call corrections in addition to recessions. plus, tops in markets are preceded by a rise in the crude oil vix. getting smarter every year. :-)
$1,000 gold
Watching the vix can be a vexing ordeal. When oil hits $10 a barrel do you care to predict where the markets will be? Gas will be 50 cents a gallon possibly how can we loose.? One thing I have learned in my long life is that things never seem to be what they appear to be. There is always a fly in the ointment.
man, do i ever agree with you 100%, gordon. i’ve been around enough decades to have learned the same lessons. the markets always self correct. that’s what’s happening now. that’s why when these bubble pop – like we’re seeing in oil – they usually go all the way to a bottom – like stocks did in 2009. we just gotta ride it out and at the bottom awaits a new dawn. if you told my grandparents we’d be talking on cell phones, cooking like magic in microwave ovens and fly around the world in jet airplanes they’d never believe. our grand kids will look back on our time like we do our grandparents. we should bet on the future. america will do great.
Mike
With all the Weiss negative forecasts and analyses I sold Lyods Bank Uk a few days ago ?Today Lyods Bank is up 10%
John
If the downside trend is to continue, this recent rally should be about ready to peter out. The neighborhood of Dow 17,050 should be the next resistance level.
it all depends on the crude oil vix. if it calms down, markets will rise. otherwise, we can expect more pain. so, what do you think oil will do? $20/bbl will cause a lotta vix. $30/bbl seems to be a happy zone for now.
The oil vix looks like oil has another few days of passivity. Then it roars again.
if oil rules the day, and we all agree it does, we need to watch the oil vix daily.
You probably know more about than me, but I have read that a spike upward in the oil vix is often a sign of a bottom. What say you? Jim
it appears that way to me, jim.
i do not know more about oil than you, jim. i have no experience in oil, you have vast experience in oil. my forte is figuring out how thing work – everything from the stock market to computers to anything that interests me. it’s about the only thing i’m good at.
…that and defending myself from the trolls on this website who like to hijack my $1,000 gold moniker. :-)
i may even have to register my trademarkâ„¢. :-(
…but i really only have trouble with one troll. i have no trouble spotting his writing style. he has several identities. one of them is directly below me right now.
You have regularly demonstrated you know plenty I don’t. I value you opinions. Thanks. Jim
Hi folks,It only money.
Each bank has put 1billion to cover the fracking bubble
Car loan ready to weight on banks bubble
Student loans ready to be a bubble
7trillion $ Obamas little or big bubble
More QE on its way?
Neg. interest rates on its way?
There is nothing to worry about,Obama has it all in hand.
It reminds of Hitler in 1944,we have got secret weapons that will solve Germans problem
Oil is most likely going to stay low for many, many years to come…. Cheney saw to that when, in the interest of short term greed, he got all of the American oilmen together back in the early days of their administrations and they forgot all the rules of supply and demand and pushed oil to $140 which got EVERYONE AND THEIR UNCLE looking for oil…. Now we have a HUGE oversupply and a ton of innovation which came when oil was so high…. That innovation is going to reduce the need for oil in the future….
Amazingly, Cheney, a hard right wing Republican, has accidentally done more in the long run to reduce emissions and clean the air than anyone in recent history!
How thoroughly Democratic of him, aye?….. :)
Nine, dumkopf. The diatribes against ‘publicans is getting very tiresome.
Ya, but you see dumkopf, it happens to be true!…… :(
It’s still boring. Jim
Dear Mr. Mike Larson,
You said – “…I wish that corporations put all their cheap-and-easy money to better use — hiring more workers, building more factories, or heavily investing in R&D, rather than just buying each other and their own shares…”.
What you are observing are symptoms of a decayed and decaying economic system (in the USA and world-wide). It is a system that entered an on-going economic crisis since late-60s/early-70s – which marks the end of the post-WW2 economic “boom”, and a time when most of the leading/major Capitalist economies began to “catch up” to the USA and compete for a bigger/better share of the virtually LIMITED world “economic pie”. This is the MAIN reason the USA is not “winning/dominating” like it used to. Many other countries simply got a lot better at competing for a better/bigger share of the LIMITED world-wide economic “pie”. Hence, the reason the USA feels “compelled” to provoke (and make “enemies” of) “strong” countries like Russia, China, etc., or, simply bomb some militarily “weak” countries back to the “stone age”.
Basically, the world-wide economic system has reached a stage of general “over-production” (more or less), and it is becoming harder for Capitalist businesses to make profits through expansions (hence, the massive amounts of share-buybacks). However, this world-wide system needs never-ending “expansion” in order to survive. Ultimately, this is (obviously) an UNSUSTAINABLE economic system. The world-wide economic system is now at a “dead-end” (more or less) and can no longer generate long-term recovery by economic means alone.
Unfortunately, this now decadent world-wide economic system is “destined” to bring about another WORLD WAR (for the similar reasons the system brought about WW1 and WW2). The real and permanent solution is obviously a FUNDAMENTAL change away from the current world-wide system, to a sustainable alternative system – a system NOT based on production for profits, but production to meet the needs of society (as the PRIMARY end-purpose of production).
Interesting. What specifically do you mean by a need based economy. Who makes those decisions? Seems that you would have to have a centralized command economy controlled probably by the government. It has been demonstrated that this is very difficult because the further you go up in the bureaucracy the worse the quality of information they receive. Trying to monitor and react to millions of instantaneous decisions made daily by individuals in a timely manner is a daunting task. As annoying and imperfect as the free market system is, with its boom- bust cycles, we really haven’t come up with anything better that I am aware of. I am really interested in how this system would work. Thanks. Jim
nobody can ever really control any market. the markets are self regulating. we can intervene, but the market always wins in the end. opec is a great example of this. in the early days, gouging and high prices hurt sales and caused opec losses. strategy shifted to a goal of stability which maximized profits. even in a monopoly, opec quickly learn they were at the mercy of the markets, not the other way around.
$1,000 gold
This market looks controlled to me. It looks more like a balloon every day being held aloft by nothing but hot air. Keep your feet on the ground.
the air is being let out of the balloon – slowly by the fed. it was overinflated slightly by stimulus, and now we need to slowly, gently bring it back down and gradually move forward again.
Nobody can ever really control the market……AGREED! But the fed sure likes to bollix the works. And they do, causing bigger problems. But you are right…. at least in the long run, they are powerless.
“a system NOT based on production for profits, but production to meet the needs of society”
=========================================================== Sounds like a centrally planned economy, like many, like China. It was our central planners (layering markets ever more burdensome red tape) that have been blowing the bubbles, refusing to let natural market forces work, until they do and the bubbles blow. All heroin users eventually O.D.
Unfortunately society has no ear for conservative money management, living within one’s means, except for boomers which are saving like crazy to aid in retirement, that’s why rates or so low. The outrageous junk bond buying is perfect example but why by junk when inflation is almost zero, cash is reasonable when risk is so high with no inflation, commodities falling unbelievably and the government pushing debt like there is no tomorrow.
But it’s a desperate world with a mentality of getting for oneself from CEO to junk bond buyers. It as if every single foolish force is trying to drive up risk without a thought for stability.
Could you give us an example of “Conservative Money Management”?
“Conservative Money Management†put your money under the mattress or bury it in the back yard in Mason jars. Japan has gone to negative interest rates and people are buying safes to keep their money in.
Balancing the US budget.
Bingo Al !!!
The industrialized, first world nations are simply over developed. Over development can lead to innovation that actually matters such as improved drugs to fight insidious diseases or it can lead to innovations such as Facebook, Twitter, and online gaming applications. Perhaps doing what we “truly need” should trump what is merely a convenience and is at best “nice to have”. Either way, bubbles are generated followed by recessions, followed by serious growth in our economy. Full blown, extended bull markets appear from time to time and provide for a sustained positive outlook, however, when the bear market makes an appearance, we act negatively for as long as it takes to replace the bear with the bull. Vicious cycle?
Vicious cycle. Al I think we are riding one of them now. It has one wheel and is heading over a cliff. Fasten your seat belt.
I would say…..NATURAL cycle. Economies expand and contract over cycles. We are now in contraction.
When we bought physical gold and silver I did not factor in DEFLATION, a bad mistake on my part. What is wrong with a country that can not produce simple INFLATION?
I read a great article that said gold is behaving quite well. You have to look at it from more than one angle. If you compare it to the dollar the price has dropped considerably, but if you compare it one on one to other currencies it has been in a bull market for two years. The value is still there. Jim
Why bother making comments and posting questions when Mike, Larry or any of the other Weiss people respond????
because the weather is bad outside and we have nothing better to do today.
Ready set go….going,going gone. The economy that is. I never went past the third grade but I know when the hog is being washed backwards….The stock market is a Ponzi scheme joined at the hip with DC…(all branches and paid administrators.A small farmer could do a better job of running the country….Gold and vacant land is the only investment left for you over-educated paupers, Do it now before the foreign owned banks and drug dealers own it all….Everything!!!
With all this doom and gloom, could this be the END TIMES ?
Perception is reality! Jim
Obama ran for office and promised HOPE AND CHANGE. Now, we have to HOPE we can CHANGE the debt he brought upon this country with his spending and big government policies.
All I have left is hope and the change in my pocket. Jim
you’re way, way too smart and talented to settle for change in your pocket, jim. don’t you dare cut yourself short.
OBAMA PROMISED HOPE AND CHANGE he gave us change……………… he doubled the national debt in 7 yrs its now on its way to $ 20 trillion dollars he has sent the unfunded liabilities threw the roof its now at over $ 101 trillion dollars and rising rapidly, that debt as of today represents a debt to each and every taxpayer young or old of $ 846,333 dollars yea I guess Obama gave us change he gutted the united states military to its lowest level in 75 yrs he gave us a stagnant economy when he promised over 6% growth for every yr he was in office, he promised that as a country he would bring us together instead he tore us apart and then he promised us the most transparent government ever and out of that all we got was lies and deceit
Hawk 5000 – Mr. Obama showed his deceit early on by promoting Geithner and Summers, then allowing his line in the sand to be crossed when he signed the 2010 extension of the Bushian richfare tax breaks. The consequence was that 18 million 2008 voters didn’t vote in 2010 and he lost control of the House. He had frittered away the strongest mandate of any incoming Democratic President since FDR and his Presidency was doomed to failure thereafter. From his gated retirement home in Hawaii, he should write a sequel to his first book and title it “The Mendacity of Deceit” !
The single most amazing fact to me about the Obama presidency is that forty plus per cent of Americans think he is doing a good job. The “it could have been so much worse”crowd is a stubborn bunch. Jim.
They are stubborn, and remain blissfully unaware what trillions in debt have purchased…
Prime working age employment is still 3 million below 2007 levels, and slightly below January 2000 levels…
http://mishtalk.com/2016/02/05/core-employment-age-25-54-still-below-january-2000-level-3-million-below-2007/
• Core employment age 25 to 54, first surpassed the level we are at today in January of 2000, 16 years ago.
• Core employment hit a peak in January 2007 at 100.716 million.
• Today, core employment is 3,133,000 below January 2007.
• Today, core employment is 796,000 below the level 16 years ago.
• Today, core population is 5,284,000 above the level 16 years ago
SUMMARY…
Three million less employed in the core age group, and five million more people in that age group! The miracle of the Government participation rate.
As bad as the Os’ domestic policy, his M.E and foreign decisions have contributed greatly to global instability and the so called “refugee” crisis.