Forget the Dow 18,000 chitchat on TV. If you really want to get the pulse of this stock market, follow beverages, bonds and cheap breakfast!
Market Roundup
What the heck am I talking about? Look at the stocks that are leading this market and the news that’s driving them. I’m seeing solid earnings news and multiple new highs for companies that sell soda, beer and breakfast sandwiches.
What about Treasury bonds, as tracked by something like the iShares 20+ Year Treasury Bond ETF (TLT)? If you looked at the broad stock averages, you’d think the economy was going great and they should plunge in price. But they’re hanging in there just fine, with yields only moving a handful of basis points off their lows from February despite the rally in stocks.
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| Beverages, bonds and cheap breakfast … Economic indicators? |
Meanwhile, banks are lagging badly and reporting truly dismal earnings news. Credit losses are surging, profit margins are slumping, and revenue and earnings growth are nowhere to be found.
Home builders are also staring to cut back on construction amid softening in sales. Housing starts plunged 8.8% in March, more than four times the drop that economists expected. Permit issuance also tanked to a seasonally adjusted annual rate of 1.09 million. That was the lowest in a year, with weakness in both single-family and multifamily activity.
Everything I’m seeing “fits” with the late-cycle thesis I’ve laid out for you here in Money and Markets over the past few months. So does the wild divergence between various stocks and asset classes that I highlighted today.
[Read More – The Consequences of Reckless Lending – Mike Larson]
Unfortunately, I can’t go into as much detail here as I wish I could. For more, I urge you to check out my blockbuster new documentary video “The Unseen Hand.” It’s online now for a limited time, and it explains why markets are behaving the way they are … and how you can take advantage of them.
As always, I welcome any feedback you might have in the comment section below. So feel free to sound off on the divergences between stocks and sectors, the divergence between Treasury bonds and stocks, or anything else you have on your mind.
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The Doha meeting has come and gone … but oil markets have generally shrugged the failure off. Why is that happening, what’s next, and what kind of policy actions can we expect as the next several weeks unfold? Those were the topics you covered in recent website comments.
Reader Donald L. said: “Unsuccessful attempts to fix the market price of oil are reflective of the fact that it’s simply not possible to fix the price of a commodity that is fungible and has many suppliers. The human desire to cheat is just too strong.”
Reader Bonnie E. added: “As I understand it, the meeting in Doha was supposed to be about the psychological impact on the price of oil. In reality, the whole notion of putting a cap on production at near-full production levels is absurd. But then they couldn’t even pull that off.”
Reader Rob R. put the meeting in a broader context, mentioning the problems caused by countries relying too much on specific resource prices. His take: “Everywhere I look, I see populist governments that have been supported by single or narrow commodity markets – Venezuela, Brazil, Russia, etc.
“Diverse economies are difficult to build, take time, and pay strong dividends in terms of resilience and stable leadership practices. We’ll see this played out over and over again as in past. This will continue to create risk and opportunity.”
As for the economy and potential policy responses, Reader Craig R. said: “Our government has been feeding the public inaccurate and misleading numbers on inflation, unemployment and GDP growth for many years. Why is it that the pundits are only concerned with the legitimacy (or lack thereof) of China’s numbers as opposed to our own?”
And Reader Mike said: “I actually hate to type this, but it sure feels like what is next. Next up will be massive money printing action by the Fed. The reality is, we have nearly $20 trillion in federal debt and no clear or rational way of paying it off. So we’re either going to see a massive, specific devaluation of the U.S. dollar … more money printing as previously noted … a move to a world or geographic monetary system … or a serious outbreak of war.
“I’m going to go with massive money printing for now. Obama wants to kick these problems down the road to the next POTUS. So, as bad as my choice for what happens next is, we’d better pray that this is what happens because all of the other possibilities are far worse.”
I appreciate the feedback. I believe the primary driver of market action right now in oil (as well as gold and many stocks) is the U.S. dollar. In turn, it’s being driven by shifting perceptions about what the ECB, Fed, and BOJ will do in the next few days with policy. So I’m keeping an eye on that and will update you with the investment implications of whatever comes next right here in Money and Markets.
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
As for the longer term, it’s all about the credit and economic cycle. Those powerful forces will ultimately drive asset prices regardless of what central bankers say or do. That’s why I made my documentary, “The Unseen Hand,” and why I recommend you take some time to watch it while it’s still available online.
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Negative interest rate policies that central banks have enacted are hurting … central banks? That’s what the Financial Times just reported. Reserve managers are being forced to chase yield in riskier bonds and stocks in order to bolster their own returns. That’s because they have to cover their operating expenses and provide some payola to their political masters at national finance ministries. What a strange world this is, no?
Sick of waiting forever while your chip card gets processed at the cash register? Don’t lose hope. Visa (V) is working with retailers to update the hardware and software that process chip-based purchases in order to speed up point-of-sale transactions. Many stores have been griping the process takes too long, resulting in customer frustration and lost sales.
The Taliban detonated a deadly truck bomb in Kabul, killing at least 28 and wounding more than 300. The Afghanistan attack appeared to target the Directorate of Security for Dignitaries, a security agency that protect top-level government officials.
What do you think of the fact that central bank NIRP policy is now hurting returns for central banks themselves? How about the use of chip cards? Do you get annoyed by processing delays? Share your thoughts below.
Until next time,
Mike Larson
P.S. If you haven’t seen “THE UNSEEN HAND” … if you haven’t learned the secret of The Golden Ratio … time is running out for you. We cannot leave it online past this week and it may go offline at any time without notice.
Don’t miss out — Click this link to view the 30-minute video TODAY!
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.
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Mike,
A late market cycle can go a fairly long time before a major/massive correction and despite the divergences. How much time do you think we have under your scenario?. Some of us are at least partially with Larry Edelson and Martin Armstrong. It is possible we could go another year with a major crash coming in 2017 and after a 25% melt up from where we are now. The odds still favor that our current Secular Bull Market which began in March 2009 will make its 8th birthday year before the next Bear Market correction occurs.
Ken
It will go on as long as we are the only game in town. Jim
That’s right. It looks like US stocks are a terrible investment right here… UNTIL you look at all the other options in the world. Call it, Tallest Midget Syndrome?
It seems that the month of the year theory (ie. buy in Oct/Nov and hold; then “sell in May and go away,” etc…) is not holding true now….. Look at what happened this past Oct., 2015; the markets went straight up after the plunge in late Aug.!! “As the first 5 trading days of Jan. goes, so goes the month, and as Jan. goes, so goes the year…” It remains to be seen if that one will come true….
In addition, I’ve noticed lately that gold is beginning to track along with the market (djia) That’s the opposite of what has been happening in the recent past.
I think ALL of it is getting ready to…………actually do what NOBODY expects!!! ……just for the fun of causing as much pain as possible to those who are in it!!
This past year, if you waited through Oct. and Nov., looking for a buying opportunity, you realized (too late) that you had already missed the boat…..that train left the station PRIOR to Oct.!!!
Then, Jan., 2016 turned out to be a slaughter house!!!
So what I’m saying is that “the old sayings on the street” no longer seem to be working.
“Sell in May and go away?!” That may turn out to be way too early….or too late!! …we still have enough time in April for the market to make a big move…..??……!!
It is also worth considering in the late part of this cycle, whether the big money has reduced it’s exposure, banks have contained their losses and which group of investors are left holding the watermelon when it hits the pavement. I’m now watching week by week and soon day by day. Not because this is how I want to invest, but because I no longer trust this system with my risk capital.
Deja irrational exuberance but do not short a final wave up. Wait for the reversal. If long,sell on new highs and let the last 20% ride until the shockwave of margin selling.
Trump will prove that elections are a fraud.
This is bullish short term. It just means that regime change will come the hard way and that debt restructuring will be yuuuge pain.
China china love china china china all day
Donald Trump Says “China”
http://youtu.be/RDrfE9I8_hs
The Founding Fathers were not big fans of Democracy. They looked upon it as a form of mob rule. The history of pure Democracy was self destruction, the tyranny of the fifty one per cent. As a compromise the people would elect the House of Representatives by direct popular vote. The Senators were to be chosen by the State Legislatures. The president was to be chosen by the Electoral College ( think Elites). We are just getting a real close look at the Elites choosing the President part. Jim
The Founding Fathers were not obsessed with a form of government but the Liberty of the individual. If this could only be accomplished with a weak and ineffective government, so be it. Jim
Jim
The founding fathers had courage and character and reliable honesty. There was truth in their words and hope for a nation was born. Step forward to a world of incompetence, to big to fail and the middle class gets stuck with a bill they can never repay. An election system sponsored by the elite where white collar crime does not go to jail. There is no comparison. The people know this and want back what they once had. A voice.
Howard, In the 1930’s the decision was made to empower a strong central government that our forefathers warned us about. What we have now was the result of that decision and I’m afraid there is no turning back. Individual Liberty gave us a vibrant middle class that is now having the life sucked out of it supporting the very rich and the poor. I wish it were otherwise. Jim
Hi Jim
It can change peacefully if enough people of good will, can see what we can see
20 trill,it must be a case for gold and wait for QE4,5,6,and how the hell is it going to be repaid,devalue the mighty $ ? Any bright sparks in the white house
McD’s, Budweiser, Coke, and Pepsi commercials have folks buying (at least the products). The automobile advertisements are relentless here in Austin, Texas. G.M. and Ford have been fearing well. Silver and gold miners have been on fire. I own 3 such companies (all incorporated in Canada). My return YTD is phenomenal. I think I may sell to recoup my initial investment and continue to hold the stocks “profit amount” and watch closely for any downside.
Profit taking on your Golds might be a good move, Al (see my remarks below). But be ready to buy again in a month or so.
Hi Mike
Whatever anyone perceives as a solution to our economic woes, a 90% tax on businesses is only going to drive away more jobs and investment capital. And for this increase in these taxes we are not offered a balanced budget, instead we are offered more free stuff. Wall street wants fast money turnover, big bonuses and more M and A activity which doesn’t help the middle class who feel left out and fed up with the boom and bust process. This is part of what is making outsiders popular with crowds, but then will we have a contested convention where their voices are blocked out yet again.
Hello Mike; I saw your video, and think it is helpful if a person can have a source for those data computations; I used to follow the sectors from a simple data source (for instance) until suspended publication. I don’t see Weise providing such information as you say is necessary for calculation — What sources to you suggest?
Chip cards are a great idea they make the EFTPOS a lot quicker and allow people to save time and spend more time on the things they enjoy.
So central banks drove interest rates down, now they can’t find decent quality investments paying enough interest to cover their own costs. What goes around comes around. They are beginning to feel the pain they have cost everyone else. It creates a psychology of money scarcity, rather than plenty. No wonder people are just trying to hold on to as much as possible of what they have, and cutting spending to the bone on nearly everything else they can. That, of course, means less business activity and less tax revenue for governments. Not that politicians seem to have noticed. They go on with the same old, same old policies – plus.
Regarding chip cards. Isn’t a few seconds worth have your card number accessed. What does it really matter if it takes a few seconds longer. OH!! I know we live in an instant society….so everything needs to be right now!!
This rally from mid Feb should be about kaput. Dow is at the top of the channel. Maybe a few more points but this rally is way over bought.
You never know if a trend will end with a bang or a whimper at dow 18000 or dow head and shoulders false breakout 20000.
If i were a rich man a very very rich man.
I would contrive to fool the greedy into regretting not betting on more upside and then going the deja crash of 29 way zig zagging down etc. So wait for the shockwave reversal say15250 level to short or just buy physical gold and relax.
That may be the pulse of the stock market, but it is not necessarily the pulse of GAAP earnings; so, is this market really sustainable or just a casino?
Sorry, let me qualify my above comment to read “is the stock market in snacks, slurps and lard asses really sustainable?”
As long as the gummint issues benefits it’s as sound as a dollar. That’s the gummint of china subsidizing exports. You can’t sell cheap junk to starving rioters. China is already paying to subsidize u.s. consumers.
Trump would make Mexico pay for the wall via paying for a portion of benefits to mexican americans on welfare. That’s fair.
Trump is no hitler not even a juan peron.
He just wants america inc. to be well run.
He is not anti russia china etc. He wants a win win functional world trade order. Period.
He would handle the reset with finesse.
Yes Giles, I would envisage if elected Trump would appoint some brilliant people to reshape our future. The GOP needs to decide if it wants to grow with the people or shrink with the consequences.
Aside from politically motivated generalizations, Trump has not indicated how his administration would differ from that of any other politician. So far, he has appealed mostly to the radical fringe. He needs to come up with some fairly definite ideas, and let us know about them, if he wants to have a real chance. Maybe talk with some of the people he would consider for major Cabinet positions, and even name them, so that voters could get some idea of where he wants to go that would be different to the political mainstream of either party.
All fiat currency has an inevitable outcome in that they return to their intrinsic value; 0.
You cannot exchange old currency for new currency except for a short time. Later its just t.p.
Patience…………we live in an exciting time. Surviving is the objective. Good will triumph over evil. There will be a reset, after much bloodshed, and the elites will again have their way. Hopefully, the informed (like us) will be financially secure enough to leave our progeny a future that is filled with hope, sans political correctness, where the individual determines one’s future.
I do note that the chip cards take longer than their predecessors. It even seems sometimes that transactions were quicker when retailers were using the old NCR machines. I also notice that some stores still use the old NCRs. These establishments are the ones that only accept cash. That is fine by me since most of the time the restaurants that do require cash often represent better value for the diner. I have to say that when you use cash at a bar you often getting quicker service. Bartenders and barmaids like the green much more than the card for obvious reasons.
More Fed Fun.
With petrodollar up to 100 Fed had ‘buckshot’ for ammo.
Stocks bonds bullion base metals oil up.
Dollar down to 94 looking lower.
When dow held 16000 told people to cover short index etfs stay long bullion etfs.
Suddenly oil is up silver copper too.
Sexy stocks frothing ooh ooh.
Is the depression over or is the dollar
racing to the bottom again? No brainer.
Hold gold and silver physically locally.
Be prepared. Enjoy your life friends.
Since 2000, stocks are up 40 per cent, gold is up 320 per cent. Jim
Oh! I forgot it is a relic from the past and doesn’t pay interest. Forget what I said above. Jim
a good example of how secular stock bears beget secular gold bulls.
well we humans need , FOOD , water or something close enough to it , roof is extra but nice to have and yes we will have the biggest Market Crash in AMERICA , China got theirs a few weeks ago , and yep yep we are going down ….
pray for America to return to GOD
 
 
 
 
 
 
 
 
 
 
 
return? when did it leave god, ed?
 
 
 
 
 
 
 
 
 
 
 
Observations about Gold:
When gold broke through the upper line of the down channel (dating from the peak of Aug., 2013), I expected it to peak and return to test that line, which it has, but it has not gone more than around $40 + or – or so from that line in the couple of months since first penetration. In fact, it seems to have formed something of a head-and-shoulders pattern, indicating the possibility of a decline of some kind (which could carry into late May, as Larry said) perhaps falling into the mid to low 1100s at least, which would be around the middle of the old channel. Then it could possibly burst higher into the mid 1300s before a correction. Eventually, it could test the downtrend from the 2011 peak, currently around 1480, and declining about $20 every 2 1/2 months. This is based mostly on observation of the short term patterns, so take it for what it is worth. It has held up fairly well for these last few months.