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Why have I been sounding so cautious lately? Why have I been so adamant about taking profits, cutting losers and raising cash for the past few months? Simple.
Because when it comes to the markets, I choose to live life NOT on the edge.
Look, there’s nothing wrong with bungee jumping, sky diving or even dog sledding to the North Pole if that’s your thing. Heck, the way people drive around here, I sometimes feel like I’m taking my life into my own hands when I hop on my road bike and do my daily 10 miles around town after work.
But when it comes to my work here at Money and Markets, and especially my Safe Money Report newsletter, I have no interest whatsoever in taking excessive risks. This is your hard-earned capital I’m charged with protecting and growing. I take that responsibility incredibly seriously, and have for every one of the 14 years I’ve been at this.
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| Dog sledding to the North Pole is one thing — but investing in the stock market is something else. |
That brings me to the current market environment. Right now, I see and hear a lot of hope out there …
Hope that the Federal Reserve won’t raise rates in September, or that it can save us from every threat in the world regardless.
Hope that the low volatility regime will continue here in the U.S., despite increasing turmoil overseas.
Hope that the spreading weakness in virtually every corner of the market … behind the S&P 500 Index … won’t result in a significant pullback.
But in reality-land where I live, I continue to see signs of tensions and weakness everywhere. Just today, in fact, the Philadelphia Semiconductor Index (SOX) broke down to a new low. It’s trading at its worst level since last October, as you can see here …
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| Philadelphia Semiconductor Index |
This isn’t just business as usual anymore. Instead, this technical action proves this is no longer just some energy/commodities issue, like the Wall Street apologists claim. It’s one that’s sweeping up more and more stocks and sectors.
And I’m not even referring to the ongoing emerging market or bond market carnage. Just in the last 24 hours, Vietnam devalued its currency for the third time in a week while Turkey’s lira fell to a record low. Meanwhile, the SPDR Barclays High Yield Bond ETF (JNK) I flagged recently, hit its lowest level in almost four years.
So I’ve said it before and I’ll say it again: This is not a market to be reckless. This is not one where you want to (metaphorically speaking) sky dive without a parachute. It’s one where moving your portfolio further away from the risk edge makes all the sense in the world. I recommend you do it.
And if you want to get specific, actionable advice – including timely “buy” and “sell” alerts – now is definitely a good time to check out my Safe Money service. I’ve been more active in it lately given these major developments, and am considering even more urgent moves I’d hate for you to miss out on.
Now let me hear how you’re approaching this market. Are we staring at a potentially large spill? Are you selling in anticipation of it? Or buying because you think we’ve already hit the lows? Are you worried about what’s happening overseas, or the deterioration in new sectors like semis? Let me know at the Money and Markets website.
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Which company is offering a better read on the economy: Home Depot (HD) or Wal-Mart Stores (WMT). You definitely had some thoughts on that question, many of which you shared at the website.
Reader Doug D. had this to say about how the state of the economy is impacting retail sales: “The economic divide in this country is taking its toll without question and the stock market should take note accordingly. I refer to the concept that I call frozen capital.
“When a rich person makes an extra dollar, it typically becomes part of a bigger pile of frozen dollars which does little to improve the economy. Wage growth for the common man is abysmal, especially when you take into account how the rising cost of health insurance saps whatever wage growth there is. Economic growth has become an illusion and the hope of the common man is getting crushed. When you crush the hope of the common man, everyone loses. It is a LOSE/LOSE proposition over time.”
Reader Frank added: “I agree there are two different customers/buyers in your example of Wal-Mart and Home Depot . I think it would be enlightening to see how these different customers pay at the cash register.
“I have no proof of this theory, but I think that the Wal-Mart customer pays with cash or a form of cash and the Home Depot customer pays with debt. If so, it will be interesting to see which customer runs out of buying power first. Lastly, did you notice in the recent report that permit applications for future housing are significantly lower than anticipated? Hmm.”
Reader Pam H. said online shopping is a key factor that should be taken into account when it comes to analyzing retail sales. Her take:
“One major factor that I didn’t see discussed was the relatively new merchandising giant, Amazon.com (AMZN). People, including myself, seem to have discovered how convenient shopping online can be and how efficient this is.
“You don’t have to wait long to receive your order, and to avoid the crowds at Wal-Mart in the checkout and blocking the aisles in the shopping areas is terrific. Home Depot really doesn’t really have that much of this sort of competition.”
Finally, Reader George E. offered this pessimistic take: “As a sophomore student taking my first Economics 101 course, we learned that the cause of the Great Depression was NOT the 1929 stock market crash, but the fact that too much money became concentrated into too few hands.
“With income and wealth inequality as bad or worse now than it was in 1928, and the fact that 90% of the anemic economic growth since the 2008 Meltdown has gone to the top 1%, only the facts that the dollar is the world’s reserve currency (for the time being) and the Fed’s injections of monetary ‘EMT saline solution’ into the collective economic ‘body’ has kept it from going into fatal shock.”
Thanks for weighing in. It’s obvious that the economy lacks the underlying, powerful, widespread income growth that we’ve seen in other recoveries in the 1980s and 1990s. That’s why overall GDP growth remains anemic, and why we seem to be just sputtering along – not collapsing, but not accelerating either. Unless and until we can break out of this malaise, it’s going to be tough to place widespread, aggressive bets in sectors like retail.
If I didn’t get to your comments, don’t be discouraged. I will try to do so in a future column. And if you didn’t share any, don’t keep those comments bottled up. Share at the website today.
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Looks like the Chinese Plunge Protection Team got to work late in the day over there. After dropping another 5%, the benchmark Shanghai Composite Index miraculously rallied to close up by a little more than 1%. One catalyst appeared to be securities filings showing that state-backed entities were becoming large shareholders in several leading firms.
Greece’s latest bailout secured approval from the German parliament today. The vote for the $95 billion bailout was 454-113, with 18 legislators abstaining. The move virtually guarantees Greece will get some borrowed money in time to make a 3.2 billion euro payment on previously borrowed money by Thursday. Because that makes all the sense in the world, right?
Home Depot turned in strong earnings yesterday, but competitor Lowe’s (LOW) couldn’t manage to do the same. Profit per share came in at $1.20 in the fiscal second quarter, missing analyst estimates by 4 cents. Same-store sales growth was only 4.3%, the weakest in five quarters.
The little blue pill now has competition from the little pink pill. Privately held Sprout Pharmaceuticals got Food and Drug Administration (FDA) approval for the drug Flibanserin (brand name Addyi) to treat hypoactive sexual desire disorder, or low levels of libido, in female patients. The FDA voted in favor despite concerns about its effectiveness, two past rejections, and side effects like low blood pressure and drowsiness.
Do you have any opinions on the latest Greek bailout, or China’s ongoing, ham-handed market interventions? The apparent inability for Lowe’s to go toe-to-toe with Home Depot, or the latest drug approval from the FDA? Hit up the website and share your thoughts when you can.
Until next time,
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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George E. from Econ 101…… The concentration of too much money in too few hands has occurred twice in the past 100 years. First in the run up top 1929 and secondly in the run up to November 2007…. Interestingly, BOTH where periods of Republican Domination and high speculation because of the absence of laws prohibiting that kind of trading… There was a really good law enacted in 1933 that forbid that kind of trading… It was called the Glass-Steagll Act. It was brought by a Democrat Majority in 1933 and it worked really well to stop a re-occurrence of 1929… Unfortunately, it was removed by a Republican Majority in 1999….
Its not the Dems or Repukes that are in charge, but their owners.. the Elitist Corporations in America, and their owners who own shares in the Global Reserve Banks. These people are never in the news, they are the families who make up the Shadow World Government, names like the Bilderbergs and Rothchilds. They own and control everything, its all planned to make them rich and everyone else their slaves… and we let them!
Look at WHO the donors are to each party and the size of the donations….. Tons of Black Pools are giving to the GOP… But more importantly, who benefits under the policies of the Republicans (wealthy and Ultra Wealthy) and who benefits under the policies of the Democrats (Average citizens)… Plenty of charts out there show how Income Inequity goes up under the GOP and down under the Democrats, just as occurred leading into 1929 and November 2007…
Please demonstrate how the average guy has prospered under Obama. He is unemployed, his healthcare costs have soared, and his energy is more expensive. If he is employed his take home pay has actually fallen.If he lives in a big city the violent crime rate in his neighborhood has doubled. God help him if he lives in coal country. As a practical matter we have a one party system with state controlled media. They have dinner together, play golf together, and have a big laugh about what suckers we all are for playing the R and D game. Jim
Once again Mike S. : Stupidity doesn’t excuse stupidity.
I believe it is “Stupid is as stupid does”… Forrest Gump…….. Which you might like to know was fiction, much like what Limphog spews
The more we debate about which side of politics is responsible for what, the more we are going to end up with another politician in 2016. Please, we need someone truly inspirational who can make us united again. A common touch yes, but a real world toughness, with a pair who can help rebalance the hidden wealth demands in markets.
I’m with Jean! Jim
Mike, these guys are all on the same team! Jim
Yes, we get you. Vote for the Dems. 1999 was a period when WJ Clinton could Easily Vetoed the Repeal of G-S.
Quit blaming the Republicans for Everything…. Trust me, the Dems are just as bad, only they are more discreet about Their Shady Dealings.
Obama, or Liz Warren could have brought G-S back…
Don’t we all “love” the way Big Pharma invents “disorders” and then comes up with a pill to treat them?!! What a huge SCAM!!
Treat is the key… Yes, Amazing how they are all capable of Treating Disease, but Not Cure…
Cure is to cut off their Money Supply…
When I ask my doctors why they only treat symptoms instead of providing cures they look at me like I’m crazy. I have a hard time believing our healthcare is determined by the Pharmaceutical companies bottom line but that appears to be the case. The Merck Manual rules. Jim
Mike most of you coments and advice look a lot like Market Timing to me. As you should already know, Market Timing NEVER WORKS!
but-but–but—-what, what about energy stocks? the oil price bottom was in at 62.87 and mike was the only one who called it. right martin?
Oil bottom? Hasn’t happened yet. Same with gold bottom, or any other commodity. I remember, back in the 1930s, a new gas station opening in our neighborhood, and charging 10 cents a gallon for the first week. Tax is more now, so it won’t go near so low, but prices may fall to near the 1930s levels before we bottom. Especially if the Fed is stupid enough to start raising rates. That is something central banks do to combat inflation, not the DEflation we are in now. Remember when breakfast of two eggs, bacon or sausage, hash browns, toast and coffee, with refills and all the trimmings commonly cost a quarter? “May come close to that again, before the communists give in.
We seem to be stuck in a cycle where heavily indebted oil companies keep producing more oil to try and maintain cash flow to service debt. At the moment it looks like we may have a long way to the bottom. I’m not sure it’s an investable trend, however. The oil market is thoroughly manipulated and full of ” surprises”. Jim
Oil could go to $20 a barrel, but the refiners will only drop gas so low. From there, States are marking up the Tax per gallon of Gas, so as the price will stay in the $2 – $3 range.
Maybe our Roads and Bridges will Finally get some Well Needed Repairs.
John S: I would not count on any increase in gas tax to not be raided just like Social Security, instead of going for much needed bridge replacement works. Desperation by politicians could even cause user fees for water, sewers, solid waste and possibly electricity to get raided. Beats the heck out of financial collapse under their watch.
Jim, I might be wrong but my cynicism leads me to believe that major oil producers (including Uncle Sam) have colluded to make the price lower in an attempt to hurt old Vladimir (Putin) and his economy. Just plain old politics at work.
Chuck Burton, if you remember what happened in the 1930s you would have to be over 80 years old as we can not recall events through age four. I will be 77 soon, so I do remember gas being 23 to 25 cents a gallon even in the early 1960s as I had my own car by 1956. The dollar was still tied to gold until 1971 when inflation set in thereafter. The Feds during the last several years should have let rates to rise well before now but didn’t, resulting in an unprecidented situation; where now applying comparisons of the past is like comparing apples to oranges. Unfortunately, life like you and I knew it when we were young is no longer the same today. God bless you young feller.
I see a lot of remodeling being done, both by home owners and those who buy, renovate and rent or resell. With loan rates for those activities low but predicted to rise, I suspect many are doing those project now before they rise.
Forget about Jan, FEB, Mar, APR, MAY, JUN.July , Aug, Sept. But October which will be the most valuable month (MVM) of the this “Whirlwind Year” 2015 . Get Ready Get Ready Fed to increase rates starting October 28th 2015. 1/4 point. Not good news for Japan and Indonesia the earth will move under your feet before the end of the year.(prepare). History does not always tells the truth. The future of energy Atomic Energy coming to you.. Mike your “Bloody Wednesday” is right around the corner. Happens on “Triple EVE of what people call Halloween” “Bloody Halloween” What a time for that to happen!! Let all prosper and do good deeds!!
Duh………..you are taking your life into your own hands when you ride your bike around town for 10 miles.
Germany giving Greece more money insures that the other countries will milk the EURO fund dry and assure that only a few of the well-managed countries survive in northern Europe.
Would someone please explain to the individuals who complain about income inequality that it is not income that makes them the 1 percent. Investment assets are not income until they are realized! The same goes for anyone who has investments, it’s asset inequality not income inequality. The market sets wages not investment results. To end, those who have been fortunate enough to increase there wealth during Qe times may soon be brought back down to Earth!
Dennis Miller says Hillary Clinton ” waddles on water”.
Mike, as we have said before, we are seeing WORLDWIDE DEFLATION take the upper hand DESPITE MORE THAN $15TRILLION of fiat based, paper based money, debt and derivative printing…Canaries are all over the coal mine. This could be the worst set up for a deflationary crash in decades…Its THAT bad…
Hmm, a pink pill coming to market, really? Is there actually a demand for such a thing? Oh yes, school districts will want to get ahold of this one for their education program.
I predict Obama not be in the White House before Trump is elected.
Hopefully in jail before he can hijack AF One to Kenya.
The stock market will soar from foreign investors and the U.S. will become insolvent before the election.
It will be worse that the 1930’s and the asset inequality gap will be astronomical.
Sure gold might soar to $5K and Silver to $125, but who will be able to buy it…?
Unemployment will reach a true 45% and the government will default on SS and Medicare. But then every state will default on their retirement systems.
Environmentalist will be singing it the streets when the only electricity is from solar and wind.
That’s purty funny Dr. Doom but only if it’s not true…..unfortunately,,,,
So, Dr. Donnie from USC, what is your “Dr” in? I’ll take that bet… Obama will still be here Trump won’t be elected and living conditions will be better and we will not be bankrupt….We are just recovering from the mistake of letting the Conservative GOP back into power. It really is that simple……
We like Trump because he has the ability to annoy Liberals as much as they annoy us. We are already bankrupt! Dr. Smith is always right.
What is the old saying, “Truth? You can’t take the Truth”….
There are three types of Republicans:
1: The Billionaires
2: The politicians who do their bidding
3: The fools who vote for them
Tell me it wasn’t fools who voted for Obama.
I take it that you are not invested nor educated and have been living in a cave since 2009 where you can listen to nothing but the :Truths” broadcast by Limphog….