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Every year around this time, I have the pleasure of traveling to Europe for an annual investment conference. It’s hosted by our business partners who publish the German-language version of Safe Money Report.
The good news is that I’ve been able to mix business and sightseeing. Past trips have included stops in Munich, Prague, Bonn and Berlin, and this year, Hamburg and Amsterdam are on my agenda.
The better news is that I get to interact with our foreign subscribers, and also with everyday people around town. I share my thoughts on U.S. markets and the U.S. economy. They tell me what’s happening in their neck of the woods. And in the end, I believe we become better investors for it.
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| During my European investment conference, I’m able to mix business with sightseeing, interacting with everyday people along the way. |
I don’t want to steal too much thunder from my presentation just yet, since I’m not delivering it until next week. But I can say that I’ll be conveying one of the most bearish messages since I first traveled to Germany in 2010.
Why? Look all around you. Even as the broad markets rallied the first few weeks of October, several sectors lagged. I’m talking about everything from financials to biotechnology to small caps.
Other sectors that did experience sharp bounces, such as energy and materials, only did so because they were in dramatically oversold territory. They still remain far, far below their highs, too. Energy stocks are down more than 12% year-to-date, despite the rally, while materials are off by around 8%.
Then there’s the ongoing turmoil in the junk bond market, and the problems that’s creating for the buyout and buyback bubbles.
As for Initial Public Offerings (IPOs), they’ve been flopping left and right. First Data (FDC) priced below its projected range, then kept falling in the days afterward. Plus, the Albertsons mega-deal was postponed and still hasn’t been rescheduled. Only the Ferrari (RACE) transaction came out of the gate strong.
How weak is the IPO market overall? Consider this: Only a handful of IPOs priced below their expected range earlier this year. But 50% of September’s offerings missed the mark. That rose to 75% in October. Moreover, IPO volume in the year through last week was running at only $30 billion. That’s less than half the $82 billion raised in the same time period of 2014.
Then there’s the disappointing earnings picture. S&P 500 profits are now forecast to decline at a single-digit percentage rate in the third quarter, then fall again in the fourth quarter. Not too long ago, analysts were expecting them to rise. But they’ve been forced to revise their projections downward at the fastest, most consistent rate since the tail end of the Great Recession.
You catch my drift? There are several reasons to worry about the outlook here, and plenty of evidence that we’re back in bear market territory. So I’d be doing our foreign subscribers — and you — a disservice if I didn’t tell it like it is.
My advice? Outside of a handful of select, highly rated, low-volatility, non-economically sensitive stocks, you’re better off getting out of many stocks. Take advantage of short-term market rallies to raise cash or add hedges, depending on how aggressive you want to be. And by all means, stay tuned to Money and Markets for my latest insights – based on what I see happening here and what I learn when I hit the road next week.
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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As long as govt can convince investors that there is no inflation and the risk is deflation,it allows the Fed to continue with its inflationary policies.That means stocks,real estate and commodities should increase in Dollar prices.I would start worrying about lower stock and housing prices,when the Fed is fighting inflation.That isn’t today.
as long as you’re going to be in amsterdam, test compare it with colorado pot … for investment purposes only. :-)
“Caution!” “Warning!!” …from all those who claim to know anything about predicting the future of the market…. Meanwhile, here we sit…….STILL waiting for the great pumpkin, Charlie Brown! (…or for the “black swan” in this case.)
For all those forecasters down on October, may I point out that we only have a week of Oct. left…. It could change, and change quick….but it better hurry up and **** or get off the pot if it’s gonna do it THIS October!
look for a bull trap any day or week now, which is a pullback to the neckline of the inverted head & shoulders formation we’re in. bear traps are a great buying point.
Clearly the equity markets are no longer a barometer of the economic health of the economy. They march to the tune of the equity departments of central bankers made possible by the Fed’s easy money policies. So up the markets go in spite of poor economic indicators because thats the way the big money boys want it. Trillions of freshly printed dollars give them control of the markets. They continue to make money with robotic buying programs which force the shorts to cover and market players to follow their lead or get left behind. The financial system that has been created is completely divorced from main street.
The big money fat cats want this system to continue while the man in the street is being hurt. Eventually this corrupted system will end and when it does look out below!
Steve
That’s when the watermelon hits the pavement and the unprepared will be left with the mess. This folly is trying to suck up every sucker it can get its hands on.
this is a time for me to be long the s&p. a pullback now will be a welcome entry point i’ll take advantage of.