The Japanese yen. Interest rates. Oil. Stocks. In technical terms, they went “nuts” today.
Market Roundup
Taking them one by one …
- The Japanese yen surged to 111 against the dollar overnight, then dropped from those highs in an early morning move that looked suspiciously like Bank of Japan intervention …
- The yield on the 30-year Treasury bond dropped as low as 2.38%, a one-year low. And the yield on the 5-year Treasury note fell as low as 1.01%, the lowest since May 2013 …
- Stocks plunged 3.9% in Hong Kong, 2.9% in Germany, and 254 points (1.6%) here on the Dow Jones Industrial Average, just to sample a few markets …
- The VIX index of volatility jumped as high as 30.90, before ending the day up 7.8%. That puts the “fear gauge” ever closer to a large-scale breakout, a panic/washout signal that has been missing so far …
- Finally, crude oil dropped to a 12-year low of $26.05 a barrel. Then we got our fifth or sixth spurious “OPEC ready to coordinate on an output cut” story of the past few months very late in the day. That caused crude (and stocks) to bounce …
Things got even nuttier on the policy front, too. Despite the fact several recent monetary policy moves haven’t worked at all, the Riksbank in Sweden decided to go further down the negative-interest-rate rabbit hole. The country’s central bank cut its benchmark interest rate by a greater-than-expected 15 basis points to negative-0.5%.
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| Stocks globally, including those in Hong Kong, tanked today as the financial turmoil intensified. |
And sure enough, rather than soothe markets, it helped rattle them further. Sweden’s krona currency quickly reversed all the depreciation that policymakers sought by cutting rates, and ended up trading higher. The country’s benchmark OMX Stockholm 30 Index also dropped almost 4%.
If this turmoil isn’t even more proof that the time for complacency has long passed … and the time for action is here … I don’t know what is. All of the action I’m seeing in the credit, currency, commodity, interest-rate, and stock markets confirms my thesis that the credit cycle began to turn in mid-2015, and that we’re in the bearish phase now.
So what can you do?
First, keep more cash in your portfolio than you have in a long time. I dramatically raised the cash holdings in my Safe Money Report model portfolio last summer, so you should be protected. You can get my urgent updates by clicking here.
If you haven’t acted yet, for whatever reason, sell down some assets into any market bounce to boost your cash holdings. Also consider allocating a greater percentage of your 401k money to shorter-term government bond funds or stable value funds, especially if you are close to retirement.
| “If you haven’t acted yet sell down some assets into any market bounce.” |
Second, hedge against downside risk. There are a multitude of inverse exchange-traded funds you can buy, including those with or without leverage, to protect against losses in your portfolio. You can read up on some of them at the ProShares website.
My favorite ones are also available to any Safe Money Report subscriber, along with specific “buy” and “sell” guidance. Those recommendations have naturally risen sharply in value as stocks have fallen.
Third, if you’re more aggressive, turn this volatile and dangerous market on its head. Buy select investments that help you turn large downside moves in vulnerable stocks into handsome profit opportunities. That’s what I’ve been doing with great success in my Interest Rate Speculator service, which you can find out more about here.
Fourth, understand that bear markets are much different from bull markets. Large, cascading selloffs … followed by government or central bank interventions that spur very sharp bounces … are common. So you have to roll with the punches by taking profits on downside investments into waterfall declines, then reloading once those oversold bounces run out of momentum.
Fifth, don’t be paralyzed into inaction. I trust that you took the many protective steps I recommended last summer and fall in my services and here in Money and Markets. So hopefully, you’re riding out this crazy volatility in good shape.
But if you haven’t acted yet, I urge you to consider the prudent, well-thought-out, conservative and deliberate strategies I’ve been recommending. I believe that with the use of those, we can not only survive — but also thrive — in this turbulent market together.
With that said, I’d love to hear from you now. What steps have you been taking … or are you taking now … in this incredibly volatile market. With bonds, stocks, currencies, and commodities going “nuts,” are you adjusting your strategies? Are there particular investments you really like — or really hate — here? Let me and your fellow investors know.
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Are you seasick yet? I know I am, what with this crazy volatility and wild swings becoming the rule not the exception. So what’s going on? And where are we headed next?
Reader Donald L. laid the blame at the feet of central bankers, saying: “This is the most inept, politically compliant Fed chairman since Arthur Burns. She refuses to tell the emperor (Obama) that he has no clothes and that current fiscal policy is ruining the country.
“On top of it all, she acts as an enabler who has destroyed the time value of money. Voters know something is wrong; that’s why they are voting for Trump and Sanders even though they haven’t a clue what either would do as president.”
Reader Craig B. also picked up on the Fed’s faults, saying: “Janet Yellen is a labor-market economist by training. Unemployment and labor issues are lagging indicators. So Janet Yellen will be the last to come around. She is not going to do anything for a very long time. Investors are now on their own. There is no more ‘Bernanke Put.'”
Reader Bill S. also took the Fed to task, offering this take: “This is just another great example of why people are so upset with the ‘establishment’ and attracted to political outsiders who want things to change.
“These people in the ivory tower really have absolutely no clue about what is going on, and are just attempting to lead us down the garden path to satisfy their own needs. I almost get sick to my stomach listening to her cocky, omnipotent voice masquerading a very limited knowledge of Econ 101.”
Lastly, Reader Howard said: “One of the problems many of us have is that Washington seems to be relying on the Fed for guidance and direction. What some are hoping for is a POTUS who will actually know what to do and get on with it. I don’t have any faith in the Fed.
“Until the world of progressives learn to budget, then we face nothing but debt, default, and collapse. Too many world governments have promised far too much free stuff without any ‘Plan B’ on how to pay for it. Populations have become dependent on something for nothing governments.”
While I have been negative on the markets, and remain so now, at least one commentator suggested the time to buy may be at hand soon. Reader Jan G. said:
“All of the readers have super-negative predictions. The last time I charted this type of sentiment was in March 2009. As a contrarian, I now believe this is stock-picking time – selectively, of course. Europe is where we were in mid-2008. The banking and healthcare sectors to me look very attractive, especially here in the U.S. I am personally selling technology, utilities and Treasuries.”
I appreciate the insights, and I wholeheartedly agree that central banks have made a mess of the economy and the markets. Their constant, overbearing tinkering and aggressive interventions over the past several years inflated massive bubbles in several asset classes.
Now, the wheels are clearly coming off the wagon. That will hopefully return assets to the fundamentally defensible valuation levels they should have traded at all along – before too much funny money puffed them up. If you have any other thoughts to add, please do so in the comment section below.
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Yet another of the megabanks in Europe laid an egg with earnings. The second-largest bank in France, Societe Generale, reported fourth-quarter earnings of only 656 million euros – missing forecasts of 944 million euros. Investment-banking profit tanked by more than a third, helping send its shares down by the most in a single day since 2011.
Twitter (TWTR) was once one of the most-hyped technology IPOs in the marketplace. But it has done nothing but lose value over the past two years amid concerns over growth and profitability. Active-user growth stalled in the most-recent quarter, and the company forecast weaker-than-expected sales for the coming three-month period.
Many insurance plans lost money on their Obamacare policies in 2014, and things didn’t get any better last year, either, according to the Wall Street Journal. The story recounted how the nation’s nonprofit Blue Cross Blue Shield plans took in $20.4 billion in premiums on their individual plans, but paid out $20.7 billion in claims.
Private insurer Humana (HUM) also just warned of deepening losses on individual plans. UnitedHealth Group (UNH), for its part, lost $475 million on Obamacare plans last year. If results don’t improve in 2016, more carriers will likely pull out of the business entirely.
What do you think about the Swedish rate cut? Is it going to work any better than the last several failed cuts we’ve seen around the world? How about the latest bad news out of a major Euro-bank – is there anything these guys can do to right the ship? And what about the news of more Obamacare losses? Will insurers be able to get it together in 2016? Let me hear about it below.
Until next time,
Mike Larson
P.S. Unlike stock markets, the currency markets never crash. Never have and never will.
The reason: Currencies trade in pairs. And since currencies are always moving relative to each other, there is always a way for you to make money.
No matter what else is going on in the world — market crashes, long bear markets, recessions and even depressions — currencies will always give you the opportunity to make money.
An option on the falling Canadian dollar posted a 76.9% gain … Another option on the declining British pound generated an 85.4% gain … And a third option on the plunging Australian dollar posted a 100% gain.
That’s enough to turn every $10,000 you invested into $20,000 in less than 24 hours!
To get on board with the massive profits to be made in currency investing, click here now.
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, you really need to mention the huge gold price rally when you comment on today’s big market moves.
In expecting a greater level of choppiness in currency markets, it is the one area that makes me nervous. Not knowing what central banks will do next with so many failed policies behind them is unsettling for a trader. It comes down to levels of risk in what you know and don’t know.
Well, the Republican Majority Congress could reinstate the Glass-Steagall Act before we have another 1929…. But, then again, their BIG DONORS, the cabal of Banking, Brokerage and Insurance, want to keep on playing wildly with our savings and their highly leveraged bets, so I’m guessing we are screwed!…. :(
Robert Rubin should not have removed it. Buttttt…….Hillary and Bill loved their Big Donors on Wall Street and did what they asked.
We here in Louisiana just got our first big address from our New Democratic Governor
Edwards. Guess what? Things are much worse than he thought when he ran. He needs $900 million more this year and $2 billion more next year. Sound familiar? If the already struggling working people of Louisiana don’t give him THIRTY SIX new taxes he will have no choice but to slash education and healthcare programs. The 19,000 consultants are safe. The big hospital in Baton Rouge will get a new $12,000,000 statue but have its funding cut by twice that. The rat Bobby Jindal robbed every State savings accounts and used every accounting trick to make the budget look balanced so he could run for President. There is no way for me to express the contempt I have for these political weasels on a family website. I hate them all. Jim
Jim, I just heard that address too. Isn’t it interesting how GDP is up 25% over the last ten years while the LA state budget is up 40%!
And twenty five per cent of managers in the bureaucracy oversee one employee. We have no one to blame but ourselves. What a bunch of patsies! Jim
Republican, Democrat, Libertarian, whatever! If I hear one more politician promise me they are going to solve a problem that they themselves caused, which is virtually all of our problems, I’m going postal. Jim
It is quite common for an incoming administration to say folks we examined the books and things are worse than we expected get ready for financial pain. Jindal was the darling of the Republicans was he not future president material. There are more states in the USA with sleeping surprises should there be administrative changes. Are their books not audited from time to time to show discrepancies before they get out of hand? I hate to use that old cliche “The Sky Is Falling” but it is.
Europe has its problem PIIGS (Portugal Italy Ireland Greece Spain).
We have our PRICKs (Puerto Rico, Illinois, Connecticut, Kentucky) and goddess knows what else lurking out there
yet the democrats hillery Clinton and barack Obama took millions from their wall street and banking donors but never a word of the truth from you just more liberal B/S
Mike:
I went to 40% cash last summer, bought SH (inverse S&P 1X) and Gold two weeks ago. But…I don’t think we are at a the point of a true mega decline yet like in 2008-early 2009. The behavioral finance model that has guided me for years (yes such a model does exist) has not moved to a sell signal yet meaning that true despair on the part of millions of 401k and IRA holders have not hit the point of running for the hills. Best guess is these folks are not the least bit aware that we could be on the cusp of another Lehman moment coming from Europe this time. It could be Deutsche Bank or Credit Suisse (whose CDS default rate went vertical today) that gets the ball rolling, but no one knows. My guess is that all those retirement account holders don’t even know who those banks are or even begin to understand the gravity of the current situation. Hence the psychology of the market still clings by a thread to hopium.
Mike
Something else to factor in is the fact that the SEC is investigating Boeing and their stock took a hit. I wonder how many more giants of industry are out there quaking in their boots with the same problem. If Boeing is guilty of some sort of hanky panky that could be a real Black Swan event as investors especially widows and orphans will no longer trust anyone. Everybody seems to be taking a page from the banks playbook. Make lots of illegal money pay a small fine. When buying shares in a company there should be some element of trust and once that bond is broken what next.
PS Mike
Remember Volkswagen now Boeing how many more hiding in the bushes.
Gold broke the upper line of it’s nearly 2 1/2 year down channel today, but closed just a bit above the line, leading to the possibility of an overshoot after that big daily gain. Also, it’s RSI and MACD are well into overbought territory. Most gold mining stocks are also overbought by those standards. I want to see a test of this gain before committing to the bull.
Some gold mining stocks are up 20 30 60% hmy up 110%
My small Canadian gold mining stock was up 15% in one day alone. I will sit back and enjoy the ride. I might add to my positions if there is a retrace.
At the sametime the S&P tested 1800 for the 4th time in a year hokding 1807 and now 1825-50.
Gold overshot on fear of system failure even after stocks held.Gold traded down from 1265 to 1235 and might close the week around 1250.
After tuesday if its still over 1225 it may end feb over 1225. If it does not fall back to1150 it is more bullish than stock and oil are bearish.
If stocks make new lows of course gold rises.
If not and gold holds 1225 -1250 into mar apr.
then gold can trade between 1200-1400 into
the election if either trump or sanders is running.
If neither is nominated or there is a recount
gold can test 1500. If things get too interesting
getting out of Diodge is more important than gold. Uncertainty favors higher gold into 2017.
If the Fed Ecb etc has no ammo left and megabanks cannot prop up stocks into the election be prepared for interesting times.
My broker mentioned JAPAN- Low interest rates forever!!!
Obamacare has had a negative impact on not only the economic well being of businesses, but also on the citizens it intended to help. Hopefully, the “Affordable Care Act” (ACA) will be modified after the next election by the administrative branch and the legislative branch working together to fix/modify what is clearly broken. Health insurers, healthcare providers, and you and I will demand change. Hopefully when the Presidential nominees are decided, they will tackle the ACA issues through each party’s platform and in one on one debates. In the meantime, writing your elected officials can help communicate valid ACA concerns, and a serious need for remedying the problems already experienced by all concerned.
The negative effect of Obamacare on businesses is actually not statistically significant; all the negative Republican chatter is a combination of racism and urban legend. Now if Bernie wins and puts in single payer, everyone’s costs will rise dramatically. And speaking of healthcare providers, there is no way they wish to retrench from the ACA.
If Bernie is elected he unfortunately will have NO chance of getting his single payer system passed because it does not benefit the greedy politicians, insurance companies and over inflated health care providers. In Canada we have a single payer system and our costs of health care are substantially lower than in the USA. It is an affordable and efficient system. The argument about long wait lists just doesn’t hold water unless you want a face lift or breast implant and all that propaganda you hear about our taxes is just not true. My total health care premium is $155.00/month for a family of four and that’s all inclusive for doctor and hospital costs with NO extras, deductibles or co-pays. It’s time you stopped listening to all the lies and got this issue dealt with in a constructive manner else your welfare, policing and social unrest costs will bring your country to its knees.
Re: Old Jack – thank you for telling it how it is. I wish more Americans would listen to you. I was at a camp out with some Canadians and they wonder why Americans are allowing themselves to be so brainwashed about single payer healthcare. They told me the same things you are saying here…..
Single payer doesn’t scare me. Ottawa being in control of my healthcare doesn’t scare me. The Washington bureaucracy being in control of my healthcare scares the hell out of me. They screw up everything they touch. Jim
Yea, that may be true but Canada has a much smaller non heterogenous population than the U.S. and I would imagine a lot less “freeloaders” than we have in America. For instance, we have millions of male Mexicans who no doubt work hard doing construction or what have you working “under the table” while at home there is a wife with five small children all collecting benefits. Multiply this by millions across the country. Then we have all of our home grown entitlement babies. The simple fact is that you can’t apply a Canadian system to America and have it work. The math just doesn’t work.
working service us it manager
My son-in-law in Canada was diagnosed with lymphoma. He was operated on and the growth removed and biopsy done and went to see a specialist in Hamilton and started his chemo treatments all within less than a month. It does not get any better than that.
working service us manager it
in Canada your health insurance premiums were subsidized from your nations nationalized oil , everything works when the projections for oil was between 120-150 per barrel , now that oil isn’t trading at those lofty levels now or in the foreseeable future and the projections are for oil to be in a trading range of 1/4 of their original projections expect your socialized medicine premiums to rise substanially
Colorado is supposedly on of the economically healthy states. Maybe. When the (former) legislature agreed to the medicaid expansion under Obamacare, 472,000 more Coloradoans signed up for “free” care. We now have 20% of Coloradoans, one out of five million, on Medicaid, and it has ballooned to 40% of the entire state budget. Goodbye highways and the university system, traditional state responsibilities.
Previously, those people were getting free care at ER facilities. That was even more expensive.
And that…..in a nutshell…..is the ugly promise of Obama/Sanders Socialism…..government overwhelmed by spending and taxation. Europe is drowning in debt…..now we are too. Many states will fail. No government can give free everything to the citizens. There just is NOT enough production to support such a fantasy.
Those 472,000 Coloradoans were without any healthcare and are poor. You must be very poor to qualify for Medicaid. Would you rather they have no coverage?The appalling fact that so many people are needy should be looked at. Perhaps the resort hotels who charge anywhere from $500 – $1600 a night and pay their workers peanuts could chip in a little more for the highways and education. Maybe the rich who patronize the resorts and spend $60,000 a week on good times could cough up an extra fee that would equalize the rest of Colorado. Maybe, maybe….
see john what OBAMA did was CRIMINAL………… to people on social security and medicare , these people paid in to a system for decades some half a century and what OBAMA did was rob social securitys medicare system of 780 billion dollars to pay for his affordable care act ACA so……….. for the states that signed on with his expanded Medicaid ………… Medicaid premiums were paid for by the federal government for 10 years ( ALL PAID WITH MEDICARE DOLLARS) but guess what john after the 10 yrs of free expanded Medicaid all that free stuff ends and its the states responsibility to pay for all that stuff
Aloha Mike,
I still do not know how you get your prices on OIL ( $30.03)?
Is this Brent or WTI? Or a combo of the 2?
WTI stands for west texas intermediate and BRENT for north sea crude, usually north sea brent sells for a premium to west texas intermediate but I have seen divergences in prices recently where north sea brent has sold for less than WTI
Lions and Tigers and Bears….OH MY!!
Private insurance companies pulling out of the Obamacare health insurance marketplace? Looks like the plan is working to perfection. The over/under on single payer should be around 5 years.
You are so right. This is exactly what was supposed happen. Single payer, here we come. Jim
Cash holdings are safer than the market, however cash remaining still is useless. My objective is to ride the volatility waves in the foreign exchange market. There are bulls and bears all the time.
P.S CDS spread on German bonds have been soaring in the recent past, signalling the symptoms of risk aversion to the euro-zone markets.
Good luck riding the FOREX volatility waves. Unfortunately nearly everyone who tries it goes broke.
the big boys-institutional investors and large hedge funds are now piling into gold-big $money !!! silver should explode next.the time to buy gold and silver stocks is now !!! mike, I am sure you know this !!!
Yep, you are still inviting investors into the market, Mike, and any way you can think of except “gold.” Where do people go when they panic? I advised gold (not bragging) two weeks ago, but all I heard on CNBC was “the bottom is close.”
Do people think the Fed. can control this? It’s out of their hands now. Sad, that investors have listened to Yellen.
The central bankers may not be finished. Dragi may be called to save the europeon banks. Germany needs Dragi to stimulate to save DB.
Dragi is no Houdini his bag of tricks is almost empty and the tricks that he has sprung have backfired on him and the rest of the negative interest rate crowd. Investors have watched this time and again as is playing out now in Japan. Just signs of desperation no bang for your buck. They may have unleashed a storm the genie is out of the bottle. This thing will take on a life of its own now.
All that happened today is that you ran stops under lows made in the indexes in january. The OPEC cutting back on oil production if implemented would only be near team bullish as your only backing up the oil supply. Market may be neat term over sold and could rally back to the 16000-16250 area. I’m still bearish and would sell in that area. Good trading all.
I basically agree with you…..maybe a little bit higher bounce to 16500, we’ll see. Then buy the shorts again. Next leg down should be really big.
Badger 10: I agree also.
AND, everyone’s saying the bottom is in for gold….BUT I think when the “big one” comes for the stock market, gold and the miners will drop right along with the markets! Gold’s simply doing a head-fake right now!
Anthony G haven’t you noticed that central bankers have been saving everything since 2000. How many times will it take before people realize central bankers won’t save anything by applying the same “solution” that was the cause of the original problem and every problem since then, too much debt.
There is only one solution – solvency will create confidence and allow growth.
Solvency. That is a word I learned years ago and lived by it. Debt was to be avoided which I did. They teach so many things in school today but little on how to handle money. I learned through the school of life. I shoveled s**t every Saturday for a local farmer for $2 a day and boy did I learn to respect money it was hard work. Free dinner and supper and when my mother saw the money pile up on my dresser she stated “Hmm you have quite a bit of money there you can now start buying your own clothes.” At age 15 my step father said I should stop school and go to work and hand my money home. It was time to say goodbye and strike out on my own. Ah the good old days.
All of the turmoil in the markets can only be made worse by government intervention. Obama and his team haven’t a clue and anything they do will only be counterproductive. Yellen should concentrate on keeping a handle on the money supply and let the markets do what they need to do.
For the longer term fiscal health of this country, the politicians need to get out of the way and let the markets restore themselves.
Hang on….
Will America go to negative interest rates? Will the savings accounts and money market account go negative? Will there be no safe place for retirees money where money will actually grow?
Lady Janet has already said The Fed governors are considering if negative interest rates may be needed as an “accommodation”. This means the stock markets will be about the only place where investors have a chance to make some money. The majority of people, however, don’t know enough to make the markets pay. Even the pros lose out from time to time. It is just another way to rob from people, for the benefit of the “elite” in government .
While Americans are focused on our economy and media distractions, the war in Syria is heating up. Syrian forces, with Russian backing, have cut off rebels in the city of Aleppo from the support they had been getting from Turkey. Aleppo has been a center of the non ISIS rebellion. Now Washington has announced that Russian planes bombed two hospitals in Aleppo. Russia, on the other hand, says that two US Air Force A-10s, flying from Turkish bases struck targets in Aleppo. The hospitals? Since there seem to be no ISIS targets in the city, why were US planes bombing there, unless in support of the rebels, who we do claim to support against Assad. What is Obama up to? Are we getting even more involved in that affair? Saudi Arabia, by the way, has said it will send support to Sunnis in Syria. ISIS is an extreme form of Sunni Islam, possibly an outgrowth of Saudi Wahhabism. Do they mean they will militarily support ISIS? In opposition to the U.S., of course.
I just read where the U.S. and Russia say they will work together to end fighting in Syria and deliver aid to cities affected. If so, it is about time the two countries try working together, and could be a positive development for the region. Will Assad go along?
Chuck, this is a bit much, even for you.
He makes a good point concerning the geopolitical nightmare the Middle East has become. Jim
Yellen best performance was in Night of the living dead…She’s killing the economy…
I AALWAYS THOUGHT SHE LOOKED LIKE A ZOMBIE
You can lose $20,000 in currencies just as fast.
Even faster.
working
Anyone that really wants to know what Trump wants to do, should read his book titled
” Crippled America “. He is the only one running that actually could change things for the better.
Mike, its madness its all rigged, the feds don’t know what to do next, poor Janet can’t even read it, Obama is a puppet to his masters, the dollar is collapsing gold is going to the moon the feds can’t print it, so I suggest you buy gold and silver?
I say stick your head between your legs and kiss your a– & your $ goodbye then get on your knees and pray! GOD GUNS GOLD & SILVER WILL STAND!!!!!!!!!!!!!!!!!!!!!
You missed 1G Donny Gumption !!!!!!!!!!!!!!!!!!!
Since the S&P500 didn’t close below 1815 yesterday, it set the stage for a bounce. How much of a bounce? Who knows? Many stocks have gotten into oversold territory, and that situation needs to be resolved before another drop comes along. It will, of course, and could be a humdinger. Or not. The markets will tell us.