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As goes the first week of January, so goes the year?
That has been a hackneyed Wall Street adage for ages. Some investors prefer to look at the performance of stocks for the entire month instead. But the general idea is the same: If the year starts lousy, it’ll finish lousy.
Me? I don’t put much faith in that kind of calendar-based stuff. This column from MarketWatch back in 2012 gives some of the statistical reasons why the indicator doesn’t mean much. Here’s another one from Forbes.
Instead, I’ve been waving my arms around like mad and warning about impending trouble since last spring for a much different reason. Simply put, market fundamentals are falling apart!
You have the commodities business in freefall, with pricing and demand falling off a cliff. The Baltic Dry Index that measures the cost of shipping various resources by sea just fell to 471, the lowest level in its 31-year history.
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| Simply put, market fundamentals are falling apart. |
You have demand for Initial Public Offerings falling off the table, with total deal volume coming in at just $30 billion thanks to a late-year swoon. That makes 2015 the worst year since the crisis year of 2009.
You have the auto loan boom/bubble sputtering and threatening to implode. That’s going to be a major problem for a key sector of the economy, one that helped prop up overall employment and GDP for the last half-decade.
You have high-yield bond spreads exploding to their widest levels since the tail end of the last recession. And if anyone tells you it’s just energy, plug your ears and run like heck! Spreads are widening fast for bonds in several other sectors.
Lastly, you have the Federal Reserve starting to raise interest rates based off the message sent by the employment statistics. But the unemployment rate and job creation figures are lagging indicators. They weaken after sales start to fall, inventories start to surge, lending standards start to tighten, and asset prices start to slump.
That means it’s increasingly likely history will show the Fed waited too long to began a hiking cycle. And therefore, it’s only going to make an already tumultuous environment even more volatile.
So I don’t think the recent stock market weakness is a problem from a CALENDAR-based perspective. I think it’s a major problem from a FUNDAMENTAL-based perspective. It tells me the previous worries I had about this being a new bear market were on target … and that the strategies I outlined in September 2015 are even more important now in January 2016.
I provide more details on what to do — to protect your wealth AND profit — in my Safe Money Report newsletter. I just released my gala forecast issue for 2016, and it has details on all these trends … as well as new “Buy” and “Sell” recommendations.Â
But, in any case, buckle up for a wild ride in 2016!
Until next time,
Mike Larson
P.S. It’s simple: This WIPEOUT of the oil and energy industry — what I am calling the Oil & Energy Fire Sale of the Century — represents your single biggest investment opportunity in ages!
The last time oil prices sank below $50 a barrel, the best oil and energy stocks handed investors like you TRIPLE-DIGIT profits!
Click this link now to read my full report and find out WHICH energy stocks are poised to SOAR in the very near future.
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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How we got this tipping point in equity markets is purely criminal. Look at the S&P chart, a 7 year juiced market with a complicit Fed allowing this to happen, looks worse than silver chart getting up to Reagan’s election in 1980. An S&P trading at 1200 looks more realistic.
if the Chinese are dumping stocks and the currency is being devalued where exactly is the “money” going?
also, isn’t the usa supposed to be the “safest market in the world:?
(according to larry edelson)!’
Mike, I bought CVX, CNP, and more recently DVN in part because of your assessment that they were good bargains and had hit their lows. Right now they are down about 30% from where I bought them. What’s different now and why should I believe you this time when you are basically saying the same thing about energy stocks?
concept of personal vehicles is changing.they will consume less gasoline.they will be less personal.
Have you seen the Elio? Two seater tandem, three cylinder engine designed for 84 mpg freeway and 100 mph. Has three wheels two outrigged in front, one rear, and one door.
And oh $6800 base price.
Rod, you’re just not believing hard enough. Mike explained the once-in-a-lifetime opportunity in energy and eventually he may be proven right:
Transcript: Greatest Energy Opportunity in 3 Decades
Martin D. Weiss, Ph.D. | Monday, May 18, 2015 at 7:30 am
I hope you also profited from his early 2015 calls about the “Big Reversal” and the long impending “Bloody Wednesday.”
Rod, some day Mike is gonna be right. I believe it will be after oil finds a bottom, and that clearly has not happened yet. I saw 1.49 for gasoline east of Bastrop Texas today. I predict it will go lower.
Simply put, market fundamentals are falling apart. … This statement as depicted on your photo is what I would call sensationalist “copy” much like mainstream news media depicts regularly. Markets go up and markets go down for reasons regardless of the economic conditions and sometimes it is because brokers and analysts can not make money unless someone buys or sells, therefore, advising to buy/sell usually trumps hold. After all, how can the financial community continue to reap in fees if investors were told to be patient and hold. Also, it is common knowledge that the indexes regularly beat the “analysts”, and even the “darts vs. the analysts” put on by the Journal each year has the darts beating the analysts the majority of the time that “contest” has been waged.
Market shaking out heading into earnings. Same as last summer we saw recovery as earnings came in. Tutes hungry for growth cautious on value. Gold is not the answer.
Reserve pressuring WMT on employment as indicator? How about some new roads, repair the bridges ,shore up some levees? Kickstart…S….>
..China WMT :-)
It is an old canard that earnings drive a market. Earnings can have provide short term bumps or drops but they have very limited correlation to overall market trends.
Look back at some charts of both for the past 60 years and you will see it. Mood (mass psychology) drives markets.
it’s the direction of earning that drives the market, not the amount. so long as the direction is positive, economy responds favorably as does the market. this in essence determines the action of the fed.
it is credit that drives the markets – more bluntly, the availability of credit that drives the markets. sentiment drives the day-to-day machinations of the market.
the root of everything is the availability of credit, and that is controlled by the fed.
Yes credit is a good thing if used wisely. The fast and easy availability of credit is the problem. The demand for credit is driven by all the wanted expensive gadgets that are of questionable use. My g/f has 4 mobiles but only uses one. Yeah you guessed it I am a old hippie retired in Thailand with a young g/f. Ah the good life. I love this column watching everybody chasing their tail to make money. All the wonderful predictions easy credit once in a lifetime opportunities and more. I think most of you have forgotten how to enjoy life your to busy chasing the almighty greenback. Good luck.
I agree with you Gordon. Well said!
you’re right, mike, the fundamentals look horrible – but the technicals look great! we just tested a pullback to the shoulder of the inverted head – the bottom of the bear trap. this is a screaming buy point!!! the fundamentals are at their worst, while the technicals are at their best. who do we listen to? fundamentals or technicals? my emotions of fear tell me to follow the fundamentals and sell, but my intellect tells me to be rational and follow the technicals and buy. everyone on this blog knows i’m ignoring my fear to sell and following my intellect and have heavily bought into this correction. i hope i’m right.
Goldman…..I look at charts every day. I don’t see anything there that would say buy on a long term basis.
we’re at the bottom of the bear trap of a correction. this is usually the last good buying opportunity before the market moves on. look at the correction in 2011 and you’ll see a bear trap there also, just like many a correction before that.
$1000 Gold . By your comments you are obviously an experienced investor. Are you looking at a trading bounce or are you saying that US stocks are a good long term buy, With the FED money printing it seems to me that the fundamentals and technical signals are basically unreliable and only short term trading works. I am only selling deep in the money PUTs to earn income, that is working to a degree.
i’m not an experienced investor. i’m an amateur and a rookie. that’s why i’m here – to learn. there’s a lot of very smart people on this site and the weiss group is highly respected, especially by me.
the best way to learn is to challenge someone smarter than you are. you’ll never learn by outsmarting someone who knows less than you do. these are some of the smartest people i’ve met yet.
We just broke the support line at 16,342 and closed a few points higher. If Monday continues down the next support level is 15,783. Good luck everyone.
Post note. Regarding the building of roads. In 2009, we (the taxpayers) forked over more than a few trillion dollars for new roads, infrastructure, etc. The money was sent by the gubmint to increase existing gubmint workers, salaries, pensions and gubmint unions. It has been estimated that ONLY 3% of those trillions ever got to a shovel. (lesson: don’t give gubmint more money)
Could the stock and bond market suddenly be getting a dose of reality? Have prices too long been based on wishing and hoping?
Mike may not believe in calendar based stuff, but the first week of January, in recent years, has forecast the market trend for the year about 7 out of 8 times. It could be wrong in any one year, but it seems worthy of paying attention to, at least.
My Forecast S & P between 1500 & 1600 in 2016
Cheers!
are the fundamentals really that bad, mike? we have dirt cheap oil, rock bottom interest rates, low inflation, full employment, comfortable yield spread, an accommodative fed … i could go on.
Hey 1000 gold, how can we have “full employment” with a participation rate of 62.6% which equates to approx. 150,000,000 out of a pop of 322 Million. There are about 94 Million still sitting around doing nothing because they can’t find decent paying jobs!
UNCLE BERNIE SANDERS and HILLERY CLINTON will get those bad old numbers in line their plan ……. start with spending another 30 trillion dollars we don’t have and with a little luck they will get the participation rate to a number they will be proud of 37-42 %
we have a 5% unrate. we could easily have a 4% or even as low as a 3% unrate before this is over. i feel sorry for those who’ve fallen off the charts and aren’t counted, but i truly believe the economy will get so good that we’ll soon have a hard time filling empty job positions.
$1,000. Aren’t you overlooking that full employment ‘seems’ to have been obtained with lower wage jobs, oil is cheap but is bankrupting the energy industry, gasoline is helping the consumer but health care costs are taking more way, plus most of our trading partners in the world are in almost depressions. It may, as you suggest be a ‘blood in the streets’ time to buy but it seems the blood could get a lot deeper for a while.
Don’t forget the tapped out consumer. His personal balance sheet is not looking to hot at the moment.
Predicating the direction for OIL based upon what has happened in the past is insane. The Arabs are trying to destroy our new found energy by underpricing OIL to the point where we can’t afford to produce. Iran is now in a position to export oil again. Russia is beginning to deploy Fracking into its technology and they have vast reserves of oil and gas. Even with an increase in demand and an over stated oil reserves, the world has enough oil for the next 50 years. The ability to predict oil futures right now is a crap shoot in my estimation.
So the VIX is at 27, that’s not even close to the 51 it hit last Aug. SPY is at 192, still 100 points above last Aug. It’s not the end of the world, it’s just profit taking at the highs, remember, BUY LOW SELL HIGH! That is what you’re supposed to do to make money. The problem is when all these doom and gloom sayers create a panic and fear drives the markets at the same time when the big players go short. Meanwhile, somebody is quietly buying while everyone is unwinding. Buy the fear, sell the greed.
Things are to the point where it is hard to separate fear from greed. They seem like Siamese twins in my estimation.
Things are to the point where it is hard to separate fear from greed. They seem like Siamese twins in my estimation.
In 1929 there was much fear. And I’m sure that there were those out there proclaiming its time to buy when there is blood in the streets and therefore went and bought. I only hope they lived long enough to benefit from their shrewd strategy.
Average Annual Stock Market return from 1929-2012 under Democratic Administrations (40 years) 10%…… During the same time period the return under Republican Administrations (36 years) is 0.4%…… Alan Grayson: “Poor Dumb Rich People” New York Times
I read your comments by email i have Santos oil and gas plus a couple of other oil and gas and i think as you do.