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1. Is the economy heading into recession or not? Data on manufacturing, services, auto and retail sales, and commercial real estate tell me we are.
The jobs data is somewhat more mixed. But it’s worth noting that a broad index of labor market conditions – one that Federal Reserve Chairman Janet Yellen herself has touted as incredibly accurate and useful – has now dropped for six out of the past seven months. That has only happened twice in the past two decades. Once was when we were heading into the dot-com recession and once was when we were heading into the Great Recession.
2. Can asset prices just keep going up even if growth tanks? Let’s face it. The underlying fundamentals haven’t mattered as much for asset prices in the past several months. Why? The never-ending supply of central bank interventions, which have crushed volatility and fueled bubble-icious trading in a wide range of assets.
But can that really persist forever? Or are we finally at a tipping point? Could the S&P 500’s breakdown from the late-July and early-September period of record-low volatility be a major shot across the bow for complacent investors? It sure is tempting to answer that latter question in the affirmative.
3. What investments can still prosper in this tricky environment? Steady Eddie companies with high Weiss Ratings, solid yields, and lower economic sensitivity have performed well for us. So have targeted put option and short-sale trades in “Everything Bubble” sectors and stocks.
If the economy continues to weaken … autos and commercial real estate slump … and credit conditions continue to tighten in the banking sector, those kinds of investments should continue to pay off. The trick is knowing which companies to target, and when.
4. Is gold one of the single-best options? As for gold, it remains one of the best-performing investments on the planet in 2016. The SPDR Gold Shares (GLD) is up almost 26% this year, more than triple the return of the SPDR S&P 500 ETF Trust (SPY).
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| Now, gold remains one of the best investments in the world. |
Gold wins as a “high-yield alternative” to negative-yield government bonds. It wins as “chaos insurance.” And it wins as protection against out-of-control central bank policy experimentation. I can easily foresee a scenario where it takes out resistance around $1,400 an ounce, then runs back toward its 2011 highs near $2,000. But interim corrections and stumbles are entirely possible.
My suggestions? First, read and digest my comments here, as well as the articles linked above. Second, keep an eye on Money and Markets for ongoing guidance. And third, join me in New Orleans from October 26-29 if you can. I believe you’ll get a ton out of this conference, which features presentations and interactive discussions with some of the best and brightest minds in the investment universe.
All you have to do is click here to register. Or call 800-648-8411 for details about the show’s content, venue, and more. Be sure to mention I sent you.
In the meantime, how would YOU answer these questions? What is really going on in the economy? Will the disconnect between asset pricing and underlying fundamentals get corrected, and if so, how? What do you think of Safe Yield stocks, gold, put options on vulnerable stocks, and other ways to play this market? Let me hear from you in the comment section below.
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The Bank of Japan and Federal Reserve have spoken. The BOJ launched a whole bunch of new, so-called “stimulus” measures (even though every previous move has failed) … while the Fed punted yet again. What does it mean, and what’s coming next for the economy and the markets?
Reader Randy said: “Government meddling is the main reason we can’t solve the ongoing problem with economies all over the world. Never before have we had so many governments, along with the central banks, tinkering and experimenting with their economies through policy, instead of benefiting from a free market policy based on true supply and demand.
“Artificial stimulation of particular parts of an economy can and does produce an artificial fat spot in one sector of an economy. That sector then collapses because it’s lopsided, or out of balance with the real economy. Every government and central bank on the planet is tweaking and pumping money, influence, and special deals for special people. It is corruption at its finest hour.”
Reader Chuck B. added: “As of the last quarter, the Fed has got its 2% inflation rate. If it also succeeds in dropping the value of the dollar against other major currencies, we are likely to see even greater inflation. Americans are having trouble paying bills now without raising their debt levels. Why do they want us to be even poorer?”
Reader Tom referenced the potential impact of the upcoming election on policy: “Why the Fed would raise rates before the election is hard to figure. They have been behind the curve for years.
“I am also thinking that maybe the economy is stronger than the GDP figures say. I don’t think that current methods of computing GDP are all that accurate. But I think the economy could do better without endless interference from big government and mindless meddling from a Fed that is fairly clueless.”
Finally, on Wells Fargo, Reader T. said: “So 5,300 working slaves at Wells Fargo do what management told them to and get issued pink slips … and management keeps their commissions and jobs. A day of reckoning will come. As for art, a fool and his money are easily parted.”
Thanks for taking the time out of your busy days to comment. I personally find the situation at Wells Fargo revolting. But then again, banks and bank executives have ripped customers off and rigged virtually every market on the planet in the past decade … and gotten away with nothing more than fines and/or slaps on the wrist. So what else is new?
Any other thoughts you’d like to share? Then hit up the comment section and fire away.
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A whopping 500 million Yahoo (YHOO) users had their accounts hacked in late 2014, with names, email addresses, birthdates, phone numbers, and passwords stolen. Yahoo believes it was a “state-sponsored” attack, suggesting hackers backed by China or Russia were to blame.
The laughable rumor-mongering in the oil market continued today, with the latest story being that Saudi Arabia would agree to production cuts if Iran freezes its own output. The problem is that Iran wants to boost output to pre-sanction levels … and that it’s one of Saudi Arabia’s major enemies in the Middle East. Bottom line: I wouldn’t hold your breath waiting for a deal.
Wells Fargo (WFC) CEO John Stumpf stepped down from a board that advises the Federal Reserve Bank of San Francisco on economic and industry issues. The move is just the latest in a widening scandal over Wells Fargo’s allegedly fraudulent opening of 2 million accounts for customers who didn’t want them (or even knew they were opened in the first place).
What do you think about the latest mega-breach of consumer data at Yahoo? How about the mixed messages coming out of the oil market? Should Stumpf step down as the head of Wells Fargo, or maybe even face criminal prosecution? Share your thoughts here at the website.
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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The one sure way to get the attention of the top management of the financial services industry is to put a few them in prison for a while.The word will get around.
How come the person directly in charge of those staff, Carrie Tolstadt, is not getting fined for say $125 million. It seems to have happened on her watch, so why is she not being charged
As for Mr. John Stumpf, and his cooperating colleagues, my belief is that they should all be on TV, publicly “drawn and quartered” in the classical medieval fashion, ad seriatim.
The thieves at Wells Fargo get berated and threatened by a Senate House committed for stealing millions. But a working class person gets three years for taking a pack of smokes.I think we should start using that privileged system for the rest of us. It would save billions in taxes by not supporting the prison lobby.
DAMAGED GOODS
Heir Stumph will not be able to outrun this controversy that is growing and dogging him at work at home and in-between. Reminds me of Charles Keating. The outcome will be similar. Constant public pressure, investor boycotts, and customer deflections may force him to step-down eventually.
Stumph can not be effective anymore in his job with all distractions following the current scandal under his watch, even if he hangs on awhile longer. The CEO of British Petroleum was similarly forced out as a result of the Gulf Oil Well Fiasco. I predict this one will end the banking career or Mr. Stumph, as well. They need a clean slate and fresh face and soon.
On Stumpf. Spent ten years in and around Washington lobbying. The whole system is a closed system of the connected – he was on a Fed advisory board you recall. It saddens me to say, the whole system is so corrupt and self-serving nothing will happen and all the Executive Officers will walk away wealthy. Hillary will extend and secure it for their and their daughter’s benefit. This is a harsh reality. Dick B
If you think Wells Fargo is bad just watch for Chase, it does a number on it’s customers.
`Hey Mike, was wondering if the volitility and lack of conviction in the market could be the result of the uncertainty of the future. Some things I’ve been thinking about was the presidential election, the possibility of the US sharing reserve currency status, and of course the numerous black swans that could be out there, not to forget the Brexit fallout. Any thoughts or opinions would be appreciated. Thanking you in advance.
LARRY
YOUTOLD AS THAT THE DOLLARS WILL GO UP SO FARES IT AS BEING OVER THREE WEEKS AND THE DOLLARS IS STILL FLAT .
SO WHAT IS YOUR OPINION REGARDING THE DOLLARS
SINCERELY
Hi Mike, as the world knows that all CEO’s, Banksters, and last but not least every POLITICIANS are the1% that are exempt from all LAWS the other 99% of use must obey or we go to jail if did as they do. They will all get theirs in the end, wait and see time will tell.
AS THE ECONOMIES AND CURRENCIES AROUND THE WORLD START TO CRUMBLE…..THEY WILL ALL MOVE TO GOLD,SILVER AND THE US MARKETS AND US $DOLLAR…….BECAUSE THAT WILL BE THE LAST SAFE HAVEN.U.S. MARKETS WILL EXPLODE TO THE UPSIDE.METALS EXPLODE TO UPSIDE AND STAY UP.HOWEVER,U.S.ECONOMY DOES FINALLY CRASH AND CRUMBLE IN THE NEXT 2-4 YEARS…..I HOPE I AM WRONG !!!….BUT MY BEST BET AND FAITH IS IN THE METALS. JAY TROW
No bady id going to fix nothing.
I suspect Wells Fargo’s CEO John Stumpf, after a slight delay in time, will retire and take his VERY golden parachute into the next phase of his life. His embarrassing and dismal performance before Congress this week should be clearly document why he is incapable of steering the bank out of this mess. I doubt he will face any criminal charges…and he’ll retire feeling “persecuted.”
As for Yahoo, when did key corporate officers first learn of the hacking and were the merger talks still active? The lawyers will be litigating those questions, I suspect.
The data seems to indicate the economy might be able to continue to eek out a very slow recovery for an extended time, but Washington will manage to trigger a recession in 2017 with their inaction and refusal to stimulate the economy and to address essential infrastructure deficiencies.
The FOMC will raise rates slowly and “encourage” Washington to stimulate the economy with infrastructure spending, tax code changes, etc. Congress will continue to stumble and bumble and be ineffective. Electing Trump will be a Black Swan event in itself, resulting in, at least, temporary volatility …. and protracted economic recession and inflation if his trade “promises” are implemented. Electing Clinton will result in pervasive Congressional obstructionism, assuming GOP control in Congress.
In 1976ni bought several sets of PRESIDENTIAL COINS,,,,,<95PERCENT PURE SILVER, , DOLLAR HALF DOLLAR AND QUARTER FOR THE PRICE OF 7.50. . THE SILVER IS WORTH ABOUT $45.00 now.and I have ben offered much more from a local collecter , .
This administration SUCKS, period. I read where the Census Bureau has changed the definition of non metro and metro areas shifting where 6 million people live and thus upping the poor income readings of rural areas. To make things worse, no mention of any such a change was made in reporting the latest income stats. Until the administration quits moving the goal posts and sidelines to suite their political needs, it remains “garbage in equals garbage out” and destroys credence for computer analysis depending on such data inputs.
Does anyone besides me see something terribly wrong in the following. So the market is now controlled entirely due to the fact that cheap money will continue well looks like indefinitely.
1. Stocks pulled back on Friday as a relief rally over the Federal Reserve’s reluctance to raise interest rates ran out of steam.
2. Headline
Stock rally slips away because crude oil slumps.
Again I ask is the stock market made up entirely of oil stocks? This whole cockamany market seems to be controlled by what cheap money and the oil market.
Boy the news media is sure dropping the ball on financial news.
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BulletWells Fargo (WFC) CEO John Stumpf stepped down from a board that advises the Federal Reserve Bank of San Francisco on economic and industry issues. unquote
What a hero folks. There is no justice here folks only anarchy. Maybe Judge Judy could step in.
Hi Mike
I have another question I’d like answered. Why is the Fed playing such a prominent role in a supposedly free market at all?
I manage a mixed portfolio of investments which requires the investment of funds into projects that offer a long term positive return. Rather than helping investment capital to be applied usefully, the Fed is poking its nose into markets and trying to control outcomes. The banks must also be losing from this uncalled for intervention. Rather than applying my time usefully in a genuinely productive capacity, I find myself trying to either find yield baring stocks at a low entry point or achieve capital gains or both. This is just capital chasing quick returns without producing anything. How can the Fed be happy with this. It doesn’t help our economy or jobs at all. We seem to be a 70% consumption economy that is slowing going south.
A national lottery would help pay the deficit, and put a lot of money in peoples pockets to spend and more tax money created. Spread the winners with several drawings instead of one multi winner.
I read that the CAPE Ratio of the S&P500 (current price, divided by past 10 years earnings adjusted for inflation) has only been as high as now, three times in the past century: 1929, 2000, and 2007. We all know what happened in the years following. How much of those reduced earnings can be attributed to Fed actions? More than they want to admit, I’m sure.
Gold is the safest investment, that’s why I purchased Larrys special report for a bargain price.
What about Wells F letting Clinton’s campaign go into peoples accts of the small contributors making $25 or smaller donations and then dragging larger amounts under $100 without any repercussions?? Huge number of complaints but no mention in the press?
Mike
XLF branched off into XLF and XLRE. Any suggestions?
Depends on who takes the Presidency and the Congress. If it is the Democrats then Citizens United goes away and the false negative financial propoganda goes away and the markets explode higher….. If on the other side we get the oragne bombastic naccisist and Congress stays with the Republicans, this market will head into the ditch within months of the take over…
Markets are ditch-bound, regardless of which idiot politician gets elected. The Fed has seen to that.
Very True!
Incredible that Sen. Warren lam-blasts Stumpf over only taking action “against the little guy” when the Federal Government has stolen every penny from Social Security Trust fund, oversees an escalating 20 Trillion budget deficit and makes a mockery of our being fiscally responsible. Wells Fargo stands heads and shoulders over our Government.
I got emails that said someone was trying to access my account at Wells Fargo. I dont have an account at Wells Fargo. maybe now I can see why I was getting those phony Messages.
That is a common scam. DON’T click on it. If they happen to actually name your bank, call the bank to verify and let them know about it.
Eagle495 does not have a clue. I say put all of them in jail and start over
The next President should create 100 thousand (and up) new jobs to completely redo the Internet to add major security and safety features. Years ago, there was a plan for doing Internet-2 to add in security features, but the plan went nowhere.
For example, to increase security, Internet data blocks can be stamped with the id and country of the originating server, data blocks are automatically scanned for problems as they are transmitted through the network servers, control totals throughout the network can detect fake intruding servers, alarms on browsers can alert when data are being siphoned off user computers by questionable intruders, etc.
Our justice system does not look like a fair system to me,petty thieves face sentencing for shop lifting and mugging. However,mega CEOs in banking and financial industry,pay fines from their company’s funds and let lose for major crimes,except for the recent New Yorker,whose son put him behind bar. Otherwise those mega thieves usually gets a free ride,from Citibank to Chase to Goldman Sac to AIG. They all play this dirty game and pay fines from their company’s coffers and get free rides.
If they stat to go to the prison for screwing up books or stealing money they should put behind bars.