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I’m a born-and-raised South Floridian, and I’ve always been a weather buff. One thing that always fascinates me is the shift from the dry season to the rainy season.
One day in May, things just change overnight. Bluer skies, lower humidity, and cool front-driven weather morphs into an environment marked by almost-daily afternoon thunderstorms, high humidity, and tropical conditions. You can basically repeat the same forecast every day until October — even though our local weathermen and women try their best to come up with new ways of saying the same old thing!
We just experienced the 2016 shift this week, and there is literally no way you can fight the change. You just have to crank up the A/C, drink a heck of a lot more water when you exercise, get your hurricane plan and supplies ready, and accept it’s going to happen year in and year out.
I actually see a lot of parallels to today’s markets. When the credit and economic cycles turn, there’s nothing investors can (or should) do to fight that shift. They just have to adapt. That’s why I’ve been advocating all of the following strategies for months:
Dump cyclicals and buy recession-resistant stocks …
Unload risky bonds and shift funds into high-quality ones …
Hedge against downside risks with inverse ETFs …
Target vulnerable names in sectors like retail, financials, technology, and materials for potentially huge downside profits, just like I’ve been doing in my All Weather Trader service.
How has that worked out? Well, I shifted to a much more conservative stance early last summer. We’ve had two major swoons since then, including last August’s meltdown. Based on my reading of the economic and fundamental backdrop, we could see another one very soon. So my advice hasn’t changed one bit.
Of course, policymakers are having a hard time accepting this cyclical shift. When you’re a politician or a Treasury secretary or a monetary policymaker, you can’t come out and say you’re impotent … and you can’t just sit there doing nothing. You have to try to keep the illusion of control going, and you keep churning out the happy talk. That’s true even if it won’t accomplish anything.
[Read More – The Consequences of Reckless Lending – Mike Larson]
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| How many times have we seen the Bank of Japan launch yet another round of QE, or NIRP, or asset purchases? |
I mean, how many times have we seen European Central Bank President Mario Draghi claim his policies are working … then be forced to unveil yet another policy a few months later when inflation and growth don’t live up to the expectations he himself laid out?
How many times have we seen the Bank of Japan launch yet another round of QE, or NIRP, or asset purchases … because the last round utterly failed to meet its goals?
How many times have the Chinese said how fundamentally strong their economy is … only to turn around and launch yet another stimulus program, even if doing so just keeps igniting rolling bubbles in stocks, property, and most recently, commodity futures?
My advice? Don’t waste your time trying to fight what you can’t fight. Change and adapt to the inevitable, just like I do every time we flip from the dry to wet season here in Florida. That strategy will help you preserve and build profits as the “Everything Bubble” bursts, and this down cycle in credit worsens.
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
Until next time,
Mike Larson
P.S. Here’s the secret that savvy insiders know and that can make YOU very rich, very quickly: In the past, every time oil prices have fallen this low, this fast … without exception … they have rebounded with a speed and force that leaves investors stunned. And investors who had the foresight to gobble up select oil and energy stocks at rock bottom prices, made vast fortunes virtually overnight. In other words: This is a rare opportunity to make a lot of money … very, very quickly. Click here to learn how to take advantage of this opportunity before time runs out!
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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You are right in your analysis about cycles IMHO but….you still are missing the tool that refines the answer to the ‘when’ question i.e. when will this market finally break. You are ahead of most individual investors. When the psychology of the large majority of investors turns to fear, then and only then will it be time to run for the hills. Do you have a tool that will give you a warning as to when that will happen?
Last I heard, he has his 10 million dollar proprietary computer program
very good advice and entertainilngly written
To what hills do you plan to run?
Yea. I agree with Peter ! at this stage we all know something will happen >The Question is when ?
If there was an analytical tool that would pin point the fear factor it would give a better indication of when ?
John
This is a controlled market. Note that the last 30 minutes of the day the Dow-30 creeps up as it did yesterday, May 19th. How can we expect to fight a government bent on controlling, with unlimited resources, the appearance that all’s okay??? That, to me, id the crucial question that no one has faced or attempted to answer. To know the truth isn’t enough. We need to know the enemy and his power to know how to behave.
I reside in a country that has a very volatile currency more so than most.My pension payments and Cash money is held in U.S.D in a US bank. it is a current working account.
If bail ins where to take place, I understand savings and investment accounts would be stolen by the banks to prop them up but how could they grab or empty current accounts as people still have to pay taxes, pay salaries and just to live food, utilities est. if they empty current accounts would it not be counter productive as no one would have any kind of money at all
Regards
Good points. Cycles are the bane of the gub-mint planning bureaucrats and economists at Central Banking, Inc. They really hate the fact that their machinations do nothing but delay and accentuate the swings of busts and booms. Try as they will to explain the ups and downs based on everyday fundamental events….to those who really listen, their pontifications are all gibberish. None of them predicted the big downturn in 08-09. They are literally full of themselves. And add to that, as they filter in and out of government and the big banks….corruption is rife. Some day, the masses will realize that these courtesans to whom they have bowed to for so long….. are really wearing no clothes.
I don’t know about the rest of the country, but there still is the drip, drip of foreclosures. The economy still isn’t getting better and there still are a lot of people hurting financially. Savings are supposedly going up, but it’s the people that can financialy afford it and can’t find an investment that’s not risky in this environment. How can the job environment improve when there aren’t new investments productivity-improvements or new ventures?
Someday soon, it seems the banks will have nearly all the money, and own nearly all the property, through foreclosures. What then, Federal Reserve? How do you get that 2% inflation when people barely have enough to live on? Your move, Ms. Yellen.
since 2008 ,Wall st and the Eurogroup and their slaves in the UK have used the financial muscle of the IMF, ECB, Goldman Sachs etc to enforce ZIRP and Money Printing/ Quantitative Easing to funnel international funds, by way of forced Austerity and loss of National sovereignty and national financial management to Washington ,London and Bonn. all trends seem to be long term. the slow rise of the Oil price and industrial recoverey of the US ,China and Japan. Germany is running a protected manufacturing base. protected by the value of the Euro; which is kept artificially low by trashing the economies of Greece, Spain, Portugal, Italy and France. the investing oppurtunities depend on specialist knowledge and research.
There are business makers and business takers. After three decades of mergers&acquisitions, the business makers have been eliminated so the takers can no longer buy innovative firms. The best new trend is “green energy” where the clean fuels of electricity and nuclear require massive amounts of mining and petroleum exploration to get the fuels for power generation. And battery replacement continues to be a booming business along with computer, smartphone and TV repair and replacement as the transistors wear out. The laws of physics dictate that the longer the energy chain the more energy is wasted. Meaning we use more energy to get unequal results. China and India have no such policies and are able to take business away from America with zero creativity. And that trend will continue until Americans do not have the purchasing power to support the trend. That’s why China eagerly lends us money to sustain the trend.
Very interesting article.