Market Roundup
Dow
17,873.22 (+44.93)
S&P
2,099.06 (+8.96)
NASDAQ
4,933.50 (+31.74)
10-YR Yield
1.85% (+0.03)
Gold
$1,210.40 (-$10.00)
Oil
$49.43 (-$0.05)
| Market Roundup |
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Dow
17,873.22 (+44.93)
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S&P
2,099.06 (+8.96)
|
|
NASDAQ
4,933.50 (+31.74)
|
|
10-YR Yield
1.85% (+0.03)
|
|
Gold
$1,210.40 (-$10.00)
|
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Oil
$49.43 (-$0.05)
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Billionaires don’t like this market. Turns out, neither do everyday investors like you.
Exhibit A: Stock funds around the world bled another $9.2 billion in assets in the week ended May 25, according to tracking firm EPFR. That raised total outflows to more than $100 billion for 2016 overall.
Exhibit B: A report from Lipper clocked outflows of $4.8 billion from U.S.-based equity funds in the most recent week. That boosted total U.S. outflows to $76.4 billion. Moreover, stock funds have NEVER seen so many assets walk out the door as they have in the last 22 weeks.
Exhibit C: It doesn’t seem to matter much whether stocks are up or down. Investors are yanking their cash regardless. Domestic equity mutual funds bled $23.8 billion in assets in April and $9.9 billion in assets in March, according to the Investment Company Institute. Those were both strong months for the S&P 500.
Contrarians sometimes point to figures like these, as well as sentiment surveys, and say “A-Ha!” The fact everyone is so negative on stocks is a reason to buy.
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| Warning signs for stocks continue to surface. |
But look at measures of panic like the SPX Volatility Index, or VIX. There’s no fear or loathing there. It’s hovering around 13, versus the 20-30 area we typically see when sentiment is negative and everyone is running scared.
Stocks are also a lot closer to their highs than their lows. Plus, the S&P 500’s P/E ratio (around 21 times trailing profits and 17.5 times forecast earnings) is far above its historical average. So stocks clearly aren’t cheap the way they are in times of panic.
Bottom line? I don’t find the contrarian argument very compelling. And when I see both wealthy “smart money” investors … as well as everyday investors … yanking money steadily and consistently out of the market … it raises a very important question: Who’s left to buy?
[Read More – The Consequences of Reckless Lending – Mike Larson]
It used to be companies themselves. But companies are running out of cash flow and cutting their stock buyback plans as a result.
| “Stick with safety and keep your own cash levels high.” |
My advice? I hate to sound like a broken record, but stick with safety and keep your own cash levels high. In a late-cycle, “ninth inning,” and potentially pre-recessionary economic and credit environment, you don’t want to go hog wild chasing stocks.
Finally, let me take a moment to wish you a pleasant Memorial Day weekend, a time to remember the sacrifices made by our service members over the decades. I hope you’re able to spend some quality time with your family and friends, as I plan to.
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I mentioned the series of billionaires’ warnings in recent columns, and asked whether that had you more or less confident in the outlook for stocks. I also covered the topic of retail sales earlier today. So what did you have to say in response?
Reader Greg G. took a fairly optimistic view about consumers, saying: “Brick-and-mortar retailers are suffering because more and more people are shopping online over the Internet. There is a large shift in spending patterns when it comes to the distribution channels, but consumer spending is alive and well.”
But Reader Bonnie E. countered by saying: “I saw Alan Greenspan being interviewed on one of the business news channels recently. What he said, at least in part, mirrored the message of Harry Dent: Consumer buying is beginning to slow down noticeably.”
“Whatever the reason for less buying, the impact on retail, according to these two fellow’s views, will continue to get worse. My personal experience is that while we are faring a little better at the gas station now than we were a few years ago, other cost-of-living expenses are keeping our pockets nearly empty.”
Meanwhile, on the subject of markets, Reader Cherry said: “I am with you Mike. My broker keeps saying, ‘Stay invested or you will lose money.’ But when I look at how much some of my bigger holdings have lost, it would have been better to leave the money in the bank. At least the capital would have been preserved.”
But Reader Tommr took the opposite tack, saying: “Fear sells, but not to me. I ignore most of it as meaningless noise. Doomsayers keep the investors on edge and questioning everything. This is the ‘Wall of Worry’ that keeps the markets rising. I am beginning to wonder if these Big Whale investors are getting too old and losing their mojo.”
Finally, Reader Peter weighed in on the issue of timing. “You and they are probably right, just early like Bass, Hussman and others. When greed truly turns to panic, they will all be right. But how long do you have to wait for them to be proven right?”
Thanks for sharing those thoughts. Despite my worries about many long-term issues (the multiple bubbles in everything from tech unicorn-land to stock buybacks to M&A to junk bonds to commercial real estate), I didn’t get aggressively cautious/bearish on this market until the middle of last summer. That’s when my credit indicators began to suggest a change in market tenor, confirming that other investors were beginning to appreciate the concerns I had.
Since that time, the market has gone literally nowhere – with two major drawdowns in the interim. Now I believe we are on the cusp of another potentially serious drawdown, and it’s coming at a time where central bankers are increasingly suffering from QF – “Quantitative Failure.” So that’s why I remain cautious, and continue to advocate defensive rather than offensive investment strategies.
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
But as always, I want to hear from you whether we’re on the same page or not with regards to the markets. So please do add any other comments you might have to the discussion section below.
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The government released its updated estimate of first-quarter Gross Domestic Product (GDP). While the number did climb to 0.8% from the originally reported 0.5%, that missed economist estimates for a bigger revision to 1%. Consumer spending wasn’t revised upward, while business investment was slashed ever further to negative-6.2% from negative-5.9%.
Donald Trump officially has enough delegates to win the Republican nomination. He used yesterday’s milestone to unveil his plan for the U.S. energy industry, one focused on easing drilling and environmental restrictions.
Should the government pay you to do absolutely nothing? Believe it or not, that question is being hotly debated in Switzerland.
The country will soon vote on whether to give an “unconditional basic income” of about $30,300 to every citizen regardless of who they are or what they do. Opponents are likely to win the June 5 referendum. But proponents argue that UBI could replace many other social welfare programs, and ultimately benefit society. Your thoughts?
Overall M&A volume has declined quite a bit, but some deals are still getting out the chute. Thermo Fisher Scientific (TMO) just said it would buy FEI (FEIC) for $4.2 billion in cash in a deal designed to boost its line of products used to analyze chemical compounds and proteins.
Fed Chairman Janet Yellen showed up at Harvard University today for some friendly back and forth with economics professor Greg Mankiw. As I expected, she didn’t have much new to say. But she did sort of, kind of validate the comments from other Fed members that a rate hike could be coming soon.”
So what do you think of the GDP figures, and the overall rate of U.S. growth? How about the backdrop for mergers and acquisitions? Do you think Trump’s energy plan makes sense? Let me hear about it this holiday weekend at the website.
Until next time,
Mike Larson
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.
{ 41 comments }
Thanks Eagle! Jim
Happy Memorial day and pray for our lost soldiers souls and for America to return to GOD
yes I am selling part of my portfolio and waiting for the next False Flags, unwanted wars so prepare GOD BLESS you all
Raising interest rate now to go ‘negative’ next year.
Mike, are you kidding me?? You are asking “Who’s left to buy?” With that huge pile of money sitting on the sidelines, there’s massive buying power out there!!!
With all that selling, a better question is “Who’s left to sell?”
I’d say the “ninth inning” was July 2015, and we’re well into our second extra inning.
With nobody earning any interest income, the only way to get by is to take from principal holdings. It is an insidious kind of wealth confiscation.
Unconditional Basic Income (UBI) sounds like a really bad idea to me. My take is that, if everyone is given the same amount of money, such as the $30,000, that money will be pretty much worthless and wouldn’t buy much of anything! It’s like when IRAs were first coming into wide use, in the 1970’s. The banks were all giving people projections showing that, if they invested their IRA contributions with there, they would end up with a Million Dollars at retirement. I thought, and said so at the time, that if everyone has a Million Dollars, that Million Dollars would be worth nothing!
Hunker down!!! I’m 27% cash, 18% precious metals, 10% inverse funds, and the other 45% all pay steady dividends in the 6.5 to 9% range. I reinvest all of my dividends, so if the individual positions fall, I get more shares for my dividends. Now it’s just wait and see what happens on November 8. GO TRUMP!!!!!!!
just when will the vix get the message. every thing is up since 02/11/16 except the vix
In reality we’re almost at UBI if you are 62 or older, it’s called Social security, and it works! And it’s social-ization. I have dozens of clients for whom SS benefits keep them in their house and buy groceries. And they spend the money wisely. And they do nothing (now) in return for it, having paid their “dues” for 40 years. So give a bum $30K a year, would you rather give him food stamps, free health care or pay to incarcerate him/her? And have him keep re-cycling in and out of prison? We’re already on the path to socialism, (the milennials put the master socialist in the WH) why not arrive at the destination and let them pay for the privilege? :) Lighten up.
The Huffington Post makes it sound like the solution for all our social problems. It sounds good in theory but it presumes everyone will spend it wisely which Is highly unlikely. It assumes people will stop making bad decisions that cause so many of our problems now. It also is very vague about where all this money will come from. Tommr is right about the inflationary potential as well. Jim
On the lighter side, I read that an alarming number of SS checks are cashed at the local casino. Jim
Chuck,
Must be a typo, “master socialist” didn’t you intend to write “DA puppet”?
I have paid into Social Security since age 16, and I’m now 68. I get upset when people call what I’m getting an “entitlement”. I have to live to age 76 just to get back what I put in raw dollars, and if you factor in a 3.1% annual return, compounded annually, I have to live to be around 96. That’s just to get back what I put in, not including what my employer added. So calling my Social Security check a UBI is wrong.
And when you put a dollar in at age sixteen it was actually worth a dollar. Jim
I presume Switzerland taxes income, so giving everyone $30,000, would just mean handing out money, then taking some of it back. Kind of silly, unless they don’t tax the first $30 grand. What is a basic cost of living there? I believe it is quite higher than in this country. If Hilary or Bernie get in, maybe we will see something like that here. Donald might do something similar, but make people work for it, at least. Maybe building his Iron Curtain.
Been in the stock market for over 2 decades. Nothing spooked me not even 2008 but with the insane debt levels of the base currency with round after round of QE and negative interests rates coming im out. Cash,precious metals ,inverse funds,puts and mining stocks is where the smart money is going.
Regarding Switzerland’s idea about “unconditional basic incomeâ€: Given human nature (at least here in the U.S.; not sure about Switzerland’s work ethic), my guess is that many people who would have worked more or harder will say, “Why bother?” and as a result productivity would suffer. Just a thought.
Monica
I believe in theory the $30,000 Minimum wage experiment is now playing out in the U.S. ( $15 hr x 40 hr x 52 weeks ) and I believe you are correct many are going to say why bother and productivity will decline . Think of the guy making $16 an hour and maybe it took him 10 years to get there and suddenly somebody starts at $15 an hour doing the same job ??? I think that person might resent it and his productivity will decline because
his wage stays the same !!!
Funny how history has been distorted and people do not know that the original Pilgrims were communists and starved that first winter because many did not pull there weight . The Pilgrims than became Capitalists with private property and rule of law and that’s when they truly became prosperous .
Funny how if we forget our history we are surely doomed to repeat it !
Vinman
Vinman
Another interpretation according to Junior High School textbooks (in the old days) was that the Pilgrims befriended (or suckered) the American Indians to help them survive with native American food like corn, and turkey. Once, these new immigrants were fed on native food, and thus survived, they took over the land, and forced the natives out, as large waves of new immigrants from Europe kept arriving to North America. As the land was very rich in resources, and lightly populated, many immigrants prospered, although many died also, as life can be harsh in the mostly undeveloped land. It is more about imperialism. In the South, John Smith was saved by the Indian Chief’s daughter, who married Smith forming some sort of friendly relation with the natives, which probably contributed to the survival of the second colony at James town after the previous first group of settlers there disappeared without a trace as to what happened to them.
ric
Yes it is true the Indians had a hand in the Pilgrims survival by showing them what to plant and hunt but many Pilgrims still did not pull there own weight under the communist system which only lasted 3 years before it was decided to let each individual or family keep the fruits of there own labors . This created such bounty that the tradition of Thanks Giving was created to celebrate and give thanks .
True many Native Americans were enslaved and many died due to there lack of resistance to European diseases . This lead to them being replaced by the African slaves which proved more hardy to such diseases . It would take a few centuries and thousands of lives and much innovation before such injustices would come to an end in America . Hopefully we have learned much from our history .
I am also mostly short the markets w/ Puts and Inverse ETF’s.
Also have been out of Miners and Gold Since Last month w/ Heavy shorts on inverse Miners and Junior Miners ETF’s. Waiting to get back into Miners and Juniors at a much better price next month. Have a bunch of cash stocked piled for the Big Sale. Never pay Retail when you can buy Wholesale.
If all this money is being pulled out of the equity market, where is it going?
Is it being invested in something or just being held in cash?
Switzerland is an anomaly in the World. It has been “safe haven” for other peoples’ money for so long, that the Swiss have come to believe in the “Wealth Fairy.” They have become complacent. . . believing that it will always be so. Excessive capital availability has allowed Switzerland to spread its teller windows all over the World. Deposits welcome. . . withdrawals discouraged. They have also used this money to make enormous investments around the World. . . some of which have been successful. However, as various economies continue to collapse, as Europe descends into socialist chaos, Switzerland will become much less desirable, and the Swiss will be foraging for food along with the rest of us. Guaranteed income for doing nothing is foolish.
The Swiss aren’t alone in believing in the “Wealth Fairy”. Quite a few Americans share that belief. We are perhaps beginning to realize life and fairy tales are only alike in a tangential way, and we need a healthy distrust for fairy dust. The fairy must get something back from waving her wand so generously. Hilary as the good fairy? Nahh… Bernie? Donald? Double Nahh.
Bernie i.e. the only one who will make the right moves when the next drepession hits.
As for the guaranteed income, that will be the norm within 2 generations as the effects of technological unemployment take hold. Productivity won’t be a consideration much longer. If your eyes are open you can see the hints of it now.
The way I see it is the markets move in threes, they climb out of a low then have two major pullbacks before attempting to rise to or above the last high. I identify this point 2 1/2 because from here on the market becomes exhausted and begins to fall into the third pullback. The retesting has been done, the news is telling how wonderful everything is and the major player distribution phase is near complete.
So instead of bouncing again the market collapses through three and heads down to its first of three pull backs in the negative direction. The larger the time frame the larger the pullbacks as can be seen on the 5 year weekly $INDU, $SPX, $COMPQ etc.
Reader Cherry wrote that her broker is urging her to stay invested in order not to miss out on the big profits. [I didn’t know brokers still used that commission-generating ploy, nor that investors still fell for it. Hope Cherry’s not one of them.] She says that all the while her portfolio has been deteriorating. Cherry, to prevent this you have only to initiate very tight (-5%) trailing stops on all your long-term positions. When a ‘stop’ is triggered, not only have you ‘gone to cash’ but you protected your profits and prevented gains from turning into losses. This keeps you in the market as long as it’s profitable. And NEVER dollar-cost-average down. That’s a sucker play advanced by the open-end mutual-fund shysters. Buy a stock only when it’s rising. Study Stock Charts to check any stock’s trend before buying.
Almost any economic-system carried out by honest people, and based on a merit system will likely work, while the best economic-system (ie. free market capitalism) carried out by dishonest people, and not based on some sort of merit system will probably be bad. (This is like what Napoleon once said that a poor plan well executed can beat the best plan carryout poorly.)
Welfare-for-the-poor programs are really welfare-for-the-rich programs in dollar and cents terms. Money provided to the poor, whether in the US or Switzerland, will eventually end up in the pockets of the super rich people. For example, in the US food stamp program, the poor people may get stamps and food, but the money go to the rich supermarket owners, the food distribution company owners, etc. For example, in Medicare and in Medicaid, patients get treatments and drugs, but it is the rich doctors, hospital owners, and drug company owners who end up with the actual cash.
The dramatic increases in the wealth-gap between the 1 percent and the 99 percent in recent decades show that the money (ie. cash) do not stay in the pockets of the poor and middle-class for long, but the cash is more and more rapidly siphoned up to the 1 percent. Before the year 2000, the 1 percent was estimated to own 30 percent of the US national wealth. Now, it is estimated that the 1 percent people own about 50 percent of the wealth of the country. This is a growth rate of about 4 percent a year. At this growth rate, the ownership of the 1 percent will double from 50 percent to 100 percent of the nation’s wealth in about 20 years after compounding. Since, the wealth-gap number is a zero-sum-game number by definition, when the 1 percent get to double and to own 100 percent, the rest of the 99 percent will own zero percent of the country’s wealth. At that time, the 99 percent may not even own the shirts on their backs. It is hard to imagine what such a world will look like. Will people live like in dark ages, and forage in Sherwood Forest like in Robin Hood’s time?
What will happen to welfare-for-the-poor programs, or rather welfare-for-the-rich programs be like? If former middle-class, former lower-rich, and poor people, if such an even happens down the road, having nothing, and they are forced to forage in the woods, to grow their own food, to make their own potteries, and shelters as squatters, supermarkets cannot find enough paying customers, and neither can drug companies, nor hospitals, nor stores selling goods, as only the 1 percent have any money. In such environments, welfare-for-the-poor (ie. welfare-for-the-rich) programs will enable the 99 percent to continue to spend to further enrich the 1 percent, as most of the money of the 99 percent eventually will go to the 1 percent to keep the economy as we know it today running.
Wait a minute Trump says he will ease drilling? They have been doing that since 2014. I dont have the exact figures , but quite a few have stopped. Really we shouldn’t be cutting back too much , or when oil gets going again we will lose mkt share. The price is the magic bullet here. If oil goes back up many American companies will stay in business.
..and if new American drilling-projects start now, they’ll just add to the over-supply glut..leading to more defaults and more failed U.S energy companies..many of which Mike Larson urged us to buy last year..The World already has too much oil & now Iran is over-supplying also..Trump wants to ease ‘restrictions’ on drilling
..and ease environmental restrictions. Mike could have worded that much better. Trump wants to add to the over-supply & ruin the environment. He does not care. But he’s right about ‘Crooked Hillary’ & we can’t have more of her establishment crap..The Bush/Clinton Dynasty nepotism disaster has to end..so USA can grow up
Probably if you gave someone 30k a yr they would piss it away ,and the gov would be in hock. Much better is to buy someone a house for 30k ,and that person wouldnt have to pay morgage fees every month.Also you could make strick rules making that person tow the line or kick him out of the program. Now with that new found money you could really jazz up the economy ,and send the GDP soaring.
Good idea
Who provides % trailing stops? Firstrade did, but not now. Actually they say they do, but it is very complicated to get to other parts of their web site.
So if everyone in Switzerland gets $30,000 a year, where will the money come from; a 100% tax on your $30,000? Just what the world needs so we can all chase inflation. But according to Bernie, wealth comes from thin air. I would rather work and buy gold. Bye, bye Bernie!
This $30,000 Swiss approach to helicopter money is one of the many liberal concepts on which I base my prediction for coming world wide Stagflation. In any event the DNC will blame the Republicans, whilst forgetting that it was on their watch that the Chinese bought up every last drop of gold on the cheap. Sometime soon I expect that it will be difficult, if not impossible, to buy gold; so my idea is to buy physical gold yesterday if not sooner. In my opinion, once the gold chase is on it will morph towards gold stocks because buying gold will be difficult if not impossible for the average person. Cheers
Trump is right on energy. Obama pumped up incentives for alternatives but let the domestic oil go down when he should not have. He hates fossil fuels and is letting the Saudis destroy the trillions invested successfully in recent years that developed a domestic oil and gas industry that the rest of the world feared No it is in Bkcy court and the domestic coal industry is gone too Thanks obam. A
I’m individual investor from Nigeria, in Africa. i want to invest in Oversea preferably, U.S.A. Please can you help me to locate a well reliable and trust – worthy STOCK BROKERAGE FIRM. I will be grateful if you did.
EasyChimeks….
Sorry to tell you this… but there is NO such thing as an honest broker. They work on commission and their firm pushes them to sell their own high marked up products. Also when you use any of them… they force you to sign a contract that states that you the customer can never sue them in court but must use arbitration. I have gone through that process and it is rigged in favor of the firm that shafted you. If you are an extremely high end customer they might put you in on inside deals…that is maybe…..! Just use a discount broker and depend upon your own brain. OK as Bolge states… it is very difficult long term to beat an index, since timing the market is difficult…. yet some insiders do it everyday… but they are INSIDERS….. Good luck
The government could pay you to write educational books adding to a more educated and wiser society. Older people have a lot of knowledge and wisdom to pass on through books about the visitudes of life.
According to Direction Alerts, we are in what must be a very unusual, and potentially very scary market. Their charts indicate that we are in a very bullish situation within a bearish market, with strong bias toward continuing. At the same time, sentiment is within .17 of 100, indicating an utterly extreme complacency among investors. That would seem to indicate that when complacency ends, it may do so with a crash that will destroy many investors wealth almost instantly. The Dow could possibly fall thousands of points in one day. It might well affect many markets, not just stocks. Even gold investments could be caught up in the crash, at least for some little time. Cash could be king for a little while, but even cash could feel the pain after a bit. It could be the end of Society, as we have known it. ‘Sounds unreal, but I put it out there for your examination.
What is this happening at this time. It is election year.