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Starting with this column, I’m introducing a new feature called “Mike’s Moves to Make.” It takes the big-picture ideas in my columns and distills them down to simple, actionable information to help you build (and preserve) your wealth. You’ll find a box with those steps to the right.
Now, let’s get down to business …
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Mike’s Moves to Make Buy: Cash, Short-Term Treasuries, Short Real Estate ETFs Sell: Autos, REITs, Construction stocks |
The prediction game isn’t always easy. But if you have a battle-tested approach based on decades of knowledge, experience, and proven techniques, it can pay off big time for investors.
My background is in analyzing the credit markets and credit cycles. I’ve spent decades watching, analyzing, and forecasting every twist and turn in the bond, rate derivatives, mortgage, consumer lending, and real estate markets.
My research suggested more than a year ago that two industries in particular were facing a major day of reckoning – commercial real estate and autos. So I urged you to dump any stocks with exposure to those two industries, including wildly popular Real Estate Investment Trusts (REITs) that investors have flocked to for income in a low-yield world.
How’s that paying off? Well, just look at the iShares U.S. Real Estate ETF (IYR) and how it’s giving up the ghost. The benchmark REIT ETTF has plunged more than 11% just since August, leaving it essentially flat on the year. Meanwhile, one of my favorite ETFs that rises in value as REITs fall has surged almost 23% in just a couple of months.
It’s not just commercial real estate stocks that are having problems, either. Check out the SPDR S&P Homebuilders ETF (XHB). It has given up every penny of the gains it had, and is now down 2% on the year.
How about autos? I’ve been slamming the sector for more than a year, given the ridiculous lending, surge in leasing, jump in incentives, slowing sales, and rampant overproduction we’ve seen.
Sure enough, shares of General Motors (GM) have massively underperformed the market throughout 2016, losing almost 7% year-to-date. I’ve been even more bearish on Ford Motor (F), and it has plunged roughly twice as much as GM.
As for Fiat Chrysler Automobiles (FCAU), its shares have lost more than 30% of their value this year alone! Parts-makers like Lear (LEA), BorgWarner (BWA) and Delphi Automotive (DLPH)? They’re down more than 3%, 17%, and 21% respectively.
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Economic Tidal Waves Act Just like Tsunamis According to the National Geographic, the enormous energy of a tsunami can lift giant boulders, flip vehicles and demolish houses. But from a financial standpoint, the K Wave will be even worse: Millions could lose their homes. Millions more could see their lifesavings wiped out in an instant. Businesses, large and small, could close their doors. Even the bare necessities of life — food, water, clothing — might become scarce. That’s why it’s so important that view my new presentation “STOCK MARKET TSUNAMI” right away, click here to watch now! |
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Dodging losses like those is absolutely essential to preserving your wealth. But there’s another reason why my warnings on these sectors are incredibly important to you: They’re eating away at the stock market’s internals.
For example, this summer, I recommended caution when it came to chasing the July/August rally. I also said that the volatility crush which followed was one of the most abnormal market events I’ve ever seen, and simply couldn’t last.
Now, the Dow and S&P 500 have given back their entire summer rallies. The VIX index of volatility has surged more than 50% from its August low. And everything from election-driven uncertainty to a renewed crash in the British pound to the ongoing meltdown in European banks has rattled investor confidence.
So what’s next? Buckle up. The renewed rockiness and intense selloffs in weak sectors and stocks that I flagged many months ago should just be a taste of what’s to come. My indicators tell me the economy is poised to decelerate, the busts in sectors like commercial real estate and autos are just getting started, and that you have to either protect your wealth from those threats — or turn them into profit opportunities.
You’ll find specific, protective recommendations to take in my Safe Money Report. And you’ll find more aggressive profit-targeting recommendations in my All Weather Trader, where my subscribers have had the chance to bank multiple rounds of double-digit and triple-digit profits from the unwinding of the easy credit cycle.
Finally, make sure you keep up to date with my latest suggestions and guidance. You’ll get my weekly columns Friday mornings in your inbox. Plus, I’ll post more interim “Mike’s Missives” updates on daily developments at the Money and Markets website.
You can read, comment on, and share them at your leisure. They’re posted on our home page, while previous ones are available in the archives here.
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.
{ 18 comments }
Good piece Mike your one of the few with some insight.
Mike
your position tracker reflects your results. Your reccos are losing your clients $.
including mine. Your timing is way off on placing your trades. Please explain how you are going to improve this terrible performance.
ed
Ed,
I completely agree with you!
Mike maybe good at picking option puts/call trades but I find he is WAY TO EARLY.
Dave
Just released figures show that my state, Maryland, had the lowest investments in the third quarter by venture capitalists since 1997, yet it stood right in the middle nationally, as it does populationwise. Investments were down 76% from the 2nd quarter, minus 86% from 3rd quarter, 2015, and down 44% for the first 9 months of this year. Even in the last recessions, investments were larger. This seems to reflect a national trend, where investment capital is drying up.
By the way, major industries in the state include bio-chemical, medical, electronics, IT and cyber, and distribution. These would be among those affected.
There is lots of construction, also – housing, apartments, warehousing, shopping and others.
Hi Chuck,
My guess is that the uncertainty of the winner of the presidential election is causing speculators to be cautions and even sell some things to build a cash reserve…
Buying opportunities are sure to come as heavily leveraged investments will be the first to
suffer with higher interest rates…
If you own investments outright, then you may be in a better position to ride out the
possible storm.
Remember, the old saying … “Conservative Times are Tough Times”
Well, the corrections would have been much easier to ride out back in 2008-2009
if a couple of bad Banks were allowed to fail.. Just think… it would have affected
fewer citizens than 8 years of Quantitative Easing with borrowed money has done.
Now, more of us will be affected by the National Debt being so huge.
There has to be a change in the direction of the Federal Government.. because the US has stopped manufacturing out of fear of pollution and a false fear of Human involvement in Climate…. Remember what a certain politician said… “Do not Waste a Good Crisis”
because you can do things that you normally can not do. Keeping the electorate
in a state of Fear allows government do do things that they could not normally do.
One thing I have noticed is that we do seem to have Skies with fewer clouds… and that when the sun goes down, I have had days where I had to switch from Air Conditioning to
wanting to turn on the heat.. I blame that on the lack of Heat retention that is provided by clouds.. Remember the old days when days and nights were BOTH HOT?
We have cleaned up the skies so much in the effort to get more sunlight for the solar panels, that the trend toward a Desert Climate is spreading..
More efficient aircraft has the effect of reducing Condensation Trails… which once helped to create clouds. Factories with smokestacks also create clouds and rain due to the tiny particulates that help to condense water droplets… as they rise to higher altitudes where they cool.. (Did you learn the Rainfall Cycle in Grade 7 Science?)
Sometimes, a little Industrial pollution can be a good thing…. since clouds keep us cooler in the daytime and warmer at night.. Clouds also are part of the rainfall cycle, and are part of Drought Reduction… because it is clouds that cause rain… as they cool.
Now we have major storms instead of more frequent smaller ones.. (and the flooding that
comes with major Weather events.)
Imagine how much more I could say if I was not a climate change denier.
Good luck to all over the next month. The next “Storm” is arriving.
I wish I lived near you, because where I live we almost always have chemtrails, not contrails, coming out of the airliners crisscrossing our skies. And no they do not dissipate, they spread out. These are not the contrails (steam) of yesteryear.
I don’t disagree with you doubting climate change because, in the very least, any temperature difference is, so far, within the error reading of any thermometer. Couple that with the widespread use of thermometers being less than 100 years. I also do not doubt that we (humans) could have caused a change, but Mother Nature has her own, and stronger, “mood swings.”
Hi Different Ron,
There are a lot less contrails now than in previous years, mainly due to improvements in Jet Engines.. Now, they actually burn in pulses leaving a dotted line of condensation to conserve fuel at high altitudes. Less fuel, less heat and water vapor means less moisture in the air to form clouds….
Re Human Caused temperature change… More Co2 is a good thing… because we do need more Plant Life to feed the growing population and Plants NEED the Co2 for Photosynthesis and growth….n Funny how Mother Nature knows this and
does what is required to feed a population that had doubled on this planet in 50 years.
The governments own graphs show that Temperature Rise LEADS any measurable increase in Co2 Levels.. so who is twisting the truth?
The only Hockey Stick Graph that appears to be true.. is the one that we see now if we plot the National Debt level from year to year.
All the best to you in this orchestrated insanity
Maybe the next two weeks will change the agenda.
regards
Ron
Chuck:
Maryland is a state heavily populated with Government workers and companies(contractors) that are greatly dependent on government contracts. I would think that the fact that the Maryland economy is so tied to D.C would have a greater impact on investment during times of easy money such as we have been for the last decade, and would therefore show greater investment on a statistical basis then other areas of the country. However, on the flip side, Maryland is not a business friendly state when it comes to taxes, regulation and the political climate…..anti-guns for instance, and has chased many companies out of the state because of these factors.
Yes, Bill, the heavily Democratic majority have allowed anti-business, pro-government politicians to destroy the business climate in the state. Maybe that had something to do with our electing Governor Hogan(R), this last time. he has done much to streamline things, such as speeding and consolidating permitting policies. His last rating among voters is a high +70% as a result. Some Democratic politicians are trying to hamstring a sizeable break (which they passed) to Northrop Grumman, one of the last big manufacturers (11,000+ workers) and drive them out. They must stupidly think this will reflect on Hogan instead of themselves. And the anti-gun nuts have largely disarmed everyone except criminals and cops. They have battles among themselves, and the innocent often are the casualties.
I am a real estate syndicator of much experience and I am soooo cautious.
When sellers counter for more money than a fair price, I suggest that they sell now because when interest rates go up, apartment prices will slump and there is shakeout ahead.
Mike,
Haven’t you been calling fro a Crash since Obama was elected…. Pretty much any chart shows that you have been dead wrong as we are now at new highs and still climbing…. It looks to me like Obama is the next FDR. Incidentally, I believe that Obama has the highest rating in his last year as FDR, the most beloved of any of our past Presidents…..
Eagle495
Sometimes a train arrives at the station late. Take a look down the tracks. Charts figures just numbers thrown up by a desperate Fed and governments to boot.
Curious if this is a call for “all” real estate to fall. That is, including equity reits such as healthcare, storage?
The markets have not crashed because the fed keeps printing money. Not only are they printing money to keep the economy from crashing they are buying treasuries to the tune of $4.5 trillion dollars. Additionally the Obama administration with congresses approval has spent nearly $10 trillion more than has been taken in over the past 8 years. This has also helped to fool the people into thinking the economy and markets are strong.
We as a country are up to our eyeballs in debt. Thanks Bernanke Yellen etc and a big thanks to Obama too. You have killed the goose.
If I don’t work and I use my credit card to buy food pay for housing and pay the other living expenses of borrowings the debt collector will eventually come the spigot will be shut off and the family will be on the street.
Good luck to all.
As for productive ag real estate in the next 2-4 years… will it strengthen ? What prospects do you think lay ahead ?
Real estate is usually weak or weakening in years that begin with “8”. I have come to expect that. Usually that is when financing gets weak for buyers. The auto industry is too lenient with 7 year loans on cars that will remain mostly trouble free as long as the electronics work and are updated timely and the tires and batteries are good – usually less than 4 years. Banks are beginning to hurt as credit will become tight again and demand, therefore, dries up. It will be some months until the average person realizes that he is losing buying power and then a recession will start. Wait until late 2017 or so for a recession.