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Investing, Markets, Posts

Check Out My Latest Article For The Huffington Post

I recently wrote an article for the Huffington Post titled, “Here’s Why Intelligent Investors Are Avoiding Stocks Right Now.” Here’s a teaser:

The stock market had an awesome year last year, rising roughly 35 percent. Many investors, inspired by the market’s strength, have now decided they want to get in on the gains. However, now is not the ideal time to put money to work in stocks. In fact, it’s a horrible time to do so…

Read the full story at huffingtonpost.com

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Investing, Markets

Investors Are Once Again Ignoring All The Red Flags And Setting Themselves Up For Failure

We’re currently witnessing an incredibly fascinating time in the financial markets. All kinds of people and media outlets are now talking about heightened risk in the stock market and I haven’t seen any real case made against it (just a LOT of logical fallacies). Still, investors keep pouring money in and the market keeps heading higher. It’s as if they’re laying down in front of a speeding locomotive, tying themselves to the tracks with their own greed.

Here are the 8 things we can all agree (based on their popularity in the press and lack of rebuttle) will doom investments made in the stock market today:

  1. Quantitative Easing is losing its efficacy and creating major imbalances. Ray Dalio recently argued that QE is now beginning to suffer from its own success in boosting asset prices. At the same time, the general public is realizing the whole program, by relying on the “wealth effect” to boost the economy, disproportionately benefits the rich while they see little or no benefit at all.
  2. But the Fed can’t stop or even taper QE without major repercussions in the financial markets. If QE’s greatest accomplishment has been boosting the economy via the wealth effect, it stands to reason that removing or even reducing it will have the opposite effect.
  3. Hence, the Fed is trapped. Richard Koo can’t find anyone to dispute this.
  4. Still, it can’t “print money” forever. At the current pace, the Fed is printing $1 trillion of new money every year and then spending much of that buying treasury bonds, essentially monetizing the debt. Even the Fed admits this cannot go on for long.
  5. Yet stocks are priced as though they will. Based on numerous metrics, including Warren Buffett’s favorite valuation metric, stocks are valued significantly higher than they have typically been in the past. In other words, very little risk is priced into the market at current levels.
  6. And investors are clearly optimistic about future returns. Why else would they pour record amounts of money into equity funds and use record amounts of leverage to boot?
  7. Even though they are guaranteed to be mediocre at best. Investment returns are based on the price you pay. Because prices are relatively high today future returns from current stock prices are reasonably estimated at 0-4% over the next decade.
  8. All of which means many investors are doomed to be let down. With potential “reward” in the low single digits and potential “risk” being 40-55% to the downside it seems investors have once again set themselves up for failure.

Isn’t it absolutely amazing how this happens time and time again?

Chart of the Day:

Oil has been a very good signal for stocks so far this year and it just took a pretty nasty tumble:

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Investing, Markets

Julian Robertson Says Stocks Are A “Bubble Market”

julian-robertsonJulian Robertson, one of the most successful hedge fund managers of the past few decades, told CNBC today:

I think we’re in the middle of a kind of a bubble market, where it’s going to take something bubble-like to happen. And prick the bubble and we’ll probably have pretty bad reactions to the breaking of the bubble…. I think you have to… lean towards– being conservative in a market [like this, by] …raising cash or going short.

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Economy, Investing, Markets

Why Ben Bernanke & Co Fear The Taper And Mr. Market Should Too

bernanke money printing

They’re printing money because they’re scared of what might happen if they don’t. -Albert Edwards

As you are probably already well aware, the Fed decided not to taper it’s $85 billion per month of bond purchases just yet. This threw most market watchers for a loop as Ben Bernanke had made it pretty clear leading up to the announcement that the Fed had every intention of beginning the process of removing this latest round of quantitative easing.

What I find interesting is that, as Stan Druckenmiller suggests, the Fed had primed the market for this tapering in bond purchases and essentially had a freebie to get it started yet they decided not to use it. Why?

Clearly, if the economy is not recovering like the Fed would hope then the $85 billion in money printing per month is just not working in the way that they hoped. The one way it has been effective is in boosting asset prices, making the rich richer but doing nothing for the unemployed. For this reason I asked on Twitter yesterday:

Minyanville’s Todd Harrison, who you can see in the new documentary about the Fed “Money For Nothing” (now in theaters), responded with a third reason and I totally agree. The Fed is now trapped. It’s printing $85 billion per month which is having very little if any positive effect on the economy yet it can’t stop without risking major repercussions.

As Stan Druckenmiller recently told Bloomberg:

If you didn’t believe before that the exit was gonna be tough, the mere hint that maybe in 3 months, if the economy’s good, we might go from 85 billion a month to buying 65 billion a month caused that kind of havoc and risk around the world how in the world does anybody think that when the actual exit actually happens prices are not gonna respond? It’s silly.

Ben Bernanke & Co. were clearly listening. Long-term interest rates nearly doubled on the mere mention of tapering while a few emerging markets saw their stock prices crash and foreign currencies went nuts. So the decision not to taper probably had less to do with the data and much to do with Fed officials fearing the ramifications of actually removing QE even to a small degree.

money_for_nothing_-_p_-_2013

So we have a Fed fearful of what might happen to the markets and economy if QE is removed and, in stark contrast, investors celebrating the decision by pushing stock prices to new highs. If this isn’t the height of irony I don’t know what is.

At some point Mr. Market is going to realize that this isn’t at all bullish. In fact, the decision not to taper after laying all the groundwork may end up being an inflection point for investor confidence in the Fed. Fortune magazine ran an article earlier this week with the headline, “The Fed Has Lost All Credibility.” It concludes:

Lately it has been getting harder to believe Bernanke. He was continuing to say that the Fed won’t raise interest rates until mid-2015, yet by the Fed’s estimates and others, the unemployment rate by that point would be getting close to 6%, past where most people expect the Fed to raise interest rates. Wednesday’s taper two-step will diminish Bernanke and the Fed’s credibility further. The market went up today because it caught Bernanke in a lie. That will make it harder for Bernanke, and the Fed, to claim it really means it next time. So much for the power of communication.

I’ve been warning for months that when the Fed’s “confidence game” comes to an end it won’t be pretty for the markets. And the endgame may now be in sight.

Posts from earlier this week:

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Technology

Flipboard + Twitter = The Ultimate Newspaper Killer

flipboard

Longtime readers know I’m a news junkie. Well, I’ve finally given up on traditional newspapers. Don’t get me wrong; I love holding a real paper in my hands. But I just don’t need one anymore. That’s because I’ve finally fine-tuned an incredible alternative. It brings together the best news sources in the world, prioritizes them based their relevance to YOU and puts it all into an elegant and efficient reader.

I’ve been on Twitter since 2007. I’ve followed and unfollowed thousands of different accounts over time to fine tune the social network into something of great value for me in my work. It’s come so far that it’s now my best source for breaking news and commentary anywhere online.

I only follow a small number of actual Twitter accounts these days so that my main stream isn’t overwhelmed. I organize all the other Twitter accounts I want to track into lists. Among these are the Wall Street Journal, Washington Post, Daily Beast, Business Insider, Financial Times, The Economist, Rolling Stone, along with reporters, professional investors and experts like Dennis Gartman, Carl Icahn, Michael Santoli, Todd Harrison, Jim Grant, Doug Kass and plenty others that share anything and everything you’d ever want or need to know about what’s going on in the financial markets and the world.

But here’s where it gets cool. There’s no way I can keep up with all of this information 24 hours a day. So we add Flipboard, a free app for your smartphone or tablet, into the mix and we get a magical news reader that aggregates and prioritizes all these tweets and gives us the latest and greatest news and views you can find and all in one place.

All you’ve got to do is add your Twitter account in the Flipboard app and then add your lists and then you’ve got your front page, world news, business, sports and entertainment all right there. The best part is that it’s real time, encompasses far more than a single newspaper could dream of covering and uses social media to make sure it’s relevant to you.

You’re welcome.

You can check out my personal Flipboard magazine, “Contrarian Curations,” here.

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Economy, Investing, Markets, Trading

Time Magazine Rings The Bell (At The Top)

timeMagazine cover indicator alert!

Investors like to say, ‘they don’t ring a bell at the top,’ but I’ve been pointing out for months that there are, in fact, various bells ringing concurrently right now. This cover image, which graces the most recent issue of Time, is just the latest in a string of them.

And for those of you who think this whole idea is a bunch of mumbo jumbo, remember this?

Time Magazine & House Pricesvia ShortSideofLong

If you’re wondering what this means to you and your investments read this.

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