Market Cycles

The Fed's 3rd Mandate & The Value Of Cash

Jan 2008: Bernanke "The Federal Reserve is not currently forecasting a recession." Jun 2008: Bernanke "The risk that the economy has entered a substantial downturn appears to have diminished." Jun 2016: Yellen "chances of recession this year are 'quite low'... The U.S. economy is doing well. My expectation is that the U.S. economy will continue to grow." Channelling Bernanke?

Imagine...

Now imagine what might happen next...

Does The U.S. Have A Plan For The Post-Oil Era?

The world's largest exporter of crude oil, the Kingdom of Saudi Arabia, recently announced a plan for its post-oil future. If a country almost synonymous with the oil economy can see the need for such a plan, how can the rest of the world, particularly the United States, the world's largest consumer of petroleum, not see the necessity of such foresight?

"Bored" Chinese Workers Created "Uncontrollable Bubble" In Commodity Futures

With the collapse of China's smoke-and-mirrors commodity bubble comes the post-mortem as the horde of Chinese gamblers flood from one government-appointed market to another as the American dream of get-rich-quick schemes appears to have been adopted by the burgeoning middle classes now disillusioned with real work. As Bloomberg reports so shockingly, from the Dutch tulip craze of 1637 to America’s dot-com bubble at the turn of the century, history is littered with speculative frenzies that ended badly for investors; but rarely has a mania escalated so rapidly, and spurred such fevered trading, as the great China commodities boom of 2016..."you have far too much credit, money sloshing about, money looking for higher returns."

Visualizing The Market Cycle

Like many controversial topics in investing, there is no real professional consensus on market timing. Academics claim that it’s not possible, while traders and chartists swear by the idea. That said, as VisualCapitalist's Jeff Desjardins notes, one thing that everyone can probably agree on is that markets are cyclical and that securities do have recurring chart patterns. They aren’t predictable all of the time, but learning the fundamentals around market cycles can only help an investor in furthering their understanding of how things work.

Cycles, Bounces, & The Only Question That Matters

Unfortunately, when central-planners "drag forward" future consumption today, you leave a "void" in the future that must be filled. That future "void" continues to expand each time activity is dragged forward until, inevitably, it can not be filled. This is currently being witnessed in the overall data trends as seen in the deterioration in corporate earnings and revenues. The only question is whether Central Banks can continue to support asset prices long enough for the economic cycle to catch up. Historically, such is a feat that has never been accomplished.

Worst Case Scenario: 73% Down From Here

QE3 ended 17 months ago and shockingly the S&P 500 is exactly where it was 17 months ago. How many bull markets go flat for 17 months? As John Hussman accurately points out, we are experiencing a topping formation in the third and biggest bubble of the last 16 years. It’s a long way down from here.

3 Things: 80% Or Bust, Mind The Gap, It’s A Bunny

“The McKenzie study also noted that on average “analysts’ forecasts have been almost 100% too high” which leads investors to make much more aggressive bets on the financial markets. “

Can Draghi's "Kitchen Sink" Beat Recessionary Earnings?

Despite ongoing Central Bank interventions which boost asset prices and acts as a huge wealth transfer tax from the middle class to the rich, corporate earnings are a direct reflection of what is happening in the actual economy. Wall Street has always extrapolated earnings growth indefinitely into the future without taking into account the effects of the normal economic and business cycles. This was the same in 2000 and 2007. Unfortunately, the economy neither forgets nor forgives.

Don't Confuse Genius With A Bull Market - 10 Steps To Redemption

Individuals are consistently promised that investing in the financial markets is the only way to financial success. After all, it’s so easy. Financial pundits across the country state the one simply buys a basket of mutual funds and they will make 8, 10 or 12% a year. Don’t confuse genius with a bull market. It’s not hard to make money in a roaring bull market. Keeping your gains when the bear comes prowling is the hard part.

Why You Should Question "Buy-And-Hold" Advice

Retail investors generally buy an off-the-shelf portfolio allocation model that is heavily weighted in equities under the illusion that over a long enough period of time they will somehow make money. Unfortunately, history has been a brutal teacher about the value of risk management.

Crash Risk & The Imminent Likelihood Of Recession

"... there is presently an enormous chasm between the point where self-reinforcing selling pressure by speculators is likely to emerge, and the much lower point where balancing buying pressure by value-conscious investors is likely to support the market. Because every seller necessarily requires a buyer, the enormous gap between the two represents substantial crash risk."

"Markets Crash When They're Oversold"

When markets begin a "bear" cycle, they can remain in an oversold condition for extended periods. There is an important 'truism' to remember - "Markets crash when they’re oversold."