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5 Things To Ponder: What This Way Cometh
Submitted by Lance Roberts of STA Wealth Management,
Well, it has been an interesting start to a New Year. As I penned yesterday:
"Since the end of the Federal Reserve's latest QE program, market volatility has picked up markedly. Since October, as QE came to its final bond buying conclusion, the drain of liquidity begin to financial market activity. As shown in the chart below, there have been three fairly sizable selloffs last quarter of 7.9%, 5.0%, and 4.3%."
"Not surprisingly, those selloffs gave birth to sharp spikes in volatility of 118%, 99% and 46.9% currently.
Since the beginning of QE-3, at the end of 2012, the financial markets have been on a seemingly unstoppable rise. While virtually 100% of all economists, analysts, and financial bloggers are currently expecting a continuous rise in asset prices for several more years, the one constant has been a steady decline in volatility. The lack of "fear" in the financial markets has been the "sirens song" for investors to step up to the casino table and place their bets in a seemingly "can't lose" bet. Each dip has now taught investors that such moments are fleeting, and those declines are best ignored. That is a dangerous lesson, to say the least, as things may now be changing."
What I find most interesting is that there is very little concern that something could negatively impact the markets. In fact, if anything would actually happen, it will just be a mild 10-15% correction. The problem is that historically, such outcomes have only been found in "rarified air." Could this time be different? Sure, anything is possible. However, as an investor my primary concern should be the protection of my limited investment capital against unmitigated destruction.
However, this week's reading list is a smattering of reads about 2015. As a contrarian investor by nature, it was interesting to note how hard it was to find views that were NOT bullishly biased. It seems we may have now entered a market realm where Unicorns and Bears are only things of legend.
1) Another Year To Soar by Ken Fisher via Forbes
"In 2015 expect an S&P 500 and global bull market extension of 15%-plus. Why?
I detailed why fourth quarters in midterm election years were historically positive 86.4% of the time–because markets don’t discount the goodies in increased gridlock–and why that continues for the next two quarters, both also 86.4% positive, history’s most positive continuous three quarters extant. Believe it.
Just so, third years of Presidents’ terms haven’t gone negative since 1939 and that was only -0.9% as Europe literally blew apart. Average third-year return? 18.5%. Excluding four single-digit years, the positives averaged 27.2%. Gridlock is great!"
Read Also: What Does Cycle Analysis Suggest For 2015 by Lance Roberts
2) Is Your Portfolio Ready For A Rough 2015 by Axel Merk via Merk Investments
"Is the recent bout in volatility yet another ‘buy-the-dip’ opportunity or a sign of worse to come? Investors struggle to both keeping up with the markets while protecting themselves against a severe correction. By taking a step back, investors might be able to see the forest for the trees to gauge whether their portfolio is ready for what lies ahead."
• The good: Risky assets have done very well in recent years.
• The bad: Portfolios may be overweight in risky assets, making them vulnerable in a market correction. In fact, as defensive assets underperformed, odds are that tax-loss selling further skewed the portfolio towards risky assets.
• The ugly: Risk-free assets, if there is such a thing, to rebalance to, don’t look so pretty either.
Read Also: In Assessing 2015 Goals, Beware Of Risk Creep by Carl Richards via NYT
3) Why Stocks May Correct In 2015 by Tom Huddleston, Jr via Fortune
"Here are some reasons why 2015 might be a disappointing year for the stock market:
- Stocks are far from cheap
- Fed will raise interest rates
- Big trouble in little Russia
- Europe is struggling
- China is a growth bummer
- Too much oil"
Read Also: What To Make Of Oil, Volatility And The Markets by David Kotok via Cumberland Advisors
4) Outlook For 2015 by Mebane Faber
"However, most of the positive momentum in the world is still in US based assets – stocks, real estate, and bonds. Most of the value is found in foreign equity markets (and arguably commodities, but with less traditional valuation methods). My favorite intersection is when value and momentum intersect. If and when the trend changes I think you could see truly explosive returns for foreign equity markets. But as we all know, and oil is a timely reminder of this now, trends can last a loooonnng time. And if US assets are the final shoe to drop….well then all equities around the world will get cheaper. "
Read Also: The Good Times Are Over by Bill Gross via Janus Capital Group
5) Buy Stocks As We Enter The Final Boom Phase by Richard Russell via Financial Sense
"For a month, I’ve told subscribers that I believe we’re now entering the third phase of the bull market. Strangely, most market analysts – almost all of whom are considerably younger than I am – are not acquainted with the sentiment phases of a bull market.
Normally, following the second phase, we have a deep correction followed by a continuation of the bull market into a third and final speculative phase.
From here on, the character of the third phase trumps everything else. All minor ripples in the market, all dips or pops, all of these are contained within the third psychological phase.."
Read Also: 2015: Reap What The Fed Has Sown by Charles Hugh Smith via Zero Hedge
Read Also: I Am Bullish - 12 Lessons For 2015 by John Cassidy via The New Yorker
Just Getting Started: 31 Tips To Keep Your @$$ Out Of Trouble by Jonathan Clements via WSJ
"A good forecaster is not smarter than everyone else, he merely has his ignorance better organised. " - Anonymous
Have A Great Weekend
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The market will never crash again. The New World Order has set upon us a while ago, and you just noticed and can't believe it.
i call your bet
with my entire stack
Gold just broke to the upside through it's 3 year downtrend - look for fireworks Monday a.m.
Sad to say this but the deflation trap has already been sprung. Look at the base metals, not just petroleum products and then look at many of the ags. There is a downward price trend on all commodities what will be bleeding over to the asset classes of real estate then equities as this year moves forward. The big disaster was the tepid confirmation from this mornings BLS Fraud report which showed the decline in wages month over month. Once wage deflation, or disinflation as CNBSFBNBBG, etc. likes to call it, takes hold and accelerates the phrase "no bid" will become common place.
The only remedy had to start in Q2 of last year and the Fed/ECB two headed monster stuck their collective heads into the sandpile of denial. This deflationary correction is a return to the same outcome we had in 1936-1937 except this time our status as a debtor nation will severely punish the Fed unless it starts buying massive quantities of government and corporate debt across the yield curve. Otherwise we will soon see negative interest rates of -0.1 to -0.5% on savings accounts and worse on 1 mo, 3 mo, and 6 mo treasuries as the crisis accelerates.
This disaster is of our own making and no one ever asked what happens in a hyperdeflationary environment where there is no bid, all caution, and total aversion to risk and owning any assets outside of universal currencies (aka, precious metals).
Please define what you mean by the word "market".
I only ponder 2 things when i see a Lance post
1) his call (3 months ago or so) that 10 yr yield will hit 4% in 2015
2) his call (2 months ago or so) that usd will weaken
how are they working so far??
Even though ZH'ers have been shown numerous examples of how before every crash, everyone believed it could never crash again, some here still say the market will never crash again.
"No, this time really is different, the FED/NWO/Govt./Bankers won't let it crash again."
Did it ever occur to you that these same people you say won't let it happen actually created every crash in history?
They now have trillions of wealth all neatly wrapped up into one juicy, irresistible target called the stock market, and they can pull the trigger any second they want after positioning correctly....and make a windfall like the world has never seen.
But, nah, they'd never do something like that.
2015 - the year to go long community colleges
virgin territory for wall street to rape & pillage
I don't know if people with outstanding student loans agree with you.
no doubt
but my line of thinking was wall street could create sham community colleges to funnel fedgov $$s into their pockets
Like Phoenix and Corinthian?
All history is meaningless in the time of the Fed.
This is the first "things to consider" list with under 10 items in quite a while ...
Bullish!
'Never sell a quiet market after a rise' must have a corollary, maybe, 'Always consider exiting a volatile market after a rise'.
Maybe this is true but if the markets are software applications connected to infinite fiat run by a bunch of criminal bankers what the hell BTFD.
3 stage cycle chart, puttn some 'Spooky Tooth' on, and fire up some conversation with Uncle Kona......
Something I don't understand. Can they raise interest rates without shooting themselves in the foot? With over 18T of debt, wouldn't a rate rise accelerate debt? Are they useing the threat of riseing rates and the possibility of more QE as a brake/gas pedal to manipulate?
Yes, they would be shooting themselves in the foot, but that's an incorrect metaphor.
It's actually our foot, not theirs.
Look out below! Thar she blows! But buy the dip...as soon as your crystal ball says to. Love to see the panic....and static cling.