Bubble Denial

Investors have an ability to delude themselves for extraordinary lengths of time. For instance, the worst annual performance for investment grade corporate bonds occurred in 2018. It was a miniscule -3.8% loss for IG corporates (via LQD). Here in 2022? IG corporates...

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Stock Valuations Do Not Matter… Until They Do

Those who refuse to give up the idea that the stock bubble has burst, or refuse to consider that the market will drop further, ignore stock valuations. Consider the popular earnings-based and book-based metrics. In what world has the 21% decline from the top provided...

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Until Something Shatters

A few weeks ago, most pundits in the financial media had declared that the bear market was over. If nothing else, they insisted, we had already seen the bearish lows. They were wrong about the bear market being over. And they are almost certain to be wrong about the...

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The Worst Is Not Yet Behind Us

At the start of 2022, the stock market had been sitting atop its highest valuation extremes ever. In fact, our modern-day circumstance rivaled 1929's super-bubble as well the dot-com hysteria in 2000. By June of this year, the S&P 500 had descended as much as 26%...

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Capitulation?

Last month, I observed something about the June stock market lows. Specifically, investors did not give up on stocks. They did not "capitulate." Here is my observation during the bear bounce in July: "In the 2000-2002 bear, individual investors dropped their stock...

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The Next Leg Down

Have we seen the bottom for the stock bubble? Bullish enthusiasts point out that when stocks have recovered more than 50% of their bear market losses, they've never fallen to new lows. For these folks, once the S&P 500 surpassed 4232, the bear market ended. On the...

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Where’s the Beef?

Since March, the Federal Reserve has rapidly hiked its overnight lending rate in an effort to curtail inflation. It may be working. However, the more important work to beat back inflation involves removing trillions of dollars from the financial system. Specifically,...

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Lies, Bigger Lies, and Economic Data

It was the worst of times, it was the best of times. On Friday, the Bureau of Labor Statistics (BLS) revealed that the country created more than 500,000 jobs in July. Equally terrific? The data show gains of nearly 1.7 million new positions in just 5 months....

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Strangest Things

Is the U.S. economy experiencing a recession? Technically... yes. According to the world's leading dictionary publisher, Oxford Languages, a recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally...

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Reverse Wealth Effect

Households as well as businesses feel wealthier when their stocks, bonds and real estate are gaining in value. It's called the wealth effect. The problem with wealth effects? They often reverse course and, eventually, cause market participants to curb participation....

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Are You Inverted?

Scores of pundits are getting bullish on stocks. Their reasoning? We may have reached peak pessimism. For example, small businesses have never expressed more concern about the outlook for future business conditions. However, the stock market is probably not...

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The 2022 Bear is Tracking 1973-1974

In 1973, OPEC's oil embargo sparked shortages throughout the U.S. I was only six years old at the time, though I still remember waiting with my father for hours on lines at the gas station. Energy inflation played a huge role in the 1973-1974 bear market. It was one...

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Da Bears

There's one thing that everyone should know about bear markets. They do not end without capitulation. For instance, in recessionary bear markets, individual investors dramatically lower their stock allocation. In the 2000-2002 bear, individual investors dropped their...

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Profit Margins: The Next Shoe to Drop

The S&P 500 has not performed this poorly in the first six months of a year since 1970. The picture is even uglier for the growth-oriented Nasdaq. Bubbly asset prices stayed frothy during the Federal Reserve's money printing spree and zero percent interest rate...

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About Those Profits

Small company stocks are down roughly 25% YTD. They're down closer to 30% from their lofty November 2021 heights. That's making some folks, including myself, take a second look at overlooked smaller companies listed on the exchanges. On some measures, in fact,...

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Getting the Recession They Want

The chair of the Federal Reserve, Jerome Powell, appeared before the U.S. Senate Banking Committee yesterday (6/22/2002). He acknowledged that a recession could result from the Fed's battle against inflation. "It's certainly a possibility," he said. In the recent...

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Is the Worst Behind Us?

How scary is the "double whammy" of higher inflation and higher borrowing costs? Businesses have never been more pessimistic about the near-term future. Companies may be taking their cues from consumers. In particular, people are unlikely to spend on things like...

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Never Say Never?

There are those who believe that the U.S. can avoid an economic downturn while simultaneously battling a 40-year high in the inflation rate. The problem? There has never been a time when annual inflation has been reined in by more than two percentage points without a...

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Coming Unglued

The Federal Reserve electronically created close to $5 trillion for the U.S. government to hand out in the pandemic. Here in 2022, we are seeing the consequences of our government's money printing gone awry. For instance, 2020 investors “took advantage” by borrowing...

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Already in Recession?

Are we already in a recession? It's certainly possible. The economic world typically defines a recession as having two consecutive quarters of negative growth. The measure of that growth? Gross domestic product (GDP). GDP contracted in Q1. And according to the Atlanta...

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Demand Destruction

Depending on the measure, housing has rarely been less affordable. For instance, if one looks at average (median) household income as a percentage of median new home price, homes have never been less affordable. If one simply looks at mortgage payments, however, the...

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The Shortest of Memories

The stock market ravaged the tech-heavy Nasdaq in the 2nd half of the year 2000. In just six months, the large-cap growth segment plummeted 40%. It was not nearly as bad for the S&P 500. Just a 10%-plus correction. A monumental buying opportunity, experts...

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Should You Mind the Gap?

Some folks do not believe that there's a housing bubble. Clearly, they're not minding the gap. What gap? The one between home prices and what people earn. When the Fed forced mortgage rates dramatically lower in the early 2000's, homebuyers could afford lower...

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Catching Down

Americans have very little confidence in the economy. In fact, you would have to go back to the banking collapse (2008-2009) to find as much pessimism as there is right now. Just how anxious are consumers? The spread between how we feel about the present (Present...

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Et Tu, Housing Bubble?

Reckless policies by the Federal Reserve did not just create a monstrous stock bubble. Money printing and zero percent rate mandates bolstered today's housing balloon -- one that rivals the mid-2000s insanity. Folks may be coming to terms with the notion that stocks...

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“Iceberg, Right Ahead!”

Few financial commentators were talking about the stock market falling nearly 20% in the first five months of 2022. And now, the very same folks are telling you that we cannot be that far from the bottom. Even if the S&P 500 falls 30% before bottoming, they...

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The Unwinding

There's a whole lot of hope that the stock market can avoid a severe downturn. So far, the S&P 500 has been able to bounce out of bear market territory (-20%). Going into this year, however, stocks were extremely overvalued. They were pricier at the start of 2022...

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If History Rhymes

Stocks have already lost 18% through the first 96 trading days of 2022. Odds are, things should get better from here, right? When stocks experience losses that surpass 10% through mid-May of a trading year, investors often see gains by the end of December. About half...

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The Stuff That Stock Bears Are Made Of

The financial media wanted you to believe that the consumer is still strong. They pointed to data that showed robust spending at retailers this past April. What they failed to tell you? Those dollars had not been adjusted for inflation. When one accounts for...

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Stop Betting on the Fed to Save Stocks

Why was inflation so horrendous in the 1970s? The U.S. Money Supply increased by more than 40% in a 3-year period. Why is inflation so troublesome today? The U.S. Money Supply increased by more than 50% over the last three years. Apologists say that the money printing...

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Say Goodbye, TINA

Many folks wonder why the Federal Reserve needs to be so aggressive with interest rate hikes. After all, 30-year fixed mortgages have topped 5%, making it nearly impossible for homebuyers to qualify. The primary way for a central bank to beat back inflation is to...

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What Are We Smoking?

It would be difficult to deny the existence of today's asset bubble. Not if macro-economic data and stock valuations matter. The stock bubble became particularly egregious in 2020. That's when the Federal Reserve's excessive money creation (a.k.a. "quantitative...

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Bubble Trouble? Here’s How To Navigate It

Higher borrowing costs are already slamming the brakes on real estate. For example, a few months ago, one might be able to get a 30-year mortgage at 3%. That mortgage has catapulted all the way up to 5%. The difference between borrowing $500,000 at 3% and borrowing it...

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Inverted Thinking

Rising interest rates? Check. Geopolitical tensions? Check? Inverted yield curve? Check. According to the research firm, CFRA, these factors alone are highly likely to be accompanied by a stock bear. When a recession has developed within 12 months of these items,...

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Will the Walls Come Crumbling Down?

The 2022 stock bubble is well-documented. Yet, what about the present-day real estate balloon? For instance, home prices are bounds and leaps beyond anything seen in the mid-2000s insanity. To make sense of the true dollars, however, one has to adjust for inflation....

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Sputtering Stock Train

The Federal Reserve added $5 trillion to its balance sheet to battle the Covid-19 pandemic. That's a whole lot of digital money creation in a matter of months. In actuality, the Fed started to print money digitally to manage the fallout from 2008's financial crisis....

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How Much Can You Bear?

The Dow and the S&P 500 have only closed in correction territory. Specifically, the mainstream indexes have only experienced top-to-bottom price declines of 10%-13%. Underneath the surface, one half of S&P 500 components (250 companies) have plummeted more...

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Technically Unsuitable

The percentage of stocks in the S&P 500 that are in a technical uptrend? 40%. In other words, the majority of stocks are trending downward. Ditto for the Nasdaq Composite. The percentage of stocks in an uptrend is a paltry 35%. Equally telling, the market's...

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When Does the Fed Retreat?

The Federal Reserve is looking to navigate a path between fighting inflation and protecting markets. Granted, the central bank’s key mandates are to fight inflation and to bolster employment. For the entirety of the 21st century, however, the Fed has concentrated on...

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Grumpy Consumers

Consumer sentiment is downright abysmal. It is as weak as it was during the 2008-2009 financial crisis and during the early 1980s recession(s). How downbeat are consumers? Data indicate that sentiment is 28% below an average reading. Consumer dissatisfaction is...

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Caveat Emptor

The dividend yield for the S&P 500? About 1.3%. That's about 65 basis points lower than the yield on a 10-year Treasury bond. The dividend yield is also nearing lows not seen since the stock market crash at the turn of the century. Some investors might be asking...

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Damage Control

According to the data, the S&P 500's correction in the the first 16 days of the year represented the worst start ever. And the final tally for January does not figure to be much better. Some are even beginning to call the price damage a "stealth bear" market. For...

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Going Up?

Many people assume that "stocks" have been a great investment over the last year. Few realize that the gains have primarily been confined to the U.S. large-cap space. Smaller company stocks represented by the Russell 2000 have gone absolutely nowhere over the last 12...

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Chart Storm

In the first few weeks of January, the Nasdaq fell 10% below its 52-week high. Meanwhile, the S&P 500 slipped about 4% from its record peak. The reason for the volatile start to the New Year? Fear of the Federal Reserve raising overnight lending rates rapidly to...

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Defining Insanity

“Insanity is doing the same thing over and over again but expecting different results” -- Narcotics Anonymous The Federal Reserve digitally printed roughly $3.5 trillion dollars between 2008 and 2014. In that brief period, the Fed created three centuries' worth of...

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History Rhymes

“History Doesn't Repeat Itself, But It Often Rhymes” – Mark Twain Cathie Wood, active stock picking manager for the ultra-hip ARK Innovation Fund (ARKK), is still a bona fide superstar. At least according to CNBC. Unfortunately, the shine may be coming off the...

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Place Your Bets

The Federal Reserve has been the investor's best friend for a very long time. For 13 years, if stocks fell a mere 10%-15%, the Fed immediately intervened with promises of ultra-low, interest rate stimulus. And when the pandemic crash of 2020 threatened to burst the...

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Dicier By The Day

Digital money printing and interest rate manipulation seemed like a no-brainer in March of 2020. The world’s economic activity had been coming to a screeching halt. Here at the end of 2021, however, there are too many dollars chasing a scarcity of available goods and...

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The Signs of Excess

Those with significant money at stake in 2000 remember what happened to them in 2000. They lost the bulk of their money. Investors certainly heard the warnings in the late 1990s, but they did not listen. Words of caution fell like silent raindrops. It was a "New...

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