Real Investment Advice

The debt problem is real. It just isn’t a bomb. As we’ve written before, the debt and deficit problem isn’t what you think. It’s a tax on future growth, collected slowly, and normal interest rates are simply the price of money doing its job, not the crisis the headlines keep selling.

“Think Like An Investor” is chapter 1 of a 5-part series examining the narratives around “investing for the long run. Learning to think like an investor rather than a speculator is not a personality quirk or a matter of taste. It is the entire game, and the good news is that it is a skill you can actually build, starting today.

So let’s do the work the timeline skips, starting with separating what actually happened from what the narrative needs you to believe. Then we’ll ask the only question that pays: should any of it change how you’re positioned this morning?

Earnings drive market corrections. That’s the finding, and the next serious decline won’t arrive with a headline about capital spending or the deficit but will begin exactly where all eight of the others began, in the profit cycle, surfacing in credit spreads and revision breadth well before it reaches any earnings report you can actually read.

“Sound money,” in its purest form, is money whose supply a government cannot expand at will. Under a gold standard, every dollar is a claim on a fixed weight of gold. You can’t print gold. So the government can’t monetize its deficits, and the money supply grows only as fast as miners pull metal out of the ground, historically around 1.5% a year.

Lately, it seems like you can’t open a financial publication without stumbling across another article declaring the 60/40 portfolio dead. The pitch is everywhere: bonds are broken, the old rules no longer apply, and investors should modernize by swapping the bonds in their portfolio for Bitcoin, gold, or whatever alternative the asset management industry is currently selling.

The AI bear case is worth taking seriously on price and financing. It is not worth taking seriously on demand. Anyone selling you the whole package as a single story, bull or bear, is selling you a mood, not an analysis. The revenue is real. The cash flow is the thing to watch. Price accordingly.

If you own treasuries, you need to make two separate decisions rather than one blended bet. The liquidity sleeve holds the bill exposure and does the work people mistakenly ask the long end to do. The duration sleeve stays deliberately small, sized as recession insurance rather than as a conviction call on falling inflation.

The second-quarter earnings season is in full swing. So far, the results are landing in line or better than the upwardly revised Wall Street estimates. That’s the opposite of how this usually works. Analysts normally trim their forecasts as a year wears on. In 2026, they’ve done the opposite.

When you measure home affordability today against the metric that actually governs the check you write each month, the picture flips. By that measure, buying a home may be easier now than it was for the Boomers and Gen Xers who get blamed for everything.

Decades of data across global markets reach the same verdict: the more frequently retail traders trade, the worse they perform. The infrastructure has never been more inviting. The losses have never been more documented. Here are some key statistics we will dive into further.

If you knew you were standing inside a stock market bubble, you wouldn’t be standing in it for long. You’d sell. So would I, and so would everyone reading this. And if spotting market bubbles was something everyone could do in real time, the bubble couldn’t form in the first place.

The AI capex risk profile has gotten sharper since then, and the argument needs tightening in a few places. The bull case and the tail risk are now the same buildout, but they are running in different directions.

Rising prices increase the value of collateral in every margin account, which automatically increases how much each investor can borrow under Reg T. Debt rises BECAUSE the market rose, not the reverse. That single fact is what breaks the ratios we’re about to examine, and it lies at the core of why margin debt risk is so often misjudged.

Wage growth peaked four years ago. Since 1985, it has led CPI by three to seventeen months in every single cycle. The May 4.2% inflation print is the noise. Watch the wages.

The money is REAL. The question was never whether it exists. It’s who’s spending it, and what they borrowed to do it. When the wall of cash and the bottom half finally commit to risk at the same moment the Fed turns hawkish, that’s not the start of something. That’s the part of the cycle where the careful investor gets paid to be careful.

Friedman was reasoning from the equation of exchange, MV = PQ. Money times velocity equals prices times real output. It’s an identity, not a theory. Where it gets interesting is when you ask which variable does the work.

Here’s the setup most investors are underrating right now. Over the next two weeks, the tape will trade on plumbing rather than fundamentals. We just cleared the largest options expiration in history. Quarter-end pension selling comes next, and then July 1 reopens the passive-money firehose into a market that already routes forty cents of every S&P 500 dollar into ten stocks.

Start with the disconnect itself. If you only looked at the Michigan headline, you’d assume the country was in a depression. However, when you look at what people are actually doing, the picture changes completely.

The catalyst that turns a healthy pullback into something deeper won’t be a single oil-soaked CPI print. It’ll be the moment forward earnings expectations start to roll over while valuations sit at the high end of history. We aren’t there yet.

The K-shaped economy has become shorthand for a tidy story. The rich pull away while everyone else falls behind. It fits the mood, and it makes for a sharp headline. The problem is that it’s mostly wrong. 

This past week, the market hit an all-time high. At the same time, Alphabet (GOOG) told investors it would raise $80 billion by selling stock to fund its AI buildout, and the shares fell about 4% on the news.

In Part 1, we explored why Dollar Dominance Remains Alive and Well. Today, we will explore the stronger-dollar trade, the one macro trade that nobody is sized for.

Reducing equity exposure during periods of elevated risk is not the same as market timing. The financial industry has spend decades blurring that distinction.

The dollar is supposed to be dying. We’ve heard that argument for the better part of a decade, and it’s getting louder, not quieter. Dollar dominance isn’t fading. In fact, the events of late April 2026 just delivered the loudest counter-signal in years.

After three decades of watching market cycles play out from both sides of the trade, I’ve come to a simple conclusion: Wall Street’s love of simple rules is one of the most dangerous aspects of investing.

Last Friday closed with the 10-year Treasury yield at 4.60%, a one-year high, and the doom commentary about rising interest rates was waiting before the bell even rang. Hyperinflation. Bond market breakdown. Paradigm shift. A 1981 fair-value retest.

That Buffett cash hoard has also created a lot of speculation, innuendo, and assumptions, which is what I want to walk through in today’s discussion. Primarily, what that cash hoard actually represents, the popular theories explaining it, and what it really costs shareholders to hold.

The stagflation narrative dominating financial social media isn’t completely wrong. That’s what makes it so dangerous. After more than 30 years of managing client portfolios through actual inflationary cycles, not watching them on YouTube, I’ve learned that the most damaging investment advice isn’t built on outright lies.

A real fundamental story doesn’t require a parabolic chart to validate it. In fact, fundamentals tend to drag prices up the trend line, not push them through the ceiling. When a “shortage” narrative arrives at the same moment that the worst-quality names in the sector are leading the index higher, that’s not fundamentals at work.

That skepticism isn’t contrarianism for its own sake, but rather the recognition that when a thesis achieves consensus, the crowd has usually already priced the easy part of the move, and the hard part is what comes next.

The S&P 500 hit a fresh record high last week. The median stock in the index is sitting 13% below its 52-week peak. That divergence is not a footnote or a curiosity.

Robots are coming to the economy. It is inevitable, really, and there is nothing that will stop it. At some point in the not-so-distant future, robots will infiltrate every aspect of our lives, from office work and manufacturing to service work and trade skills, and even your home. Here are some numbers for you.

Here’s where I want to start, because this is the point that almost every government debt analysis, including the article we’re responding to, completely ignores. Government debt doesn’t disappear into a void. By definition, if the Government borrows capital from someone, that capital must flow somewhere.

As of this writing, the Strait of Hormuz remains effectively closed since February 28. Roughly 20% of the world’s seaborne oil stopped moving through the chokepoint. T

The stock market selloff between February 28 and April 14 produced one of the more instructive market lessons in recent memory. It isn’t because of what the market did, but because of what investors did in response.

The BLS jobs report has become so distorted that it often tells us almost nothing reliable about the actual state of employment. I realize that is a serious claim, but let me back it up with the data. I want to show you what I believe is a simpler, more honest alternative.

Over the last few weeks, we have published real-time market commentary as the correction proceeded. The goal was to help investors navigate the more dire outcomes promoted on social media. A largely unexpected outcome was that the S&P 500 outlook changed dramatically in a matter of days.

That article digs into the plumbing behind oil shocks and recession, and exposes why, over the years, I’ve learned to distrust the loudest voices in the room.

Last week, the stock market rally was one of the best performances in nearly a year. The S&P 500 surged 3.4%, the Nasdaq climbed 4.4%, and the bulls declared the correction over. As I have stated before, having watched markets for more than 35 years, I have come to recognize the difference between a relief rally and the end of a corrective cycle.

After more than three decades of watching oil markets upend economies, one pattern keeps repeating: investors learn the wrong lessons from the last shock. The 1973 OPEC embargo taught us that geopolitical disruptions are temporary.

The fiat currency collapse narrative is one of the most emotionally satisfying arguments in all of financial punditry. It feels intellectually rigorous, draws on genuine history, and speaks to deep and legitimate anxieties about government overreach, monetary recklessness, and the long-term consequences of unlimited debt creation.

What’s unusual today is the degree of divergence between individual stocks and the cap-weighted index. When a handful of stocks carry enough weight to paper over widespread internal damage, investors holding diversified portfolios feel the pain long before the headlines acknowledge it.

Every few months, a headline appears declaring that the U.S. dollar’s reign as the world’s reserve currency is over. China is dumping Treasuries. Central banks are hoarding gold.

Last week, on March 19th, the S&P 500 closed below its 200-DMA for the first time since May 2025. The first instinct is to panic as media headlines talk about bear markets and financial crisis events. However, as we will explore today, the data says it depends entirely on the type of break: sustained or brief.

This past weekend, Adam Taggart and I discussed what happens to Treasury bond yields when the United States enters a military conflict. The conventional wisdom is reflexive and tidy.

The private equity (PE) business is huge. When I say huge, I mean $4.4 trillion huge. However, as we warned then, the risks have come home to roost. The private equity and private credit industry is heading into a gut-wrenching period of consolidation.

The “fiat is dying” argument has become a catchphrase narrative among digital asset bulls, gold bugs, and cryptocurrency advocates. That narrative’s core is that central banks have printed vast amounts of money.

The S&P 500 closed at 6,740 on Friday, its lowest level since mid-December, as technical deterioration, collapsing payrolls, and $100 oil converged on the charts. Every major moving average has broken. Here’s what comes next.

If the SaaSpocalypse narrative proves to be more panic than prophecy, the critical task becomes identifying which companies will emerge stronger.

Economic growth metrics for the United States have recently shown surprising resilience; however, consumers’ economic sentiment has not. According to the Bureau of Economic Analysis’s advance estimate, real Gross Domestic Product expanded at an annualized rate of just 1.4%.

Money – everybody wants it, but few actually have it. As shown in recent financial statistics, the “wealth gap” in America continues to grow between the “haves” and the “have-nots.”

“China is dumping US Treasuries to get out of the dollar.” This claim has been circulating the mainstream feeds lately, with the narrative that the “end of the dollar is near,” or “the US will lose its funding base,” and “bond yields will surge.” But are those claims valid? Such is what we will explore in more detail.

The article from the Wall Street Journal titled “Why My Generation Is Turning to Financial Nihilism” by Kyla Scanlon argues that Gen Z is embracing high-risk financial behavior out of despair and detachment, but the data shows something very different. 

Since the beginning of the year, we have discussed the “reflation trade” and its impact on specific market sectors. This past weekend’s newsletter also showed some of these more extreme returns in various market sectors since the beginning of the yea

The market got off to a strong start in 2026, with investors chasing industrials, materials, and commodity-related stocks as the reflation narrative gained traction. The “reflation narrative” is the belief that a range of policies will boost the rate of economic growth in the U.S. without triggering inflation.

For nearly two years, markets were driven by the same speculative narrative that “this time is different.” Speculative narratives are not only seductive but also contribute to investment behaviors that obscure reality. Speculation disguised as investing is a losing proposition.

Market cycles are once again at the center of the investment narrative as we head into 2026. The optimism is familiar as earnings held up in 2025, the economy avoided recession, and big tech lifted the indexes. However, those victories are already reflected in the price.

Mainstream expectations, those from Wall Street, economists, and corporate strategists, have congealed around a bullish economic outlook for 2026. Most forecasts project stronger economic growth, with contained inflation, and continued investment in technology and capital expenditure.

By assessing the macro and market drivers that shape each outlook, we can lay out clear, practical tactics to prepare your portfolio for either path. Whether the bullish or bearish case prevails in 2026, your edge will come from disciplined risk management, not from guessing the future.

It is critical to understand that 2026 will not deliver certainty. Instead, investors should focus and make decisions based on probabilities backed by data, earnings trends, policy shifts, and macro signals.

AI productivity gains will demand active solutions, not government gifts. Skill development, apprenticeships, employer-based training, wage insurance, and mobility support. These tools address displacement directly, while UBI does not.

The Wall Street consensus forecast for 2026 earnings growth is strong by historical standards. Analysts are giddy and projecting another year of double-digit growth in S&P 500 earnings per share (EPS).

The goal isn’t to be perfect; it’s to make fewer mistakes than last year because investing success doesn’t come from reading motivational quotes or watching market TikToks at midnight.

In 2025, the prices of precious metals rose sharply, with silver prices recently surging past $80 per ounce. Of course, when precious metals rise, there is always the same group of commentators (mostly paid newsletter writers and physical metal dealers) to declare that a financial analysis is underway.

There is a rising market risk in 2026 that is largely overlooked as we wrap up this year. Optimism about 2026 is running high. Currently, investors are pricing in strong economic growth, robust earnings, and a smooth path of disinflation. Notably, Wall Street estimates suggest a significant acceleration in corporate profits...

It’s that time of year when Wall Street polishes up its crystal balls and begins predicting returns for 2026. Since Wall Street never predicts a down year, which would be unwise for fee-based product revenues, these forecasts are often inaccurate and sometimes significantly wrong. Let’s review some previous years.

Over the last couple of years, inflation alarmists such as Paul Tudor Jones, James Grant, and Jeff Gundlach have all said that inflation is returning with force. In different ways, they each stated that they would not own Treasury bonds due to the expectation that inflation would rise as the dollar declined due to the ongoing deficits.

During extended upward-trending markets that reward risk-takers and punish caution, everyone is a “bull market genius.” That dynamic flips investor psychology and, over time, creates a false sense of control.

As someone who views corporate finance through a pragmatic lens, I’ve been closely watching the current surge in capital expenditures (capex) tied to artificial intelligence (AI). When a company spends massive amounts of free cash flow and takes on increasing debt, does that lead to a positive outcome for investors?

Rising margin debt levels signal increasing speculation and leverage in the market, with the cost of carrying this debt nearing historical peaks that have typically preceded significant stock market corrections.

Due to the federal government shutdown, official jobs data remains incomplete, forcing the Federal Reserve to rely on alternative private-sector reports to gauge the labor market. These alternative data sources, such as the ADP report and Revelio Labs estimates, indicate a widespread and concerning slowdown in employment, with job creation stalling, openings shrinking, and layoffs rising across many sectors.

In today’s markets, mentioning the “B-word” will get you thrown into the “permabear” camp, and everyone immediately assumes you mean the end of the world: death, disaster, and destruction. Yes, bear markets have terrible short-term impacts, but they also allow the system to reset for healthier growth in the future.

Yes, we may be in the second market bubble of this century. Alternatively, the market may be pricing in a shift as fundamental as the transition to either electricity or the internet. Either way, investors must think clearly, act deliberately, and avoid the kind of blind speculation that turned past booms into bloodbaths.

The U.S. economy’s recent growth has a distinctive engine: large‑scale capital expenditures (capex) tied to artificial intelligence (AI). Firms such as Microsoft, Alphabet (Google), Meta Platforms, and Amazon have announced massive investments in data centers, servers, networking equipment, and AI infrastructure.

In the end, it does not matter if you are “bullish” or “bearish.” However, what is grossly important in achieving long-term investment success is not necessarily being “right” during the first half of the cycle, but by not being “wrong” during the second half.

While consensus remains cautious, there is a case, however tenuous, for economic reacceleration. This isn’t about ignoring risks. It’s about acknowledging that conditions aligning could drive a shift from stagnation to renewed growth.

The math on forward return expectations, given current valuation levels, does not hold up. The assumption that valuations can fall without the price of the markets being negatively impacted is also grossly flawed.

I recently penned an article on “Money Supply Growth,” which elicited a very thoughtful response from Garrett Baldwin via Substack. He argued that labeling Federal Reserve operations as “money printing” is not rhetoric, but rather a reality. He points to Ben Bernanke’s 2010 interview, where Bernanke described how the Fed marks up digital accounts.

Classical conditioning teaches us a valuable lesson regarding the current investor dilemma. Pavlov’s research discovered a basic psychological rule: when a neutral stimulus is repeatedly paired with a reward‑stimulus, eventually it will trigger the same response even when the reward is absent.

Gold is not immune to market cycles. It’s a volatile asset driven by shifting narratives and capital flows. If you’re buying gold today, understand what’s supporting the price, and what could shake that support loose. Treat gold as a hedge, not a core growth asset.

We live in what Brett Arends claimed as“The Dumbest Stock Market In History,” but I believe it is potentially the most dangerous era. That phrase is not hyperbole as it reflects structural distortion, extreme valuations, and an investor base intoxicated by momentum and narrative.

Bold calls to “run to gold, silver, and bitcoin” make for strong headlines, but they oversimplify the reality of modern finance. As we’ve seen, money supply growth is not inherently a sign of debasement but reflects economic expansion. Far from being destructive, government deficits flow directly into private-sector savings and stabilize household balance sheets.

I want to discuss a different approach to portfolio management with you today. Rather, how to think like a “bear,” so you see the risks of the speculative bull run. However, to act like a “bull” to capture the gains while available. But that is a difficult skill to master.

Every market cycle eventually changes investor psychology to believe risk has been conquered.

If you want to understand where we are in the cycle, skip the noise and follow profits. Corporate profits are the lifeblood of investment, hiring, and market returns.

Following Friday’s selloff amid the resurgence of tariff threats on China, I asked ChatGPT a simple question: ”How to Stay Calm In The Stock Market?” In this week’s post, I thought it would be helpful to review ChatGPT’s advice and discuss it in more detail.

When bear market losses occur, headlines talk in percentages: “The market dropped 20 %.” Investors nod. A 20 % decline sounds manageable, historical, and expected.

Over the past three years, the economic conversation has been a “promised recession.” If you read the headlines, tracked economist surveys, or even listened to Wall Street strategists, you would have assumed a downturn was imminent. And yet, here we are, late into 2025, and the U.S. economy is still standing.

While it may seem that way at extremes, momentum tends to exhaust, and reversals or corrections become more probable. The RSI gives us a real-time gauge of when a trend may be vulnerable to a pullback or turn.

While the market is betting on an economic revival to support current valuation levels, the real economy is suggesting things are slowing down. Notably, the evidence isn’t coming from obscure corners. It’s showing up in the indicators designed to give us a heads-up before a storm arrives.

The buildout of data centers and the power grid may offer the best opportunity to generate sustained growth. The scale of investment is large enough to matter, the economic multipliers are high, and the timeline aligns with when fiscal pressure will peak.

To understand where the market might go, you need to weigh both the bull case and bear case in light of what is actually priced and what risks remain unacknowledged. The data support the bull momentum case, but many components are already baked into current prices.

We will examine five major investment strategies: value, growth, momentum, dividend, and index investing. Each comes with strengths and weaknesses. More importantly, each offers lessons from history’s greatest investors, including Benjamin Graham and Warren Buffett.

Despite the slowdown, the Federal Reserve remains hesitant. Chair Powell noted softening labor conditions at Jackson Hole and suggested the door is open to rate cuts. But no concrete shift in policy has occurred.

Surface-level diversification is no longer enough in a market increasingly driven by passive flows and dominated by a few mega-cap names. Owning multiple funds or asset classes does not guarantee protection if the underlying exposures overlap. Investors must go deeper and look beyond labels and into the actual drivers of risk and return.

The failures aren’t isolated miscalculations but the predictable result of a flawed framework that policymakers have clung to for decades. Keynesian economics didn’t just “get it wrong” in 2025, but has repeatedly failed to deliver on its promises for over forty years. And the consequences are becoming impossible to ignore.

Here is the hard truth you must learn. Your real edge comes from limiting damage when you’re wrong and maximizing gains when you’re right, which is the very foundation of any risk plan. You will lose. You must build your system around that fact.

Energy prices indicate economic strength, or, in this case, weakness. If the global economy grew strongly, the need for oil consumption would rise, absorbing the current production levels, causing energy prices to rise.

“Buy Every Dip” has lately been the “Siren’s Song” for this market. Such is seen in the flows into ETFs over the course of this year. Retail investors treat pullbacks as temporary noise, and their behavior borders on mechanical. Every sell-off is seen as an opportunity, not a warning.

The latest economic data suggests the US economy is decelerating. That means growth is slowing, jobs are shrinking, and households are spending less.

There is little doubt that excess bullishness has invaded the general market psyche. Just a couple of months following the market decline in March and April, where sentiment turned exceedingly bearish, the S&P 500 hovers near its highs.

To benefit from a corporate buyback, an individual must sell their shares to the company. Conversely, those holding on to their shares are not compensated.

The meme stock movement is again dominated by speculative retail trading driven by online forums, social media hype, and short-term momentum.

I understand the concerns about rising debt levels. However, the problem of rising debt levels for the U.S. is NOT a default but a continued degradation of economic growth. Let’s start this discussion with a basic fact—without continued increases in debt, there would be very little to no economic growth.

As the turn of the calendar occurred on Friday, the bull streak for the market since the April lows ended. Such was not unexpected, and the correction has been a topic of discussion in our daily market commentary over the last two weeks.

Over the past year, financial headlines continue to flood investors with doomsday predictions about the U.S. dollar. Whether it’s social media influencers waving “dollar collapse” charts or YouTube personalities warning about debasement, the noise has become deafening.

When markets decline—especially after long periods of sustained growth—the familiar advice resurfaces: “Be patient. Stay invested. Ride it out.” The rationale? The market always goes up over time. But there’s a critical flaw in this narrative.

Wall Street has a long history of selling the newest shiny object to Main Street just as the trade begins to sour. If the music stops at this private equity party, you don’t want to be the last one still dancing.

Retail speculation is once again gripping the markets. A recent Wall Street Journal article highlighted how the latest retail gambling vehicle—zero-days-to-expiration (0DTE) options—has exploded in popularity.

Few are as candid and historically accurate as hedge fund manager Kyle Bass when identifying structural breaks in the global economy. In a recent interview, Bass painted a grim but telling picture of China’s economic condition, warning.

A couple of years ago, I wrote about absolute versus relative returns. Given the latest market run, I am getting a lot of questions about chasing returns, and individuals comparing themselves to the S&P 500 index.

Next week, the Q2-2025 earnings season will begin in earnest as a barrage of S&P 500 companies report, starting with the Wall Street money center banks on Tuesday and Wednesday. Since earnings drive the market by supporting investor expectations, what should investors expect? Let’s dig into the details.

The bull market is alive and well, even amid widespread talk of the “death of U.S. exceptionalism.

For sophisticated investors, this technical shift marks a subtle but powerful pivot in monetary mechanics. It could create demand for Treasuries, improve market liquidity, and push yields lower at a time when the economy is slowing.

The Fed’s credibility rests not on never being wrong, but on being adaptive and forward-looking. Inflation has cooled, wage growth has moderated, and economic momentum is slowing. Now is the time for the Fed to focus not on headline fears, but on real-time data.

The recent decline in the dollar relative to other currencies is well within historical norms. Notably, previous declines were much larger without the “fear-mongering” from the “experts of doom.”

Given the uncertainty of future events, global investors seek a “safe haven” for investment dollars. As such, U.S. Treasury Bonds and the U.S. dollar appreciate given their perceived “financial safety.” Last week, global investors were already starting to make that shift with the dollar rising.

The Iran-Israel conflict and equity markets are now in sharp focus. As direct strikes escalated in June 2025, global financial markets responded immediately. Israel’s airstrikes on Iranian nuclear and energy infrastructure triggered retaliatory missile and drone attacks from Iran.

Lately, the “deficit narrative” has dominated much of the financial media, particularly those channels that are continual “purveyors of doom.” In this post, we will discuss the “deficit narrative,” the likely outcomes, and why the cure for the deficit may be found in Artificial Intelligence.

In recent years, “buying the dip“ and more vulgar variations have often been equated to “dumb money” or retail investors, who are presumed to always make a mistake. However, as investors, we need to rethink how we view “buying the dip” because the whole goal of investing is to “buy low and sell high.”

It would seem evident that most investors would understand that consumer spending drives economic growth, ultimately creating corporate earnings growth. Yet, despite this somewhat tautological statement, Wall Street appears to ignore this simple reality when forecasting forward earnings.

Buying stocks is always hard. Particularly during corrections. Or, near market peaks. Or, when stocks are falling. And when they are rising. Oh, buying stocks is also tricky when valuations are high. And when they are low. You get the point.

It doesn’t take much to understand that Ray Dalio, a hedge fund titan, is like every other human being and is prone to error. I will not dismiss Dalio entirely, as his track record of managing money at Bridgewater is nothing to be scoffed at.

Given the uncertainty of what potentially happens next, the recent rally is an excellent opportunity to adjust portfolio risks to navigate the next leg of this market cycle.

Keep your market perspective in check, avoid anchoring, and focus on your investment goals rather than market volatility.

As investors, we need to step back and examine the history of previous debt downgrades and their outcomes for the stock and bond markets. Let’s start with what Moody’s rating agency stated about its rating change.

Fisher Investments recently wrote an interesting article asking whether corporate stock buybacks affect markets.

Assessing a bear market rally proves challenging when you experience it firsthand. It is only in hindsight that the complete picture reveals itself to investors. Of course, after a bear market rally, investors tend to review their investments and speculate on what they should have done differently.

While coming in much stronger than expected, the latest employment data confirmed what we already suspected: the economy is slowing.

Over the past two weeks, the market has had a furious nine-day rally, the longest winning streak in 21 years.

In investing, success is often judged by numbers—returns on investment, percentage gains, and the ability to outperform benchmarks like the S&P 500. However, some investors frequently pursue a peculiar set of “awards” without realizing the pitfalls they embody.

Despite the recent rally, the correction continues. While wanting to “buy the dip” is tempting, there has been enough technical damage to warrant remaining cautious in the near term.

Are you a “speculator” or an “investor”? This is an essential question that every individual deploying capital into the financial markets must answer. The reason is that how you answer that question determines how you should behave during market cycles.

In financial markets, few technical patterns generate as much attention and anxiety as the death cross.

Inflation risk has been a significant topic of discussion in the mainstream media for the last few years.

The American consumer is tapped out. The savings buffer is gone, wage growth is declining, and credit costs are rising. Corporate America is already adjusting to this new reality, with companies issuing cautious guidance for 2025.

Yield spreads are critical to understanding market sentiment and predicting potential stock market downturns. While yield spreads have widened, they remain well below the long-term averages. However, if recession risks increase due to tariffs, sentiment, or illiquidity, those yield spreads will widen further.

A Wall Street axiom states that the stock markets lead the economy by about six months. While not a perfect predictor, the stock market reacts to investor expectations about future corporate earnings, economic activity, interest rates, and inflation.

Following the latest Federal Reserve meeting, there was a massive surge in media headlines stating “stagflation.” The media’s stagflation panic is unsurprising as it elicits memories of the late 1970s during the Arab oil embargo.

Over the last couple of weeks, the market sell-off eclipsed 10% on an intraday basis, sending investor sentiment plummeting to levels usually seen during more significant declines and previous bear markets.

It has been an interesting correction. The average retail investor was “buying the dip” despite having an extremely bearish outlook.

Human stupidity is the one thing you can rely on in financial markets. I recently read a great piece by Joe Wiggins at Behavioral Investment, which discusses why “Investing is hard.”

The recent sell-off has certainly sparked concerns with investors but the NYSE advance-decline line is an important technical measure to watch. However, what is it, and why does it matter?

The risk of a recession in the U.S. is not zero. This is particularly true as the current Administration tackles Government bloat and implements tariffs. However, before we discuss why the risk of a recession could increase, it is crucial to remember the 2022 experience.

Investor’s bearish sentiment has surged to levels that generally align with previous market corrections and crashes.

One of the most referenced valuation measures is Dr. Robert Shiller’s Cyclically Adjusted Price-Earnings Ratio, known as CAPE.

Just recently, S&P Global released its 2026 earnings estimates, which, for lack of a better word, have gone parabolic. Such should not be surprising given the ongoing exuberance on Wall Street. Unsurprisingly, rationalizations justify illogic when too much money is chasing too few assets.

If Trump tariffs Chinese, European, or Canadian products, those countries tend to enact counter-balancing tariffs on U.S. products. Such slows demand for goods and services between all parties, again a deflationary process.

Retail investors are expected to become more bullish about increasing equity exposure when markets rise.

There are many media-driven narratives about the impact of tariffs on the economy and the markets. Most of them are incredibly bearish, predicting the absolute worst possible outcomes.

The market defies more negative news because retail investors continue to step in and “buy the dip.” In our recent Bull Bear reports, we discussed the push by retail investors, but looking at retail sentiment is quite remarkable.

The Federal Reserve’s record of forecasting has frequently led it to respond too late to changes in economic and financial conditions. In the most recent FOMC meeting, the Federal Reserve changed its statement to support a pause in the current interest rate-cutting cycle.

Over the weekend, President Trump announced tariffs of 25% on both Canada and Mexico, as well as a 10% tariff on China.

Bullish exuberance is returning to the markets and the economy in a big way following the Presidential election.

On Monday, markets were rocked by news that a Chinese Artificial Intelligence model, DeepSeek, performed better than expected at a lower development cost.

In today’s post, we will examine the money supply represented by M2, the Federal budget deficit, the Fed’s previous adventures with QE, and the correlation to inflation.

Retail investors are the most optimistic about higher stock prices in 2025 by the most on record. Unsurprisingly, that sentiment resulted in the psychological rush to overpay for assets, pushing forward 1-year valuations sharply higher.

As we head into 2025, investors are giddy over the market returns of the last two years. As shown, the annual returns, while elevated, have come with only average volatility along the way.

In last week’s discussion with Thoughtful Money, I noted that we are becoming more “tactically bearish” as we progress into 2025. While we have remained primarily bullish in equity positioning over the last two years, several risks are now worth considering.

I publish an updated version of my New Year “investor” resolutions yearly. The purpose of the process is to take an annual inventory of what I did and did not do over the last year to improve my portfolio management practices.

As we enter 2025, the financial markets are optimistic. That optimism is fueled by strong market performance over the last two years and analyst’s projections for continued growth. However, as “Curb Your Enthusiasm” often demonstrates, even the best-laid plans can unravel when overlooked details come to light. Here are five reasons why a more cautious approach to investing might be warranted in 2025.

In a recent discussion on TheRealInvestmentShow, Bob Farrell and his 10 investment rules were discussed, which elicited several email questions asking, “Who is Bob Farrell, and where are these rules?”.

I never thought someone would label me a “Permabull.” This is particularly true of the numerous articles I wrote over the years about the risks of excess valuations, monetary interventions, and artificially suppressed interest rates.

It’s that time of year when Wall Street polishes up its crystal balls and predicts next year’s market returns. Since Wall Street never predicts a down year, these forecasts are often wrong and sometimes very wrong.

Understanding the trajectory of corporate earnings is crucial for investors, as these earnings significantly influence stock valuations and market performance.

While analysts are currently very optimistic about the market, the combined risk of high valuations and the need to rebalance portfolios in the short term may pose an unanticipated threat.

Corporations are currently producing the highest level of profitability, as a percentage of GDP, in history.

Financial markets often move in cycles where enthusiasm drives prices higher, sometimes far beyond what fundamentals justify.

Credit spreads are critical to understanding market sentiment and predicting potential stock market downturns.

Following President Trump’s re-election, the S&P 500 has seen an impressive surge, climbing past 6,000 and sparking significant optimism in the financial markets. Unsurprisingly, the rush by perma-bulls to make long-term predictions is remarkable.

With the re-election of President Donald Trump, the worries about tariffs and pro-business policies sparked concerns of “Trumpflation.” Inflation has been a top concern for policymakers, businesses, and everyday consumers, especially following the sharp price increases experienced over the past few years.

Paul Tudor Jones recently voiced concerns that rising U.S. deficits and debt and increasing interest rates could lead to a fiscal crisis. His perspective reflects the long-standing fear that sustained borrowing will trigger inflation, raise interest rates, and eventually overwhelm the government’s ability to manage its debt obligations.

Investor exuberance has rarely been so optimistic. In a recent post, we discussed investor expectations of returns over the next year, according to the Conference Board’s Sentiment Index.

The prospect of a Trump presidency has led to much debate and speculation about how markets might react. Depending on what policies are eventually passed, there are potential risks and opportunities in both the stock and bond markets.

Corporate buybacks have become a hot topic, drawing criticism from regulators and policymakers. In recent years, Washington, D.C., has considered proposals to tax or limit them.

Key market indicators for November 2024 present a complex but opportunity-filled environment for traders and investors. Following the first phase of Federal Reserve rate cuts and growing global uncertainties, the technical landscape suggests several notable shifts. Let’s explore the key market indicators to watch.

I was emailed several times about a recent Morningstar article about J.P. Morgan’s warning of lower forward returns over the next decade. That was followed up by numerous emails about Goldman Sachs’ recent warnings of 3% annualized returns over the next decade.

Seasonality has long influenced stock market trends, offering insights into predictable cycles of strength and weakness throughout the year. Yale Hirsch, the creator of the Stock Trader’s Almanac, is one of the most well-known contributors to studying these patterns.

Recent events, particularly the devastation caused by Hurricanes Helene and Milton in 2024, provide a clear example of why destruction does not create long-term economic prosperity. Despite the short-term boost in economic activity from rebuilding efforts, the broader economic implications are far more detrimental.

While greed is necessary to build wealth, excessive greed often has far more terrible consequences when investing.

The Bureau of Economic Analysis (BEA) recently released its second-quarter GDP report for 2024, showcasing a 2.96% growth rate. This number has sparked discussions among investors and analysts, particularly those predicting an imminent recession.

When most people hear the word “risk,” they think about wild market swings, scary headlines, and losing money overnight, but Howard Marks, Co-Chairman and Co-Founder of Oaktree Capital Management, takes a different approach. In his new video series How to Think About Risk, Marks digs deep into what risk is and how investors should handle it. Spoiler alert: It’s not just about volatility.

As the November 2024 election draws near, the election outcome will profoundly affect the financial markets. Whether Donald Trump or Kamala Harris wins the presidency, each administration will bring distinct policies creating investment opportunities and potential risks for investors. With a divisive political landscape, it is crucial to understand how these potential outcomes can shape the stock market and your portfolio strategy.

We are currently in the “everything market.” It doesn’t matter what you have probably invested in; it is currently increasing in value. However, it isn’t likely for the reasons you think. A recent Marketwatch interview with the always bullish Jim Paulson got his reasoning for the rally.

An analysis of Presidential Candidate Trump’s policy proposals recently suggests that tax cuts will increase the deficit. While the raw analysis is correct, as it subtracts the potential for reduced tax collections from the tariff revenue, it ignores the impact on economic growth.

Last week, the Federal Reserve made a significant move by cutting its overnight lending rate by 50 basis points. This marks the first rate cut since 2020, signaling the Fed is aggressively supporting the economy amid a backdrop of softening economic data. For investors, understanding how similar rate cuts have historically impacted markets and which sectors tend to benefit is key to navigating the months ahead.

When stock markets rise, the bullish narrative tends to dominate, overlooking the potential impact of market declines. This oversight stems from two main problems: a basic misunderstanding of math and time’s critical role in investing.

Since 2020, momentum investing has generated significantly better returns than other strategies. Such is not surprising, given the massive amounts of stimulus injected into the financial system. However, Brett Arends for Marketwatch noted in 2021 that momentum investing can give you an edge.

The August jobs report highlighted a critical reality: the labor market is cooling off. While the headline figures seemed decent, the underlying data reveals clear warning signs that worker demand is slowing.

The S&P 500 index is a critical benchmark for the U.S. equity market, and its performance often dictates investor sentiment and decision-making. Between November 1, 2022, and September 6, 2024, the S&P 500 experienced a significant rally but not without volatility. Currently, investors have very mixed views about where markets are heading next as concerns of a recession linger or what changes to monetary policy will cause.

While technology is a powerful driver of economic growth, it also presents challenges that can negatively impact productivity, equality, mental health, and societal cohesion. Addressing these issues ensures that technological advancements promote sustainable and inclusive economic growth.

Since the end of the “Yen Carry Trade” correction in August, bullish positioning has returned with a vengeance, yet two key risks face investors as September begins. While bullish positioning and optimism are ingredients for a rising market, there is more to this story.

In a recent discussion with Adam Taggart via Thoughtful Money, we quickly touched on the similarities between the U.S. and Japanese monetary policies around the 11-minute mark. However, that discussion warrants a deeper dive. As we will review, Japan has much to tell us about the future of the U.S. economically.

As noted in this past weekend’s newsletter, following the “Yen Carry Trade” blowup just three weeks ago, the market has quickly reverted to more extreme short-term overbought conditions.

The latest retail sales report seems to have given Wall Street something to cheer about. Headlines touting resilience in consumer spending increased hopes of a “soft landing” boosting the stock market.

The market’s 8.5% decline during August sent shockwaves through the media and investors. The drop raised concerns about whether this was the start of a larger correction or a temporary pullback. However, a powerful reversal, driven by investor buying and corporate share repurchases, halted the decline, leading many to wonder if the worst is behind us.

Since the end of the financial crisis, economists, analysts, and the Federal Reserve have continued to predict a return to higher levels of economic growth. The hope remains that the Trillions of dollars spent during the pandemic-driven economic shutdown will turn into lasting organic economic growth.

Are the “Mega-Cap” stocks dead? Maybe. But there are four reasons why they could be staged for a comeback. The recent market correction from the July peak certainly got investors’ attention and rattled the more extreme complacency.

A Universal Basic Income (UBI) sounds great in theory. According to a previous study by the Roosevelt Institute, it could permanently increase the U.S. economy by trillions of dollars. While such socialistic policies sound great in theory, history, and data, they aren’t the economic saviors they are touted to be.

On Monday morning, investors woke up to plunging stock markets as the “Yen Carry Trade” blew up. While media headlines suggested the sell-off was due to fears of a recession, slowing employment growth, or fears over Israel and Iran, such is not the case.

Economist Claudia Sahm developed the “Sahm Rule,” which states that the economy is in recession when the unemployment rate’s three-month average is a half percentage point above its 12-month low.

In bullish years, markets often have corrections. Yet, after a lengthy bullish run, it always surprises me how quickly investors and the media panic with the slightest hint of a market pullback.

Overly optimistic investor expectations of market returns may be a problem.

Yes, the market could continue to rotate massively from large-cap to small and mid-capitalization companies. However, given the current levels of bullish sentiment and allocations against a backdrop of weakening economic data and widening spreads, this suggests the current rotation may be nothing more than a significant short-covering rally.

Over the last few years, a handful of “Mega-Capitalization” (mega-market capitalization) stocks have dominated market returns. The question is whether that dominance will continue and if the same companies remain the leaders.

With both economic and inflation data continuing to weaken, expectations of Fed rate cuts are rising. Notably, following the latest consumer price index (CPI) report, which was weaker than expected, the odds of Fed rate cuts by September rose sharply. According to the CME, the odds of a 0.25% cut to the Fed rate are now 90%.

Some state that “bears are like a ‘broken clock,’ they are right twice a day.” While it may seem true during a rising bull market, the reality is that both “bulls” and “bears” are owned by the “broken clock syndrome.”

Lately, I have been getting many questions about investing in private equity. Such is common during raging bull markets, as individuals seek higher rates of return than the market generates.

Wall Street analysts continue significantly lowering the earnings bar as we enter the Q2 reporting period. Even as analysts lower that earnings bar, stocks have rallied sharply over the last few months.

Financial advisors get a bad rap. Some deserve it; most don’t. The problem for the entire investment advisory and portfolio management community stems from the “career risk” they inevitably face.

Goldman Sachs recently upped its price target to S&P 6300 for the end of this year, along with Evercore ISI upping its year-end target to 6000. Such is not surprising given the strong run in the markets this year.

Over the last decade, there has been an ongoing fundamental debate about markets and valuations. The bulls have long rationalized that low rates and increased liquidity justify overpaying for the underlying fundamentals.

The latest consumer survey data from the New York Federal Reserve had interesting data.

Recently, James Grant, editor of the Interest Rate Observer, was asked about his outlook for interest rates. He sees interest rates moving in a cyclical pattern, potentially rising for another multi-decade period.

More than a few individuals were active in the markets in 1999-2000, but many participants today were not. I remember looking at charts and writing about the craziness in markets as the fears of “Y2K” and the boom of “internet” filled media headlines.

It is always interesting when commodity prices rise. The market produces various narratives to suggest why prices will keep growing indefinitely. Such applies to all commodities, from oil to orange juice or cocoa beans. For example, Michael Hartnett of BofA recently noted.

In 2022, we discussed the market’s deviations from long-term growth trends. That discussion centered on Jeremy Grantham’s commentary about market bubbles.

The future of electricity demand for everything from electric cars to Bitcoin mining to artificial intelligence may also be the cure for our debt concerns.

Corporate greed is not causing inflation, despite the claims of many on the political left who failed to understand the very basics of economic supply and demand.

As we discussed recently, Wall Street economists increasingly believe the risk of recession has fallen sharply.

During ripping bull markets, investors often start benchmarking. That is comparing their portfolio’s performance against a major index—most often, the S&P 500 index. While that activity is heavily encouraged by Wall Street and the media, funded by Wall Street, is benchmarking the right for you?

Every year, investors anxiously await the release of Warren Buffett’s annual letter to see what the “Oracle of Omaha” says about the markets, the economy, and where he is placing his money.

While there is much debate over whether another bear market is imminent, weekly moving average crossovers suggest a different outcome for now. There are many current concerns, from geopolitical risk to still inverted yield curves, slowing economic growth, high interest rates, and inflation. Yet, despite those concerns, markets are flirting with all-time highs.

When it comes to the financial markets, investors have a litany of investment vehicles to choose from. The choices are nearly unlimited, from brokered certificates of deposit to complex derivative instruments.

The latest FOMC meeting caused a stock rally as Jerome Powell turned more “dovish” than expected. While Powell did note that progress on inflation has been lackluster, the announcement of the reversal of “Quantitative Tightening” (QT) excited the bulls.

Over the last two weeks, the bullish sentiment index has reversed from extreme greed to fear. The composite net bullish sentiment index, comprised of professional and retail investors, fell from 38.15 to 9.9 in two weeks.

Behavioral traits and cognitive biases are anathemas to portfolio management as they impair our ability to remain emotionally disconnected from our money. As history all too clearly shows, investors always do the “opposite” of what they should when it comes to investing their own money.

Is this just a correction after a strong bullish advance from November, or is the bull market ending?

The latest National Federation of Independent Business (NFIB) survey was an economic warning that departed widely from more robust governmental reports.

Economic “reflation” is becoming the next bullish narrative as equity valuation increases continue to outpace earnings gains, at least according to Gold Sachs and Tony Pasquariello.

While immigration has positively impacted economic growth and disinflation, this story has a dark side.

In the most recent report from FINRA, margin debt levels have surged as bullish investors leverage their bets in the equity market. The increase in leverage is not surprising, as it represents increased risk-taking by investors in the stock market.

Your mother likely imparted valuable investing lessons you may not have known. With Mother’s Day approaching and bullish market exuberance present, such is an excellent time to revisit the investing lessons she taught me.

During running bull markets, much commentary is written on why this time is different and why investors should not worry about market corrections.

Technical measures and valuations all suggest the market is expensive, overbought, and exuberant. However, none of it seems to matter as investors pile into equities to chase risk assets higher. A recent BofA report shows that the increase in risk appetite has been the largest since March 2021.

One of the most interesting conundrums is the surging wealth gap in America. Despite two of the largest bull markets in history since 1980, most Americans struggle with making ends meet and are unprepared for retirement. Such a reality starkly differs from the belief that rising asset prices benefit the masses.

It is long past the time that we face the fact that “Social Security” is facing a retirement crisis. In June 2022, we touched on this issue, discussing the stark realities confronting Social Security.

With the last half of March upon us, the blackout of stock buybacks threatens to reduce one of the liquidity sources supporting the bullish run this year.

Household equity allocations are again sharply rising, as the “Fear Of Missing Out” or “F.O.M.O.” fuels a near panic mentality to chase markets higher.

Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite.

Presidential elections and market corrections have a long history of companionship. Given the rampant rhetoric between the right and left, such is not surprising. Such is particularly the case over the last two Presidential elections, where polarizing candidates trumped policies.

Valuation metrics have little to do with what the market will do over the next few days or months. However, they are essential to future outcomes and shouldn’t be dismissed during the surge in bullish sentiment.

After over two years, retail investors, also known as the “dumb money,” are almost back to breakeven.

I revisited that original post a couple of weeks ago as the market approached its 5000 psychological milestone. Since then, the entire market has surged higher following last week’s earnings report from Nvidia (NVDA).

Recently, retail investors have started chasing small-cap stocks in hopes of both a rate-cutting cycle by the Federal Reserve and avoiding a recession.

Don’t fear all-time highs in the market. Such is a natural response for investors who are concerned about market risk. However, rather than fearing market exuberance, we must understand what drives it.

Regarding the surprisingly strong employment data, Fed Chair Powell said the quiet part out loud. The media hopes you didn’t hear it as we head into a contentious election in November.

While the bulls remain entirely in control of the market narrative, divergences and other technical warnings suggest becoming more cautious may be prudent.

The cost of housing remains a hot-button topic with both Millennials and Gen-Z. Plenty of articles and commentaries address the concern of supply and affordability, with the younger generations getting hit the hardest.

Of course, the market peaked in January 2022, just four months later, at 4796.56. Fast forward 2-full years of returning investors to breakeven, and the market is again approaching that magical round number of 5000.

I received an email this past week concerning George Soros’ “Theory Of Reflexivity.” It’s an interesting question, and I have previously written about the “Theory of Reflexivity.” Notably, this theory begins to resurface whenever markets become exuberant.

As the financial markets grind higher, retirement savers have consciously decided to add more to equity risk. Such was the result of a recent Bloomberg survey.

As money market account balances soar, the mainstream media again proclaims, “There is $6 trillion of cash on the sidelines just waiting to come into the market.”

As the stock market hit all-time highs this past week, there remains an interesting disconnect from the more dour economic concerns of the average American. A recent survey by Axios, a left-leaning website that supports the current Administration, addressed this issue.

As we get ready to review the Q4 earnings report, stocks have rallied sharply over the last two months

Economic growth continues to defy expectations of a slowdown and recession due to continued increases in deficit spending.

A stunning post from VisualCapitalist showed a poll of 8550 investors and 2700 advisors and the gap between the two of future portfolio return expectations. The poll was global; however, I will focus on this post’s domestic portfolio return expectations.

A recent warning by YahooFinance warns investors to sell their cash and buy bonds and stocks now as the Fed pauses.

What is the “wealth effect,” and why is it important? It is a great question and reminded me of “A Funny Thing Happened on the Way to the Colosseum.“

In October, the markets were down 10% from the July high, bond yields were touching 5%, and talk of a coming recession was rampant. What happened?

It’s that time of the year where Wall Street polishes up their crystal balls and pin targets on the S&P index for the upcoming year. As is often the case, while Wall Street is always optimistic, the forecasts prove pretty wrong.

Is a stock market correction coming before the Santa Claus rally at the end of the year?

I previously discussed a slate of recessionary indicators with high correlations to recessionary onsets. However, as we head into 2024, many Wall Street economists predict a “soft landing” or “no recession” outcome for the economy.

As I wrote this blog, the S&P 500 index is up roughly 17% year-to-date. Most likely, your portfolio isn’t. This is a common frustration among many investors in the market this year in particular.

Are you an “investor” or a “speculator?”

The Chicago Fed National Activity Index (CFNAI) is arguably one of the most important and overlooked economic indicators.

Is the bond bear market finally over? That is the question everyone is asking now that bond prices rallied sharply following the November FOMC policy meeting.

Despite substantially tighter monetary policy, the strength of jobs and retail sales stumped expectations of a recessionary downturn in 2022.

While often difficult, investing rules can help us maintain our focus and investment discipline in volatile or uncertain markets.

Economists no longer expect a recession. Such was according to a recent WSJ survey of Wall Street economists.

The “pain trade” continues to be higher into year-end.

While the article focuses mainly on the rise in bond yields, it applies to several current market events.

Restrictive monetary conditions, from higher yields and tighter lending conditions, are the Fed’s “Waterloo.”

As the “soft landing” narrative grows, the risk of a “crisis” event in the economy increases. Will the Fed trigger another crisis event? While unknown, the risk seems likely as the Fed’s “higher for longer” narrative is compromised by lagging economic data.

Psychology in markets is always fascinating. In February 2009, I wrote “8 Reasons For A Bull Market.” While in hindsight, it is easy to see that was the right call, overall, psychology was highly negative at the time.

While bond yields have risen sharply lately, fund flows into bonds tell two very different stories.

Once again, due to the ongoing lack of fiscal responsibility in Washington, the markets and the economy faced a Government shutdown.

“Compound market returns.” During bullish markets, there is inevitably a regurgitation of this myth that was contrived to extract capital from retail investors and place it in the hands of Wall Street.

While September has been a bit sloppy so far, will further weakness in October weigh on investor sentiment before the seasonally strong period begins?

The hit TV series “That 70s Show” aired from 1998 to 2006 and focused on six teenage friends living in Wisconsin in the late 70s.

The term “Bond Vigilantes” is a nostalgic twist on an old-west theme. In the nineteenth century, the American West formed self-appointed groups, or committees, to seize the duties of law enforcement and judicial authority in situations when citizens found law enforcement lacking or inadequate.

Okay, I took a little poetic license, but the point is that while we try, predictions of the future are difficult at best and impossible at worst.

Since the beginning of the year, economic data has continued to defy the recession calls of 2022.

Mega-cap stocks continue to dominate the market in 2023. The question is, why? After all, many other great companies have arguably much better valuations and fundamentals.

Powell’s recent Jackson Hole Summit speech was mainly as expected. Well, except for the part where Powell obfuscated the truth behind the surge in inflation.

About once a year, I have to address the issue of chasing the “10 Best Days” of the year.

Fitch’s recent downgrade of the U.S. debt rating alarmed investors as the deficit and debt steadily increased. The downgrade sent 10-year Treasury bond yields above 4%, causing concern about America’s deteriorating financial condition.

Since the beginning of 2022, the media has regularly warned a recession is coming.

Government bonds or stocks? If you were picking an asset class to outperform over the next 18-24 months, which would you choose?

Tax receipts are falling, which has historically preceded economic recessions.

There is a rhythm to the markets, and market cycle lows support bull market recoveries. Recently, Ed Yardeni made a bold prediction that the S&P 500 index could hit a high of 5400 in 2024.

Such is the latest rationalization to support the “bull market” narrative.

Of course, hindsight is always 20/20. Last year there were many reasons to be bearish. Things were seemingly so bad, with everyone expecting a recession, that there was nowhere to go but up.

While Washington continues a seemingly unbridled spending spree under the assumption “more spending” is better, debts and deficits matter. To better understand the impact of debt and deficits on economic growth, we must know where we came from.

No matter what happens, financially or economically, there is always a high number of companies regularly beating Wall Street estimates.

ESG scoring and mandates remain a subject we have contested since it sprang to life in 2020. The push of “woke activism” on, and by companies, to meet nebulous or artificial standards has led to various bad outcomes.

The volatility index is so low it has to go higher eventually. Such seems obvious, but this year, despite the banking crisis, higher interest rates, and slowing economic data, investors continue to abandon hedges amid bullish optimism.

There is much debate as of late on the current market cycle. Is it a bear market? Maybe. But what if this is just a correction within a 40-year-long secular bull market cycle?

Does stock risk decline the longer the holding period is? It’s a great question and something I received a comment about.

Millions of young Americans will face the end of the student loan payment moratorium this summer. Why is this happening now, after a three-year break from payments?

Is the recent rally a “bull trap,” or are we in a new “bull market?” Such was a question I recently received on Twitter. Of course, understanding the term “bull trap” is needed for those not deep into technical analysis.

“Signs” was a song by the Five Man Electrical Band in 1970 about the hippie movement. The song came to mind as I was looking at the economic data recently.

The current market speculation surrounding artificial intelligence (A.I.) has garnered everyone’s attention.

“It’s a ‘New Bull Market’!” Over the past few days, the call of a new bull market has plastered headlines and media commentary.

Bullish sentiment has surged as the “Fear Of Missing Out,” or FOMO, kicked in in recent weeks. It is somewhat interesting to write this blog, given that we discussed the exact opposite roughly one year ago.

The Eurozone just entered a recession as the region posted two consecutive quarters of negative economic growth. The manner in which it entered a recession is a bit quirky.

In several recent blog posts and weekly Bull Bear Reports, we discussed our concern over the narrow breadth of the rally in 2023.

Lately, we discussed macro-related market issues such as the” A.I., chase,” but a technical review can help manage shorter-term risks. Currently, the debate is about the market rally from the October lows. Is it a resumption of the 2009 bull market trend or an extended bear market rally?

Could monetary conditions be supportive of the “soft landing” scenario? While the “recession” versus “no recession” debate rages, there is a precedent for a “soft landing” scenario. Such is where the economy slows substantially but avoids a deeper contraction.

I received many emails and questions on “why” we are adding the U.S. Treasury bond to our portfolios. The question is understandable, given its dire performance in 2022, where bonds had the biggest drawdown since 1786.

The A.I. chase is making for a very narrow market.

The artificial intelligence, or “AI,” revolution is upon us. The financial media and headlines are abuzz with stories of generative “AI” and the subsequent “industrial revolution.”

Could massive monetary support have softened the deep bear market many expected? It is an interesting question. Particularly given the Fed has hiked rates at one of the most aggressive paces in history.

What if I told you that future returns could approach zero? Such seems hard to believe, considering young investors piling back into the markets since the beginning of the year

The COT (Commitment Of Traders) data, which is exceptionally important, is the sole source of the actual holdings of the three critical commodity-trading groups, namely: Commercial Traders, Non-Commercial Traders and Small Traders.

The financial media is rife with misinformation on the debt ceiling and the jump in interest rates. However, a history review shows that the “debt-ceiling” issue is not only a non-crisis, but the recent rise in rates is likely an opportunity to buy bonds.

Taking risks is no longer necessary to make a return on your savings.

In life, there are things that we should be convicted and committed to. For example, the love for our families, spouses, and religious beliefs. We can also be convicted about other things, such as political ideologies, social issues, and environmental causes.

The vast “cash hoard of 2023” has the bullish media salivating about what it means for the future of equities. That cash hoard in money market funds now exceeds $5.2 trillion.

What can breakeven inflation rates tell us about oil prices, energy stocks, and market direction? It turns out it’s a lot more than you think.

Despite media headlines, podcasts, and broadcasts suggesting “doom and gloom” lurks around the corner, investor bullishness has increased markedly since the October lows. This isn’t the first time we have discussed investor sentiment, which is often wrong at the extremes.

Recession odds have climbed considerably since Jerome Powell’s testimony before Congress and the latest FOMC meeting. However, the recent failures of Silicon Valley Bank (SVB) and Credit Suisse (CS), as higher rates impact regional bank liquidity, also added to the risks.

The market bottomed last October despite ongoing concerns about inflation, higher rates, recessionary risks, and a banking crisis. While the media headlines and youtube podcasts are filled with “crisis” headlines, as noted in “Analysts Raise Estimates,” expectations for growth and earnings are rising.

Despite an ongoing “banking crisis,” investors continue to chase stocks triggering several bullish buy signals.

Recession indicators are ringing loudly.

“QE” or “Quantitative Easing” has been the bull’s “siren song” of the last decade, but will “Not QE” be the same?

“QE” or “Quantitative Easing” has been the bull’s “siren song” of the last decade, but will “Not QE” be the same?

With the collapse of Silicon Valley Bank, questions of potential “bank runs” spread among regional banks.

Could the consensus view of a “no recession” scenario be wrong? As portfolio managers, this is the question we ask ourselves daily.

Warren Buffett defended stock buybacks in Berkshire Hathaway’s annual letter, pushing back on those railing against the practice he believes benefits all shareholders.

Gen Zers, according to a recent Magnify Money survey, are overly optimistic about being wealthy.

While there are certainly many complaints that “capitalism” is broken, such is not the case.

A recent Wall Street Journal article discussed how retail traders that made millions during the pandemic trading the market are now mostly wiped out.

Economically speaking, bullish bets are mounting on a “no landing” scenario, which suggests the economy will avoid a recession entirely.

Last week, we discussed why the more bullish technical formations were at odds with the many recession forecasts.

The market correction has started.

Last week, we discussed why the more bullish technical formations were at odds with the many recession forecasts.

Bullish investors continue to “Fight the Fed,” hoping that a change to monetary policy will reignite the 12-year-long bull market.

Despite mounting evidence supporting recession forecasts, the stock market remains at odds with that outlook.

The most recent NFIB (National Federation Of Independent Business) is sending a strong signal of an economic recession.

From a contrarian investing view, everyone remains bearish despite a market that corrected all of last year.

Optimism is increasing on Wall Street, with investors hoping for a “soft landing” in the economy.

The “pain trade” is likely higher over the next few weeks.

Is the Fed trying to wean the markets off monetary policy?

The lag effect of monetary policy changes will surprise the Fed as the fiscal “pig” of stimulus begins to exit the economic “python.”

Home prices have started to correct as interest rates rose sharply in 2022.

For many investors who started their investing journey following the financial crisis, forward returns will be disappointing compared to the last decade.

Just recently, James Bullard, President of the St. Louis Federal Reserve, suggested the central bank might need to employ the “7% solution” to ensure the complete destruction of inflation.

With 2022 finally over, and not soon enough, such is an excellent time to review our “investor resolutions.”

Much ink has been spilled over the death of the 60/40 portfolio.

Extremely harsh weather conditions from winter storm Elliot resulted in thousands of flight cancellations last weekend.

Managing your portfolio has more to do with gardening than you might imagine.

The big question heading into 2023 is the dreaded “R” word.

Capital represents the resources and labor used to produce goods and services.

In 2023, the math of valuations suggests returns will likely be challenging as markets remain difficult to navigate.

The key takeaway from Wednesday’s FOMC meeting: despite encouraging inflation news, the Fed believes they have a long inflation fight ahead.

Will a dollar decline be good for stocks? It is an interesting question, given that during 2022 there was a significant non-correlation between the dollar and the stock market.

Since the beginning of October, the market has performed better as a “Fed Pivot” bull case pushed investors into the market

Recently, Bank of America discussed the “5-Lessons From The Nifty Fifty.”

After 12 years of a liquidity-fueled, Fed-induced bull market, are the markets set to start another “secular” bear market?

Following the weaker-than-expected October inflation report, stocks surged on hopes the Fed will “pivot” sooner than later. As we discussed recently, a “policy pivot” is not necessarily bullish but instead suggests more bearish market action will come first.

Is a “hard landing” coming, economically speaking, as the Fed continues its most aggressive rate hike campaign in 40 years?

With the midterm elections behind us, does the market outlook improve given a now gridlocked Congress? Historically speaking, such is the case.

There was a time when a large portion of Americans belonged to the “middle class.”

Since June, the market rallied on hopes of a “policy pivot” by the Federal Reserve.

Are the FANG stocks dead?

October started strong and then slid to new lows but managed to rally back toward the month’s end.

The Fed’s next crisis is already brewing.

Is a “lost decade” ahead for markets? Stanly Druckenmiller believes that could be the case.

Last week, the FOMC published its minutes from the September meeting, confirming its recent stance that Fed rate hikes will continue until inflation is vanquished.

“Recession Fatigue” is setting in as consumers struggle under rising interest rates, high inflation, and a declining stock market.

While the Fed continues to hike rates to combat high inflation levels aggressively, history shows that deflation will become a more significant threat when something “breaks” in the financial or credit markets.

Is this the “Superbubble’s Final Act?” Such was a fascinating piece of commentary recently from Jeremy Grantham, famed investor and co-founder of GMO.

The strong dollar remains a risk to corporate profits and asset prices as the impact on the global economies grows.

“Market instability” remains the most significant risk to central banks globally.

A recent MarketWatch article discussed JPMorgan’s Chief Operating Officer, Daniel Pinto, views about a coming mild recession.

The latest rate hike announcement by the Fed sent stocks tumbling to the year’s lows. While last week’s market action was brutal, the good news is the markets are set up for a rather significant short squeeze higher.

The massive debt levels provide the single most significant risk and challenge to the Federal Reserve. It is also why the Fed is desperate to return inflation to low levels, even if it means weaker economic growth.

Stocks are far from cheap. Based on Buffett’s preferred valuation model and historical data, return expectations for the next ten years are as likely to be negative as they were for the ten years following the late ’90s.

Asset bubbles have been prevalent throughout history.

Recently, the Biden Administration started taking victory laps on deficit reduction.

At the Jackson Hole Summit, Jerome Powell made it clear the Federal Reserve remains focused on combatting inflation despite recession signals rising in tandem.

Last year, I wrote an article discussing that 2022 earnings estimates were too optimistic given the impending reversal of the economic “Sugar Rush” of massive liquidity injections.

Small business sales are the lifeblood of the economy.

The “Rule Of 20” says the “bear market” may just be resting despite much commentary to the contrary.

Buy stocks in a bear market.

The bear market is over.

Jerome Powell isn’t Paul Volker, and this isn’t 1982.

Economic slowdown but no recession!

Pulling forward growth over the last decade remains the Federal Reserve’s primary tool for keeping financial markets stable while economic growth rates and inflation remained weak.

Jim Cramer recently stated it will be time to buy stocks when the Fed pivots.

Every investor must learn the one investing lesson in surviving the long game: how math works.

As expected, Wall Street wins again.

No recession. 

ESG underperformance will be the strategy’s eventual undoing.

MMT Policy (Modern Monetary Theory), the grand experiment, was tried following the pandemic-driven shutdown of the economy.

Basic economics says that companies can only set prices at a level where the current supply will meet demand. Moreover, looking at prices in a vacuum is also very misleading because it doesn’t account for changes in the firm’s input or operating costs.

The “Bullwhip Effect” has gotten the media’s attention as of late. However, the causes, effects, and consequences to the market and monetary policy are not well discussed.

The “Fear Of Missing Out,” or “F.O.M.O.” is a centuries-old behavioral trait that began to get studied in 1996 by marketing strategist Dr. Dan Herman.

An earnings recession is coming as the Fed hikes rates which accelerates an economic recession.

“HODL,” an original misspelling taken on as a badge of courage by cryptocurrency investors, spread to “Meme stocks” during the runup in 2020 and 2021.

An oil price and energy stock price reversion may be starting.

NFIB signals a recession is coming…again.

An “economic hurricane” is coming.

Investors are terrified.

Social Security has a problem.

When will the bear market end?

Will the Fed pause its rate hikes as markets correct?

Is a “lost decade” ahead for markets?

High inflation has captured the headlines as of late particularly as CPI recently hit the highest levels since 1981.

The disinflationary impact of Fed policy on equities is coming.

Investing during a recession can be a very difficult, and often dangerous, prospect.

Investor sentiment has become so bearish that it’s bullish.

“Don’t be bearish.” That was the message delivered by a Wall Street Journal article in August 2021.

A bull market in bonds is set to return with a vengeance as the Fed once again makes a policy mistake.

Buying stocks is easy; the hard part is knowing when to sell.

Recession warnings are clearly on the rise. Much of the initial media fervor focuses on the inversion of the yield curve.

Is there a bear market lurking in the shadows?

Is it still a “bear market rally?”

The “wisdom of the crowd” isn’t always wise to follow. A recent article by Scott Nations via MarketWatch made an excellent point.

Did Goldman Sachs destroy a persistent myth about investing in stocks? Sam Ro recently suggested such was the case for the “sacred CAPE ratio.”

“Anatomy of a Bear Market” by Russell Napier is a “must-read” manuscript. Given current market dynamics, a review seems timely.

Yield curve inversion conversations are dominating the media to the point it almost sounds like the start of a bad joke.

The surge in bond yields suggests that we are nearing the ideal entry point to buy longer-duration bonds for capital appreciation and portfolio protection.

Bailouts are the root cause of the dysfunction of capitalism and the demise of free markets.

“Cash Is Trash” is a common theme as of late as inflation rages from the massive monetary interventions of 2020 and 2021.

Recession risk is rising rapidly. In fact, it is possible that we may already be in one.

The Fed’s QE is officially over.

An earnings reversion is coming.

Hiking rates into a wildly overvalued market is potentially a mistake. So says Bank of America in a recent article.

Greedy corporations are not causing inflation.

“Geopolitical Risk” could well be a reason for the Fed to slow-roll tightening monetary policy in March.

A March stock market rally is likely, but does that mean the risk of a bear market is over?

Market pullback or bear market? Such seems to be the question on everyone’s mind as of late, given the rough start to 2022 so far.

Earnings estimates are more deviated from long-term growth trends than at any point in history.

Economic stagnation arrives as expected as the “Sugar Rush" of liquidity continues to fade from the system.

A 50-percent decline will only be a correction and not a bear market.

Disinflation, and ultimately deflation, is a more significant threat than inflation over the next two years.

A Potemkin economy has lured the Fed, economists, and Wall Street analysts into a potentially dangerous assumption of economic normalcy.

Jeremy Grantham recently made headlines with his latest market outlook titled “Let The Wild Rumpus Begin.”

What if the Fed can’t hike rates? It’s an interesting question and one we delved into in Part 1 – “Fed Won’t Hike Rates As Much As Expected.”

Rate hikes will be far fewer than the markets currently expect.

“Don’t Fight The Fed.” But, unfortunately, that mantra has remained a “call to arms” of the financial markets and media “bullish tribes” over the last decade.

Passive ETFs are hiding a bear market in stocks.

“Speculative” is a word that aptly sums up the year 2021.

Here are my New Year “investor” resolutions for 2022.

The reality is that despite media commentary to the contrary, debt-driven government spending programs have a dismal history of providing the economic growth promised. As a result, the disappointment of economic and earnings growth over the next year is almost a guarantee.

During bull markets, investors have a concise memory of previous bear markets. Such is why, throughout history, cycles repeat as lessons must get learned and relearned.

When the Fed initially starts hiking rates, it is usually during a strongly trending bull market. Much like a car rolling downhill in neutral, tapping the brakes initially doesn’t do much to curb the momentum. However, keep pushing on the brake pedal long enough, and the car will slow to stop. There are two things to take away from the chart below.

“Wipe Out” is an appropriate description of what is happening beneath the calm surface of the bull market.

Going to all cash in your portfolio to avoid a crash can be just as costly as the crash itself. A recent CNBC article quoted a $200 billion money manager suggesting “every stock market investor should be ready to go to cash.”

Financial history is littered with the remains of ideas that marked the peaks and troughs of markets over time. From magazine covers to the world’s tallest skyscrapers to new investment products and strategies. Most proved to be the result of the psychology at that time, whether it was excessive bullishness or overwhelming fear.

The market is disconnected from everything. Throughout history, there are correlations you would expect to hold constant between the market, consumer confidence, and the economy.

The Fed’s monetary policy has screwed Americans. Such is the basic premise of a recent Washington Times article discussing inflation.

Inflation vs. deflation – while headlines get filled with “inflation” concerns, historical data shows “deflation” remains a threat.

Could the Fed trigger the next “financial crisis” as they begin to hike interest rates? Such is certainly a question worth asking as we look back at the Fed’s history of previous monetary actions.

Do rising interest rates matter to the stock market? Many in the financial media and advisory community are scrambling to locate periods where rates rose along with stocks. Has it happened? Absolutely. However, it was only a function of timing until it mattered.

While the Fed notes valuations are elevated, the crucial message to investors gets obfuscated. From current valuation levels, the expected rate of return for investors over the next decade will be low.

“Is cash a good hedge?” It’s a focus of a recent article discussing “fast” versus “slow” risk which examined the financial impact on equities and cash over long-term periods.

Charting the stock market “melt-up” in prices, and the Fed’s naivety of the laws of physics may be of benefit to younger investors. After more than a decade of rising prices, accelerating markets seem entirely normal, detached from underlying fundamentals. As a result, new acronyms like “TINA” and “BTFD” get developed to rationalize surging prices.

Fundamentally speaking, there are more than a few indications that 2022 earnings estimates are still overly exuberant. However, the bullish optimism currently supports rising stock prices.

What If I told you that 40% of the bull market rally over the last decade was from buybacks alone? That may not be as crazy as it sounds.

While the promise of a continued bull market is very enticing, it is essential to remember that all markets ultimately complete a “full cycle.” Therefore, if your portfolio, and eventually your retirement, depends on the thesis of an indefinite bull market, you should at least consider the following charts.

Like all rules on Wall Street, Bob Farrell’s rules are not hard and fast. There are always exceptions to every rule, and while history never repeats exactly, it often “rhymes” closely.

We dig into the bullish and bearish case for the market as we head into the end of the year. Currently, investors face a conundrum between year-end seasonality and the Fed starting to taper its bond-buying program.

Is the risk of a more significant correction over now that the expected 5% decline is complete? That was a hotly debated question after this past weekend’s newsletter supporting the idea of a reflexive rally into year-end.

No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here?

The fact we have the lowest interest rates in 5000-years is indicative of the economic challenges we face.

On Monday, stocks solidly cracked below the 50-dma, but the bounce off the lows has investors asking if it’s “time to buy?”

After 40-years of economic erosion, there are still deficit deniers.

We don’t disagree the S&P 500 could well hit a target of 5000. But, let us be honest about the reasons why...

Gold. What’s wrong with it? From spiking inflation, falling real interest rates, and massive money printing, it seems logical that gold, a touted inflation hedge, should be rising. Yet, so far this year, gold has done little.

As the Fed started to talk about “taper,” the “bulls” sent a stern warning with a 2% “crash” they shouldn’t. After a couple of weeks of several Fed speakers discussing the need to reduce monetary accommodation, a quick sell-off brought had Powell singing a “dovish” tone at the recent Jackson Hole summit.

The question of Japanization in the U.S. continues as the S&P 500 tracks the Nikkei of 1980.

Young investors are taking on personal debt to invest in stocks.

“Pet Rocks” first appeared in the mid-70s as a novelty item. Just recently, digital NFT’s of “pet rocks” sold for over $100,000.

In the fastest bull market in history, the S&P 500 doubled from its pandemic lows.

Did the Fed’s “monetary policy experiment” fail?

The question I get most often is “when is the next bear market?” There are three specific items that tend to predict bear markets and recessions with some accuracy.

The data shows the Fed is behind the surging wealth gap.

Was the second quarter the peak of economic growth and earnings?

“Past Performance Is no guarantee of future of results.” Such is the disclaimer below every performance chart produce by the financial marketplace.

A few years ago, Paul Wallace penned an article entitled: “GDP Is A Grossly Defective Product.” The recent release of the Q2-2020 report reminded me of it as the media fawned over the 7.6% print.

In this past weekend’s newsletter, I discussed the issue of the markets next “Minsky Moment.”

It’s now official that the recession of 2020 was the shortest in history.

Monetary policy is not expansionary despite widespread belief otherwise.

Knowledge vs. experience. When it comes to investing, such is what separates long-term success from failure.

Is the retail investor rampage over?

Bond yields are sending an economic warning as this past week 10-year Treasury yields dropped back to 1.3%.

“Warnings From Behind The Curtain” almost sounds like the title of a good “Cold War” fiction novel.

In Part-2 of “Capitalism” does not equal “Corporatism,” we delve into why bailouts support corporatism and how to fix the system.

Wall Street is once again in the midst of a “money heist” from naive investors.

A couple of weeks ago, in “Warning Signs A Correction Is Ahead,” we said quite a few indicators set the stage for a pick-up in volatility.

Bull markets always seem to end the same – slowly at first, then all at once.

Much like “Humpty Dumpty,” despite the Fed’s best efforts, you can’t create permanent inflation from artificial growth.

Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases.

After a decent rally from the recent lows, there are multiple warning signs a correction approaches.

The media is buzzing with claims of an “Economic Boom” in 2021.

Bear markets matter, and they matter much more than you think.

I can understand the confusion when this past week I discussed the issue of “If everyone sees it, is it still a bubble?”

“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives

Over the long term, confusing market crashes and bear markets can be detrimental to investor outcomes.

“If everyone sees it, is it still a bubble?” That was a great question I got over the weekend.

The recent NFIB survey suggests we are only in an economic recovery, not an expansion.

One of the interesting aspects of “bull markets” is the further they go, the lower forward returns fall.

There has been much commentary suggesting bonds have gotten overvalued due to historically low rates.

When there is a discussion of low future returns due to valuations, what gets missed is that such requires a bear market.

During a recent CNBC interview, Jeremy Siegel suggested stocks could rise another 30% before the boom ends.

There is no way this bull market doesn’t end very badly.

As markets surge to record highs, analysts are rushing to ratchet up earnings estimates as optimism explodes.

Recently, the March jobs report showed a whopping 916,000 new jobs.

In retail investing, do the “blind lead the blind?” Such was a question I asked recently about young investors who are “Long Confidence And Short Experience.”

I recently discussed why “Free, Isn’t Really Free” regarding the retail investor. While “free trades” have certainly reduced the transaction costs, the selling of data to the highest bidder has likely cost investors more than they saved.

Since the “Financial Crisis,” the hope was that inflating asset prices would trickle down into economic growth.

The fleecing of retail investors continues as “payment for order flow” expands.

In a “market mania,” retail investors are generally “long confidence” and “short experience” as the bubble inflates. While we often believe each “time” is different, it rarely is. It is only the outcomes that are inevitably the same.

The expected “sugar rush” from more stimulus is why the economy will “run hot” then crash. As every parent knows, giving a child too much “sugar” leads to a “rush” of energy. Then comes the crash, where you find them in some odd place taking a nap.

The markets took a tumble to start this week as rising interest rates and inflationary pressures begin to weigh on outlooks. Those worries quickly diminished as Jerome Powell changed the rules to reassure Wall Street that “QE” is here to stay.

More than 90% of investors believe the economy will be more robust in 2021, with a consensus it’s a V-shape recovery. For the first time since January 2020, chief investment officers want to increase capital spending rather than improve balance sheets.

One of my favorite investing legends is Oaktree Management’s Howard Marks. His investing wisdom and in-depth knowledge of investor psychology and market dynamics are unparalleled. Given the “speculative mania” we continue to watch in the market, I thought a review of some of his previous thoughts is appropriate.

As discussed in Friday’s #Macroview, stimulus, mainly when it comes from debt, does not create organic economic growth. In the second part of this analysis, we delve into why Powell is wrong when he says more stimulus will solve the employment problem.

2021 has certainly started off interesting. From Reddit readers chasing the most heavily shorted stocks, to the new Administration discussing more stimulus, investors have had plenty to deal with. A market review seems appropriate as the bulls seem to remain bulletproof even as the mania grows.

The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles. They are also aware that most policy tools are likely ineffective at mitigating financial risks in the future. Such leaves them being dependent on expanding their balance sheet as their primary weapon.

The illusion of surging savings rates or the decline in the debt-to-income ratios obfuscates the real economic problems and fosters the belief that monetary policies are working. They aren’t.

We can’t predict the future. If we could, fortune tellers would all win the lottery. They don’t, we can’t, and we aren’t going to try. However, this doesn’t stop the annual parade of Wall Street analysts from putting out forecasts on the S&P 500.

In September 2019, I wrote “NFIB Survey Trips Economic Alarms,” Of course, it was just a few short months later the U.S. economy fell into the deepest recession since the “Great Depression.” The latest NFIB survey is sending a strong warning to investors piling into small-cap stocks.

As we enter 2021, there are two myths told to investors to support the bull market narrative. The first, as we debunked recently, is that low-interest rates justify high valuations. The second is that since valuations are not as high as the “dot.com” crisis, there is no “stock market bubble.”

In the current bull market advance, few people are willing to sell, so buyers must keep bidding up prices to attract a seller to make a transaction. As long as this remains the case, and exuberance exceeds logic, buyers will continue to pay higher prices to get into the positions they want to own.

In October, I discuss how the “2nd Derivative Effect” would mute the impact of future stimulus programs. With the passage of the $900 billion stimulus package, we can update the estimates for the economic impact heading into 2021.

“Maybe this time is different. Those words, supposedly the most dangerous to utter in the investing realm, came to mind amid the frenzied pops in the highly anticipated initial public offerings recently.” That quote was from Randall Forsyth discussing why the current market mania reminds him of the “Shades of 1999.”

Recently, President-Elect Joe Biden named Janet Yellen to be his administration’s Treasury Secretary. Yellen quickly proclaimed the reason “I became an economist was because I was concerned about the toll of unemployment on people, families, and communities.” Such provides excellent commentary, but her track record as Federal Reserve Chairman shows she is more for the top 10% of the economy than the bottom. In reality, and what the markets already suspect, her appointment is an “arranged marriage” to the Fed.

In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed.

There is much to debate about the current level of interest rates and future stock market returns. However, what is clear is the 40-year decline in rates did not mitigate two extremely nasty bear markets since 1998, just as falling rates did not mitigate the crash in 1929 and the subsequent depression.

It’s that time of year when Wall Street analysts started trotting out the predictions for earnings growth and stock market targets for the coming year. Unfortunately, each year these overly optimistic estimates are ground down as the year progresses. Next year will be no different as earnings growth will disappoint in 2021.

The rally in energy companies is likely premature. To understand why such may be the case, we have to review a bit of history.

Recently, Ed Yardeni discussed his view of why another “Roaring 20’s” may lie ahead. However, while I certainly can appreciate his always “bullish optimism,” there is a significant fundamental problem with his view.

We have recently written a couple of posts about the “exuberance” that has invaded the market since the election. Such is often seen near short- to intermediate-term peaks in markets as investors go “all-in” without a net.

“The stock market is not the economy.” Such has been the “Siren’s Song” of investors over the last couple of years as valuation expansion has been the sole driver of the market’s performance. However, given that corporations derive their revenue from economic activity, the “Buffett Indicator” suggests investors may be walking into a trap.

I want to discuss a recent WallStreet Journal article by Ruchir Sharma entitled “The Rescues Ruining Capitalism.” We talk much about the bailouts and stimulus programs related to the economic shutdown and pandemic. However, the bailouts began back in 2008 when the Federal Reserve intervened with the insolvency of Bear Stearns.

One of the most recent mantras in the financial media is that housing prices rise because there is an inventory shortage. While it is an excellent headline for “getting clicks,” the are 3-reasons why there really is NO housing shortage.

I recently published an article discussing why “recessions” are a good thing by reverting debt buildups excesses during expansions. The argument against debt reversions is always the same in that “debt-to-income” ratios low.

As we near the 2020 Presidential election, rhetoric from both sides is ramping up. Depending on your personal “echo chamber” of social media, you are likely confident why your candidate is the best choice, and the opposition is the worst. However, when it comes to economic prosperity and the financial markets, who is the best choice? To answer that question, we will focus on the “policies,” not the “politics.”

Neel Kashkari, in a recent CNBC interview, said, “I don’t see any moral hazard here“ when asked if the Fed’s massive liquidity injections have blown a bubble. What exactly is the definition of “moral hazard.”

It is a given that you should never mention the “R” word. People immediately assume you mean the end of the world: death, disaster, and destruction. Unfortunately, the Federal Reserve and the Government also believe recessions “are bad.” As such, they have gone to great lengths to avoid them. However, what if “recessions are a good thing,” and we just let them happen?

There is currently much hope for another fiscal stimulus package to be delivered to the economy from Congress. While President Trump recently doused hopes of a quick passage, there a demand for more stimulus by both parties. While most hope more stimulus will cure the economy’s ills, it will likely disappoint due to the “2nd derivative effect.”

The amount of outstanding debt, and the subsequent deficit, has long been a problem in the U.S. For the last two decades, policymakers have made annual promises for more substantial economic growth. Yet with each passing year, growth rates weaken, and economic prosperity worsens.

Whether it is Paul Tudor Jones or any other great investor throughout history, they all had one core philosophy in common; the management of the inherent risk of investing.

We have recently been discussing the lack of performance in value versus growth. Such is historically the case during the late-stage, exuberance-driven, bull markets. However, not everything classified as a “value stock” is necessarily a value. The problem today, more so than at any point previously, is the astonishing lack of value in “value.”

Over the last several months, we have discussed the remarkable underperformance of value versus growth. While many investors quickly dismiss the performance gap under the guise of “this time is different,” it has important longer-term implications. In today’s missive, we want to discuss value, the margin of safety, and the real art of “doing nothing.”

I have previously discussed the importance of understanding how “physics” plays a crucial role in the stock market. As Sir Issac Newton once discovered, “what goes up, must come down.”

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

It’s a tale of two bull markets. One part of the market is trading as you would expect with near depressionary economic numbers. The only description for the other part is “insane.”

As we have been discussing, this past week, the S&P 500 index set an all-time high. Importantly, the breakout to all-time highs confirms the 35% decline in March was only a correction and not a bear market. The implications are important as the change of definition suggests a bear market still lurks for the full-market cycle to complete.

With the second quarter of the 2020 reporting season mostly behind us, and with markets testing “all-time” highs, do earnings support the bullish thesis? Such is the fundamental question surrounding the debate over the record deviation between “momentum” and “growth.”

Soros’ view on the pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market, creating a feedback loop between the markets and fundamentals.

A recent CNBC article states the Fed will make a major commitment to ramping up inflation. How is this different than the past decade of promises for higher inflation? More importantly, while the Fed may want inflation, their very actions continue to be deflationary.

According to a new study by the left-leaning Roosevelt Institute, a universal basic income could permanently make U.S. economy trillions of dollars larger. While such socialistic policies sound great in theory, history, and data, show it isn’t the economic savior it is touted to be.

Despite the surging stock market from the March lows, trillions in liquidity support from the Fed, retirement confidence declined.

There has been a growing concern over Technology stocks as investors “Party Like It’s 1999.” While no two periods are the same, the outcomes often are. For longer-term investors, if we are amid another “Tech Bubble,” the biggest challenge is navigating it and “living to tell about it.”

Value (investing) is dead. Long live value investing. Such certainly seems to be the mantra as investors continue to pile into growth stocks while rationalizing valuations using methodologies which historically have not worked well.

In this week’s “Technically Speaking,” the “Golden Cross” arrives, but are the bulls safe? As noted two weeks ago, is the 50/200 dma crossover is historically bullish for equities. However, with markets facing one of the worst earnings declines on record, could overly exuberant investors be walking into a trap?

When looking at the acceleration in the price of the Nasdaq, and particularly within the small group of stocks driving that advance, you can begin to fathom our concerns. Furthermore, the divergence between the Nasdaq and the S&P 500 index is emulating the late 90’s.

Over the last quarter, the “Death of Fundamentals” has become apparent as investors ignore earnings to chase market momentum. However, throughout history, such large divergences between fundamentals and price have resulted in low future returns. This time is unlikely to be different.

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.

If you haven’t heard of Modern Monetary Theory, or “MMT,” you will soon. If you recently lost your job due to the economic shut down, and received a stimulus check, you are already a beneficiary. As we will discuss in Part-1 of this two-part series, MMT’s theory falls flat when faced with reality.

With sentiment currently at very high levels, combined with low volatility, and a high degree of investor complacency, all the ingredients necessary for a market reversal are currently present. Am I sounding an “alarm bell” and calling for a massive correction? No.

Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?

There are a tremendous number of things that can go wrong in the months ahead. Such is particularly the case of surging stocks against a depressionary economy.

Rationalizing high valuations won’t improve future return outcomes.