Here are the latest items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of JWR. (SurvivalBlog’s Founder and Senior Editor.) Today, I’m issuing a U.S. stock market crash warning. (See the Stocks section.)
Stocks (Crash Warning):
The New York Stock Exchange just recorded its 71st “all time high” trading session since the November 2016 Presidential election. The market is now essentially stair-stepping upwards. The P/E ratio of the Dow Jones stocks now stands above 31 to 1. There have only been two times since the early 1880s that U.S. stocks have been so grossly overbought: Just before 1929 stock market crash and just before the 2000 “dot.com” bubble implosion. Consider this an earnest stock market crash warning. It is now very likely that U.S. stock markets will drive into a mountain, in a rocket-propelled vehicle that lacks an Oscillation Overthruster. It is that time, folks: “Eject, Bukaroo, Eject!”.
I now strongly urge my readers to soon reduce your stock and stock ETF holdings to less than 20% of your portfolio. Retain only a few individual stocks that you deem sufficiently crash proof. it is best to hold stock in companies that manufacture crucial consumer products. Think in terms of what will be needed by families regardless of the business cycle, as a safe haven. A few such stocks come immediately to mind. They include: Clorox (CLX), Exxon-Mobil (XOM), Fortune Brands Home and Security (FBHS), Johnson & Johnson (JNJ), Kimberly-Clark (KMB), Lamb Weston (LMB), and perhaps Medtronic (MDT). Again: Limit these stock holdings to less than 20% of your portfolio. The rest of your net worth should now be in: A.) Your primary residence; B.) A retreat property that is sitting on productive farm or ranch land; C.) Precious metals; D.) Firearms, magazines, and ammunition; and E.) Other barterable tangibles. Ideally, items A and B on this list should be combined. (It is best to live at your retreat year-round!) – JWR
Commodities:
China’s Yuan for Oil With Gold-Backed Futures Goes Mainstream Media. (A hat tip to H.L. for sending us the link.)
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OPEC Aims For Smooth Exit From Production Cut Deal
Forex:
Dollar index trims loss as new home sales hit near 10-year peak
Economy and Finance:
From leftward-leaning NPR: Next Fed Chair Will Help Determine Pace Of Interest Rate Hikes
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A headline from The Philippines: Banks further tighten real estate loans
Troubling Trends:
Next, Mike Williamson (SurvivalBlog’s Editor at Large) spotted some news from the Socialist People’s Paradise of Denver. Knowing Denver politics, this isn’t surprising: City restrictions won’t let Denver mom sell home for market value
Tangibles Investing:
Stefan Gleason: Threats to Digital Wealth Point Up Need for Tangible Backup
Provisos:
SurvivalBlog and its Editors are not paid investment counselors or advisers. So please see our Provisos page for our detailed disclaimers.
News Tips:
Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who particularly watch individual markets. And due to their diligence and focus, we benefit from fresh “on target” investing news. We often “get the scoop” on economic and investing news that is probably ignored (or reported late) by mainstream American news outlets. Thanks!
While I agree with the above statement that a crash is coming, I believe the timing is way off. We are not in a bubble yet folks. I believe we have at least a year and maybe two until a crash, and in that time the market will probably go up at an accelerating rate. How can you protect yourself? One way is to use trailing stop loss sell orders. Do not put these in your brokerage firm’s computers.There’s a website called tradestops.com (I have no connection to them). You put your securities in, set your stop, and if the market closes at or below the stop price for that security, they text and email you. The next day, you sell that stock at the open. This strategy should allow you to ride the market up and still get out before the big one. If doing so makes you nervous, gradually reduce your exposure over the next year, but still use the stops. Note that you can put stops on mutual funds and ETF’s as well as stocks. Note also that I suggest putting stops on bond mutual funds too.
The second step in this strategy is to wait until the bottom, when there’s blood in the streets (perhaps literally). When you can buy huge dividend-paying stocks at a P/E of 4 or less, that’s the time to get back in.
This line of thought assumes that the system will survive the next crash, and that it will not be TEOTWAWKI. If you feel that way, you won’t be buying back in because there won’t be anything to buy.
I am not a lawyer but it seems like this is an Expost Facto regulation. A good firm of class action lawyers should be willing to take on Denver with over 600 claimants involved. This is another case of government run amuck with their social engineering schemes.
http://www.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
What could possibly go wrong?
1) I am not a financial advisor so the following is just my opinion.
2) The primary indicator of a stock crash that I use is the inverted yield curve — i.e, when long term Treasury rates drop down to near the short term rates. According to the Fed, that has been a nine month-1 year leading indicator of past recessions.
3) It happened in 2000 when the Internet bubble popped (which would have caused a worse recession if not for the massive federal spending response to the Sept 11, 2001 attack). The yield curve flattened again in Dec 2006 as the subprime bubble began to collapse.
4) My understanding of why the yield curve flattens is that the Smart Money — which knows disaster is approaching — moves into the best investment in a depression : long term Treasury bonds which are safe, immune to deflation and pay interest. If you look at precious metals in 2008, you see their prices collapsing due to the threat of deflation– then rising as the federal government went deeply into debt to pump money into rescuing the big banks.
5) So far the 10 year bond is still about 1 percent above the 2 year Treasury. One issue is whether the yield curve is still a good forecast when the Fed has driven short term rates down to near zero.
6) I do agree that if a crash occurs it could be a major disaster — our federal debt has soared by $10 TRILLION in just the 8 years of the Obama administration. Our NIIP (NET debt to foreigners after subtracting our foreign assets and debts they owe to us) SOARED during Obama’s administration — from $2 Trillion to over $8 Trillion. That’s over 40 % of our annual GDP. Plus the retiring baby boomers are an increasing burden on the federal government since the money they paid into Social Security and Medicare Trust Funds over the past 45 years has already been spent.
Re the rise in the stock market it may be driven by a cut in costs not rise in earnings. The Democrat news media has been very quiet over several thing Obama did:
a) Obama cut the payments that US corporations have to put into pension funds by allowing them to assume they will earn 5% ANNUAL profits on the pension fund assets over a 25 year period — an obvious accounting fiction but one which lets corporations show their pension funds are funded near 95% of requirements even when they are below 80%.
b) Obama also cut Social Security liabilities by screwing women badly. Until about 2 years ago, a married woman who had worked and paid payroll taxes could get half-benefits at age 66 under her spouse’s SS account and delay drawing on her own account until age 70, allowing her account benefits to grow. Fair since the half-benefit recognize women’s contributions as stay at home mothers and the full benefits rewards them if they go back to work after the kids enter school.
Also, women tend to live 5 years longer than their husbands.
c) But Obama did away with that, forcing women to draw on their accounts at 66– which reduces their lifetime benefit by about $100,000 , depending on their wages.
2) Much of the Democrat’s news media hyping of “sexual aggression ” by men is deceit designed to distract women voters attention away from WHO has really been stabbing women in the back on behalf of Rich campaign donors. And , of course, there were a LOT of women suffering unemployment during the 8 years of Obama’s Big Bailout.
PS With unemployment causing a corresponding drop in women’s life savings.
3) And our deceitful news media has ALSO been very quiet about how Obama’s healthcare “reform” is dumping increasing costs onto the American worker. Companies are cutting their costs by bring in new healthcare plans that make workers pay large deductibles (no insurance payment until worker has first paid out several thousand dollars), higher premiums (thousands just to get the insurance) , higher percentages for worker co-payments after deductible is met and higher caps ($13,000) on how much co-payments a worker has to make for severe illnesses.
Commenting on the real estate article.
Curious stuff. I don’t have a problem with the city demanding a percentage of new massive housing tracts to be pegged for lower income families. There has got to be a way to break the cycle of poverty that afflicts segments of the population.
That being said, the city is hosing her. They allowed her to purchase the home outside of their fancy, well managed program. They screwed up. A non-corrupt city management would have admitted their failure and let her move on with her life.
Instead, they are trying to retroactively force her into the program. Not sure why her attorney is bothering fighting the corrupt city hall. File a massive, maybe billion dollar law suit over discrimination. Not sure what kind of discrimination, but thats what good lawyers are for.
Stops may not protect you in the event of a crash. There are “fast market” rules that come in to play. Better not be counting on the stops.
Re inverted yield curve: when the fed funds rate rises to equal the rate on the 10 year US treasury bond, history suggests a crash is imminent.Check out this: https://fred.stlouisfed.org/series/T10YFF/