Black Monday – The stock market crash of 1987

Posted on 02/12/2023 by Yanis P.

Black Monday: The Day Wall Street Fell

On October 19, 1987, global stock markets experienced one of the most dramatic single-day declines in history, an event that would come to be known as “Black Monday.” The Dow Jones Industrial Average plummeted 22.6%, its largest one-day percentage drop ever. This financial earthquake sent shockwaves through markets worldwide, leaving investors shell-shocked and economists scrambling for explanations. The reverberations of Black Monday continue to echo through financial history, offering valuable lessons about market psychology, systemic risks, and the delicate balance of global finance.

The Perfect Storm: Factors Leading to the Crash

The causes of Black Monday were complex and multifaceted, involving a confluence of economic, technological, and psychological factors. In the months leading up to October 1987, the bull market had been running hot, with the Dow gaining over 40% in the first eight months of the year. This rapid ascent had pushed valuations to historically high levels, creating a potentially unstable situation.

Warren Buffett, the legendary value investor, had warned about the dangers of overvaluation in the months preceding the crash. He famously said, “Be fearful when others are greedy, and greedy when others are fearful.” In the context of Black Monday, this wisdom proved prescient, as the market’s greed-driven ascent set the stage for a fear-driven collapse.

Several macroeconomic factors also contributed to market jitters. Rising interest rates, a weakening dollar, and growing trade deficits created uncertainty about the U.S. economy’s future. These concerns were exacerbated by geopolitical tensions, including conflicts in the Persian Gulf.

The Role of Program Trading and Portfolio Insurance

A critical factor in the severity of the Black Monday crash was the widespread use of computer-driven trading strategies, particularly portfolio insurance. This technique, designed to protect large institutional investors from market downturns, involved selling stock index futures as the market declined. In theory, this would offset losses in the underlying stock portfolio.

However, as John Bogle, founder of Vanguard and pioneer of index investing, later observed, “The idea that you can use futures for portfolio insurance is one of the most mischievous ideas that’s ever come into Wall Street.” The problem was that as more investors adopted these strategies, they created a self-reinforcing cycle of selling pressure.

On Black Monday, as the market began to decline, portfolio insurance programs triggered widespread selling of futures contracts. This, in turn, led to further declines in the stock market, triggering more selling. The result was a cascade effect that overwhelmed the market’s normal stabilizing mechanisms.

Mass Psychology and Market Panic

The events of Black Monday offer a stark illustration of the power of mass psychology in financial markets. As prices began to fall rapidly, fear and panic spread among investors, leading to a classic “flight to quality” as traders rushed to sell stocks and move into safer assets like Treasury bonds.

George Soros, the renowned hedge fund manager known for his theory of reflexivity, has often spoken about the self-reinforcing nature of market trends. In the context of Black Monday, Soros’s insights are particularly relevant. He argues that market participants’ perceptions can influence the fundamentals they are trying to reflect, creating feedback loops that can lead to extreme outcomes.

This psychological cascade was evident on Black Monday, as the initial decline in prices led to increased selling pressure, which in turn caused further price declines. This self-reinforcing cycle of fear and selling created a market environment where rational analysis was overwhelmed by emotional reactions.

Cognitive Biases in Action

The Black Monday crash also provides a vivid example of how cognitive biases can influence investor behaviour. One particularly relevant bias is the availability heuristic, where people judge the likelihood of an event based on how easily they can recall similar occurrences. Before Black Monday, many investors had become complacent due to the long-running bull market, underestimating the possibility of a severe market downturn.

Charlie Munger, Warren Buffett’s long-time business partner and a student of human psychology, has often spoken about the importance of understanding cognitive biases in investing. He once said, “The psychology of misjudgment is a terribly important thing to learn.” The events of Black Monday underscore this point, demonstrating how collective cognitive biases can contribute to market instability.

Technical Analysis and Market Signals

From a technical analysis perspective, there were warning signs in the market before Black Monday. The Dow had reached a then-record high of 2,722 points in August 1987, but had begun to show signs of weakness in the weeks leading up to the crash. Many technical indicators, such as the advance-decline line and the number of stocks making new highs versus new lows, had been diverging from the market’s upward trend.

William O’Neil, founder of Investor’s Business Daily and developer of the CAN SLIM investment strategy, has emphasized the importance of recognizing these technical warning signs. He argues that investors should pay close attention to the market’s overall health, not just individual stock prices. In the case of Black Monday, these broader market indicators were flashing warning signs that many investors overlooked.

The Global Nature of the Crash

One of the most striking aspects of Black Monday was its global nature. Markets around the world experienced severe declines, highlighting the increasing interconnectedness of global finance. The crash began in Hong Kong and spread westward through European markets before hitting the United States.

John Templeton, a pioneer of global investing, often spoke about the importance of looking beyond one’s home market. The events of Black Monday underscored this point, demonstrating how financial contagion could spread rapidly across borders. This global dimension added to the sense of panic, as investors realized that there was nowhere to hide from the market turmoil.

The Role of Market Makers and Liquidity

One factor that exacerbated the severity of the crash was the failure of many market makers to fulfill their role of providing liquidity. As selling pressure mounted, many market makers stepped away, refusing to buy stocks or quoting extremely wide bid-ask spreads. This lack of liquidity further fueled the market’s decline.

Paul Tudor Jones II, a hedge fund manager who famously predicted and profited from the 1987 crash, has spoken about the importance of understanding market structure and liquidity dynamics. He once said, “The most important rule of trading is to play great defence, not great offence.” On Black Monday, the breakdown of normal market-making activities highlighted the crucial role that liquidity plays in maintaining orderly markets.

The Aftermath and Policy Responses

In the immediate aftermath of Black Monday, there were fears of a repeat of the Great Depression. However, swift action by the Federal Reserve, led by Chairman Alan Greenspan, helped stabilize the markets. The Fed issued a statement pledging to provide liquidity to support the financial system and quickly lowered interest rates.

Ray Dalio, founder of Bridgewater Associates, has often emphasized the importance of understanding how policy responses can shape market outcomes. The Fed’s actions after Black Monday demonstrated the powerful role that central banks can play in stabilizing financial markets during times of crisis.

In addition to monetary policy responses, regulators implemented several changes to market structure in the wake of Black Monday. These included the introduction of circuit breakers, which automatically halt trading if the market falls by a certain percentage, and limits on program trading.

Lessons Learned and Long-Term Implications

Black Monday served as a wake-up call for investors and regulators alike, highlighting the potential for sudden, severe market dislocations. It underscored the importance of risk management and the dangers of overreliance on computer models that may not adequately account for extreme events.

Benjamin Graham, often referred to as the father of value investing, famously said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” The events of Black Monday demonstrated the truth of this statement, showing how short-term market movements can be driven by fear and speculation rather than fundamental value.

For long-term investors, Black Monday reinforced the importance of maintaining a disciplined approach. As Peter Lynch, the legendary Fidelity fund manager, often advised, “The key to making money in stocks is not to get scared out of them.” Those who held steady or even bought during the panic were rewarded as the market recovered relatively quickly, with the Dow regaining its pre-crash level by early 1989.

The Legacy of Black Monday

More than three decades later, Black Monday remains a pivotal event in financial history. It serves as a reminder of the market’s capacity for extreme movements and the importance of preparing for tail risks. The crash also accelerated trends towards globalization and computerization in financial markets, shaping the modern trading landscape.

Jesse Livermore, a legendary trader from the early 20th century, once said, “There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.” While the specific circumstances of Black Monday may not be repeated, the underlying lessons about market psychology, systemic risk, and the importance of liquidity remain highly relevant today.

As we reflect on Black Monday, it’s worth considering the words of Carl Icahn, the activist investor: “The key to success is to keep growing in all areas of life – mental, emotional, spiritual, as well as physical.” For investors and market participants, this means continually learning from past events like Black Monday, adapting to new market realities, and always staying vigilant for the next potential market-moving event.

Conclusion: Black Monday’s Enduring Relevance

Black Monday stands as a stark reminder of the market’s capacity for extreme movements and the complex interplay of factors that can lead to financial crises. It highlights the importance of understanding market psychology, the potential pitfalls of new technologies, and the crucial role of liquidity in maintaining market stability.

As Jim Simons, the mathematician and hedge fund manager, once observed, “The best way to make money is to have a lot of uncorrelated bets.” The events of Black Monday underscore the wisdom of this approach, demonstrating the dangers of overconcentration and the value of diversification.

Ultimately, Black Monday is a powerful lesson in humility for all market participants. It reminds us that no matter how sophisticated our models or how long a bull market has run, the potential for sudden, severe market dislocations always exists. By studying and understanding events like Black Monday, investors and policymakers can work to build more resilient financial systems and develop strategies to navigate future market turbulence.

Stock Market Trends

Posted on 02/08/2023 by Yanis P.

Tactical Investor Volatility Index Readings are Soaring

Stock Market Trends: Volatility Index readings have surged to a new high (as shown in the header image above), which means that extreme behaviour in all areas can be expected in and out of the markets. Additionally, we added new psychological data points to the V-Indicator and we suspect that this new high could correspond to a new development in the Coronavirus outbreak. Let’s hope it’s a positive one.

The ETF Trend Portfolio is our most conservative portfolio, so in the light of recent developments, one of which is that V-readings have soared to new highs, we are going to err on the side of caution. This is a dangerous development as over the past 12 months we added a new psychological component to this indicator, and this new high corresponds to the Coronavirus outbreak.

We are not in the “panic” generating business, so there is no need to panic, but this development could mean (operative word being “could”) that China is not telling the full story. The dangerous development is in regards to extreme market volatility; the market could shed several thousand points and then recoup these losses just as fast. Most traders are not prepared for this type of action, so when the market’s pullback strongly or appear to be crashing, they will throw the baby out with the bathwater and in doing so make a colossal mistake.

We are not going to squander time mincing words; instead we are going to provide hard cold facts that will more than clearly broadcast how extremely effective and accurate this service is. Read more about our VIP Futures Service.

China Could be downplaying the situation

In all likelihood, China is releasing selective pieces of data, but in general, the world is used to this. However, what could trigger a sharp reaction from the markets is if this data proves to be damaging. There have been previous scares before and in each case, the markets sold off, but the sell-off proved to be a buying opportunity. The last sell-off was due to the Ebola virus scare back in Oct of 2018.

In the long run, this is not a negative development as the long term trend is still bullish, so if it comes to pass, we will have an opportunity to get into stocks and ETF’s at a discount. We have adjusted pending sell orders, stops and in some cases, cancelled pending orders on the following ETF’s. Bottom line while prudence is warranted, Panic is not; hence focus on the trend and ignore the noise.

Volatility Index readings are high but we are not going to follow the herd

Hence the statement below refers to several dangerous trends but not the ones that come straight to one’s mind:

This is a dangerous development as over the past 12 months we added a new psychological component to this indicator, and this new high corresponds to the Coronavirus outbreak. Interim Market Update Jan 31, 2020

We want to clarify what we mean by dangerous (in the above statement) as we don’t want anyone to falsely assume that we are embracing some of the wild conspiracy theories being put forward regarding this virus. We analysed the data thoroughly, especially the psychological data. We also looked at data evaluated by other level headed experts; many thanks to our subscribers for providing links to some of these experts, which once again solidifies our claim that we are fortunate enough to some have some of the best minds out there as part of our community. We have concluded that the Coronavirus issue is being blown out of proportion.

Weaponised news; A dangerous trend with no end in sight

The first trend is that news is going to be weaponised to the extreme to support whatever narrative a given group of individuals have decided to embrace or force on a subset of the crowd. Secondly, as V-readings have no surged to new highs, the market will experience more random bouts of extreme volatility and this should be embraced when the trend is positive.

Thirdly, violence (as in wars, crime, etc), wild weather patterns will be more prevalent going forward and extreme and we mean extremely stupid behaviour is going to be embraced. Lastly, polarisation levels are going to rise to such an extreme that we could reach a point where a simple disagreement set off something akin to a mini civil war.

Back to the Coronavirus issue:

In Asia, masks are selling out like hotcakes and we suspect many stocks that are in the vaccine creation field have experienced huge price increases. In other words, a group of companies are making out like bandits while the masses being fleeced again. The data out there states that this virus has a mortality rate of 3% and no new data has come out refuting it.

Therefore we find it quite interesting that many financial experts with no background in medicine or psychology have gone out of their way to state that the situation is on the verge of becoming a pandemic. Too many experts believe in the deep state, while there is an apparatus that could be called the “deep state”, their understanding of this topic is limited at best.

The way these power brokers work is to indoctrinate people, so the players are willing participants or blind participants (blind as in being mentally blind and not physically blind) which boil down to the same thing. These individuals are used as cannon fodder; the objective is achieved by pandering to their wild fantasies. This objective is achieved by allowing Gossip artists to masquerade as reporters. In the old days, they would be called fisherwomen.

As of now, we have found no objective data that backs the many claims non-experts are pushing regarding the Coronavirus and the only dangerous trends we see are the ones we have addressed above. Could the situation change? Yes, anything is possible, but history reveals that most naysayers are full of hot air as the world was supposed to have officially ended a long time ago

We had pandemics before so this is nothing new

As I am typing, people are dying all over the world. In the time it took me to type this sentence, more than 15 people died. Seventy-eight thousand people have died today, and the number will rise to 80,000 or more by the time you get this update. So far this year 9,500,000 people have died, and that number rises every second. One could state that death is a pandemic, but no one is screaming about that issue. Smoking-related and or Cancer-related deaths could be also classified as a pandemic as more than 16.6 million will die this year from both, and yet no one makes a big deal (9.6 million from cancer and seven million-plus from smoking).

To date, roughly 2860 people have died from the coronavirus, and suddenly it’s the new Black Death. To be clear, we are not making light of the situation, but so much attention is being given to this one agent when compared to other agents of death. Here is an interesting fact; there are twice as many new births as deaths on a global basis. Live data on world deaths, birth rates, coronavirus deaths, etc. can be obtained from here http://bit.ly/32wVaQA

High Volatility Index Readings: Use This To Your Advantage

There have been more than a dozen outbreaks since 1980 and with far deadlier outcomes in some instances, but if you look at the chart above, after a knee jerk reaction, the markets trended higher. Hence, the Tactical Investor saying; “every disaster leads to a hidden opportunity” and the only way to spot that opportunity is not to give in to panic. We envision a similar outcome for the coronavirus, the markets could still sell-off but that sell-off should be viewed through a bullish lens.

The mass mindset is hard wired to panic. One can overcome this shortfall by observing this behavior impartially and then ask this simple question “why am I doing something that has never led to a positive outcome”. Secondly, as we have advocated for years, one should maintain a trading journal and the best time to put pen to paper or fingers to a keyboard is when the markets are tanking. Make a note of the emotions that are swirling through your mind. Jot down some of the headlines the media is pushing out and observe the reactions from your fellowman. This information will prove to be priceless in the weeks, months, years and decades to come.

The markets are trading in the extremely overbought ranges on the weekly charts, and in theory, they should let out some steam, but the monthly charts, for now, are exerting more upward pressure than they normally do. It should be noted that the weekly charts also move relatively slowly, so there is still time for the markets to let out some steam.

Courtesy of Tactical Investor

What Will The Stock Market Return In 2020?

It’s the most wonderful time of the year — when investment gurus unveil their predictions for what the stock market will return in the coming year.

We expect investment experts to have crystal balls that allow them to see how the stock market is going to perform in the future. Of course, they don’t have crystal balls, and their predictions often aren’t helpful.

The problem with expert predictions of the stock market isn’t that they are wrong — which they often are — the future is uncertain, and we shouldn’t expect anyone to predict it. The problem is that investors often listen to these predictions and base investment decisions on them.

There are better ways to cope with the uncertainty of the 2020 market than listening to predictions. Before we get to those, let’s review what we can predict and what we cannot.

What We Can Predict
While the stock market follows a cycle but defies prediction, history can provide insight into what we might expect from the markets in any given year.

The histogram below displays the dispersion of returns on the S&P 500 since 1928:
As you can see, in about two-thirds of the years, the market is up and about one-third of the time it is down. The distribution is roughly a bell curve with a positive skew and a fat left tail (meaning large negative returns happen more often than a bell curve would predict). Full Story

The Top 15 Stocks to Buy in 2020

Heading into a new year, all investors want to know is what stocks they should be buying.

At the beginning of this year, I attempted to answer that question by compiling a portfolio of the top 15 stocks to buy for 2020. In mid-February, that portfolio of stocks was up a whopping 22% year-to-date.

Then, the novel coronavirus outbreak went global. Russia and Saudi Arabia started an all-out oil price war. Financial markets across the globe fell off a cliff. So did my portfolio of top stocks to buy for 2020.

But, I think now may be as good a time as any to double down on these top stocks. Coronavirus headwinds are fleeting. They will pass. Once they do, these long-term growth stocks will get back to winning.

In no particular order, the top 15 stocks to buy for 2020 in March are:

Facebook (NASDAQ:FB)
Activision (NASDAQ:ATVI)
Luckin Coffee (NYSE:LK)
Beyond Meat (NASDAQ:BYND)
Netflix (NASDAQ:NFLX)
Pinterest (NYSE:PINS)
Canopy Growth (NYSE:CGC)
Square (NYSE:SQ)
The Trade Desk (NASDAQ:TTD)
Etsy (NASDAQ:ETSY)
Okta (NASDAQ:OKTA)
JD.Com (NASDAQ:JD)
Stitch Fix (NASDAQ:SFIX)
Nio (NYSE:NIO)
Snap (NYSE:SNAP)

Without further ado, then, let’s take a look where these top stocks to buy for 2020 are going next. Full Story

20 Predictions for the Stock Market in 2020

t’s a brand-new year, and boy, does 2020 have some big shoes to fill. Last year, we witnessed the benchmark S&P 500 (SNPINDEX:^GSPC) gallop higher by nearly 29%, which is quadruple the historic average annual return of the stock market, inclusive of dividend reinvestment and when adjusted for inflation.

The big question, of course, is what might the current year hold for the broader market and investors? The following 20 predictions for the stock market in 2020 may offer some insight.
1. There will be no recession in 2020
Probably the biggest question on investors’ minds is whether a recession is brewing. While that does look to be the case following a very brief inversion of the two-year and 10-year Treasury bonds in late August, data from Credit Suisse, dating back to 1978, shows that the average recession doesn’t pop up until 22 months after the inversion occurs. Similarly, stock market returns don’t turn negative until an average of 18 months after an inversion, putting the market on track to lose its steam during the first quarter of 2021 (assuming these averages hold true).

For the time being, the longest economic expansion in U.S. history looks poised to continue.
2. The stock market will have another positive year
Despite the stock market delivering returns that were well above the historic norms in 2019, this year should deliver more gains to investors. Full Story

Stock Market Crash Of 1929

Posted on 02/04/2023 by Yanis P.

What was the ‘Stock Market Crash Of 1929’

The Stock Market Crash of 1929 began on October 24. While it is remembered for the panic selling in the first week, the largest falls occurred in the following two years. The Dow Jones Industrial Average did not bottom out until July 8, 1932, by which time it had fallen 89% from its September 1929 peak, making it the biggest bear market in Wall Street’s history. The Dow Jones did not return to its 1929 high until November 1954.

BREAKING DOWN ‘Stock Market Crash Of 1929’

The stock market crash of 1929 followed a bull market which had seen the Dow Jones rise 400% in five years. But with industrial companies trading at price-earnings ratios of 15, valuations did not appear unreasonable after a decade of record productivity growth in manufacturing – that is until you take into account the public utility holding companies.

By 1929, thousands of electricity companies had been consolidated into holding companies owned by other holding companies, which controlled about two-thirds of American industry. Ten layers separated the top and bottom of some of these complex, highly leveraged pyramids. As the Federal Trade Commission reported in 1928, these holding companies’ unfair practices — like bilking subsidiaries through service contracts and fraudulent accounting involving depreciation and inflated property values — were a “menace to the investor.”

Full Story

A brief history of the 1929 stock market crash

The stock market crashed in 1929, plummeting into a correction.
Margin buying, lack of legal protections, overpriced stocks and Fed policy contributed to the crash.
There are ways to protect investors’ portfolios from downturns.

On October 16, 1929, Yale economist Irving Fisher wrote in the New York Times that “Stock prices have reached what looks like a permanently high plateau.” Eight days later, on October 24, 1929, the stock market began a four-day crash on what became known as Black Thursday. This crash cost investors more than World War I and was one of the catalysts for the Great Depression. Irving Fisher’s declaration went down as the worst stock market prediction of all time.

Before the 1929 stock market crash: Risks and warning signs

Hindsight is always 20/20 but in the Roaring Twenties, optimism and affluence had risen like never before. The economy grew by 42% (real GDP went from $688 billion in 1920 to $977 billion in 1929), average income rose by about $1,500 and unemployment stayed below 4%. In the wake of World War I, the U.S. was producing nearly half of global output and mass production made consumer goods like refrigerators, washing machines, radios and vacuums accessible to the average household. Investing in stocks became like baseball – a national pastime. As newspaper headlines trumpeted stories about teachers, chauffeurs and maids making millions in the stock market, concerns about risk evaporated.

Full Story

Why The 1929 Stock Market Crash Could Happen In 2018?

As U.S. stocks continue soaring to record high after record high, investors anticipating an inevitable plunge have yet another cause for sleepless nights. The CAPE ratio, a measure of stock valuations devised by Nobel Laureate economist Robert Shiller of Yale University, is now at a higher level than it was before the Great Crash of 1929, the Financial Times reports, adding that the only time the CAPE was even higher preceded the dotcom crash of 2000-02. However, the FT notes, there are some differences between 1929 and 2018 that make the CAPE parallel less terrifying for investors.

From their previous bear market lows reached in intraday trading on March 6, 2009, through their closing values on January 12, 2018, the S&P 500 Index (SPX) has gained 318% and the Dow Jones Industrial Average (DJIA) has advanced 299%. Regarding the CAPE valuation analysis, there are several key limitations.

Drawbacks of CAPE

According to investment manager Rob Arnott, the founder, chairman and CEO of Research Associates, CAPE has been on an upward trend over time. This makes sense both to him and to the FT since the U.S. as progressed from being essentially an emerging market to the world’s dominant economy during the course of more than a century. As a result, both believe that an increasing earnings multiple for U.S. stocks would be justified. While the current value of CAPE is above its long term trend line, the difference is much smaller than in 1929, as Arnott’s detailed research paper shows.

Full Story

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Bitcoin Crash: Is Bitcoin Bull Dead Forever?

Posted on 02/03/2023 by Yanis P.

The dot.com mania underwent a backbreaking correction before the market blasted off and topped out at the end of 1999. The image above illustrates that Bitcoin also experienced such a correction, but because of the large follow through move it appears to be nothing but a blip. Consider that from a high of 2977 (June 10, 2017); it dropped to a low of 1808 set on the 15th of July 2017; it shed roughly 40% in that short period (illustrated by the green box). Everyone knows what followed.

Misery loves company, but it tends to Pay’s very poorly in the long run
It looks grim, the media is pumping end of the world type scenarios, strong bulls are showing signs of weakness, and even contrarian investors are starting to break. Pure contrarians are smarter than the masses, but they do have flaws; the smartest investors are the ones that put the principles of mass psychology into play. They observe the mass mindset, and they understand that even when fear starts to creep into the equation, they are compelled to ask this question: Was the crowd in a state of euphoria when the market topped out? If the answer is “no”, then no matter how terrible the picture might look, the end game is that the crowd is being set up for a false downward move. And the normal response would “why”. Simple answer, this is an advanced form of Pavlovian training.

The Bitcoin crash was like the Tulip Bubble, it was a scam from the beginning. The ones that made the money were the ones that got in first, the ones that got in late were handed their heads on a stinky tin platter. Never get into an investment when the masses are euphoric, buy when there is blood in the streets and vice versa.

Stock market crashes are different as they don’t represent one sector, so it is just a matter of time before the markets will revert to the norm. From a mass psychology perspective, stock market crashes are nothing but long-term buying opportunities. Forget about the what happens if the stock market crashes scenario, and focus on what you would do if stocks you were dying to own before are now selling for pennies on the dollar.

Pavlovian Type Training Is Being Used On The Masses
When the market does put in a bottom after experiencing a backbreaking correction, and then goes on to mount a powerful rally; the crowd imprints the following data in their minds. Buy the pullback because it is a fake trap to drive us out; they also start to believe in the following mantra: “The stronger the pullback, the better the opportunity”. Next time when the Market puts in a top, bullish sentiment will remain unusually high, and that will be the warning to students of Mass Psychology that the real skull crushing correction is on its way. Again, we point you in the direction of the not too distant Bitcoin spectacular bull market and the equally spectacular crash. From low to high Bitcoin tacked on 11,000% in gains and the masses still assumed that the only direction it could trade was up. When it topped the Bitcoin crowd was beyond ecstatic.

As for whether the bitcoin crash is over, we believe that one should wait a bit longer before jumping in and for all intents and purposes, Bitcoin is highly unlikely to test the 20,000 ranges for a very long time. On the downside, bitcoin is likely to test the 3000 ranges with a possible overshoot to the 2,500 ranges before a meaningful bottom takes hold. At this point in time, there are many other stocks that look interesting and far more attractive than bitcoin, for example, PG, MRK, TCEHY, etc

Courtesy of Tactical Investor

Random views on Bitcoin Crash

So, you’ve heard about Bitcoin and you want to invest…
You’re not the only one! Bitcoin has been one of the best investments you could have made in the last 5 years. People are still using it to make a lot of money, in many different ways.
In this guide, I will teach you the history of Bitcoin, the future of Bitcoin and how to understand what goes into a Bitcoin price prediction. We will look at predictions for different years, including the Bitcoin price prediction 2019. I will answer the questions that are on everybody’s minds, like “Will Bitcoin crash?” and “Why is Bitcoin rising?”.
Understanding how to predict and invest is the first step to building a successful portfolio. However, with all investments, there are risks involved. So, you should always speak to a financial advisor before making any major decisions. Before going to Bitcoin price prediction, let’s go back a little to the basics. I assume, as you are reading this guide, you must have heard of Bitcoin. Bitcoin is the world’s first digital currency and it has been very popular over the last year! A lot of people have made large profits by buying Bitcoin for a low price and then selling it for a high price.
Confused? Well, let me explain.
Bitcoin is a currency, just like US Dollars, Japanese Yen or British Pounds. It can be bought, sold and exchanged for goods and services. Full Story

Is Now The Time to Buy Bitcoin? The 2019 Edition

Many investors are still hesitant about Bitcoin ending the bearish period, despite Bitcoin’s recent consolidation price action and market fundamentals looking strong
How will you know if it’s the time to buy Bitcoin? In this article we’ll present signs that may indicate on an end to the current bear market.
Timing the market is almost impossible – meet the DCA option.
Most experienced traders know that markets are primarily driven by emotions, and the key to cracking them is understanding the market psychology as well as being able to interpret technical analysis and chart fundamentals.

Despite this public knowledge, many of us still fall into the same traps that cause us to either lose money or miss out on significant investment opportunities. This is not just limited to Bitcoin and crypto.

The current sentiment around the crypto markets indicates that the majority may be falling for yet another emotionally driven trap.

Ironically, people rushed to buy Bitcoin when it first hit $10,000 and $15,000 in late 2017, yet now when the price is around the mid $3K range (discount of over 80% from the all-time high), there is steady progress and strong market fundamentals, buyers seem to be more hesitant than ever about entering the market and buying Bitcoin.

Perhaps it’s the fear of being yet another victim of the market crashes we’ve seen during the 2018 bear market, or the constant negative messaging led by the mainstream media insisting that ‘Bitcoin is dead’ or a ‘pyramid scheme’. Full Story

Strategist Who Called Bitcoin Crash Says It’s Time to Buy Crypto

Bitcoin is in the middle of a sustained recovery and investors should use recent weakness to buy more, according to Fundstrat technical strategist Robert Sluymer. The largest cryptocurrency climbed to its highest since November.

“Use pending pullbacks to continue accumulating Bitcoin in the second quarter in anticipation of a second-half rally through ~6,000 resistance,” Sluymer wrote in a note May 2. He sees Bitcoin’s rebound from its 200-week moving average and breakout from its first-quarter trading range as “the early stage of a longer-term recovery developing.”
Bitcoin advanced as much as 7.2 percent to $5,795.50 as of 9:33 a.m. in New York, according to Bloomberg composite pricing. The 55 percent jump in 2019 has helped pull rival tokens higher. Litecoin has soared more than two-fold.

Adding to the overall optimism Friday was a Wall Street Journal report that Facebook Inc. is reaching out to financial companies and online merchants to help launch a cryptocurrency-based payments system tied to the social network.
Sluymer warned in mid-November, when Bitcoin was trading around $5,500, that the asset had suffered “significant technical damage” that could take months to repair. Over the next several weeks, Bitcoin slid to as low as $3,136.04. In February, Sluymer cautioned that the technical position in the crypto space was still weak. Bitcoin didn’t recover the $5,000 level until early April.

Fundstrat was an early mover in analyzing cryptocurrencies and developed its own indexes. And Sluymer’s colleague, Fundstrat co-founder Tom Lee, is regarded as a Bitcoin bull. Full Story

Scholarly Escapades: Exceptional Reads for the Curious

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Trending Now News Equates To Garbage; It’s All Talk & No Action

Posted on 02/02/2023 by Yanis P.

Trending Now (Fake) News Equates To Garbage

Have you ever heard or seen the press push good news and that begs the question why? Fear sells, and everyone is using fear as the tool to manipulate the masses. It is the oldest trick in the books, but unfortunately, it works like a charm. The so-called Trending Now News concept is just another ploy to make garbage somewhat platable.

Once you realise the ploy, it is easy to deal with the issue. How do you recognise the ruse, the best way is to stop watching TV. For example, I cut the cord roughly 10 years ago. I am always asked if I have a smart TV, and I respond with “yes it’s brilliant” because it keeps its mouth shut most of the time. When you stop watching the news which is nothing but gossip on steroids, one finds out that nothing has changed. That’s when the realisation sinks in that today’s news has, and will always be an avenue for the best gossipers to turn garbage into sensational headlines. The news is worse than “toilet paper”; at least toilet paper is good for one swipe, one can’t lay the same claim to today’s news.

The media is going to continue to weaponise the news. Be prepared for fantasy claims regarding Brexit, the trade war with China, and any other factor that can be spun. Ridiculous claims that make no sense will be used to try to push the fear factor higher; once again the best solution is to just ignore what the media is pushing and focus on the trend.

The “silver lining” is that fear of the unknown increases the “uncertainty factor” and in doing so breathes even more life into this bull market. Until the Masses embrace this bull, this mad bull is unlikely to die. The logical path based on the news is to panic, the illogical path is to ignore. Logic works when it’s based on reality, but fear is not based on reality, it’s based on a perception of what “could” happen. If you start to fantasize over what could, would, and should happen, one cannot focus on the trend. Ignore the noise and focus on the trend.

Despite the fact, that the DOW is dangerously close to testing its old highs, there are too many traders sitting on the sidelines waiting for the markets to pull back. For almost this entire year, the number of individuals in the neutral camp has exceeded the individuals in the Bearish and Bullish camps. Neutrality equates to uncertainty and uncertain individuals are the 1^st ones to panic.

These chaps will react the same way they have always reacted in the past when the markets do pullback, they will panic and flee for the hills and the whole process of waiting for the next pullback will start over again. In the end, these guys worry about everything but never focus on the main issue, which is to make money in the markets. The only way to make money in the markets is to be in it; as the say, the rest is just noise. Hence there is a very good chance that the next pullback could push neutral readings to the 50% mark. Every time this has occurred (since the inception of this bull market), the markets recouped their losses and then surged to new highs.

The weekly charts illustrate that the Dow is now trading in the overbought ranges; it still has a bit of room before it moves into the extremely overbought zone. On the monthly charts the MACD’s have still not experienced a bullish crossover; until they do there is always a chance that the markets could experience a stronger than expected pullback. If this occurs embrace the correction as we from Nov 2018 to Jan 2019. Market Update April 13, 2019

Random thoughts on the Fed and Stock Market March 2019

In terms of the stock market, until the Fed changes its mind, all sharp corrections have to be viewed as buying opportunities, and backbreaking corrections have to be placed in the category of “once in a lifetime events”, provided of course the trend is positive. That is what we are here for; to inform you if the trend is positive (Up) or negative (down).

The world is going to witness a Fed that has decided to make a cocktail of Coke, Heroin, Crack and Meth and take it all in one shot. Imagine what a junkie on this combination of potent drugs is capable of doing, and you will have an idea of where the Fed is heading in the years to come. Now the Gold bugs will cry “I told you so”. Our response to this statement; not so fast little bugs. While precious metals will do well, we think stocks in key sectors (and we are not referring to Gold stocks) will pulverise the precious metals sector in terms of returns. One such area is robots (particularly Sex-bots) and AI. Market Update Feb 28, 2019

Courtesy of Tactical Investor

Random views on Trending Now Fake News

how to avoid financial fake news

Steve McDonald (SM): The topic this week is information sources. With the president claiming that there’s all types of fake news out there, I have news for him: There’s always been fake news in the money press.

So we have Matthew Carr here today to talk about reliable information sources and why that’s so important if you’re going to get the market right.

Welcome, Matt.

Matthew Carr (MC): Thanks for having me, Steve.

SM: It’s my pleasure. We’re not going to get political, I promise you. But is there a lot of fake news in the money press?

MC: Oh, I’m with you. I believe there’s always been some sort of fake news or bias in the press. You know, when I was growing up, we were always taught to read, for example, The Washington Times and The Washington Post.

You read the same story in both publications. They each have a slant either to the left or the right. And you know that somewhere in the middle is the truth. And in the financial press, everybody’s going to pick their sides.

We live in this divided world where our political affiliations sort of dictate everything that we do, so it is important you try to make sure you’re cobbling together the best, clearest picture as possible, and a lot of times that just means pulling from as many sources as possible.

SM: Do you have a primary source of information that you like to use? Full Story

How Social Media Giants Are Fighting The Fake News Menace

In recent times, the issue of fake content has taken epic proportions. Major social media platforms like Facebook (NASDAQ:FB) , Twitter (NYSE:TWTR) , Weibo (NASDAQ:WB) and Alphabet’s (NASDAQ:GOOGL) Google have frequently come under fire for failing to combat the spread of fake news on their platforms.

Social media giants are playing an expansive role in connecting the world, thanks to the improvement in Internet speed and connectivity as well as solid penetration of mobile devices. Per a survey by Pew Research Center last year, 20% of American adults learn about current affairs through social media and only 16% through newspapers.

However, according to the Reuters Institute Digital News Report 2018, the usage of social media and aggregators for news is declining, primarily due to trust and privacy issues, and fake news concerns. The report, which surveyed more than 74,000 people in 37 markets, stated that only 23% of respondents trust the news they find on social media.

Fake News Proliferates Faster

Fake news is spread via bots and fake profiles that use cookies to track people’s website visits. Based on that data, fake profilers and bots allure users to view fake content. Notably, this not only fans the flames of misinformation but also creates cybersecurity threats.

Fake news has been responsible for numerous sensitive situations, including terror propaganda and tampering with people’s sentiments about culture, religion and politics. Full Story

How To Invest In A Time Of Fake News?

This election year has created a major challenge for investors: How to deal with the fake news that now circulates daily. The basis of investment fake news is trying to build forecasts and outlooks on political pronouncements. Therefore, we need to ignore the fake flow and focus on facts. Only by doing so can we have a sensible strategy for pursuing returns and controlling risks.

Disclosure: Author is invested in selected U.S. stocks and actively managed U.S. stock funds. Holdings include Apple, Starbucks and Walt Disney, mentioned below.

“Fake news” has two components, commonly used after elections

Taking as fact the statements of desire (primarily by President-elect Donald Trump) that drove the election cycle. The problem is that desires often change when the governing period starts, Moreover, the U.S. Government structure and political realities offer no assurance that desires can become reality, either quickly or as envisioned.

Making pronouncements of surefire investment actions based on simplistic interpretations of those statements of desire. This elementary A=B without fact, fulsome reasoning and common sense is an invitation to underperformance or, worse, loss as the contrarian approach turns out to be the correct path.
Ramping up the challenge is the trail of contradictory statements of desire

Based on his Donald Trump’s statements regarding military buildup, the advice is that we should buy defense stocks. However, what about Trump’s roast of Boeing and Lockheed, plus his dismissive attitude toward our NATO allies, a source of foreign sales? Full Story

Stock Market Crash Stories Experts Push Equate to Nonsense

Posted on 01/28/2023 by Yanis P.

Stock Market Crash Lies Make for Excellent Fables

The lies the media and all the experts were pumping during the sell-off phase (Nov-Dec 2018) was that the crowd had to worry about higher rates and an increasingly hawkish Fed. And viola, like magic the narrative has changed; now they are talking about a Powell put and how the Fed is turning dovish, which clearly proves two points we have been stating for a long time

Mass Media should be viewed and treated with the same respect one accords to sewage.
The masses (which include the experts) are always on the wrong side of the fence. For the record, these same penguins were stating that the markets were destined to crash last year.

Fear pays Poorly

First of all, we hope that the majority of our subscribers are starting to perceive that succumbing to Fear is a dangerous strategy to adopt. Life and investing should not be stressful; stress is something that every Tactical Investor should abhor. Moreover, remember, stress comes down to perceptions; alter the perception and one can shift from being stressed to being serene.

Investors are sitting on a massive pile of cash, and it is growing by the day.

The masses panicked when the so-called Santa Claus rally failed to materialise. What they failed to spot was that Santa was providing the astute player with a lovely shopping list and all the goods were on sale. This January effect was one of the strongest on record and more than makes up for the Santa Claus fail, proving that our stance to remain cool during the so-called December meltdown (opportunity as far we are concerned) was the right posture to take. Santa Claus did not give presents last year, but he provided us with a fantastic list of stocks to buy at a discount price.

To date institutions and individuals have poured billions upon billions of dollars into money market funds. The apparent culprits were; Interest rates, the trade war, government shutdown, Trump investigations and whatever other rubbish you can come up with. Money market assets surged to $3 trillion this January, the highest level since March of 2010, clearly indicating that the masses as always know nothing and jump into the wrong investment at precisely the right time.

Pay close attention to the masses for the data they willingly provide is worth its weight in Gold. Sadly, the masses volunteer for the role of being used as “cannon fodder” over and over again. Try to save them, and they are likely to crucify you to the nearest pole they can find. Watch or read Plato’s allegory of the cave to understand why the masses will never reward anyone that tries to open their eyes.

Common Themes During Stock Market Crashes

The world is ending, and everyone needs to flee for the hills. The wretched media then diligently create a cocktail on steroids, and serve it to the herd; without fail, they fall for the same ploy over and over again.

“Investors can penalize themselves. While money market funds offer safety, they come at a cost as they accept a lower yield,” said Jerome Schneider, head of short-term portfolio management at PIMCO in Newport Beach, California.

https://www.youtube.com/watch?v=BgQ79evjylc

“I like cash now. You can earn a very reasonable return on cash,” said James Sarni, senior portfolio manager at Payden & Rygel in Los Angeles.

We stated all along that the Fed was lying about inflation and now the truth has emerged. Suddenly Powell is changing his tune. Now he has pledged to be “patient” before raising rates; what gives? B.S that is what gives, the Fed’s only function is to foster boom and bust cycles.

“I worry those investors who have long-term horizons may be hurting themselves,” said Kristina Hooper, global market strategist at Invesco in New York.

As always the masses will wait until the very end, then they will jump in and shortly after that the markets will tank. For the masses, the only possible outcome is pain and loss. Investors sitting on the sidelines are already paying the price, quality stocks have made a strong comeback from their Dec lows, and the party has just begun.

PIMCO’s Schneider stated the following, and we could not agree more

“They tend to play it safe for too long,”

What Is Our Response To These Stock Market Crash Stories

It is rubbish end of story, for the markets have already priced this factor in and the experts are now going to spin gossip into news. At the moment they are still pushing the Tariff wars issue, but it will end on the same note; lots of huffing and puffing but the bad wolf will not be able to blow the house down. What will knock this bull out? When the masses are ecstatic; until then all the nonsense that is graciously labelled as “news” should be taken with a barrel of salt and a shot of whiskey.

Despite, the sharp rally the markets have experienced, the masses surprisingly are far from bullish; in fact, the largest number of individuals is in the neutral camp. The current reading; the number of individuals in the neutral camp stands at 37 and bears account for 32; this means that 69% of individuals are still either uncertain or bearish and that has to be viewed as fantastic development.

Courtesy of Tactical Investor

Random views on Sock Market Lies

Stock Market Facing a 2019 Crash: 70% Correction Warning

July 2019 will mark exactly 10 years since the end of the Global Financial Crisis in 2009. It will also mark the longest period of economic expansion on record, surpassing the 1991 to 2001 internet boom.

The question – Is the current boom sustainable?

The 90s economic boom was fuelled by the internet. This economic recovery has been fuelled by historically low-interest rates and cheap credit – a situation many investors and economists say cannot last.

Warning Signs: The End of the Economic Boom
2018 has been the most volatile year in the stock market since the recession, and volatility can make stock market crises more likely.

The Interest Rates and Financial Crises Relationship
As the US economy firing on all cylinders, the Federal Reserve has increased interest rates eight times since 2015. However, as the US nears full employment, there is an increased danger of rising inflation and consumer prices.

Increasing interest rates is a strategy to curb the rise of inflation – increasing the cost of credit and making saving more attractive strikes a balance between people spending and saving.

However, there are also dangers to this approach. Lower consumer spending has a negative impact on the revenue of consumer-facing businesses. Declining revenue then tightens spending across both the consumer and business landscapes. At the same time, higher interest rates make it harder for financially weak companies to meet their debt obligations. Full Story

A Global Market Crash In 2019? 5 Must-See Charts!

Global markets look shaky. Global stocks were volatile this year, and even U.S. stocks have followed their path lower in recent months. The million dollar question is whether this will result in a global market crash in 2019 or whether this is the end of a weak period. After publishing our Stock Market Crash In 2019 Brewing forecast we now look at global markets. Based on these 5 charts we want to make a point about the probability of a global market crash in 2019, and indicate which leading indicators to watch.

InvestingHaven’s recent analysis of the important and violet global market crashes recent decades shows that any important crash started with weakness in currency and credit markets.

In other words any attempt to forecast a global market crash starts with a thorough analysis of leading currency charts as well as yields.

More specifically we have to look for the long term chart patterns, and structural changes in patterns like reversals from secular support or resistance as well as breakouts or breakdowns from secular trends. This is also the focus in this article, and we do so based on 5 long term charts.

The short answer to our question whether we should prepare for a global market crash in 2019: no we do not see enough evidence as of now of a global market crash in 2019 but some of our leading indicators are visibly deteriorating. Full Story

Stock Market Crash Inevitable in 2019: Bitcoin to Rise

Whenever a person buys a bitcoin or any other cryptocurrency, basically you are investing in a market known as the crypto market. Most of the people think that there must be a relation between the current trend of other markets such as the stock market on the crypto market. And if it so, one must be worried about what will happen to the crypto market if the stock market collapse. Also, before that, one must foresee the chances of the stock market to be crashed in the upcoming years.

Well, in this article we will discuss two things which are anyhow interconnected to each other. The first phenomenon that we are going to discuss is the collapse of the stock market in 2019. Is it going to happen and what are the chances of the stock market crash in 2019? In the next section, we will discuss how if the stock market crashes in 2019, it will uplift the crypto market and bitcoin will rise due to it. So, let us first focus on how the collapse of the stock market is inevitable in 2019.

The stock market going to crash in 2019:
It has been ten years that a stock market crashed. As per the trade experts, the stock market is definitely going to collapse this year. The year 2018 itself was one of the worst years for stock market after 2008. Let us have some facts regarding the stock market current scenario: Full Story

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Most Hated Stock Market Bull can’t be stopped by weak economy

Posted on 01/27/2023 by Yanis P.

The data below serves as further proof that the economic recovery is nothing but an illusion. It has only benefited those who don’t really need it. The rich have become even richer, the middle class has vanished and the poor are becoming even poorer.

Real incomes have been flat to down slightly for the average household in the bottom 60% since 1980 (while they have been up for the top 40%).
Those in the top 40% now have on average 10 times as much wealth as those in the bottom 60%. That is up from six times as much in 1980.
Only about a third of the bottom 60% saves any of its income (in cash or financial assets).
Only about a third of families in the bottom 60% have retirement savings accounts—e.g., pensions, 401(k)s—which average less than $20,000.
For those in the bottom 60%, premature deaths are up by about 20% since 2000. The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000).
The top 40% spend four times more on education than the bottom 60%.
The average household income for main income earners without a college degree is half that of the average college graduate.
Since 1980, divorce rates have more than doubled among middle-aged whites without college degrees, from 11% to 23%.
The number of prime-age white men without college degrees not in the labor force has increased from 7% to 15% since 1980. Full Story

What should you do?

Sentiment indicates the masses are not bullish so this market is not ready to crash. Instead of panicking make a list of stocks you would like to own and when the market’s pullback, buy these quality stocks at a huge discount.

Permabear meaning – A Special Kind Of A Stupid

Posted on 01/24/2023 by Yanis P.

Being a Permabear is a recipe for disaster.

The meaning of a Permabear, characterized by persistent pessimism about market prospects, is fundamentally flawed and historically disproven. This approach not only defies logic but also contradicts decades of market data. Consider the case of Robert Prechter, a notorious Permabear who predicted a Dow Jones Industrial Average (DJIA) crash to 1000 in 1987. While the market did experience a significant drop that year, it rebounded swiftly and continued its long-term upward trajectory, leaving Prechter’s followers with substantial losses.

Examining any long-term chart of major market indices reveals an undeniable upward trend. For instance, the S&P 500 has shown an average annual return of approximately 10% over the past century, accounting for inflation and dividend reinvestment. This consistent growth pattern renders the Permabear stance not just imprudent but potentially ruinous for long-term investors.

It’s crucial to understand what is bullish divergence in this context. A bullish divergence occurs when the price makes a lower low, but a technical indicator forms a higher low, often signalling a potential trend reversal. Permabears frequently overlook these signals, missing out on significant market rallies. A notable example is the period following the 2008 financial crisis, where numerous bullish divergences appeared in various technical indicators, presaging the strong bull market that followed.

The 100-year chart of the Dow Jones Industrial Average serves as incontrovertible evidence against the Permabear stance. Despite numerous economic downturns, world wars, and financial crises, the overall trajectory remains decisively upward. This chart demonstrates that markets have consistently recovered and surpassed previous highs, rewarding those who maintain a long-term optimistic outlook.

The solution is simple.

Focus on the simple factors, for that is what helps determine the trend; factors such as mass sentiment and extreme patterns (technical analysis) are on the charts. The news is not an essential factor; in fact, toilet paper has more relevance than news; at least it serves a noble function; one cannot say the same of news.

Anyone who advocates giving into fear should be thrown head first out of the front door(figuratively speaking, that is) and never allowed back into your house or mind. Fear never pays off; only the vendors of fear will make a handsome buck, and the buyers will lose their pants, shirts, and knickers, too.

Marc Faber is a classic example of A PermaBear that is full of rubbish

This dude has predicted prediction calling for the mother of all crashes since the inception of this bull (2009), but the only thing that has crashed so far are his predictions of a crash. He would probably make a very good science fiction writer, for he seems to spend a lot of time concocting scenarios that have a very low probability of coming to pass.

Here he states that we are going to experience a great recession in 2018

It turns out, once again, that the only recession was in his predictions, which, for now, are the only things that have been in a bear market. Hence, if you are a Permabear on his ability to predict market direction, it could actually pay off.

Then he goes on to state the party is going to end in 2018

Random Musings on Permabear Meaning

The concept of a permabear extends beyond mere pessimism; it represents a deeply ingrained psychological bias that can severely impair investment decisions. This mindset often leads to missed opportunities and financial underperformance. For instance, consider the case of Dr. Marc Faber, known as “Dr. Doom” for his consistently bearish outlook. Despite his reputation, Faber’s predictions have frequently been off the mark, particularly during the bull market that followed the 2008 financial crisis. His persistent bearishness caused many followers to miss out on significant gains in sectors like technology and healthcare.

Fear, the driving force behind the permabear meaning, is a potent but often misguided emotion in investing. Historical data shows that fear-driven market exits typically result in substantial opportunity costs. For example, investors who sold during the market panic of March 2020 missed out on the subsequent rally, where the S&P 500 gained over 100% in the following 18 months. This underscores the importance of maintaining a balanced perspective and not succumbing to fear-based decision-making.

Understanding what bullish divergence is can be a powerful tool in combating the permabear meaning. A bullish divergence occurs when the price makes lower lows, but technical indicators show higher lows, often signalling a potential trend reversal. For instance, during the 2018 market correction, several technical indicators displayed bullish divergences on the S&P 500 chart, preceding a strong rally in 2019. Recognizing such signals can help investors maintain a more balanced and opportunistic approach to market fluctuations.

Stress reduction in investing is not just about emotional well-being; it’s a crucial factor in making sound financial decisions. Research in behavioural finance has shown that stressed investors are more likely to make impulsive decisions and fall prey to cognitive biases. A study by the University of California, Irvine, found that chronic stress impairs decision-making abilities and risk assessment. To combat this, successful investors often employ strategies such as diversification, dollar-cost averaging, and maintaining a long-term perspective, which can help mitigate stress and improve overall investment outcomes.

Experts love to push the argument that investing is hard and that it takes forever to master this art. Remember that investing is an art, not a science and art is meant to be enjoyed. So are the masses starting to jump on the bandwagon after this strong turn around; the obvious answer would be yes. The not-so-obvious answer would be no. Continue reading. It turns out, at least in the first half of 2019, the not-so-obvious answer would be the right choice. The masses are still nervous, and until they start to dance on the streets, every strong correction should be viewed through a bullish lens.

Conclusion on Permabear Meaning

This bull market is unlike any other; before 2009, one could have relied on extensive technical studies to more or less call the top of a market, give or take a few months; after 2009, the game plan changed, and 99% of these traders/experts failed to factor this into the equation. Technical analysis as a standalone tool would not work as well as it did before 2009 and, in many cases, would lead to a faulty conclusion. Long story short, there are still too many people pessimistic (experts, your average Joes and everything in between) and until they start to embrace this market, most pullbacks ranging from mild to wild will falsely be mistaken for the big one.

The results speak for themselves; the majority of our holdings were in the red during the pullback, but now they are in the black, proving that one should buy when there is blood flowing in the streets. It is a catchy and easy phrase to spit out but very hard to implement because when push comes to shove, the masses will opt for being shoved.

Courtesy of Tactical Investor

Random views on Permabear

Another warning light is blinking on the dashboard of the US economy. This time it is the inflation-tied Consumer Price Index (CPI) which has the bears scurrying for their bomb shelters. David Rosenberg, a so-called perma-bear, was filling Twitter feeds with his unique brand of doom and gloom for the Dow Jones and wider US stock market.

GLUSKIN SHEFF ECONOMIST: CPI DATA PORTENDS RECESSION

David Rosenberg

Today’s CPI did miss targets against an expectation of a 0.2% increase relative to the 0.1% reading. The Dow Jones is easing gently off its highs today as well, having lost 53.29 points as of the time of writing.

In isolation, that’s a snoozefest, but Mr. Rosenberg did note something particularly interesting about the data as a predictor of recession. Apparently, he is using price pressure as a sort of alternative yield curve.

BOND-YIELD INVERSION: A STRONG INDICATOR OF RECESSION
Given that interest rates are always somewhat interconnected with inflation due to the Fed’s approach to monetary policy, this is not particularly ground-breaking. It is interesting, though, particularly with the bond market teetering on the brink of inversion. Full Story

A prominent Wall Street permabear says the stock market is ‘stoned on free money’ and it could ‘prove fatal’

One prominent strategist says the market is high literally and figuratively. Albert Edwards, global strategist at Société Générale, cautioned on Thursday that stock markets were becoming “stoned on free money,” leaving them “detached from reality.” It’s a condition that the strategist says could “prove fatal,” in the end.

U.S. equity benchmarks — and those across the globe — have roared back from a late-2018 selloff that culminated in one of the worst December returns in years, but Edwards says, in a Thursday note, that those gains have been largely aided by central banks that are willing to “inject another dose of euphoria into its market patch.”

Indeed, since a Dec. 24 low last year, the Dow Jones Industrial Average DJIA, -0.70% and the S&P 500 index SPX, -0.50% have both advanced by about 20%, while the Nasdaq Composite Index COMP, -0.22% has returned about 23%, thus far, as of trading midday Thursday, according to FactSet data.

Easing trade-war tensions between the U.S. and China have helped stocks rebound, but a policy pivot by the Federal Reserve in January arguably delivered the most substantial shift in investor sentiment over recent weeks.

The Fed, headed by Chairman Jerome Powell, said it would be more patient in assessing future rate moves, and minutes of the January gathering released on Wednesday indicated that its efforts to reduce a $4 trillion asset portfolio could conclude as early as the end of 2019. Full Story

Permabear Sentiment Index

Yesterday, I have created a download item that creates an index called the Roubini Sentiment Indicator. The same guys who created this indicator also created another one called the Permabear sentiment index. Permabear refers to people who are always pessimistic and negative about the future direction of the economy and markets. The Permabear sentiment index is built using aggregate keyword volume data from Google Trends. The index is the result of the sum of four Google Trends popularity indices; the keywords used to create these indices are: Roubini, Peter Schiff, Marc Faber and Nassim Taleb.

The item will login in your Google account, load Google trends and create a Google Trends popularity index for each permabear. It will then download the data, parse it, calculate the sum of each permabear volume data and then save the result in ticker symbol: ^GOOGLE_TRENDS_PERMABEAR. As with the Roubini Sentiment Indicator, you must set the email and password fields of this download item to your Google email and password (Select the item, click on Update, click on the “2 Field(s)” button).

The author of the Permabear Sentiment Index claims that the Permabear Sentiment Index can make 3.5% over a short period of 3 weeks compared to the 1.6% yield of the Roubini Sentiment Indicator over the same period. The author gives one reason behind the good performance of this index. Full Story

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Technology Driven Deflation Will Kill The Inflation Monster

Posted on 01/23/2023 by Yanis P.

Technology-Driven Deflation

Venture funding for AI is surging as evidenced by the chart below and the trend is showing no signs of letting up; in fact, the trend is so powerful that one can almost start with certainty that technology-driven deflation is going to be a very powerful force to reckon with. Imagine, small companies having the power to do what Amazon does but on a different scale. For example, flippy the burger bot replaces several workers saving a business up to 100K a year

“We are excited about the impact Miso’s AI-based solutions will have for the restaurant industry. Humans will always play a very critical role in the hospitality side of the business… We just don’t know what the new roles will be yet in the industry.”

The Bot will never get tired, never need uniforms and it’s not going to get sick or complain. Bottom line it is the perfect worker for small business burger joints that are looking to contain their costs and improve their services. As for the big players are concerned, it has the potential to reduce their overhead by billions. Last but not least, companies won’t have to worry about paying a minimum wage of up to $15 an hour and providing benefits

Little Caeser’s want to create their own Bot

Pizza chain Little Caesars has been awarded a patent for an AI-based robotic system that will help assemble Pizzas at a significantly faster pace. The patent includes two robots, one stationary arm and another fully-fledged robot chef to handle the dough and take care of oven duties.

According to the company’s explanation in the patent, the robot would free Little Caesars from the tedium of repetitive tasks and allow them to “perform other value-added tasks.” Presumably, that’s the same thinking that gave us Flippy, the burger-flipping robot.

It doesn’t appear to actually cook the pizzas or slice them, and the only listed topping is pepperoni — though it probably wouldn’t be hard to adapt it to other toppings. I’m sure there are only so many ways one can “properly distribute” pineapple or olives. Still, there are other robots already doing the things this particular one can’t — Zume Pizza in Silicon Valley, for example, can shape the dough and bake the pizzas at a rate of 372 an hour.

If Little Caesars were to ever combine their robot with Pizza Hut’s self-driving pizza delivery truck, the only human force we’ll ever need will be a single human to load the pizzas into the car. Full Story

Could the pizza bot move like Flippy? Time will tell

“Now he moves like a ninja and is more reliable,” says David Zito, the CEO of Miso Robotics, which created Flippy.

“We’ve been trained since childhood that robotics were coming in the future,” notes Louise Perrin, an accountant who works nearby. “To be a part of it, to see it and watch it happen live in front of you … is absolutely incredible.”

“I had to come in and see Flippy,” she says. “I’d heard the buzz. The concept of a robot flipping your burger is awesome.”

Central Bankers action could Fuel Technology-Driven Deflation

The shrinkage of the U.S. Federal Reserve’s balance sheet has played a significant role in exerting upward pressure on borrowing costs as parts of the U.S. economy have shown signs of decelerating, a study from the Kansas City Federal Reserve released on Wednesday showed.

The model developed for the study showed the level of reserves plays “an important role in determining the federal funds-IOR spread over the medium- and longer-term and that repo rate dynamics play a relatively less important role,” A. Lee Smith, a Kansas City Fed senior economist and the author of the study, wrote. Full Story

The China Factor

It is premature to say China is coursing toward a Japan-like falling-prices drama. Yet recent data warrant a moderately sized blip on investor radar screens. In November, consumer prices slid 0.3% from a month earlier, while producer prices fell 0.2%. On a year-on-year-basis, producer prices advanced just 2.7% in November, the weakest reading in two years (consumer prices are up 2.2% from a year ago).

Bond traders are taking no chances. Earlier this week, 10-year yields dropped to 3.27%, the lowest in more than 18 months. And, really, they have every reason for gloom considering the headwinds blowing China’s way — and how they may intensify next year. Full Story

Courtesy of Tactical Investor

Nothing about 1987 stock market crash anniversary

Posted on 01/20/2023 by Yanis P.

Stubbornness does have its helpful features. You always know what you’re going to be thinking tomorrow.

Glen Beaman

Expert after expert is busy proclaiming that the world is about to come to grinding halt again.

They never seem to let up on pushing this sewage onto the unsuspecting masses. This is a clear example of insanity in action; mouthing the same thing over and over again with the desperate hope that this time the outcome will be different. The outcome will not be different this time, at least not yet. These guys should focus on writing fiction for reality seems to elude them completely. For years we have stated (and rightly so) that until the sentiment changes, this market will continue to soar higher and higher.

Here is a small sample of the flood of articles that were pushed out this month. If one simply glances through them, one would almost be compelled to think that the writers shared the same notes. There is almost no originality in these articles. The theme is the same, just because it’s October the focus is on the disaster aspect of the 1987 crash. Almost no one mentions that it proved to be a monumental buying opportunity. The focus is oh the financial world came to a grinding halt. Only it did not, the only that came to a halt was the rubbish the predecessors of today’s experts were uttering back in 1987. This reinforces the view that most financial writers have chosen the wrong profession One word sums all this nonsense “Rubbish.”

Could the 1987 stock market crash happen again? – Reuters
Black Monday anniversary: How the 2017 stock market compares with 1987 – Market Watch
Black Monday: 30 years after 1987 stock market crash… Wall Street raises fears of REPEAT- express.co.uk
Thursday marks 30th anniversary of the Black Monday stock market crash – courier-journal
Buy Climax at 30th Anniversary of 1987 Stock Market Crash – Money Show
The Crash of ’87, From the Wall Street Players Who Lived It – Bloomberg
Black Monday: Can a 1987-style stock market crash happen again? – USA Today

So are we stating that the stock market will never crash?

No that is not what we are stating. The market will crash, but for the astute investor, “crash” is the wrong word to use. A strong correction is more likely as most astute investors got into this market a long time ago. It is the crowd that will eventually decide to embrace close to the top that will experience this crash that the experts have been hyping about for years.

This market will experience one strong correction before it crashes, but the moment the Dow sheds 1000 points or more these experts will crawl from the rocks they were hiding under and start screaming bloody murder. To which our response is, please scream as loud as you can; for it will push the markets lower creating a better buying opportunity for us. This is exactly what we said in Aug of 2015 before Trump won and countless times before and after that.

This market is extremely overbought so a pullback ranging from 1500-3000 points should surprise no one and it certainly should not be construed as a crash but viewed as market releasing a well-deserved dose of steam. To state otherwise, would simply be disingenuous, which seems to be the only real qualification these so-called experts posses

Market Sentiment indicates that the crowd is far from Ecstatic

The Bullish sentiment has risen somewhat, and the crowd is not as anxious as it was at the beginning of this month or last month, but until the readings indicate this crowd is euphoric, a crash is unlikely. Many people state that most people don’t have money to invest in the markets. We beg to differ; look at whats going on in the Bitcoin market, now that is a market showing some signs of Euphoria; the stock market in comparison is at the lukewarm stage.

Buy The Fear & Sell The Noise

The only thing that is going to crash and has been crashing since 2008 is the egos of these “know it all” experts. If any of them had even listened to themselves half of the time; they would have bankrupted themselves several times over. The fact that they are still around chiming the same rubbish is clear proof that they don’t believe a word they are putting to print and therefore neither should you.

Why Not Try Something New For A Change

Make a list of stocks you would love to own at a discount. When the market lets out a nice dose of steam, instead of fleeing for the hills, you can purchase top quality stocks for a discount

The sheer volume of these articles validates our view that the masses are from bullish and a crash is unlikely. Until the sentiment or the trend changes, all strong corrections should be viewed through a bullish lens.

Obstinacy is the result of the will forcing itself into the place of the intellect.

Arthur Schopenhauer

Black Monday: The Day Wall Street Fell

The Perfect Storm: Factors Leading to the Crash

The Role of Program Trading and Portfolio Insurance

Mass Psychology and Market Panic

Cognitive Biases in Action

Technical Analysis and Market Signals

The Global Nature of the Crash

The Role of Market Makers and Liquidity

The Aftermath and Policy Responses

Lessons Learned and Long-Term Implications

The Legacy of Black Monday

Conclusion: Black Monday’s Enduring Relevance

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Volatility Index readings are high but we are not going to follow the herd

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Back to the Coronavirus issue:

We had pandemics before so this is nothing new

High Volatility Index Readings: Use This To Your Advantage

What Will The Stock Market Return In 2020?

The Top 15 Stocks to Buy in 2020

20 Predictions for the Stock Market in 2020

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What was the ‘Stock Market Crash Of 1929’

BREAKING DOWN ‘Stock Market Crash Of 1929’

A brief history of the 1929 stock market crash

Before the 1929 stock market crash: Risks and warning signs

Why The 1929 Stock Market Crash Could Happen In 2018?

Drawbacks of CAPE

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Trending Now (Fake) News Equates To Garbage

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Random views on Trending Now Fake News

how to avoid financial fake news

How Social Media Giants Are Fighting The Fake News Menace

How To Invest In A Time Of Fake News?

Stock Market Crash Lies Make for Excellent Fables

Fear pays Poorly

Investors are sitting on a massive pile of cash, and it is growing by the day.

Common Themes During Stock Market Crashes

“I like cash now. You can earn a very reasonable return on cash,” said James Sarni, senior portfolio manager at Payden & Rygel in Los Angeles.

Random views on Sock Market Lies

Stock Market Facing a 2019 Crash: 70% Correction Warning

A Global Market Crash In 2019? 5 Must-See Charts!

Stock Market Crash Inevitable in 2019: Bitcoin to Rise

Thought-Provoking Chronicles: Stories to Ponder

What should you do?

Being a Permabear is a recipe for disaster.

The solution is simple.

Marc Faber is a classic example of A PermaBear that is full of rubbish

Random Musings on Permabear Meaning

Conclusion on Permabear Meaning

Random views on Permabear

A prominent Wall Street permabear says the stock market is ‘stoned on free money’ and it could ‘prove fatal’

Permabear Sentiment Index

Contemplative Journeys: Stimulating Articles

Technology-Driven Deflation

Little Caeser’s want to create their own Bot

Could the pizza bot move like Flippy? Time will tell

Central Bankers action could Fuel Technology-Driven Deflation

The China Factor

Expert after expert is busy proclaiming that the world is about to come to grinding halt again.

So are we stating that the stock market will never crash?

Market Sentiment indicates that the crowd is far from Ecstatic

Buy The Fear & Sell The Noise

Other Articles of Interest