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Asset protection

Surviving the Plight of the Black Swan

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Posted by Brent Woyat, CIM, CMT - Canaccord Genuity Wealth Management

on Tuesday, 19 September 2017 06:27

Screen Shot 2017-09-19 at 6.37.37 AMA brief look over time at periods of extreme volatility in the stock market shows us that many of these periods are associated with unpredictable, large-scale disruptions, often termed as “black swan” events. We have experienced these events within our own lifetime – the 2011 tsunami in Japan, the collapse of Lehman Brothers in 2008, and the unforgettable 9/11 terrorist attacks in 2001.

The origin of the term “black swan” dates back historically to a time when swans were only believed to be only white in colour. At that time, a black-coloured swan was seen as an impossibility. More recently, former Wall Street analyst and Chicago options exchange trader Nassim Nicholas Taleb redefined a black swan event to be an outlier which has an extreme impact but, due to human nature and rationalization, becomes explainable.

A look back over time shows that black swan events occur fairly frequently. They may have a significant short-term impact on the financial markets, but oftentimes do not create any long-lasting impact. These abrupt market-changing events often cause discomfort and, due to human nature, often pressure investors to hastily react. However, in hindsight, after these black swan events are over and things have returned to normal, the simple act of staying-the-course may also be a viable defense.

Are there any pre-emptive measures that you can take to prepare for a black swan event? Here are some practical investment tactics that you might consider to help you to black swan-proof your investment portfolio.



Asset protection

Pension Storm Warning

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Posted by John Mauldin - Mauldin Economics

on Monday, 18 September 2017 06:37

Storms from Nowhere
Blood from Turnips
Promises from Air
Chicago, Lisbon, Denver, Lugano, and Hong Kong

This time is different are the four most dangerous words any economist or money manager can utter. We learn new things and invent new technologies. Players come and go. But in the big picture, this time is usually not fundamentally different, because fallible humans are still in charge. (Ken Rogoff and Carmen Reinhart wrote an important book called This Time Is Different on the 260-odd times that governments have defaulted on their debts; and on each occasion, up until the moment of collapse, investors kept telling themselves “This time is different.” It never was.)

Nevertheless, I uttered those four words in last week’s letter. I stand by them, too. In the next 20 years, we’re going to see changes that humanity has never seen before, and in some cases never even imagined, and we’re going to have to change. I truly believe this. We have unleashed economic and technological forces we can observe but not entirely control.

I will defend this bold claim at greater length in my forthcoming book, The Age of Transformation.

Today we will zero in on one of those forces, which last week I called “the bubble in government promises,” which I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.

Earlier this year I called the pension mess “The Crisis We Can’t Muddle Through.” Reflecting since then, I think I was too optimistic. Simply waiting for the floodwaters to drop down to muddle-through depth won’t be enough. We face an entire new ocean, deeper and wider than we can ever cross unaided.


Storms from Nowhere?



Asset protection

Market Complexity Could Trigger the Next Crash

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Posted by Visual Graphics

on Wednesday, 13 September 2017 07:15

Screen Shot 2017-09-13 at 7.40.02 AM

Double Click Image for the Whole Story in Graphics

Complex systems are all around us. 

By one definition, a complex system is any system that features a large number of interacting components (agents, processes, etc.) whose aggregate activity is nonlinear (not derivable from the summations of the activity of individual components) and typically exhibits hierarchical self-organization under selective pressures.

In today’s infographic from Meraglim we use accumulating snow and an impending avalanche as an example of a complex system – but really, such systems can be found everywhere. Weather is another complex system, and ebb and flow of populations is another example.


Just like in the avalanche example, where various factors at the top of a mountain (accumulating volumes of snow, weather, temperature, geology, gravity, etc.) make up a complex system that is difficult to predict, markets are similarly complex.

In fact, markets meet all the properties of complex systems, as outlined by scientists:

1. Diverse
System actors have different points of view. (i.e. bullish, bearish, long, short, leveraged, non-leveraged, etc.)

2. Connected
Capital markets are over-connected, and information spreads fast. (i.e. chat rooms, phone calls, emails, Thomson Reuters, Dow Jones, Bloomberg, trading systems, order entry systems, etc.)

3. Interaction
Trillions of dollars of securities are exchanged in transactions every day (i.e. stocks, bonds, currencies, derivatives, etc.)

4. Adaptive Behavior
Actors change their behavior based on the signals they are getting (i.e. making or losing money, etc.)

And like the avalanche example, where a single snowflake can trigger a much bigger event, there are increasing signs that the complexity behind the stock market has also reached a critical state.


Here are just some examples that show how the market has entered into an increasingly critical state:

Record-Low Volatility
The VIX, an index that aims to measure the volatility of the market, hit all-time lows this summer.

Bull Market Length
Meanwhile, the current bull market (2009-present) is the second-longest bull market in modern history at 3,109 days. The only bull market that was longer went from the 1987 crash to the Dot-com bust.

Valuations at Highs
Stock valuations, based on Robert Schiller’s CAPE ratio (which looks at cyclically-adjusted price-to-earnings), are approaching all-time highs as well. Right now, it sits 83.3% higher than the historical mean of 16.8. It was only higher in 1929 and 2000, right before big crashes occurred.

Market Goes Up
Investor overconfidence leads investors to believe the market only goes up, and never goes down. Indeed, in this bull market, markets have gone up 67 of the months (an average gain of 3.3%), and have gone down only 34 months (average drop of -2.6%).

Here are some additional signs of systemic risk that make complex markets less stable:



Asset protection

After A Wild Trading Day, Here Is What You Need To Know…

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Posted by Bill Fleckenstein via King World News

on Tuesday, 12 September 2017 06:30

2015-Will-Be-A-Year-Of-Panic-Desperation-Radical-Change2-864x400 cThe stock market exploded out of the gate, gaining about 1% in the first hour, apparently because North Korea didn’t cause any trouble over the weekend and — fortunately — Hurricane Irma was not as bad as had been feared. 

A Lot of Hot Air
The only problem with using those two arguments....

....continue reading HERE


Legendary Short Seller Covers Gold & The Dollar Ahead Of KWN Maguire Interview Release


Asset protection

Preliminary Bout Done, Main Event Soon To Come In The Metals

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Posted by Avi Gilburt - Elliottwavetrader.neter.net

on Friday, 08 September 2017 08:03

First published on Sun Sep 3 for members:  While the metals refused to offer much in the way of a pullback last week, they sure did provide us some nice sideways consolidations.  In fact, they held support almost to the penny, and then continued higher on Friday (Sep 1).

And, while everyone seems so skittish to be bullish, the metals are still setting up to leave the station with many disbelievers watching on the sidelines.  But, as I noted in my trading room this past week (of (Aug 28-Sep1), “In metals, you may get scared, you may freak out, you may lose your mind . . . but as long as support holds, there is no reason to lose your position.”

Allow me to show you what I mean from the example of our trading support and resistance over the prior week using the GDX.  Once the GDX broke out, I put out a chart showing the support we then had to hold to keep pressure to the upside (GDX1).  Moreover, I even highlighted the next target should support hold.  In GDX2, you will see that the market held the top part of the support box, and then continued to our higher target, and even slightly exceeded our target by a few cents.  So, in GDX3, I raised our support region to point to where I thought the market will likely pull back after striking our target. 

Well, for the next two days the market tested our support region, the initial test shown in GDX4, wherein I added our next target for the smaller degree move.  And, as we can see in GDX5, the GDX rallied to our next target on Friday, before beginning another pullback, as expected, during the rest of the day on Friday.  And, we basically had the same tracking we did on a micro basis with the GLD all week, as it held our noted support in the 124 region.

Thus far, metals have been holding upper support, and not providing the bigger pullback I had ideally wanted to see.  So, it does look like the GDX may have left the station. 



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