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Asset protection

Listening to the Permabears Is a Great Way to Go Broke

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Posted by Lee Adler - Money Morning

on Wednesday, 27 September 2017 06:43

The other day, I had an interesting question thrown my way: What's the single most dangerous investing trend you're seeing out there right now? What could people be doing that's a surefire way to just go flat broke?

My answer is probably not what you would expect – after all, today and every day, I'm "Opposite Guy."

So I'm going to give you the answer you didn't expect. But it's the right answer historically.

It'll help you along your path to becoming a successful, independent, self-directed, and, above all, wealthy investor.

And the best part is, the answer is going to save you a ton of money and heartbreak…

Conventional Wisdom Only Gets You So Far

Here's something else you probably weren't expecting from Opposite Guy: You can always follow the conventional wisdom… if you want.

That, however, will only help you in a bull market, when the conventional wisdom is usually right and can stay right for a long time.

Bull markets are when cable talking heads can set themselves up as mystical profit prophets just by hawking the FANG stocks – Facebook Inc. (Nasdaq: FB), Amazon.com Inc. (Nasdaq: AMZN), Netflix Inc. (Nasdaq: NFLX) and Google/Alphabet Inc. (Nasdaq: GOOG) – to the credulous masses.

bear-dartSee? Bull markets are easy.

But bear markets do come along every so often, and when they do, the conventional wisdom that's made you bull market gains will lose you a lot of money – fast.

Here's where I'd bet you were expecting me, Opposite Guy, to say that buying the FANGs is the most dangerous trend.

After all, that's what all the bears have been saying – and I have a bit of an undeserved reputation as a permabear. I'm supposed to agree that buying the FANGs at these extreme valuations is insane and a surefire way to go broke.

Trouble is, I'm not a permabear. I'm a trend identifier. I use liquidity and technical analysis to signal, identify, and confirm trends, as well as indicate likely turning points. That's why my analysis has, in fact, been mostly bullish for years. You can follow my liquidity work over at Sure Money and my technical work in the Wall Street Examiner Pro Trader.

Lately, I have been warning that the forces of liquidity that establish market context and drive trends will soon turn bearish, and this week, they started to. My short-term LAMPP indicator, which you can follow at Sure Money, turned red this week.

If you’re not making gains like this… you could be cheating yourself out of tens of thousands of dollars.

That's a big distinction – and an expensive one if you've been following constant doomsayers.



Asset protection

U.S. Retirement Market Ponzi Fueled By Record Concentration In Stocks By Young Americans

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Posted by Steve St. Angelo - SRSrocco Report

on Monday, 25 September 2017 07:06

For the U.S. Retirement Market Ponzi Scheme to continue, there must be a new group of suckers to pay for the individuals who are receiving benefits.  Without a new flow of funds, the Ponzi Scheme comes crashing down.  Such was the case for the individuals who invested in the $65 billion Bernie Madoff Ponzi Scheme that came crashing down in 2008.

Interestingly, the U.S. Securities & Exchange Commission (SEC) that investigated Madoff Securities in 1999, 2000, 2004, 2005, and 2006, found no evidence of fraud or the need for legal action by the commission.  The failure of the SEC to find any wrong-doing by Bernie Madoff should provide Americans with plenty of reassurance and confidence that their 401k’s are the highest quality sound investments in the market.

Regardless, the concentration in equities by young Americans reached a record high since the 2008 financial crisis.  According to the most recent data put out by the Investment Company Insititute (ICI), Americans in their twenties who participated in 401k plans, 75% of the group invested more than 80% of their funds into equities in 2015 versus 48% of the group in 2007:


In just eight years, Americans in the 20’s age group invested in 401k’s, increased their equity exposure (80+%) from less than a half to three-quarters.  Furthermore, those in the 30’s age group increased their equity concentration from 55% to 70% in the same period.

All this means is that younger Americans participating in the 401k Retirement Market have considerably increased their exposure to stocks while net benefits paid out have now gone into the red.  I wrote about this in my article, Something Big, Bad and Ugly Is Taking Place In The U.S. Retirement Market:



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:



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