Wealth Building Strategies

Game Plan for Late-Cycle Investing

Posted by Financial Sense Advisors, Inc

on Thursday, 08 March 2018 06:01

The three key themes in the current market environment - a rise in volatility, inflation, and investor sentiment - are characteristics of a business cycle in its later stages. Taking Warren Buffet's rule #2 "Don't Lose Money" to heart, they make a comprehensive case for a late-cycle investing game plan which includes shifting away from stocks towards cash, % bearing assets and commodities and commodity-related stocks. - Robert Zurrer for Money Talks

Theme # 1 – Rising Volatility

Investors have been spoiled over the last two years with record low levels of volatility in virtually every asset class, causing some investors entering 2018 to throw caution to the wind as euphoric levels of greed crept into the market. The title to our quarterly newsletter was "Records Were Made to Be Broken" and the recent market decline has ended some of those records already. Using S&P 500 data going back to the Great Depression, the US stock market set a new record of going 311 days without a 3% decline and 404 days without a 5% decline. We are unlikely to repeat these feats any time soon as we believe investors should anticipate a more volatile environment going forward as we transition through a major turning point in global monetary policy.

In the aftermath of the Great Recession of 2007-2009, we saw central banks respond with unprecedented stimulus using zero-interest-rate-policy (ZIRP) and quantitative easing (QE) to expand their balance sheets to unimaginable levels. The collective result of these actions was an end to the Great Recession and the beginning of new liquidity-fueled economic expansions and bull markets around the world.

The global liquidity tide of easy money began to slow down first with the US Fed ending its QE program in 2014, eventually raising interest rates in 2015 for the first time since 2006. Along with a steady increase in rates, the Fed is also on track to shrink its balance sheet to the tune of an estimated $420 billion this year and $600 billion next year. Though President Trump has enacted a stimulative tax cut, as Dave Rosenberg recently pointed out (Lunch with Dave, 12/28/17), estimates project $140 billion in stimulus for economy-wide earnings this year with additional gains of $80 billion next year—a small offset to the liquidity drain from monetary policy.

Further adding to the monetary liquidity drain will be the European Central Bank (ECB), which is slated to end its QE program later this year. According to Wells Fargo, the combined purchases of the world’s two biggest central banks—the Fed and ECB—will turn negative beginning this summer and only accelerate in the second half of the year.

02Source: Advisors Perspective

Furthermore, when we look at the annual growth rate of the top seven central banks' balance sheets, we see that it will likely turn negative in 2019 for the first time since 2015. If you can recall, 2015 into 2016 was a very tumultuous period with back-to-back double digit declines and fears over a major market top in the works.

global qe negative

For the better part of the last decade stock prices and central bank balance sheets have been joined at the hip so anything to upset the apple cart should not be dismissed. As the global liquidity tide starts to go out over the next year, we are likely to see who has been swimming naked (as Warren Buffett famously remarked). This should also add to further volatility, a common characteristic seen in the later stages of the business cycle.

Theme # 2 – Rising Inflation



Mike's Content

The Dangers of Gov't Cooling Real Estate

Posted by Michael Campbell

on Wednesday, 07 March 2018 07:28


The BC Government wants to trash the most important industry in the province in the name of affordability. An industry that has a huge workforce. Michael has the numbers and makes the case that Gov't should leave real estate alone. 

....also related from Michael: Your Moral & Intellectual Superiors





Economic Outlook

Trump Plays with Fire on Trade

Posted by Peter Schiff - Euro Pacific Capitalapital

on Wednesday, 07 March 2018 06:45

Peter Schiff makes the case that probably inspired White House chief economic advisor, former Goldman Sachs president and free trade advocate Gary Cohn to resign from President Donald Trump's administration. Michael Campbell also disagrees with Trump in his passioned comment HERE - Robert Zurrer for Money Talks

Trump Plays with Fire on Trade

tariffs-steel-aluminum-860x450 cWith his announcement last week of broad tariffs on imported steel and aluminum, President Trump launched what could be the first salvo of an all-out global trade war. Seemingly itching for a fight, he gleefully tweeted that "Trade wars are good, and easy to win." It seems like Trump thinks the conflict will play out much like Ronald Reagan's 1983 week-long invasion of Grenada rather than the more telling quagmires that unfolded in Vietnam, Afghanistan and Iraq. He's wrong.

Apart from overestimating America's bargaining position, Trump and his supporters grossly misunderstand the nature of international trade and how Americans have benefited from a system that has allowed us to continually consume foreign goods on credit. While this "benefit" has also placed a cost on domestic industries, I don't believe that Trump has any idea how a trade war can reduce current American living standards.

As justification for his surprise offensive, Trump likes to highlight how America's gargantuan annual trade deficit (which has



Stocks & Equities

Todd Market Forecast: Bullish

Posted by Stephen Todd - Todd Market Forecast - Todd Market Forecast

on Wednesday, 07 March 2018 06:24

#1 ranked Trader by Timer's Digest with a 31.6% return for 2017 is still looking for higher stock prices and has switched to bullish Gold in last evenings letter after going bearish the US Dollar on March 2nd. The chart below certainly indicates there is still a lot of fear on the part of investors, though less than in previous days. Investors are driven by two emotions: fear and greed. Too much fear can sink stocks well below where they should be. Robert Zurrer for Money Talks


Todd Market Forecast for 3pm PST Tuesday March 6, 2018

DOW + 9 on 1040 net advances

NASDAQ COMP + 41 on 818 net advances



STOCKS: When the market is up over 300 on a session, it would hardly be surprising to see profit taking the next day. The bears tried, but failed. We were impressed by the action, especially breadth. The advance decline line has been a solid performer.

The Russell 2000 made a new rally high today. It's a good sign when smaller caps are outperforming. See the charge below.

There are almost zero signs of a top of any significance. Pullbacks should be bought.

GOLD: Gold was up $15. A sharply lower dollar helped. This changes our outlook below.

CHART: There are no guarantees in this business, but when the high techs are leading the charge, it suggest that there are higher prices ahead. Today the SOX or semiconductor index made an all time high (bottom arrow).

Screenshot 2018-03-07 06.21.46

BOTTOM LINE:  (Trading)



Mike's Content

An Ominous Prediction

Posted by Michael Campbell

on Tuesday, 06 March 2018 07:57

Governments are desperate for money to fund their promises. They are going to go where the money is & Michael forecasts where the money is that Government is going to go after. If you are a homeowner, you might best listen to what Mike thinks is coming right at you:


....related from Michael: Here Comes Job Losses




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