2018 was a wild ride on Wall Street, with volatility so violent it made daily swings of 500 or more points on the Dow seem almost “normal.”
We experienced several record-setting point swings on the Dow and came within a hair of entering a bear market, where securities fall 20% or more from recent highs.
But there’s a big difference between a bear market decline of 20% and a major market crash, like the one we had during the 2007-2009 financial crisis, which knocked the S&P 500 down by 57%.
And when the dot-com bubble burst in 2000, the S&P 500 plummeted by nearly 50%.
And since this time around we haven’t yet entered a bear market (by the most common definitions), that means we are (still) in the longest-running bull market in history.
In two months, this bull market will hit its tenth birthday – something that’s never happened before. [Read more…] “Take Our Survey and Tell Us Where You Think the Stock Market is Headed”
Who can forget those dark days of the housing market crash of 2008? The vacant homes and neglected lawns. The abandoned swing sets and forgotten barbecues. The bright signs and bold arrows that needed little explanation: “Foreclosure.” “Auction.” “Bank Owned.”
We’re told that the housing bubble and collapse was about predatory lending and high-risk borrowers who were duped into loans that they couldn’t afford. The massive regulatory response to the subprime crisis meant that banks were no longer allowed to behave BADLY… so they chose to behave DIFFERENTLY.
Shhh. Your Bank Has a “Big” Dirty Little Secret. Read this Very Carefully…
The largest source of mortgage lending in the United States is now being done by non-banks – financial entities that offer unsecured personal lending, business loans, leveraged lending, and mortgage services… but do not hold a banking license. As a result, they’re not subject to standard banking oversight and can engage in risky lending.
But where do they get the money to make these loans? You guessed it: Wells Fargo, Citibank, Bank of America and everyone else who got their hands dirty ten years ago. [Read more…] “Shhh! Your Bank Has a “BIG” Dirty Little Secret – it Could Crush Your Retirement”
October was one of the most volatile months for the Dow since 1900. Back then, we were hopping on the first electric buses in New York City and enjoying a new kind of sandwich called a “hamburger” in New Haven. And, we were piling onto an early “Loop the Loop” roller coaster on Wall Street.
Fast forward to October 2018… and enter the Zero-G Inversion Coaster. The Dow fell by over 1,000 points in two days. The S&P 500 dipped in and out of correction multiple times. The Nasdaq plummeted 700 points mid-month, soared over 300 points the next week, and then tumbled back down over 500 points toward month-end. It comes as no surprise that the Fear Index also hit a 3-month high.
It wasn’t Halloween that spooked the markets last month…
Investors had plenty to fear with trade wars, tariffs, rate hikes, Fed policy, underwhelming earnings, slumping housing data, and political partisanship run wild. And as the sugar high of tax cuts, low interest rates and low inflation wears off, there’s a pervading sense that we’ve reached some sort of flashpoint.
What keeps economists up at night? One very sobering question:
What if This Economy is “as Good as It Gets”?
[Read more…] “October 2018 Was Among the Most Volatile Month for Stocks in 118 Years”
In his 1865 poem “If,” Rudyard Kipling famously wrote, “If you can keep your head when all about you are losing theirs … yours is the earth and everything that’s in it.”
That’s a big “if” at the moment. Let’s face it; few people are “keeping their heads” right now.
We’re drowning in a reactionary stew where everything from an exchange of ideas to a “taper tantrum” seems to cause a convulsive panic in the stock market.
And even if you don’t lose your head, you can STILL lose your money! Here’s why…
Admittedly, October has always been a devilish month for Wall Street. Black Tuesday was October 29, 1929. Black Monday was October 19, 1987. And the crash of 2008 happened on October’s doorstep on September 29, 2008, when the Dow dropped over 777 points. On October 10 of this year, the Dow dropped 832 points – the third-worst point drop in history.
These are the days of falling acorns and Chicken Littles! It’s in this climate – despite historically low unemployment, robust GDP, and soaring consumer confidence – that 800-plus point sell-offs are even possible.
The problem is not just the prevailing concerns about high debt, trade wars, and rising interest rates; it’s the collective uncertainty and reactionary group-think over which we have no control.
Contagion Has Become the Wild Card Enemy of Wealth Accumulation
[Read more…] “Why You’ll Lose Money in the Market Even When You Invest Rationally”
They are the ultimate conspiracy theories – the beliefs that the earth is flat and that economies are not cyclical.
The Flat Earth Society (a movement that is active and growing today) finds the notion of a horizontal earth far more plausible than a round planet perched on an axis. To their members, gravity is an illusion and objects are not pulled down, but rather continually accelerate upward.
Adopting this notion requires one to reject all prevailing scientific wisdom and research. And despite centuries of empirical evidence, some Flat Earthers believe that one could literally walk off the end of the world.
Those who think the current bull market will continue to rise without a crash or major correction are equally illogical. Despite generations of economic theory, Blind Faith Bulls have sunk most of their net worth into equities on the unquestioning belief that stocks will climb unabated.
Flat Earthers and Blind Faith Bulls Share a Common Suspension of Disbelief…
[Read more…] “Flat Earthers and Blind Faith Stock Market Bulls – What Do They Have in Common?”
Those of us who remember the 1960’s TV action series, Batman, recall how the caped crusaders defended Gotham City from super villains. At the very instant our heroes had their backs to the wall, the announcer would urge us to “Tune in next week. Same Bat Time – Same Bat Channel” for the continuation of the episode.
As we sit ten years out from the financial crisis, it feels like we’re at a similar juncture in the story of the U.S. economy. It has literally picked up where it left off – with the usual suspects and the same, unsuspecting victims.
If history is any guide, we’re on track to experience another economic downturn, triggered by similar conditions – with a similar outcome.
On a visit to Fortune magazine back in July of 2007, Treasury Secretary Hank Paulson declared, “This is far and away the strongest global economy I’ve seen in my business lifetime.”
A Year Later, We Were in a Global Financial Crisis Many Consider to Have Been the Worst Since the Great Depression
[Read more…] “Will Household Debt Lead to the Next Financial Crisis?”