All of us at Critical Signals Report, and I in particular, am grateful for the exceptional commentary, feedback, and questions we’ve received from our recent reports.
I was even touched to see some words in French as well (Merci!).
Ideally, of course, I would wish to have the time to address you all individually.
I am by no means a financial “diva,” but we at Critical Signals Report face a paradoxical but welcomed problem of simply having too many queries to address one at a time.
That said, I have read through your well-thought-out emails and have striven to extract many of their key themes and issues (and a few first names) which I will address below.
Many important items were raised, from Keynesian versus Austrian economics (nod to Terry) and 401K woes (from Jay), to the intricacies of specific stocks and recommended sectors to precious metals and cannabidiol names (Alan).
In short, there’s a lot of ground to cover as we journey through this extraordinary yet deeply distorted period of market history.
The Fed Experiment Has Changed Everything
The first point to make, and which needs to be the broadest, begins and ends with this simple premise: Today, and entirely due to central bank intervention, the rules of investing have changed.
Stated otherwise, traditional thinking will not serve any of us in these non-traditional markets.
This theme of central-bank distortions-and subsequent beer goggle investing-runs through most my articles and will also run through most of my responses.
Folks, with a Fed that prints trillions in fiat money to support and resurrect a failed banking system and which artificially stapled interest rates to record lows in order to support a debt-driven bubble masquerading as a “miracle recovery,” we are now in uncharted waters-an investment environment of unprecedented and staggering levels of centralized control from a class of not-so-heroic personalities…
Such centralized control has no real precedent in U.S. market history, although we’ve seen versions of it elsewhere in time, from the infamous French disaster of 1790 to the zombie economy of the post-1989 Nikkei crash in Japan.
Today, the major central banks of the world-in China, Europe, Japan, and the U.S.–have effectively taken command over natural supply and demand forces.
The best word to describe such a staggering shift boils down to an experiment-namely, a massive central bank experiment.
The bulk of your questions and the direction of your investments will thus hinge almost entirely upon how this experiment plays out.
That is, where it is headed next and how it will ultimately end.
I’d like to boast and say that I know precisely how and when this experiment will end, whether positively or negatively, and down to the precise fiscal quarter, month, or day.
Unfortunately, no one can honestly provide that answer, as no one has a genuine case study in modern financial history to track such a global central bank experiment.
Watch the Fed, Be Informed, and Don’t Ask for Market Timing but for Market Signals and Preparation
For the near term, I can say this much: As long as the Fed keeps rates low, this will buy you and the markets time, and thus, short of a black swan event and the occasional dips, markets will continue to trend nervously and precariously upwards to new highs.
For the long term, I can also say this: An arrogant (and now desperate) central bank which thinks it can solve a debt problem through the creation of more low-rate debt is both delusional and destined to fail-and fail at a historical level.
Even though there is upside ahead, possibly even a major melt-up before a crash, no one should be all-in if chasing market tops given the current asymmetry between risk and reward in these over-valued markets.
Yet ironically, this debt crisis-and danger-is so big, and the stakes so high, that our Fed will do almost anything now to buy time.
This too can be seen as near-term bullish for U.S. stocks, but investors need to be careful not just greedy.
Again, there is still a window of upside to trade this near-term window, as I’ll show below, but one should not put all one’s chips on the table even when trading a Fed “fat pitch.”
Don’t Beat Yourselves Up
Others of you (i.e. Jay) admitted to being burned gravely in the 2008 crisis and seemed almost apologetic for not capturing the full ride up from 2009 to until today.
Please do not feel angry at yourselves for missing the full arc of the Fed-induced “recovery” that began in 2009.
There is no need to beat one’s self up for this.
Yes, of course, the markets saw a record surge in the last decade, and if one were to have perfectly timed the March 2009 lows to the recent highs in the market, and if one had been fully invested and picked every tech and growth stock without blinking, then yes, absolutely: You would have made a fortune and increased your wealth by hundreds of percentage points.
But here’s a little bit of consolation: Almost no one achieved this…
Sure, it’s easy to show back-tested fortunes and what the markets have done with record-breaking hindsight.
But the facts confirm reality rather than rear-view mirror “wisdom” …
And as for the great, 300+% bull ride from 2009 onwards, here are some points worth remembering as some of you unfairly beat yourselves up for not capturing every penny of the rise in the last 10+ years.
First, keep in mind that when the Bull market began on March 9, 2009, the S&P 500 was down 57% from its 2007 peak.
If you felt beat up, you were hardly alone.
No one, including the Fed Chairman, the Treasury Secretary (a former Goldman Sachs CIO), or a vast majority of hedge fund “experts” saw the 2008 Bear coming or even warned a soul.
In fact, Bernanke, Yellin, Greenspan, and other Fed officers were uniformly saying “all is well” just minutes before the markets tanked.
Thereafter, Wall Street looked like one collective “deer in the headlights” as Bear Sterns and Lehman Brothers fell to their knees.
I remember those days well, and I was in the heart of it just shaking my head.
Not to boast, but I was even in the home of the chairman of one those too-big-too-fail banks that week the markets were tanking, and he didn’t have a clue what to do…
Stated more simply, you weren’t any less “dumb” than the so-called “elites.”
Unfortunately, the Fed bailed them out, not you…
Furthermore, even those who wanted to get back in the markets in 2009 had much less wealth to do so.
Most Americans didn’t have the support of a Fed hand out (unlike the banks who caused the crisis), and thus, most Americans were rightfully reluctant to put more chips on the table.
This is not because most Americans are “dumb,” but simply because most Americans are human, and humans (unlike most bankers) feel pain…
Just before the markets tanked, moreover, over 80% of the nation’s stock market wealth was in the hands of just the top 10% of the country’s wealthiest families.
By 2016, they owned over 86% of all the stocks.
Stated more simply, the wealthy could afford to take more risk, whereas the rest of America-i.e. many of you who have asked me for guidance on your 401K’s-could not afford to.
In fact, the vast majority of U.S. citizens missed out on most of that market rise not because they were less intelligent or less bold, but simply because the markets were designed to benefit a minority of our country, not the majority.
A Gallup survey confirmed that about 45% of Americans had no money at all in these markets since well before 2008.
And as for those who were invested, 43% were in passive index funds tracking the market, not making a killing in bitcoin or capturing every percentage point rise of the FAANG stocks or, later, the lemon that is/was TESLA.
In short, don’t beat yourself up for “missing out.” If you were in any part of the post-08 markets, you were at least “in the game.”
Can the Fed Prevent a Recession?
Others are asking if the Fed can keep this “miracle” charade going indefinitely?
That is, like Japan in the last 30 years after its infamous market crash in 1989 (of which it has yet to recover), can the U.S. Fed, like the Bank of Japan (who invented “Quantitative Easing”), simply keep America in a zombie-like state?
That is, can we live “recession free” off the Fed’s low-rate/money-printing respirator for years to come?
I touched upon this specific theme/possibility in a separate article, entitled The Great Con.
You’ll see the argument behind (or case for) such a “zombie” scenario.
So, there we have it then, the great Fed “experiment.” Since 2009, one could argue that it has been a confirmed success.
Heck, just look at the DOW and the S&P ripping up by over 300% upon waves of QE1, QE 2, QE 3, QE 4, and years and years of near zero percent interest rates.
But this experiment can not be judged at half-time or the 6th inning.
We have to wait for the full game to play out.
Three End Games to Consider-A Rise? A Fall? Or a Long Stagnation?
The game (or “experiment”) will, of course, end in one of three ways, either: (A) the markets just keep rising to even greater highs, (B) the markets crash at record-breaking levels, or (C) the Fed just keeps printing money and forcing rates to the floor for years, and like Japan, the U.S. merely inches along at low growth while the market avoids a crash and the economy limps toward a long recession.
You have asked me to answer which of these scenarios is going to occur.
In my coming four-part report, I’ll argue that in fact all of these scenarios are likely to play out in succession-that is, more short-term highs to come (the “melt-up”), followed by a subsequent “melt-down” and finally, a long, slow-growth period of Japan-like stagnation, despite all the Fed’s “tricks.”
But how will you know when? How will I know?
What We Know We Know
That’s a good question. I’m a market veteran, not a tarot reader.
I can’t promise your future nor guarantee you instant wealth. No one can.
Nor can I promise you perfect market timing. No one can.
But I can get you pretty darn close, and with some exceptional tools to back this up.
Because my colleague and I at Critical Signals Report are market veterans, so we can be both good and blunt about what we do best (no room for modesty today folks).
Our decades of experience allow us to track hundreds of complex market indicators on fancy screens with hedge-fund depth to get as close to certainty as anyone can in storm-tracking even these experimental markets.
We thus provide what we believe are the best signals for protecting and growing your wealth currently available through an online platform.
In short, we created Critical Signals Report to be your own version of a trusted family office-internet style…
It’s our job to reduce all these complex indicators down to simple signals that you can easily understand and from which you can make informed decisions on your own portfolio based upon your own personal situation and risk levels.
That’s precisely what the most expensive and fancy family offices do: Experienced geeks like us give solid, simple, and clear data to rich folks, who then make investments together based on solid information rather than media spin.
We at Critical Signals Report will be offering a service that gives all investors-not just the richest-solid signals, experienced advice, and trending data which you can then track daily to know just where we (and your portfolio) are in these experimental and fluctuating markets.
With us, you’ll know far better than most just where the markets are in their cycles up, sideways and down, so that you can decide upon which strategies (long, short or cash-defensive) to pursue in both protecting and expanding your market wealth.
We will tell you precisely which stocks, sectors, vehicles and strategies (long, short, options or inverse ETFs) to be using during these cycles as the grand Fed-experiment plays out in both epic rises and epic falls.
Folks, we think you’re gonna love it. Why? Because we love it-and thus we’re good at this stuff.
Going forward, if you stick with the Critical Signals Report, we won’t tell you what “you should have done” or what you “could have done.” That’s absurd.
Instead, we’ll tell you what you can and should do, and give you more than one option, depending on your age, risk level and experience.
As importantly, we’ll give you the same data we are seeing (and what’s not seen in the media), so that you can make informed decisions based on the best we can deliver, and also with your own judgement and common sense-which doesn’t require an MBA for you to invest far better than the former CEO’s of the very banks we bailed out in 2008…
Tomorrow, I have for you more answers from more questions by you.
So if you don’t see your specific question answered just yet, keep an eye out for tomorrow’s post.
Until then, get informed, stay safe, and be profitable out there.
5 responses to “You Want Answers that the Fed Won’t Give You”
May 04 2019