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The FAANG-nary In The Coal Mine

The long-awaited breakdown in sentiment is finally here
Friday, July 27, 2018, 6:48 PM

Two weeks ago, I issued a report to Peak Prosperity's premium subscribers, warning of an immiment downwards re-pricing of the FAANG stocks. I even made a rare recommendation for taking an active short position against them (one now up 18%).

That report proved quite timely. Over the past 10 days:

  • Netflix (NFLX) is down 10% after issuing disappointing subscriber growth and Q3 guidance
  • Facebook (FB) is down 20% after  delivering lower user and revenue numbers than the Street was expecting
  • Amazon (AMZN) is flat despite posting blowout Q2 EPS, offset by a revenue miss
  • Google/Alphabet (GOOGL) has managed a meager 3% rise, as earnings & revenue beats were tempered by rising costs and a record $5 billion EU anti-trust fine

This sudden weakness among key FAANG members is extremely significant. Much more so than most investors realize. » Read more

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Dreamstime

The Case For Starting To Build A (Small) Short Position

Why I just took on a new short trade in my portfolio
Tuesday, July 10, 2018, 3:01 PM

So, we're in the midst of (yet) another rally in the markets. But this one feels different...

For those sitting on large cash positions, it's increasingly looking like the long-overdue and long-awaiting end to the secular bull market may indeed arrive this year.

There is NOTHING wrong with remaining 100% in cash and simply letting your cash appreciate realtive to stocks/bonds/etc when the correction hits.

But, if you want to have some upside exposure to the correction, now is a good time to consider how much of your portfolio to allocate to that strategy. And what to put it in. And to start putting small positions in place.

Technically, it continues to look like something broke at the start of 2018. The ruler-straight run-up in the major stock indeces seen over the past decade suddenly stopped as the year began. Since then, we've seen more price volatility than in the past several years combined.

And despite the most recent price action, both the Dow and the S&P 500 remain below their all-time-highs set in early January. And while the NADAQ is now higher, there are many reasons to be concerened about its ability to rise much further -- a rationale I'll lay out shortly below.

Technical Red Flags

This latest rally is rising two important red flags.

The first is volume-related. This most recent rally has occured on exceptionally low volume, near the lowest levels seen over the past year.

This indicates that the optimism represented by today's buyers is not widespread across market participants (i.e., there's not a horde of buyers eager to keep pushing prices higher). This hints that the rally may soon run out of steam.

Low volume driving a rising market also suggests fewer buyers willing to step in to defend today's price levels if they start falling.

The second warning sign is that we're seeing Rising Wedge formations appearing in the major equity indices as we see in this chart... » Read more

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Off The Cuff: The Fed May Be Less Worried Of A Stock Plunge Than We Think

As long as credit flows, it's OK with lower stock prices
Tuesday, March 27, 2018, 2:53 PM

In this week's Off The Cuff podcast, Chris and Axel Merk discuss:

  • Dissecting Last Week's FOMC Meeting
    • Powell definitely seems different from his predecessors
  • Why The Fed May Not Worry About Stock Prices
    • All it really cares about are functioning credit markets
  • How Sick Is Europe?
    • Very, but it can linger a long time
  • The Prospects For Gold
    • Well-poised to outperform other assets this year

In the wake of last week's FMOC meeting, the first one for new Fed Chairman Jerome Powell, our site's central banking expert Axel returns to the podcast to share his assessment of the banking world's newest sheriff. Axel believes, as a lawyer (unlike his academic predecessors), Powell is fairly unconcerned with economic theory or asset prices. What he cares most about is regulation and the continued functioning of markets. So as long as credit -- the lifeblood of the global economy -- is flowing, he may not care much where prices end up...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
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I Just Added To My Short Position

Keeping you updated on my portfolio positioning
Wednesday, August 16, 2017, 2:01 PM

Last year, I detailed out my personal investments in the report How My Portfolio Is Positioned Right Now. It turned out to be one of our most popular articles over the past few years.

In it, I mentioned that I'll do my best to update our subscribers when I make a material change to my portfolio allocation.

Well, I just did. » Read more

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Why The Markets Are Overdue For A Gigantic Bust

It's just not possible to print our way to prosperity
Friday, June 9, 2017, 7:38 PM

As much as I try, I simply cannot jump on the bandwagon that says that printing up money out of thin air has any long-term utility for an economy.

It's just too clear to me that doing so presents plenty of dangers, due what we might call 'economic gravity': What goes up, must also come down. » Read more

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This Is How Sentiment Shifts And Markets Crash

Once faith in the Fed is lost, things will get ugly fast
Friday, September 2, 2016, 4:47 PM

Executive Summary

  • The Facebook legions rip the Fed to pieces
  • The WSJ joins in the attack??
  • The 'smoking gun' showing how the Fed's only priority is to serve its banking masters
  • Why a revolt against the Fed is necessary, inevitable and just

If you have not yet read Part 1: Sorry Losers!, available free to all readers, please click here to read it first.

Facebook Fed Farce

The Fed, surprisingly, has a Facebook page.  While it’s not surprising that they have one because every organization is aware that they need a ‘social media presence’ it is surprising that the Fed seems to be completely unaware that Facebook is a social networking site, not a policy regurgitation platform.

Well, the Fed put up its policy aims and the responses from the public were consistently brutal or delightfully snarky. 

But I did not find a single one, out of hundreds, that was complimentary of the Fed or in any way demonstrating that the Fed has any sort of credibility left with the public.

These are priceless: » Read more

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mentalfloss.com

The Death Of Hopium

Tech Bubble 3.0 is in the process of bursting
Tuesday, October 13, 2015, 4:48 PM

I got my MBA at Stanford in 1999 when the dot-com bubble was at its zenith, worked for a VC-funded start-up as well as one of the biggest Internet juggernauts (Yahoo!). I lived in Palo Alto, the central core of the tech scene.

As a result, I have a pretty good read on how Silicon Valley works. Many of the folks I worked and went to school with are now in leadership positions at the big operating companies, VC firms and hedge funds in that ecosystem now -- so I have personal knowledge of who's making the decisions.

And it's no secret that I think it's degenerated into a steaming pile of hucksterism. » Read more

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The Erosion of Community

We're losing the bonds that once made our society thrive
Monday, February 17, 2014, 12:58 PM

In an age which seems abundantly well-served by individualism, consumerism, the central state and global corporations, why does this erosion of community matter? After all, aren’t we doing rather splendidly despite a declining sense of community? » Read more

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Returning to the 'Real'

The virtual is not an adequate substitute for the authentic
Tuesday, September 3, 2013, 11:34 AM

A paradox of life in these times is the inverse relationship between technological wizardry and the satisfactions of being a live organism in a real place (i.e., on the planet Earth).  It probably boils down to a proposition that the American public is not ready to entertain: that the virtual is not an adequate substitute for the authentic. Eventually it will be a hard lesson to learn. » Read more