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    Market Update: How Much Lower?

    Lance Roberts explains why risk remains to the downside
    by Adam Taggart

    Friday, September 11, 2020, 9:04 AM

Well, as we thought it might, the sell-off in stocks that started last week has continued.

The Tech-heavy Nasdaq is down -9% from last week’s highs, with high flyers down much more – like Apple down -17% and Tesla down nearly -30%.

Was last week the top? Are we headed down further, perhaps much further, going forward?

This week’s guest expert, Lance Roberts of RIA Advisors predicts that, while no one knows what will happen in the immediate short term, longer term risk in today’s markets remains squarely to the downside.

In his assessment, the -33% plunge back in February wasn’t actually a true correction, as valuation multiples for stocks didn’t come down nearly far enough to matter. And of course, these multiples are back at records highs now.

Additionally, key markers still show the system is at extreme levels of over-valuation. For example, during a correction, margin debt decreases dramatically (by being retired or via default), and yet today, margin debt balances are the second-highest in history:

Margin debt chart

Add in the uncertainty of the fast-approaching November US presidential election — including the increasing likelihood that no follow-on stimulus package will get passed before then — and the short-term is looking dicier, too.

Lance shares his thoughts on where pockets of opportunity lie for today’s investors, but his general outlook is very similar to what ours has consistently been of late: this is a time to prioritize risk management and build capital that you can deploy at better valuations once the inevitable correction arrives:

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Anyone interested in scheduling a free consultation and portfolio review with Mike Preston and John Llodra and their team at New Harbor Financial can do so by clicking here.

And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical coronavirus preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.

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24 Comments

  • Fri, Sep 11, 2020 - 2:21pm

    #1
    obizzozero

    obizzozero

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    4+

    Thank you Adam!

    I enjoyed the interview with Lance and the discussions. Thank you!

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  • Sat, Sep 12, 2020 - 6:32am

    #2

    JAG

    Status: Gold Member

    Joined: Oct 26 2008

    Posts: 490

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    Fantastic Interview

    Another great interview Adam. You are on a roll!

    I have never heard of Lance Roberts or his work but one thing he said really hit home with me. We are in a bull market, not a bear market.

    The speed and size of the March decline had me believing that a bear market had begun but in reality it was just a correction within a bull market. That seems obvious but I was blinded to it. Thanks.

    And Adam, you really are a talented interviewer. No drama. No attention on yourself, just on the subject. Most importantly, you ask really good questions. That is so rare these days. Many, many thanks....Jeff

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  • Sun, Sep 13, 2020 - 2:09pm

    #3
    dryam2000

    dryam2000

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    I offer up my 2 posts here...

    These “Markets” are ultimately going to implode beyond what 99.9+% of people can imagine.....maybe not within the next month, or 3 months, or next year, but I don’t think it’ll be much past that.  I suggest people gain a bigger picture view and many are missing the forest through the trees.  Frankly, I believe I have a very good idea where things are headed.  And, I’m not anything special.  Others have been able to see this coming for years and have written books on it.  Hint:  someone testified to Congress in 1959 warning of what is now upon us.

    For PP members, they can see my posts here (granted, it’s a shortened version as a more full version).

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  • Sun, Sep 13, 2020 - 3:14pm

    #4
    MKI

    MKI

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    See this coming for years?

    These “Markets” are ultimately going to implode beyond what 99.9+% of people can imagine.....maybe not within the next month, or 3 months, or next year, but I don’t think it’ll be much past that. I suggest people gain a bigger picture...

    Well, all those who could see this coming "way back in 1959" have missed out on some of the greatest wealth transfers in the history of humanity?

    You certainly disagree with the interviewee Lance, who flatly states "no one knows what will happen in the immediate short term". Lance is just one of your 99.9% rubes?

    Myself, I don't think so. I think Lance has a pretty good handle on market timing...but I've been wrong before...

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  • Sun, Sep 13, 2020 - 3:43pm

    #5
    dryam2000

    dryam2000

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    In Chris Martenson-like terms

    Infinite treasuries on a finite planet -> an extraordinarily unhappy ending.

    Happy trading

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  • Sun, Sep 13, 2020 - 4:14pm

    #6
    EddieLarry

    EddieLarry

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    Futures are up for tomorrow

    1/2%+. Who knew?!

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  • Sun, Sep 13, 2020 - 4:43pm

    #7
    JWhite

    JWhite

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    Posts: 118

    Great video!

    Happy Anniversary Adam!

    This was a great interview - I quite like Lance Roberts and have followed the Real Investment Daily blog for some time.

    Recently I watched this interesting BBC documentary about the 1929 crash, which continued until July 1932, and the factors leading up to it, beginning in 1919.  There are some parallels with today's environment (high debt, stock overvaluations, euphoria etc.).

    https://www.youtube.com/watch?v=qlSxPouPCIM

    Of course, not everyone lost their shirt during the 1929 stock market crash and depression - there are also some interesting videos about how some people became very wealthy during this time.  For example, some bought properties when the real estate prices bottomed out, and became landlords for others who lost their houses and started renting.

    One interesting point in the BBC documentary was that there apparently wasn't one identifiable thing that caused the crash.  The week before, the automobile sector was somewhat down one day, and suddenly the general sentiment changed and within a few days people went from buying on margin to selling everything, not even knowing the market price as it was crashing.  People are fickle (especially when following the herd).....

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  • Sun, Sep 13, 2020 - 4:49pm

    #8
    Rob Laporte

    Rob Laporte

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    This Time IS Different: Why Stocks Won't Crash

    Around 2016, I posted the view below to PeakProsperity.com, asking for a refutation. No good ones came. 

    Several months prior to economist Campbell McConnell’s January 2019 death, when he was healthy and sharp, I had his daughter and friend of mine read him the text below, and he agreed that it is sound and possible. Over decades Professor McConnell has sold hundreds of thousands of economics textbooks.

    One question that has long perplexed me concerns the macro-economic impact of money printing in its various forms. In short, much depends on whether money printing can counterbalance debt defaults and zombies, such that the main impact is lower productivity and growth (like Japan), and not financial market armageddon. Loans written off and marked to market, non-performing loans, bankruptcies, and the like, eliminate money, but that money can be replaced by money printing. Likewise for declining velocity of money (via Freidman’s MV = PT). Yes, with the moral hazards of cheap money, poor businesses ventures happen, but those ventures still employ people and move the economy, just inefficiently. And large efficiencies from technology countervail, so that GDP can still do OK. True, panic can undermine this long scenario, but panic gets simmered down sufficiently by central bank printing, in part because enough big and institutional investors understand the logic I explain here. This synopsis might explain why long-predicted financial doom (as opposed to normal periodic ~20% downs in markets) has not been sustained since 2008--and may not happen for many years, if ever. Instead, it’s more like Japan—30 more years of tepid economy, but no thundering crash.

    Extrapolating from the above, Federal Reserve debt could go up 30x from now at near zero central bank rates, without bad consequences. Rising rates would likely do temporary damage after they have served the PR purpose of supporting the credibility of fiat currency systems, but then one crisis or another has central banks bringing rates back to near zero.

    Something has to account for now many years of dire predictions being wrong. And remember, if you lost half your stock wealth today [now September 2020], you’d be back to early 2013 levels, which was about double is 21s century low, and markets would climb again.

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  • Mon, Sep 14, 2020 - 12:17pm

    #9
    springbank1

    springbank1

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    Great interview

    Really good session with Lance and New Harbor.  These weekly market updates have been exceptional and provide great context...

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  • Mon, Sep 14, 2020 - 12:40pm

    #10
    MKI

    MKI

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    his Time IS Different: Why Stocks Won't Crash

    Something has to account for now many years of dire predictions being wrong. And remember, if you lost half your stock wealth today [now September 2020], you’d be back to early 2013 level

    Mike Green of Logica Capital thinks the reason is index funds. They are about half of the market now and have no intelligence, only to ape the active participants. So new money follows large cap stocks regardless of value. Up up up. Nobody is selling if they are just piling into index funds due to paycheck allocation with target date funds, nor paying attention to value.

    Sadly, I'm guessing we have a long way to go in this bubble, unless the boomers panic en-mass. Otherwise, we may go up many times from here. The practical response? Own VTI with a stop loss at 1% below where you buy it, and re-buy it at original price. There are no fees anymore to buy/sell VTI plus it's very liquid and will sell rapidly the only risk is missing the buy on the way up during a flash crash. I'll take the opportunity cost risk to avoid FOMO.

    Everyone keeps harping on how overvalued the stocks are. My response? They've been overvalued for nearly ten years. The change? Index funds, 401ks, and the Fed Put. Yes, this time it IS different. But definitely keep your stop losses tight...

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  • Mon, Sep 14, 2020 - 5:35pm

    #11
    stewjj

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    When Will Stocks Fall

    Jim Rogers said that "Being early is the same as being wrong".

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  • Mon, Sep 14, 2020 - 6:46pm

    Steve

    Steve

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    Better a day early than a day late

    Being early is the same as being wrong ...

    Although it is painful to miss out on the run-up, I had rather be a day early (and positioned in hard assets and a garden with production) than invested in equities and a day late.

    My seedlings for the 1st round of my fall/winter garden began sprouting yesterday ... 360 plants so far ... The plan is to start getting them in the ground during the 1st week in October, then follow-up with a second round at the end of October ... plenty of time before the election.

    Turnips, Greens, Arugula, Swiss Chard, collards, Mustard Greens, Beets, Kales, Broccoli, Spinach, Lettuce, Chinese Cabbage, Stonehead Cabbage, Carrots, Bunching Onions, Brussels Sprouts, Leeks...

    Next week will be spent harvesting the cover crop of purple hull peas and sweet potatoes, cultivating the soil and getting the mounds ready to go.

    Hope those puts and calls work-out for y'all long-haulers.

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  • Mon, Sep 14, 2020 - 7:02pm

    robie robinson

    robie robinson

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    Steve!

    You are my hero!

    Mine is the same except cauliflower and no arugula! Am on my third rotation of top pick pink eye purple hull peas. 150’ times three. If you don’t want to can, and blanching takes too much time, and.... pack them fresh into a quart freezer bag, fill with water and freeze. Thaw and cook,they taste like fresh.

     

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  • Mon, Sep 14, 2020 - 7:10pm

    Steve

    Steve

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    Hurricane season & Freezer space

    Down here on the Georgia coast we are wary of hurricane season.  Two of the past four years we lost power for 4-5 days and had to discard everything in our freezer when we returned to the island.  And that included a good bit of fish...Although we are trying to make room in the freezer by eating up the yellow squash, okra, peppers, zucchini, egg plant and the like, we're trying to wait until we get past hurricane season to start freezing again.  I have been eating my pickled okra, though.  It has become pretty popular among friends and family.  Next time I'll keep it a secret!

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  • Mon, Sep 14, 2020 - 8:49pm

    MKI

    MKI

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    Be positioned in a garden than invested in equities a day late

    I agree; who wouldn't? But this is a false dichotomy. Why not have resilient food production while owning stocks with tight stop-losses that are working for you while you sleep?

    In fact, we just jarred thousands [literally, yes that's with an "s"!] of pounds of meat/fish/crab-apples/vegs while simultaneously taking profits from stocks hitting their stop losses as the market fell. Like Lance was saying, it needn't be either-or with stocks. Sure, own one's home first and keep 10% NW in PM as insurance...but gardening and harvesting (when done right) literally pays for itself...allowing even more money to be invested in stocks (or resilient tools/land, etc). It's a win-win. And as one's NW increases, one is forced to buy even more PM to keep the 10% rule...what's not to like?

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  • Mon, Sep 14, 2020 - 8:53pm

    MKI

    MKI

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    Freezing vs Canning

    had to discard everything in our freezer when we returned to the island.

    We go about 1/3 freezing and 2/3 canning for meat, fish, veg, fruit. We like freezing but it's pretty expensive compared to canning...what's your thoughts?

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  • Tue, Sep 15, 2020 - 2:56am

    robie robinson

    robie robinson

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    Hurricane season & freezer space

    I was raised to believe there is a bit more nutrition in frozen vs. canned. Whether true or not I can’t image pickled okra being worth anything frozen, or pickled beets,,,the canning process definitely adds. I esp. enjoy a home made hummus that is made from canned purple hull peas,the canning time,heat,pressure affects the texture so a perfectly creamy yet robust hummus is the result.

    we live a good way inland yet manage to loose power frequently. Our chest freezers can go 2 full days without power if left shut(and kept full). We have hundreds of gallons of diesel fuel on the farm and diesel generators. Emergency electricity isn’t an issue. One of our three chest freezers is a 24 v sundanzer solar freezer. Oddly, it seems more expensive than the 110 freezers as it requires maintenance and goes thru a pair of batteries 18-24 mos.

     

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  • Tue, Sep 15, 2020 - 5:27am

    #18

    robshepler

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    Robbie?

    We just added our second Sundanzer, our first has been running for 12 years on the same set of batteries......(HUP Solar One)

    What kind of batteries are you using? How deep are you discharging?

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  • Tue, Sep 15, 2020 - 5:39am

    robie robinson

    robie robinson

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    Batteries

    I use batteries for trolling motors bought from a marine store. I don’t know the amp hours, they’re big and heavy. Never thought that my charge controller could be programmed to lessen the depth of discharge? IF so that would really affect battery life.

    our goal is to wean ourselves off modernity and be content with depression era existence ie. fewer conveniences.

     

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  • Tue, Sep 15, 2020 - 6:19am

    Steve

    Steve

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    Hummus, Batteries, Pickled Okra, Purple Hull Peas and Resiliency

    LOL, the pickled okra are water bath canned, not frozen.  They are quite popular with dill seeds, garlic and serano pepper.

    Robbie, please share your canning recipe for the hummus?  We love hummus.

    I have around 800 square feet. of purple hull peas as my cover crop.  They are gorgeous and lush!  Conditions must have been perfect for them this year.  We plan to harvest them once in about a week before plowing them under.  I know, what a waste not to get 3 harvests ... but timing is everything and we have to get started with the new planting.

    Regarding batteries ... We are living in a condo on the beach ... learning to garden in the community garden here on the island.  While it is beautiful, there is no room (or tolerance by the HOA) for power back-up.  We are using this time to learn what we can to reposition to a more resilient life-style while we wait for our condos to sell, one at a time, before moving to a more sustainable property.  I feel like we waited too long to pull the trigger.

    Convincing the wife hasn't been easy.

    While she humors me, I'm not sure she will actually come along when I finally get the cash together to move to a rural plot in the mountains.  And it just gets more expensive with time.

    But, never give up.

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  • Tue, Sep 15, 2020 - 6:22am

    Steve

    Steve

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    Where do you set your stop loss?

    MKI, Agreed.   Unfortunately, the owning of stocks has not been my forte ... All that technical stuff just doesn't make a lot of sense to me.

    Where do you recommend one go to learn valuable stock trading skills?

    How do you choose where to set your stop loss?

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  • Tue, Sep 15, 2020 - 6:24am

    robshepler

    Status: Bronze Member

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    Damn, the food's good ain't it?

    Yep, you should be able to do that..... we are using only the top 10% of the battery, they have a 10 year warranty and are still going strong.

    Over the years I have collected canning jars at estate sales, my wife suddenly understands.... I love to can, she loves to freeze, we will hang on to that convenience till it fails. We butcher and smoke, but I still love fresh sausage.

    I don't know about you Robbie, I am eating better than I ever have. The rewards of this lifestyle are expressed at the dinner table.

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  • Tue, Sep 15, 2020 - 8:15am

    Penguin Will

    Penguin Will

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    Hmmmmm.....

    I had to smile at your tagline Steve. I was sitting here wondering what a similar styled tagline for us might be. Perhaps: Deer steak, firewood, tomato sauce, half runner beans, and Mountain Life. 🙂

    Funny how so many different perspectives and lifestyles can get crammed into one site's members isn't it?

    About being too late? You know I have to say I've been surprised how that aspect has played out. It seems like things have been and still are playing out in a process instead of an event. As some things like land availability (in some locations) and the time to startup begin to bite you also have other things like telecommuting being more accepted by employers. And that makes it easier to unplug.

    Take care,

    Will

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  • Tue, Sep 15, 2020 - 10:13am

    MKI

    MKI

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    Stocks & Food

    Where to learn stock trading, where set stop loss?

    I don't think it's necessary to learn much about stocks to own them:

    1) Open a brokerage account at Vanguard (only a minor PIA).

    2) Buy Total Stock Market ETF (VTI, the entire US stock market). This is free to buy/sell 0.03% annual fee, basically free.

    3) Set a stop loss 1% below where you buy, easy at Vanguard online. Raise the auto-sale price (stop loss) monthly to lock in all gains. When sold $ rolls to an interest bearing account (~1.5%) then set up a re-buy option at the prior sale price.

    You can get more complex with value investing individual stocks (I do both it and VTI) but VTI has matched my value investing for a decade. This process is minor work (re-buying every time stocks go gown 1%) but VTI is quite stable and it's enjoyable to lock in profits anyway :-)...if your wife like to can or freeze she will love locking in profits to save you the work :-).

    BTW: we are extremely jealous of your growing area. Hell, I nor my wife don't even know what hummus is, had to look it up! It's amazing how every area has it's strengths for food production...yet few even do it anymore! Our crab-apples/berries rot on the vine in our area, our animals and fish go unharvested, and nobody has chickens or gardens even with lots of land...it's criminal...

    Regarding canning: there are several foods that we can because they taste better that way (pink salmon & crab-apples) but mostly we just do it for cost saving (ran the numbers once and it was painful). I do agree with those here that we get more nutrients freezing (we have 5 chest freezers!) and prefer it but it's a luxury while cans are our staple.

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