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    Market Update: Stampede!

    May's highly-suspect jobs report sparks a buying frenzy
    by Adam Taggart

    Friday, June 5, 2020, 5:20 PM

Mess with the bull and you get the horns…

That’s the continued lesson this uber-distorted market is beating into investors: Don’t doubt the rally; it will never end.

With hardly a down day in sight over the past several weeks, stocks continued higher this week and then positively *exploded* upwards upon the release of today’s “INCREDIBLE” (per Presidential tweet) May payroll report.

While the payroll numbers do indeed appear ‘incredible’ (meaning: ‘defying belief’) and seem destined for some pretty serious downward revisioning as economists parse through some very concerning assumptions and admitted errata by the BLS, the trading algorithms clearly didn’t care. The rosy headlines were a plenty good enough reason for them to ignite a stampede of the bulls and buy with abandon.

Today’s violent action, coming on top of a remarkable and ridiculous streak that has vaulted stocks to unprecedented levels of over-valuation, is a prime example of the dangers facing concerned investors thinking of shorting these maximum stupid markets.

We discussed this conundrum last week: those paying attention realize that there’s no way today’s prices can be sustained. But there’s a very real possibility that, if you stand in front of this mindless juggernaut mania by going short, it can destroy your position long before your thesis is proved right.

As we do each week, we’ve once again asked the lead partners at New Harbor Financial, Peak Prosperity’s endorsed financial advisor, to share their latest insights into the road ahead for investors.

And this week we’re fortunate to welcome a special expert guest, Wolf Richter from WolfStreet.com. Wolf  joins the program to share his latest analysis on the Federal Reserve’s liquidity flows. For those who believe that the only thing that matters in today’s markets is continued central bank stimulus, few people follow the details of that more closely than Wolf, making this week’s update video a must-watch:

Anyone interested in scheduling a free consultation and portfolio review with Mike and John 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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31 Comments

  • Fri, Jun 05, 2020 - 6:15pm

    #1
    Steve

    Steve

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    4

    It's the Twilight Zone!

    We have clearly entered the Twilight Zone!

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  • Fri, Jun 05, 2020 - 6:16pm

    #2

    Adam Taggart

    Status: Platinum Member

    Joined: May 25 2009

    Posts: 5916

    5

    Wolf's audio

    Just thought I'd address this before the comments start coming in. Yes, given his covid-lockdown location at the time of recording we had trouble with his broadband connection, especially with the audio quality.

    But we judged it was discernible enough to keep it in this video. Wolf has such important observations to share, we decided you'd prefer to strain a bit to listen versus missing out. Also, I summarize his main points at the 16-minute mark.

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  • Fri, Jun 05, 2020 - 7:20pm

    #3
    US Strength

    US Strength

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    5

    Will the crowds on the street pivot to protest the economic divide?

    I suspect that a lot of the people on the street think that they are protesting one man's horrible death as a means to draw attention to, and end systemic racism.  But I think deep down inside a lot of them have an innate sense that "something" is wrong and they want to do something about "it".

    "It" is the economic divide and it is increasing exponentially and ordinary folk are paying for it.  Case, case, case, cluster, cluster,  - boomtime (for the few).

     

     

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  • Fri, Jun 05, 2020 - 10:01pm

    #4
    MKI

    MKI

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    Joined: Jan 12 2009

    Posts: 253

    7

    Great iinterview, again.

    1. Anyone wanting a summary: just skip to 16 min where Adam gives a quick, concise, and complete summary. Better than the interview itself! Adam's ego needs no sop, but I remain a  fanboy. I just wish you would put in the show notes the times you do a summary...

    2. I grimly note that for all the gloom and doom and all-time-high-lament, he refuses to short this market. Heh.

    3. I enjoyed the discussion of FOMO (fear of missing out) and TINA (there is no alternative). Amen.

    4. Very disappointed nobody is separating the "market" from "individual dividend paying stocks". Buying individual, historically undervalued stocks along with using stop-losses is a FOMO & TINA way to get a share of the upside without any risk.

    5. Also disappointed nobody mentions that historic metrics may not work at all in this TINA market, especially the idea that unemployment is a reasonable metric in a post-scarcity world.

    6. Also disappointed nobody is pointing out how easy it is to have a decent quality of life while cutting our oil consumption. Most of GDP is just a fiction - it's not real production that adds wealth, but merely obscene consumption that doesn't add much to our life.

    7. Finally, this virus economy has brought our first BUI to the real-life phase. IMO this is the future, and it's just bread and circus stuff. But I don't see why the Fed and the rich can't pay us all off for decades to come as long as production of real goods and services can continue. And people are hungry to work, so that shouldn't be a problem. I think the market is reflecting something and nobody here is listening at all.

    Keep up the good work!

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  • Sat, Jun 06, 2020 - 10:09am

    #5

    timeandtide

    Status: Bronze Member

    Joined: Apr 03 2010

    Posts: 55

    2

    Why try to rationalize a market that you say is irrational?

    Adam and Chris are always describing the markets as crazy, nuts or irrational and then try to rationalize them. The market is not irrational but the speculators and investors who drive the markets are. Of course they are not stupid but when it comes to entering an arena which is always uncertain, they tend to act on impulse while believing that they have very good rational reasons for what they are doing. The number of times I have seen a market head in one direction in the morning with a suitably rational explanation and then a complete reversal in the afternoon with an opposite rationalization to "explain" it are too common.

    Essentially, in aggregate, millions of participants from all over the world are constantly looking around and over their shoulders to see what every one else is doing and then following suit. In other words, in uncertain conditions, they follow the herd. Most of the time it tends to be upward, when the mood is positive, and less often it is downward in short sharp bursts. Bull markets are always more long lasting than bear markets. People act on impulse and rationalize afterwards.

    The number of times I have seen markets go down on good fundamental economic news and go up on bad news are so numerous yet investors continue to make bets on these rationalizations. There is a lot of wisdom in the idea of selling when the euphoria is peaking and buying when there "blood on the streets". The latter was given as a good reason for being bullish now in a comment on a charting website yesterday but clearly the context was wrong because the markets are well off a bottom.

    What is obvious to me is that speculators and central bankers are still in the grip of an astonishing optimistic frenzy. The trades by small speculators in call options trading less than 10 contracts have risen from a weekly average around 2 million to 12 million. That is also 4.5 million contracts greater than at the February top.

     

    For the punters it is a greedy optimism. For the bankers it a desperately hopeful optimism. Christine Lagarde yesterday had none of the cockiness which was so evident in recent years in central bankers. I sense that they wish they could pull the plug but they are in so deep, they don't know how to. However, they are pulling back.

    The shorts have been killed in the last 6 weeks. Once they are out the way there will be no one left to buy the market ( the shorts have to buy to close a winning trade).

    Yesterday had all the hallmarks of a blow-off top.

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  • Sat, Jun 06, 2020 - 10:33am

    MKI

    MKI

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    1

    The market is not irrational but the...investors who drive the markets are.

    The market is not irrational but the...investors who drive the markets are.

    Market valuation was "irrational" a full decade ago (based upon many historical metrics).  Yet the data shows stocks have over the last 10 years returned 150%. This is not an anomaly. A decade is a long time, long enough to judge who was "rational".

    Yesterday had all the hallmarks of a blow-off top.

    A decade ago I thought the market had many of these hallmarks! And I bought stocks. At what point does one change their hallmarks to match observed reality? 15 years? 20 years? 25 years?

    As for myself, I changed my hallmarks in 2009. I realized to my horror the Fed & Congress were now unleashed. I expect money from helicopters.

    The only real question: when will all the looting at the public trough run out of money? Myself, I don't think we are even close. What say you?

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  • Sat, Jun 06, 2020 - 10:57am

    #7
    nordicjack

    nordicjack

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    Buying tulips

    Heck, i'll buy a tulip at 500 if i can sell it for 600.  There is just too much confidence that the market is safe and secure and a place to make money in all conditions.   one day , they all wake up and realize they are just tulips.       That day is the day I jump in.. I am sure I can crash the market , just need to put my money in.    and it will go to zero tomorrow.  I am lucky that way.

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  • Sat, Jun 06, 2020 - 11:07am

    #8

    Mark_BC

    Status: Bronze Member

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    Mark_BC said:

    But is it irrational? Isn't that the game bankers have been playing for over a hundred years now? Make new money out of nothing (with increasingly sophisticated ways to do that since 1913) and they get first crack at it in order to buy up things. Prices rise due to the new money. Wages are the last thing to go up. It's a transfer of wealth from middle class to the rich.

    If the central banks are printing up all this money to prevent a deflationary implosion of the system, which they don't want to happen because without the system intact their looting mechanism would no longer work, then where else is the money going to go?

    Precious metals? It already is, it's being soaked up there with virtually no increase in metals prices due to the extreme fraud of fractional reserve metals funds (no gold actually backs the contracts -- essentially limitless supply to keep price down and keep the canary in the coal mine singing). So institutional investors can no longer really go to PM's anymore for the anti-money printing trade.

    It makes perfect sense to me why the stock market is going up and I don't see it ending until the system ends. The question is whether deflationary crashes will happen. Very hard to predict those.

    My AAPL call was decaying over the last week since I was silly and didn't wait for a pullback to buy in. Then yesterday I was saved by the fake jobs report. But instead of waiting to make a decent profit I sold it soon after it was in the green, so I made enough money to buy a new windshield wiper for my land cruiser.

    Next week I'll wait for another pullback to get back in.

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  • Sat, Jun 06, 2020 - 12:27pm

    #9

    tourcarve

    Status: Member

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    4

    Somewhat out of central bank control...

    Mike said that "tangible assets are somewhat out of central bank control." I'd like to hear more about that word "somewhat."

    And I am another big fan of Adam's abilities to ask pertinent questions and summarize meaningfully...

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  • Sat, Jun 06, 2020 - 12:53pm

    #10
    noktisvallis22

    noktisvallis22

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    Joined: Sep 12 2014

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    1

    all things come to an end....

    whats the endgame here?    dow at 35k ? by november?

    all the longs will be  congratulating themselves, then one day in mid november  markets crash 20% down ... market closed then the next day 20% down ... market closed......  then   real market valuations???   dow at 7000??      bernie madoff  investors thought they had a good thing until one day they woke up to reality and their portfolio was  worth nothing after all.   That day , if it comes to the general public,   and real free market forces are revealed, then you will see real rioting in the streets..

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  • Sat, Jun 06, 2020 - 1:17pm

    Mark_BC

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    Mark_BC said:

    Before the CovidCrash I was making 20-30% per week on calls. If you can do that for 6 months as the market goes up, only allocating 30% of your investing assets at a time to be safe, then even if there's a crash 6 months from now and you lose all of your active positions, you are still way ahead. I'm kicking myself for figuring this out so late in the game. I'd be a multi-millionaire today if I started this a few years ago.

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  • Sat, Jun 06, 2020 - 2:02pm

    MKI

    MKI

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    Tulips & Real Market Valuations

    Not every stock in the stock market today is a tulip. Some are not even very overvalued.

    Below are 10 stocks that are not tulips at least based upon how much money they are making and sharing with their investors. Look, I agree the economy is crap and IMO these companies are mere conduits for cash direct from the Fed. But what do I know? I thought this a decade ago, too. But I just look at the data: below are their cash flow metrics: ROIC, FCFY, & Dividend Yields. These are definitely not pretty little "tulips", but rather they are massive cash generating machines. Why not buy a little of each with stop losses just in case? The yields are very real; many trading commissions are zero today, so it's no problem to use stop-losses, no real barrier to entry. Since they are all paying fat dividends, their interest rates match the rates of any savings account. Also, every one of these companies have thousands of employees working day and night to make real things people want, making these companies a political force screaming for the Fed to juice the market:

    1 Philip Morris International PM 29% 7% 6.38%
    2 AbbVie, Inc ABBV 25% 7% 5.09%
    3 Charles Schwab SCHW 14% 7% 2.01%
    4 Omnicom Group OMC 14% 6% 4.75%
    5 Reliance Steel & Alum RS 14% 10% 2.58%
    6 Worthington Industries WOR 8% 11% 3.21%
    7 VSE Corp VSEC 7% 7% 1.38%
    8 Eastman Chemical EMN 6% 7% 3.88%
    9 Snap-On Inc SNA 13% 6% 3.33%
    10 Cass Information Systems CASS 9% 1% 2.68%

    These blue chips are rated A or B, and at cyclical lows. Sure, any and all could all lose 50% at any time, so sure never put too much in any one stock. But do you really think the government will let all of them fall for very long? I don't. I believe Powell & Trump have their helicopter loaded with UBI cash, all gassed-up and ready to go. Hell Nancy signed off it it a decade ago and she is still around- trust me, she will do it again! She is afraid of running out of ice cream...

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  • Sat, Jun 06, 2020 - 2:04pm

    #13
    centroid

    centroid

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    centroid said:

    The protests aren't just about Mr Floyd. its primarily about wealth inequality. Sometimes people are struggling to articulate their anxiety and need a vehicle on to which they attach that anxiety. Mr Floyd is it. People are also anxious about the perpetual “growth” paradigm pushed by the fiat banking system, realizing it cannot continue when they are witnessing fires around the world, deforestation, droughts, mass extinctions, extreme temperature events and pandemics etc. I like Brent smiths words (lifestyle coach), when someone is complaining about something he always asks “what are you really complaining about?”

     

    All roads lead back to the fiat money system:

    Broken countries.  Broken trade. Broken bond markets. Broken manufacturing. Broken businesses. Broken housing markets. Broken Labour markets. Broken people.  Mal-investments. Wealth inequality. Big Government. Mass immigration. Overpopulation. Nature fighting back. Wars. Even climate change.

    End the FED. End the ECB. End the BOJ. End the PBOC. End the BOE. End the SNB. End the RBA

    Bring back The Classical Gold Standard.

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  • Sat, Jun 06, 2020 - 10:36pm

    #14
    sonarvord

    sonarvord

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    Who is doing all the buying?

    The S&P has been trading at a high volume during these past few months.  I wish I had a chart to track the breakdown over time for all the buyers and their proportional volume levels.  Robinhoodies, institutional, international, retail, etc.  One or more these groups are going to eventually run out of cash or motivation.  I guess we can simply keep track of margin levels?

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  • Sun, Jun 07, 2020 - 6:48am

    Mike from Jersey

    Mike from Jersey

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    @MKI

    MKI,

    Really like your comments. Especially about finding value stocks in the midst of all this craziness and using stop loss orders to protect against catastrophic losses. I have been buying and selling based upon careful research into fundamentals, but so far I have not used stop loss (or stop limit) orders as a part of that strategy. Your suggestion is a good one.

    Like you, I try to balance the use of historical metrics with the realization that we are at a point of historical change (at least, I believe we are). The real problem we all face is that things may soon occur which have little or no historic analogue. A lot of times, I simply have to admit to myself that no matter how much study I put in, the results from here on out may be completely unpredictable.

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  • Sun, Jun 07, 2020 - 2:56pm

    #16
    KugsCheese

    KugsCheese

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    Sprott?

    Thoughts on the Sprott Gold Fund for IRA?   I would think Sprott Resource Holdings is legally firewall'd.

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  • Sun, Jun 07, 2020 - 2:59pm

    KugsCheese

    KugsCheese

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    KugsCheese said:

    Who is buying bankrupt Hertz stock?   Its a firehose of money so it has to go somewhere.  Not healthy though!

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  • Mon, Jun 08, 2020 - 12:21am

    timeandtide

    Status: Bronze Member

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    timeandtide said:

    Hi MKI,

    You miss my point. Of course the prices in the market are irrational but the market itself is not. The market is merely responding to the offers and bids. The chart I put up is that of small traders and is a very strong indication that prices are reaching peak craziness. The "strong hands" will be selling into those call contracts. For the number of weekly trades to surpass those of the February top when we know that earnings will be decimated in the immediate future is exactly what you can expect in a dead cat bounce of pure hope.

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  • Mon, Jun 08, 2020 - 12:33am

    timeandtide

    Status: Bronze Member

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    timeandtide said:

    The Fed was pumping QE liquidity from August 2008. It made not a jot of difference - the market kept falling relentlessly until March 2009. It's not a good idea to count on the Fed.

    Here is a useful summary of why:  https://www.elliottwave.com/free-reports/2020-foresight

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  • Mon, Jun 08, 2020 - 9:39am

    #20
    Hanoi Joe

    Hanoi Joe

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    3

    Beginning to despair...

    I agree that this entire rally is from Fed printing / corporate bailouts, but I'm losing faith that it will end.  It seems like the markets will keep going up as long as the government wants it to, and clearly, they have no intention of stopping.  I also think they're cooking the data (the Jobs Report that just came out seems pretty doctored).
    Regardless of what the real situation is, I'm losing faith that a second leg down is even possible, and I've been a bear for a while now.
    Anyone else completely demoralised by the unfairness?  When will this rally end?  Will it ever?

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  • Mon, Jun 08, 2020 - 9:45am

    #21
    MKI

    MKI

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    MKI said:

    Your Elliot wave link seems to go behind a paywall; could you check it?

    The Fed was pumping QE liquidity from August 2008. It made not a jot of difference - the market kept falling relentlessly until March 2009. It's not a good idea to count on the Fed.

    Yep, and then government got serious. Notice the market since 2009?

    Never ignore the collusion between fiscal and monetary here. We are looking at government program after program to fuel the economy and markets, from tax rebates to welfare payments to Medicaid to food stamps. Basically, from 2008-2009, the US slowly came to an agreement (with both political parties) to do whatever it takes to fund the stock market and stay in power. This is what TARP was all about. Look who now owns our housing - the government. Our businesses - the government. Imagine what the deflation in housing or stock prices would be if the government exited. Hell, Precter might actually be right for once :-). It ain't gonna happen.

    I had positioned myself for deflation in 2008, only to watch the bailouts reinflate the economy. Now, UBI is the next big threat, just just in case the market doesn't "get the message". Then, it's helicopter time. No joking - they can and will just distribute cash directly into our bank accounts.

    One could see all this happening way back in 2009, and it's unfolded exactly as expected, a full decade of fake economy, 150% gains. It's been very nice, and it's not over yet. But it's too big, too corrupt, and too international to make any real cause-and-effect predictions, like the Fed does this so that will happen. They will do what it takes. All we are waiting for now is what happened to communism - the failure of the economy itself. But I think we are a while from that.

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  • Mon, Jun 08, 2020 - 10:02am

    #22

    davefairtex

    Status: Member

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    Posts: 2188

    2

    not everything is overvalued

    I'm going to (belatedly) agree with MKI.  Not everything is overvalued.

    Energy (XLE, and also OIH) got absolutely shellacked in March.  Lots of stuff was super cheap - generational lows - many items were trading at near-bankruptcy prices.  I didn't buy enough of it.  But the stuff I did buy is doing ridiculously well.

    Silver miners too.

    I also really appreciate his buy list.  If we have another correction, I can dig that list out and pick some of them up.

    For sure I think they'll do better than long-dated treasury bonds - which, at some point, will probably be defaulted upon, one way or another.

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  • Mon, Jun 08, 2020 - 10:51am

    DennisC

    DennisC

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    "In and out. Nobody gets hurt"

    A friend of mine liked this one, FENY.  Said she almost doubled her investment since March.

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  • Mon, Jun 08, 2020 - 8:21pm

    fundamentalness

    fundamentalness

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    Stop losses work, until they don't. Large crowds and small exits.

    Trading platforms crashing - usually when you need them most:

    https://www.zerohedge.com/markets/etrade-downagain

    And just for laughs - stocks of bankrupt companies going up:

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  • Tue, Jun 09, 2020 - 12:58pm

    #25
    MKI

    MKI

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    Stop losses work

    Stop losses work, until they don't. Large crowds and small exits.

    Stop losses are the safest way to avoid large crowds and small exits. This is the very reason to use them! It's a computer automated process & immediate; mine occur before I have access to trade within the market. And the next layer of protection is 1) buying large-cap stocks (which are very liquid) and 2) using a large company to trade (say like Vanguard).

    The mistake so many make regarding stocks (and on so many other emotional issues) is making the theoretical perfect the enemy of the realistic good. In this world, nothing is 100% secure. Not gold, not one's private property, not even our relationships nor physical safety. All we can do smile and mitigate reasonable risk. And in the end we know for sure we will die and leave everything behind. Our very time in this world is a merely a matter of risk management, and of course guaranteed to fail in the end.

    Regarding the prices of stocks? Many people seem to think stocks are like the lottery. For many people that's indeed true, who are are guessing about the price of oil or grain or gold. But it's not true at all for stocks that pay dividends and have solid profits and book values. The metrics allow one to judge real value. Using these metrics, blue-chip stocks that have paid dividends for decades are actually some of the safest investments one can own.

    In fact, every time you hear somebody decrying "the stock market", or boasting about big wins based upon guesswork, you know they haven't a clue. The "stock market" is like saying "all white people" or "all Texans". That's not investing at all, that's rank speculation.

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  • Wed, Jun 10, 2020 - 4:24am

    #26
    fundamentalness

    fundamentalness

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    Have the stock market indices outperformed real inflation?

    MKI, I hear what you're saying regarding risk, picking blue-chip stocks, etc. As with a lot of things one shouldn't throw all stocks away just because there are many bad ones. A stop loss strategy does of course hinge on the fact that there must be willing buyers for what you're selling at that moment. Your first mitigation strategy will help with that - solid companies, so there should be more willing buyers.

    It certainly seems like the Fed will keep pumping money into the system, and as much as it takes. Powell said this in as many words, didn't he?  It really is the only tool they have left, and in that environment, stocks of companies that produce real goods that people need, and have solid financial metrics, will probably be the safest bet. 

    MKI, I notice that in the list you quoted at the start of this thread most seemed to be companies producing physical goods, except for the Info Systems company (CASS)?

    I came across this interesting video that seems to explain quite nicely whether the indices (not individual stocks, MKI) are keeping up with inflation or not.

     

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  • Thu, Jun 11, 2020 - 6:39am

    #27

    Adam Taggart

    Status: Platinum Member

    Joined: May 25 2009

    Posts: 5916

    4

    Sell The News? Markets Open Down Post-Fed Presser

    Yesterday, Fed Chairman Jerome Powell told the nation the central bank was at the ready to support stock prices in order to keep companies alive and employing workers - asset bubbles be damned.

    While that should be music to the market's ears, stocks started selling off hard in the aftermarket, possibly due to Powell's announcement that the Fed will continue its quantitative easing at the rate of $80 billion/mo -- which is substantially lower than the ~$65 billion/week rate over the past two months.

    The markets just opened deep in the red:

    Given the manic melt-up of the past several weeks/months, a break of some sort was overdue.

    The key question here is: Is this just a breif pressure release, to be followed by a resumption of the trend higher? Or is this reality finally intruding, popping history's first asset price bubble inside of a recession?

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  • Thu, Jun 11, 2020 - 7:24am

    #28

    davefairtex

    Status: Member

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    Posts: 2188

    3

    look at the sectors in a correction

    Sector-wise, this is a mostly energy-and-bankster-led correction.

    OIH: -7.20%

    XLE: -4.74%

    IYR: -4.49%

    XLF: -3.98%

    Looks like crude may be correcting, which is causing at least some of the problem.  And the banksters are faced with 0% rates for 2.5 years.  No fun for them.

    Tech seems ok: -1.78%, with the overall market down -2.78%.

    So far, not a general collapse.

    So far.

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  • Thu, Jun 11, 2020 - 10:39am

    MKI

    MKI

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    Powell told the nation

    Yesterday, Fed Chairman Jerome Powell told the nation the central bank was at the ready to support stock prices in order to keep companies alive and employing workers - asset bubbles be damned.

    As a stock owner, this makes me wary. When Powell feels the need to actually "say" this, then the Fed must be nervous or in trouble - political or technical.

    My thinking is us peons can sorta grasp the "secular" situation, but not the day-to-day. IOW we can grasp it's summer or winter, but to try to predict the daily weather is hubris at best. I doubt Powell himself has a clear view of things.

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  • Thu, Jun 11, 2020 - 12:04pm

    #30

    000

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    Joined: Dec 10 2013

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    Munchen Magot Corruption

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  • Fri, Jun 12, 2020 - 9:40am

    Edwardelinski

    Edwardelinski

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    Joined: Dec 23 2012

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    Munchen Magot Corruption

    A consortium of large news orgs. now suing for the info.If your a fan of the criming check out these 2 cute little interactions.Mapping Corruption:Trumps'Executive Branch by David Dayen and Trumptown in ProPublica.Errybody into the pool....

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