Tuesday , March 19 2019
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Lance Roberts

Lance Roberts

Lance Roberts has sharpened that lens with 30 years in the investing world from private banking and investment management to private and venture capital. Lance Roberts’ perspective and common sense analysis is sought after by media outlets such as Fox 26 News in Houston, CNBC, CNN and Fox Business News along with numerous publications including the Wall Street Journal, USA Today, Reuters and the Washington Post. Roberts is the Editor of the X-Factor report and publishes the blog Daily X-change.

Articles by Lance Roberts

Technically Speaking: A Different Way To Look At Market Cycles

13 hours ago

Personal Request:
I need your assistance with a new project.
We have recently launched a beta version of our new Financial Health App backed by the power and security of Yodlee, AWS, ForgeRock, and Intrinio. Our goal is to develop the next generation financial application to help you get control of, and grow, your wealth. Once you try it out, give us feedback as we continue to develop many new features over the next few months. 

A Different Way To Look At Market Cycles
In this past weekend’s newsletter we noted the issues of similarities between the current market environment and previous market peaks in the past. To wit:
“It isn’t just the economy that is reminiscent of the 2007 landscape. As noted above, the markets also reflect the same. Here are a couple of charts worth reminding you

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After Two Of The Greatest Bull Markets In U.S. History, Why Are Boomers So Broke?

2 days ago

Last week, Jeff Desjardins of Visual Capitalist wrote in a post:
“While it’s true that putting your money on the line is never easy the historical record of the stock market is virtually irrefutable: U.S. markets have consistently performed over long holding periods, even going back to the 19th century.”
This goes back to Wall Street’s suggestion of “buy and holding” investments because over 10- and 20-year holding periods, investors always win.
There are two major problems with this myth.
First, on an inflation-adjusted, total return basis, long-term holding periods regularly produce near zero or negative return periods.

Secondly, given that most individuals don’t start seriously saving for retirement until later on in life (as our earlier years are consumed with getting married, buying

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The Goldilocks Warning 03-16-19

3 days ago

Market Review & Recap
The Goldilocks Warning
Sector & Market Analysis
401k Plan Manager

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Can you help me?
I would appreciate it if you would download our new Financial Health App and try it out. Backed by the power and security of Yodlee, AWS, ForgeRock, and Intrinio, we are seeking to develop the next generation financial application to help you get control of, and grow, your wealth. Once you try it out, give us feed back as we continue to develop lots of new features over the next few months. 

Market Review & Recap
Over the last couple of weeks we discussed the “wild swings” in the market in terms of price movements from overbought, to oversold, and now back again. The quote below is from two week’s ago but is

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Stock Buybacks Aren’t Bad, Just Misused & Abused

6 days ago

There has been a lot of commentary as of late regarding the issue of corporate share repurchases. Even Washington D.C. has chimed into the rhetoric as of late discussing potential bills to limit or eliminate these repurchases. It is an interesting discussion because most people don’t remember that share repurchases were banned for decades prior to President Reagan in 1982. 
Even after the ban was lifted, share repurchases were few and far between as during the “roaring bull market of the 90’s” it was more about increasing outstanding shares through stock splits. Investors went crazy over stock splits as they got more shares of the company they loved at half the price. Most didn’t realize, or understand the effective dilution; but for them it was more of a Yogi Berra analogy:

“Can you

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Technically Speaking: Will The Next Decade Be As Good As The Last?

8 days ago

In this past weekend’s newsletter we stated:

“This short-term oversold condition, and holding of minor support, does set the market up for a bounce next week which could get the market back above the 200-dma. The challenge, at least in the short-term remains the resistance level building at 2800.”

That bounce occurred on Monday which allowed us to add some trading positions to our portfolios. We update all of portfolios regularly at RIA PRO (Try now for FREE for 30-days with Code: PRO30)

Our job as portfolio managers is simple:

Protect investment capital, and; (Long-term view)Take advantage of opportunity when it presents itself. (Short-term view)The blending of the short and long-term views is the difficult part for readers to understand.

“If you have a long-term

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Economic Theories & Debt Driven Realities

9 days ago

One of the most highly debated topics over the past few months has been the rise of Modern Monetary Theory (MMT). The economic theory has been around for quite some time but was shoved into prominence recently by Congressional Representative Alexandria Ocasio-Cortez’s “New Green Deal” which is heavily dependent on massive levels of Government funding.
There is much debate on both sides of the argument but, as is the case with all economic theories, supporters tend to latch onto the ideas they like, ignore the parts they don’t, and aggressively attack those who disagree with them. However, what we should all want is a robust set of fiscal and monetary policies which drive long-term economic prosperity for all.
Here is the problem with all economic theories – they sound great in theory,

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What Do Central Bankers Know? 03-09-18

10 days ago

What Do Central Banks Know?
Sector & Market Analysis
401k Plan Manager

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In last week’s missive, we discussed a critical point concerning the bull run so far.

“Despite the underlying economic and fundamental data, the markets have surged back to extremely overbought, extended, and deviated levels. The chart table below is published weekly for our RIA PRO subscribers (use code PRO30 for a 30-day free trial)
You will note that with the exception of bond prices, every market and sector is more than 5% above its 50-day moving average and year-to-date performance is pushing more historic extremes both in price and in extreme overbought conditions. 

On virtually every measure, markets are suggesting the fuel for an

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QE – Then, Now, & Why It May Not Work

12 days ago

Since the beginning of the year, the market has rallied sharply. That rally has been fueled by commentary from both the Trump Administration and the Federal Reserve of the removal of obstacles which plagued stocks in 2018. The chart below is an abbreviated, and a bit sarcastic, version of events.

While the resolution of the trade war is certainly beneficial to the economy, as it removes an additional tax on consumers, the biggest support for the market has been the assumption the Fed will return to a much more accommodative stance.
As we summed up previously for our RIA PRO subscribers (try it FREE for 30-days)
The Fed will be “patient” with future rate hikes, meaning they are now likely on hold as opposed to their forecasts which still call for two to three more rate hikes in 2019

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Technically Speaking: Monthly Chart Review Yields Bearish Signals

15 days ago

With the month of February now officially in the books, we can take a look at our long-term monthly indicators to see what they are telling us now.

Is the bull market back?

That’s the answer we all want to know.

Each week on RIA PRO we provide an update on all of the major markets for trading purposes.

(See an unlocked version here. We also do the same analysis for each S&P 500 sector, selected portfolio holdings, and long-short ideas. You can try RIA PRO free for 30-days with code PRO30)

However, as longer-term investors and portfolio managers, we are more interested in the overall trend of the market. While it is fundamental analysis derives “what” we buy, it is the long-term “price” analysis which determines the “when” of the buying and selling aspects of portfolio

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The Fed Doesn’t Target The Market?

15 days ago

Earlier this month, I penned an article asking if we “really shouldn’t worry about the Fed’s balance sheet?” The question arose from a specific statement made by previous New York Federal Reserve President Bill Dudley:
“Financial types have long had a preoccupation: What will the Federal Reserve do with all the fixed income securities it purchased to help the U.S. economy recover from the last recession? The Fed’s efforts to shrink its holdings have been blamed for various ills, including December’s stock-market swoon. And any new nuance of policy — such as last week’s statement on “balance sheet normalization” — is seen as a really big deal.
I’m amazed and baffled by this. It gets much more attention than it deserves.”
As I noted, there is a specific reason why “financial types” have a

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Bull Run Reaches Exhaustion 03-01-19

17 days ago

Bull Run Reaches Exhaustion
Sector & Market Analysis
401k Plan Manager

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On Tuesday, we discussed a very important point with respect to the bull run so far.

“Despite the underlying economic and fundamental data, the markets have surged back to extremely overbought, extended, and deviated levels. The chart table below is published weekly for our RIA PRO subscribers (use code PRO30 for a 30-day free trial)”

“You will note that with the exception of bond prices, every market and sector is more than 5% above its 50-day moving average and year-to-date performance is pushing more historic extremes both in price and in extreme overbought conditions. 
Those overbought conditions are more prevalent in the chart below. On

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S&P 500 Monthly Valuation & Analysis Review – 3-1-19

18 days ago

J. Brett Freeze, CFA, founder of Global Technical Analysis. Each month Brett will provide you their valuable S&P 500 Valuation Chart Book. This unique analysis provides an invaluable long term perspective of equity valuations. If you are interested in learning more about their services, please connect with them.

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Tax Cuts A Year Later – Did They Deliver As Promised?

19 days ago

Leading up to and following the passage of the Tax Cuts and Jobs Act (Trump Tax Cuts) I wrote a lot of analysis on the fallacy of tax cuts, why tax cuts wouldn’t change corporate behavior, and why tax cuts are an ineffective method of improving economic growth.
I received a lot of push back on my views then the “mainstream” analysis was the tax cuts would jump start economic growth. Of course, with 2017’s Q1 economic growth coming in at a meager 0.7% annualized, it would certainly seem to be needed. But as I questioned then:

“Do tax reductions lead to higher economic growth, employment and incomes over the long-term as promised?”

Speaking to NBC’s Meet the Press, VP Mike Pence argued at the time he was confident that eventually, the deficit would decline as it would be overcome by

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Technically Speaking: Sell Today? Risk Vs. FOMO

21 days ago

The market is downright bullish. 

There is little reason to argue the point given the bullish trend since the December 24th lows. Of course, such is not surprising given the Fed’s dovish turn from tightening monetary policy to quietly putting the “punch bowl” back on the table.

But yet, this rally is occurring at a time where Europe’s earnings growth rates for the just reported Q4-period stands at a -1% annualized, which is the lowest since Q2-2016, and the U.S. is on the verge of an earnings recession as well as declining economic data.

Something doesn’t quite jive. As Morgan Stanley’s Mike Wilson noted (via Zerohedge):

“The US is also about to enter an earnings recession, ironically after one of the strongest years for corporate profits on record, the picture of American

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10-Steps To Achieve The “Real” American Dream

24 days ago

Just recently, I spoke with Andrea Riquier, MarketWatch’s reporter on housing, about the issue of affordability and current housing trends in the U.S.
[embedded content]
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One of the interesting points we discussed is the issue of a “house” as a representation of the “American Dream.” 
I cannot entirely agree.
A House Is Mostly An Expense
When it comes to home ownership people mainly suffer from the “psychological” issue of “anchoring” where an individual is “tied” too heavily to an initial piece of information which affects decision making. This occurs specifically with respect to home ownership.
I seriously doubt you can tell me what you paid for a pound of swiss cheese four years ago. Why? Because it was an inconsequential

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Bulls Charge Into Economic Slowdown 02-22-19

24 days ago

Bulls Charge Into Economic Slowdown
401k Plan Manager

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Last weekend, we discussed the two things driving the markets currently:

“The first is the Fed.
As we discussed with our RIA PRO subscribers (use code PRO30 for a 30-day free trial) last week, 
“Today, [Cleveland Fed Reserve Governor Loretta Mester] all but put the kibosh on further rate hikes and, per Mester’s comments, will end balance sheet reduction (QT) in the months ahead.”
The second is “hope.”
On Friday, on headlines that talks are continuing with China, the market pushed through those resistance levels as shown below. “

It is virtually the same story during this past week.
No…wait…let me restate that.
It is EXACTLY the same story this week. 
The

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The “There Is No Recession In Sight” Chartbook

26 days ago

Yesterday, Michael Lebowitz wrote an interesting piece discussing the “yield curve” and the message it is sending. To wit:

“Recently, Wall Street and the Financial Media have brought much attention to the flattening and possible inversion of the U.S. Treasury yield curve. Given the fact that an inversion of the 2s/10s Treasury yield curve has predicted every recession over the last forty years, it is no wonder that the topic grows in stature as the difference between the 2-year Treasury yield and the 10-year Treasury yield approaches zero. Unfortunately, much of the discussion on the yield curve seems to over-emphasize whether or not the slope of the curve will invert. Waiting on this arbitrary event may cause investors to miss a very important recession signal.”

Mike is right. The

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Technically Speaking: You Carry An Umbrella In Case It Rains

28 days ago

With the markets closed yesterday, it gives us a chance to review the short, intermediate, and long-term signals the markets are currently sending.

Brett Arends recently wrote an excellent piece for MarketWatch with respect to investors feeling like they “missed out,” on the recent rally. To wit:

“Sure, if you’d bought and held you’d have been sitting in stocks during the boom since Jan. 1. But you’d also have been sitting in stocks when they tanked last quarter. The Dow has risen more than 2,000 points this year, but it fell more than 3,000 in the fourth quarter. Even after the rally, the Standard & Poor’s 500 is still 6% below last September’s peak. The average level on the S&P 500 during 2018 was 2,744, says FactSet. The level today: 2,745. It’s a wash. Meanwhile, the rest of the

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The Fed Conundrum – Data Or Markets?

29 days ago

Following the Fed’s last meeting, we published for our RIA PRO subscribers (use code PRO30 for a 30-day free trial) a simple question:
“What does the Fed know?”
Of course, this meeting followed the stock market plunge at the end of 2018 where their tone that turned from “hawkish” to “dovish” in the span of just a few weeks. Seemingly, despite the previous commentary about concerns over rising inflationary pressures, it was pressure from Wall Street and the White House that quickly “realigned” the Fed’s views.
The Fed will be “patient” with future rate hikes, meaning they are now likely on hold as opposed to their forecasts which still call for two to three more rate hikes this year.
The pace of QT or balance sheet reduction will not be on “autopilot” but instead driven by the current

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Is It A (Bull) Trap? 02-15-19

February 16, 2019

Is It A (Bull) Trap?
Sector & Market Analysis
401k Plan Manager

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On Tuesday, I discussed the issue of the markets being stuck between various short and longer-term moving averages. To wit:

“Despite those more macro-concerns, the market has had a phenomenal run from the ‘Christmas Eve’ lows and has moved above both the Oct-Nov lows and the 50-dma. This is clearly bullish in the short-term for investors. With those levels of previous resistance now turned support, there is a little cushion for the bulls to hold on to.
The biggest hurdle for a bullish advance from current levels is the cluster of resistance sitting just overhead. Sven Heinrich noted the market remains stuck below the collision of the 200-day, the

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Recession Risks Are Likely Higher Than You Think

February 14, 2019

It is often said that one should never discuss religion or politics as you are going to wind up offending someone. In the financial world it is mentioning the “R” word.
The reason, of course, is that it is the onset of a recession that typically ends the “bull market” party. As the legendary Bob Farrell once stated:
“Bull markets are more fun than bear markets.”
Yet, recessions are part of a normal and healthy economy that purges the excesses built up during the first half of the cycle.

Since “recessions” are painful, as investors, we would rather not think about the “good times” coming to an end. However, by ignoring the risk of a recession, investors have historically been repeatedly crushed by the inevitable completion of the full market and economic cycle.
But after more than a decade

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Technically Speaking: Stuck In The Middle With You

February 12, 2019

In this past weekend’s missive, we discussed the market stalling at the 200-dma. To wit:

“We said then the most likely target for the rally was the 200-dma. It was essentially the level at which the ‘irresistible force would meet the immovable object.’”

“What will be critically important now is for the markets to retest and hold support at the Oct-Nov lows which will coincide with the 50-dma. A failure of that level will likely see a retest of the 2018 lows.” 

“A retest of those lows, by the way, is not an “outside chance.” It is actually a fairly high possibility.  A look back at the 2015-2016 correction makes the case for that fairly clearly.”

“But even if a retest of lows doesn’t happen, you should be aware that sharp market rallies are not uncommon, but almost

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Should We Really Not Worry About The Fed’s Balance Sheet?

February 11, 2019

Bill Dudley, who is now a senior research scholar at Princeton University’s Center for Economic Policy Studies and previously served as president of the New York Fed and was vice-chairman of the Federal Open Market Committee, recently penned an interesting piece from Bloomberg stating:
“Financial types have long had a preoccupation: What will the Federal Reserve do with all the fixed income securities it purchased to help the U.S. economy recover from the last recession? The Fed’s efforts to shrink its holdings have been blamed for various ills, including December’s stock-market swoon. And any new nuance of policy — such as last week’s statement on “balance sheet normalization” — is seen as a really big deal.
I’m amazed and baffled by this. It gets much more attention than it deserves.”
I

Read More »

Did An Irresistible Force Meet An Immovable Object? 02-09-19

February 9, 2019

Irresistible Forces & Immovable Objects
Sector & Market Analysis
401k Plan Manager

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Since the day after Christmas, the markets have been in a surge very similar to what we saw in January of 2018.
Here is January 2018

And 2019

Of course, in February 2018, the rally ended.
While I am not suggesting that the markets are about to suffer a 10% correction, I am suggesting, as I wrote this past week, is that the markets have been “Too Fast & Too Furious.” 

“Short-term technical indicators also show the violent reversion from extreme oversold conditions back to extreme overbought.”

As we have discussed previously, price movements are very much confined by the “physics” of technicals. A couple of weeks ago, we drew out

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Technically Speaking: Too Fast, Too Furious

February 5, 2019

On December 25th, I penned “My Christmas Wish” where in I stated that is was “now or never” for the bulls to make a stand.

“If we take a look back at the markets over the last 20-years, we find that our weekly composite technical gauge has only reached this level of an oversold condition only a few times during the time frame studied. Such oversold conditions have always resulted in at least a corrective bounce even within the context of a larger mean-reverting process.”

“What this oversold condition implies is that ‘selling’ may have temporarily exhausted itself. Like a raging fire, at some point the ‘fuel’ is consumed and it burns itself out. In the market, it is much the same.You have always heard that ‘for every buyer, there is a seller.’  While this is a true statement, it is

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Buffett, Shiller, Bogle & Tobin: Valuations, Forward Returns & Winning The Long-Game

February 4, 2019

What a difference just a couple of months can make.
Since the financial crisis, there has been much commentary written about the low forward returns on stocks over the subsequent 10-year period from high valuation levels. The chart below shows the forward 10-year returns from previously valuation levels.

However, just a couple of months later, those forward returns have exploded higher.

What changed?
Nothing really. It is simply the function to the massive decline in 2008 being removed from the 10-year average.
However, while the forward returns have spiked in recent months, this has been due to a market that has been fueled higher by massive amounts of global monetary stimulus rather than a reversion in valuations that fostered an organic growth in returns.
Just recently, Brian

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Fed Kills The Bear…For Now 02-01-19

February 2, 2019

The full newsletter will return next week.

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It’s 4:40am on Friday morning and I am sitting in the airport waiting for my flight to Vancouver, B.C.  One thing about being at the airport this early…there is no line…for anything.  Anyway, I am on my way to present at the annual MoneyTalk Conference where I am honored to be the keynote speaker this year. 
But here is my problem. I had to prepare my presentation and send it to my hosts a couple of weeks ago. The topic was simple enough…“how to navigate a market that has changed trend.”
The problem, for my presentation on Saturday anyway, is that narrative may have been postponed. Which is what I want to discuss with you this week – “How the Fed sent the bears back into

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The Interview: Why Another 50% Correction Is Possible

February 1, 2019

I recently sat down with Peak Prosperity’s Chris Martenson to discuss an article I wrote last year on why another 50% correction is possible.
I have attached a link to the original article below the interview along with a the chart and explanation of the RIA Economic Composite Indicator I discuss with Chris.
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Notes To Interview:
“During a bull market, prices trade above the long-term moving average. However, when the trend changes to a bear market prices trade below that moving average. This is shown in the chart below which compares the market to the 75-week moving average. During ‘bullish trends’ the market tends to trade above the long-term moving average and below it during ‘bearish trends.’”

In other words, at least for me, it is the overall TREND of the market

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Dalio’s Fear Of The Next Downturn Is Likely Understated

January 31, 2019

“What scares me the most longer term is that we have limitations to monetary policy — which is our most valuable tool — at the same time we have greater political and social antagonism.” – Ray Dalio, Bridgewater Associates
Dalio made the remarks in a panel discussion at the World Economic Forum’s annual meeting in Davos on Tuesday where he reiterated that a limited monetary policy toolbox, rising populist pressures and other issues, including rising global trade tensions, are similar to the backdrop present in the latter part of the Great Depression in the late 1930s.
Before you dismiss Dalio’s view Bridgewater’s Pure Alpha Strategy Fund posted a gain of 14.6% in 2018, while the average hedge fund dropped 6.7% in 2018 and the S&P 500 lost 4.4%.
The comments come at a time when a brief

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Quick Take: January 30, 2019 Fed Meeting

January 31, 2019

NOTE: This article was released yesterday to our RIA PRO subscribers. For timely, actionable information, you can get a FREE trial now by entering the CODE: PRO30.
The statement and press conference following the January 30th Federal Reserve policy meeting was, with little doubt, a further pivot to a dovish stance. The statement below is from the prior December meeting and marked up in red to highlight changes in the current January 30th statement. The big clue about future interest rate policy is in the following addition:  “the Fed will be patient as it determines what future adjustments to the target range…” “Patient” tells us that the Fed’s plans to raise rates two or three times in 2019 are now on hold. It also leads the reader to believe the next move could just as easily be a

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