Tuesday , January 22 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

Should Retirees Worry About Bear Markets?

1 day ago

Michael’s assumptions on expanding inflationary pressures later in retirement is correct, however, they don’t take into account the issue of taxation. So, let’s adjust Kitces’ chart and include not only the impact of inflation-adjusted returns but also taxation.
The chart below adjusts the 8% return structure for inflation at 3% and also adjusts the withdrawal rate up for taxation at 25%.

By adjusting the annualized rate of return for the impact of inflation and taxes, the life expectancy of a portfolio grows considerably shorter.
While inflation and taxes are indeed important to consider, those are not the biggest threat to retiree’s portfolios.
There is a massive difference between 8% “average” rates of return and 8% “actual” returns.
The Impact Of Variability
Currently, the S&P 500

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Bulls Take Round One: 01-18-19

3 days ago

Bulls Take Round One
Sector & Market Analysis
401k Plan Manager

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Last week, we discussed the continuation of the rally from the December 24th lows.

“The rally, as we laid out two weeks ago, continues to work within the expected range back to 2650-2700.” 

“Importantly, the previous deep ‘oversold’ condition which was supportive of the rally following Christmas Eve has now been fully reversed back into extreme ‘overbought’ territory. While this doesn’t mean the current rally will immediately reverse, it does suggest that upside from current levels is likely limited.” 

As I discussed previously, what was needed for the bulls to gain control of the narrative were several important issues:
Central bank activity

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Technically Speaking: Bull Or Bear? Comparing Views

7 days ago

As the trumpets sound to signal the start of earnings season, the battle between fundamentals and “hope” begins. While earnings expectations have weakened markedly in recent months, the bulls remain steadfast in their belief the market correction is now over.

As I discussed in this past weekend’s missive :

“‘The stock market just got off to its best start in 13 years. The 7-session start to the year is the best for the Dow, S&P 500 and Nasdaq since 2006.’ – Mark DeCambre via MarketWatchWhile headlines like this will certainly get ‘‘clicks’ and ‘likes,’ it is important to keep things is perspective. Despite the rally over the last several sessions, the markets are still roughly 3% lower than where we started 2018, much less the 11% from previous all-time highs.

Importantly, there

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Understanding Market Cycles

8 days ago

I was digging through some old charts over the weekend and stumbled across this gem from AlphaTrends which explains the “best time to buy stocks.”
“Is it possible to time the market cycle to capture big gains?
Like many controversial topics in investing, there is no real professional consensus on market timing. Academics claim that it’s not possible, while traders and chartists swear by the idea.
The following infographic explains the four important phases of market trends, based on the methodology of the famous stock market authority Richard Wyckoff.
The theory is that the better an investor can identify these phases of the market cycle, the more profits can be made on the ride upwards of a buying opportunity.”

So, the question to answer, obviously, is:
“Where are we now?”
I’m glad you

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Bull Rallies & Market Tops 01-11-19

10 days ago

Bull Rallies & Market Tops
Sector & Market Analysis
401k Plan Manager

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Bull Rallies & Market Tops
Last week, we discussed the fulfillment of our expectations for a bull rally. While the rally was attributed to the rather “dovish” stance taken by Jerome Powell and commentary from the White House on potential progress on resolving the “trade war” with China. The reality is it had little to do with those headlines but was simply a reversal of the previous “exhaustion extreme” of sellers during November and December. 
The rally, as we laid out two weeks ago, continues to work within the expected range back to 2650-2700. 

Importantly, the previous deep “oversold” condition which was supportive of the rally following

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What Will Cause The Next Recession?

12 days ago

J. Bradford Delong wrote a very interesting article discussing the trigger for the next recession. 

“Three of the last four US recessions stemmed from unforeseen shocks in financial markets. Most likely, the next downturn will be no different: the revelation of some underlying weakness will trigger a retrenchment of investment, and the government will fail to pursue counter-cyclical fiscal policy.
Over the past 40 years, the US economy has experienced four recessions. Among the four, only the extended downturn of 1979-1982 had a conventional cause. The US Federal Reserve thought that inflation was too high, so it hit the economy on the head with the brick of interest-rate hikes. As a result, workers moderated their demands for wage increases, and firms cut back on planned price

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Rosso’s 2019 Reading List

13 days ago

Business Insider is prolific with the number of reading lists they produce every year.
What books grace Jamie Dimon’s nightstand? Which titles motivate Warren Buffett? Granted, there are respectable fiction and non-fiction selections among their lists; several have captured my attention.
Business Insider fails miserably when it comes to the topic of investing. Blind buy-and-hold is the overarching theme so candidly, I ignore their choices. It’s not that I haven’t read them. I have. With close to 30 years of financial services industry experience and employed 14 of them by a large organization that minimized the impact of the financial crisis on client portfolios, I cannot in good faith endorse most of their investing and finance selections.
I have witnessed the anguish firsthand of those

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Technically Speaking: Return Of The Bull Or Dead Cat Bounce

14 days ago

“No animals were harmed during the writing of this article.” 
If you listen to the media, the shocking and totally unexpected downturn last was unable to be foreseen by anyone. Thankfully, it’s now over and we can get back to the roaring bull market. 
Or can we?
Mark Hulbert wrote an interesting piece recently stating:

“The stock market’s recent correction has been more abrupt than you’d expect if the market were in the early stages of a major decline.
I say that because one of the hallmarks of a major market top is that the bear market that ensues is relatively mild at the beginning, only building up a head of steam over several months. Corrections, in contrast, tend to be far sharper and more precipitous.”

His view is a common pushed out in the mainstream narrative as of late, but is

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Kass: Follow The Money

14 days ago

The Tremor Before the Quake and the Fed’s $450 Billion Balance Sheet Reduction

“The combination of rate hikes and balance sheet reductions from the Federal Reserve in 2018 sucked up global U.S. dollar liquidity and put emerging markets under immense pressure in 2018. Emerging market equities were 20-30% lower from February through October, then the S&P played catch-up to the downside. This, combined with tariffs from the White House, has placed global manufacturing in a significant slowdown that has begun to circle back into the United States. After all, over $60T of global GDP is OUTSIDE the USA.” – Lawrence McDonald, “Fed Cave-athon Driving Stocks Higher For Now“

Why did Fed Chairman Jerome Powell’s comments on Friday get such a ringing endorsement from the equity market?
The answer

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Are We In A Secular Bull Market?

15 days ago

Just recently, Jeff Saut from Raymond James made a very interesting statement with respect to the recent market decline.
“Speaking to last week’s Dow Theory sell signal, we really cannot decide to ignore it, as we did with two previous false sell signals, or honor it because we continue to believe this is a secular bull market.”
It is an interesting point and one that has been prognosticated by several Wall Street analysts and bloggers in recent months like Josh Brown who recently penned:
“If Ari is correct, then we are currently enduring a cyclical bear market but the secular bull market that began in 2013 with fresh S&P 500 record highs is still intact.”
Here is the problem with the analysis.
Secular markets, bull or bear, are not defined by price movements.
For example, if the market is

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The “New Year” Starts With A Rally 01-04-19

17 days ago

New Year Starts With A Rally
Sector & Market Analysis
401k Plan Manager

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New Year Starts With A Rally
Last week, I discussed the potential for a rally as we head into the New Year based on both the more extreme levels of short-term oversold conditions coupled with the statistical tendencies going back to 1990. To wit:

“Interestingly, the market retraced exactly 38.2% of the previous decline and failed at important overhead support…it is critically important the markets muster a rally, otherwise, we are most likely looking at a retest of recent lows at a minimum, or new lows at the worst.
While I still expect a rally which could potentially reach 2650-2700, the overall market environment remains negative which, for

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The Problem With Wall Street’s Forecasts

18 days ago

Over the last few weeks, I have been asked repeatedly to publish my best guess as to where the market will wind up by the end of 2019.
Here it is:
“I don’t know.”
The reality is that we can not predict the future. If it was actually possible, fortune tellers would all win the lottery.  They don’t, we can’t, and we aren’t going to try.
However, this reality certainly does not stop the annual parade of Wall Street analysts from pegging 12-month price targets on the S&P 500 as if there was actual science behind what is nothing more than a “WAG.” (Wild Ass Guess).
The biggest problem with Wall Street, both today and in the past, is the consistent disregard of the possibilities for unexpected, random events. In a 2010 study, by the McKinsey Group, they found that analysts have been

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2019 Investing Resolutions

22 days ago

The biggest problem for investors is always the bull market itself.
When the “bull is running” we believe we are smarter and better than we actually are. We take on substantially more risk than we realize as we continue to chase market returns and allow “greed” to displace our rational logic. Just as with gambling, success breeds overconfidence as the rising tide disguises our investment mistakes. 
Unfortunately, it is during the subsequent completion of the full-market cycle that our errors are revealed. Always too painfully and tragically as the loss of capital exceeds our capability to “hold on for the long-term.” 
As 2018 comes to an end, it is time to review my “New Year’s Investor Resolutions.”
These are the same resolutions I attempt to follow every year. There is no shortcut to

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The Santa Rally Left Much To Be Desired 12-28-18

24 days ago

The Santa Rally Left Much To Be Desired
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This is going to be just a short market update as I am traveling this week to Taos, New Mexico for a quick end of the year ski trip with my family. It is also a bit bittersweet, as this is the last year that all four of my kids will be together as my oldest leaves for Germany next summer.
However, after such a rough last couple of months, not to mention the worst December performance for the markets since 1939, I simply could not leave you “hanging’ particularly as we head into the New Year. The full letter will return in the New Year.
So, let’s get to it.
The Santa Rally Left Much To Be Desired
Over the last couple of weeks, I have been discussing the potential for an oversold

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The Biggest Threat To The Market – Loss Of Confidence

26 days ago

Yesterday, saw a record surge in the markets.
Such was not surprising given the extreme oversold condition in the market. More importantly, throughout market history, the biggest bull rallies have occurred during bear markets.

$SPX +5% or greater days since 2000. Big picture, bulls DON’T want to see this pic.twitter.com/nYwfperhKi
— Matt Thompson, CFA (@dynamicvol) December 26, 2018

Yesterday’s relief rally was simply that.
As shown in the chart below, following the breakdown of the market from its consolidation pattern in October and November, the market plunged 20% from its previous all-time highs. Despite the massive surge in stocks yesterday, all the market managed to do was recoup 2-days of losses.

From the previous peak in early December, the market has yet to even achieve a 38.2%

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It’s Now Or Never For The Bulls

28 days ago

In April of this year, I wrote an article discussing the 10-reasons the bull market had ended.
“The backdrop of the market currently is vastly different than it was during the ‘taper tantrum’ in 2015-2016, or during the corrections following the end of QE1 and QE2.  In those previous cases, the Federal Reserve was directly injecting liquidity and managing expectations of long-term accommodative support. Valuations had been through a fairly significant reversion, and expectations had been extinguished. None of that support exists currently.”
It mostly fell on “deaf ears” as the market rallied back to highs. But the “worries” of the market have continued to mount despite the speculative rally. As Barbara Kollmeyer penned yesterday morning:
The markets have enough to worry about these days,

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Why Gundlach Is Still Wrong About Higher Rates

29 days ago

Last Monday, Jeff Gundlach, famed bond fund manager and CIO of Doubleline, made an interesting comment during an interview with CNBC when he stated that the 10-year Treasury yield would top 6% by 2020 or 2021.
6% would be the highest yield since 2000.
The chart below shows Gundlach’s estimated yield as compared to the long-run range of economic growth. (Note that real GDP growth was running at 5.27% in 2000 as compared to 3.0% today which is also getting weaker.)

As I discussed last week, interest rates are a function of the economy. So, while Jeff suggests that yields are rising to 6% in the next couple of years, such would suggest an extremely strong rebound in economic growth. Unfortunately, there is no evidence currently of a major upturn in economic growth due to surging deficits,

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Santa “Grinch” Brings Lump Of Coal 12-21-18

December 22, 2018

Santa “Grinch” Brings A Lump Of Coal
Sector & Market Analysis
401k Plan Manager
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As noted last week, I am in the process of moving this weekend so my access to my normal data feeds is a bit limited. However, given the market turmoil this past week, I wanted to address a few of the more relevant issues as we head into the last week of the year. Of course, as always, if you have any questions or concerns please don’t hesitate to email me. 
A Lump Of Coal
Last week, I discussed the potential for a “Santa Claus” rally as we head into the end of the year based on both the more extreme levels of short-term oversold conditions coupled with the statistical tendencies going back to 1990. To wit:
“IF ‘Santa’ is going to visit

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Weekend Reading: Last Chance For Santa Claus

December 21, 2018

So far, the month of December has sucked.
From Powell to Gundlach, to Trump, and a falling oil prices, there hasn’t been much “holiday cheer…”

However, with the market very oversold, there is still hope that “Santa Claus” could soon appear.
If we take a look back at history, going back to 1957, we find that only a small percentage of the time does the market decline for more than 4-weeks in a row without a reflexive bounce.

The red vertical bars are every 4- or more consecutive negative return weeks as compared to the S&P 500. As you will note in the statistics, out of the total period of time analyzed 57% of weeks are positive versus 43% negative. Notice that “clusters” of 4- or more negative weeks occur around market peaks and bear markets as opposed to bullish market trending periods.

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Why The Secular Bear Market In Oil Prices Remains

December 20, 2018

In 2013, I began warning about the risk to oil prices due to the ongoing imbalances between global supply and demand. Those warnings fell on deaf ears as it was believed that “oil prices could only go higher from here.”
It didn’t take long for those predictions to play out. In May of 2014, I wrote:
“While it is likely oil prices could get a bit of a bump from a decline in the U.S. dollar, ultimately it will come down to the fundamentals longer term. It is quite clear that the speculative rise in oil prices due to the ‘fracking miracle’ has come to its inglorious, but expected conclusion…It is quite apparent that some lessons are simply never learned. “
Of course, as with all things, particularly when it comes to commodities, it doesn’t take long for speculation to once again grab hold and

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Technically Speaking: Has “BTFD” Become “STFR”

December 18, 2018

Kevin Wilson recently penned a piece for Seeking Alpha that made a great point about where the markets are currently. To wit:
“Famous market observer Art Cashin mentioned a metaphor in October 2017 that resonated with me. He said (words to the effect that) at that moment, market players had only the protection provided by pictures of lifeboats, not the lifeboats themselves. This is just like the Titanic, whose measly 16 lifeboats looked nice, but left many hundreds on board with no means of escape when the ship sank. That is the current market situation in a nutshell. Players seem to believe that their positions are diversified enough to protect them in a downturn, and in any case, many appear to expect no major drawdown in spite of many months of extreme volatility. I would argue that the

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You Have A “Trading” Problem – 10 Steps To Fix It

December 17, 2018

In April of 2018, I wrote an article entitled “10-Reasons The Bull Market Ended In 2018” in which I concluded:
“There is a reasonably high possibility, the bull market that started in 2009 has ended. We may not know for a week, a month or even possibly a couple of quarters. Topping processes in markets can take a very long time.
If I am right, the conservative stance and hedges in portfolios will protect capital in the short-term. The reduced volatility allows for a logical approach to further adjustments as the correction becomes more apparent. (The goal is not to be forced into a ‘panic selling’ situation.)
If I am wrong, and the bull market resumes, we simply remove hedges and reallocate equity exposure.
‘There is little risk, in managing risk.’
The end of bull markets can only be

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Is The Market On The Naughty List? 12-14-18

December 15, 2018

Is The Market On The “Naughty” List
Lack Of Experience
Daily, Weekly, Monthly View
Sector & Market Analysis
401k Plan Manager
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Important Note: Over the next couple of weeks, the newsletter will most likely be just a short note updating you on market action and portfolio positioning due to travel schedule and moving issues. Of course, as always, if you have any questions or concerns please don’t hesitate to email me. 

Is The Market On The Naughty List?
Two weeks ago, I warned that the “G-20 rally” had exhausted a bulk of the “oversold” condition which had existed at that time. I also recommended remaining cautious until the underlying technical backdrop had improved 
While that turned out to be very good advice, the

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Weekend Reading: Did The Grinch Steal The Christmas Rally?

December 14, 2018

On Tuesday, we put on a small S&P 500 trading position for an oversold bounce. At first, it didn’t work and we were almost stopped out, but a late day rally kept us in the position.
Wednesday was a different picture as stocks rocketed out of the gate on more “trade talk” news with China, but that rally faded as well heading into late day as the owner of the “National Enquirer” was granted immunity in exchange for details on another Trump-related “hush money” payment.
Yesterday, the markets struggled out of the gate as economic data pointed to slowing rates of inflationary pressure and economic growth, fell into negative territory, and then ended the day flat.
This morning stocks opened down as concerns of global economic weakness rose from China.
So far, the “Santa Rally” has failed to

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The Bond Rally Was No Surprise

December 13, 2018

Nathan Vardi recently penned an article for Forbes entitled “Surprise! The Late-Year Bond Rally.”
“In August, Jamie Dimon, CEO of JPMorgan Chase & Co. and the nation’s most prominent banker, predicted the yield on the benchmark 10-year Treasury note could reach 4% in 2018. He cautioned investors to prepare for 5% or higher.

Dimon’s call was not a contrarian one. It had become conventional wisdom on Wall Street that rates were headed higher and that the Federal Reserve would be tightening monetary policy for the foreseeable future.”

Jamie Dimon wasn’t alone. There were many venerable Wall Street veterans from Bill Gross, Paul Tudor Jones, Ray Dalio, and Jeff Gundlach were also calling for higher rates. But, these calls for higher rates and the “End Of The Great Bond Bull Market” have

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Technically Speaking: “Will Santa Visit Broad & Wall?”

December 11, 2018

In this past weekend’s missive, “Stuck In The Middle (Range) With You,” I discussed the view from John Murphy via Stockcharts.com that the S&P 500 may have more downside to come. To wit:
The daily bars in the chart shows the S&P 500 retesting previous lows formed in late October and late November. And it’s trying to hold there. The shape of the pattern over the past two months, however, isn’t very encouraging. Not only is the SPX trading well below its 200-day average. The two red trendlines containing that recent sideways pattern have the look of a triangular formation (marked by two converging trendlines). Triangles are usually continuation patterns. If that interpretation is correct, technical odds favor recent lows being broken.
If that happens, that would set up a more significant

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Technically Speaking: “Will Santa Visit Broad & Wall?”

December 11, 2018

In this past weekend’s missive, “Stuck In The Middle (Range) With You,” I discussed the view from John Murphy via Stockcharts.com that the S&P 500 may have more downside to come. To wit:
The daily bars in the chart shows the S&P 500 retesting previous lows formed in late October and late November. And it’s trying to hold there. The shape of the pattern over the past two months, however, isn’t very encouraging. Not only is the SPX trading well below its 200-day average. The two red trendlines containing that recent sideways pattern have the look of a triangular formation (marked by two converging trendlines). Triangles are usually continuation patterns. If that interpretation is correct, technical odds favor recent lows being broken.
If that happens, that would set up a more significant

Read More »

Kass: Top 10 Reasons Why We May Be Entering A Bear Market

December 11, 2018

“It’s okay to be wrong; it’s unforgivable to stay wrong.” – Marty Zweig, (October 16, 1987 Wall Street Week – at six minute and 40 second mark!)
As observed on Wall Street Week 31 years ago by Lou Rukeyser, the Dow Jones Industrial Average “crashed” by more than 230 points in the week ending October 16, 1987 – knocking out all previous records. In the aforementioned video (above) Lou cited a tumbling in Treasury bonds, jitters in the Persian Gulf, an discouraging political situation, scary layoffs on Wall Street and, of course, the mindless computer based (“portfolio insurance”) selling. (Full disclosure I managed some of the family’s wealth while a General Partner at Glickenhaus and Co.)
Sound familiar? It is (as last week’s market dive was also conspicuous in it’s character)!
But the

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Why Another 50% Correction Is Possible

December 10, 2018

All of sudden….volatility.
Well, that is what it seems like anyway after several years of a steady grind higher in the markets. However, despite the pickup in volatility, the breaks of previous bullish trends, and a reversal in Central Bank policy, it is still widely believed that bear markets have become a relic of the past.
Now, I am not talking about a 20% correction type bear market. I am talking about a devastating, blood-letting, retirement crushing, “I am never investing again,” type decline of 40%, 50%, or more.
I know. I know.
It’s the “doom-and-gloom” speech to try to scare investors into hiding in cash.
But that is NOT the point of this missive.
While we have been carrying a much higher weighting in cash over the last several months, we also still have a healthy dose of equity

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