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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: Signs Of Exuberance Warn Of Correction

2 days ago

During the past couple of weeks, I have discussed the rising levels of exuberance in the markets. Importantly, that exuberance combined with surging margin debt levels warns of an impending correction.
I recently discussed why this is not a “new bull market,” which changes the dynamic of the understanding of “risk” in markets.
Following actual “bear markets,” investor sentiment is crushed, valuations revert toward their long-term means, and price trends are negative. Notably, few investors are willing to “buy” assets in the market. However, “corrections” do not accomplish any of those outcomes.
While the mainstream definition of a “bear market” is a 20% decline, such has little relevance to what constitutes a “bear market.” As noted in “March Was Only A Correction,” there is a significant

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NFIB Survey: Sends A Strong Warning About Small-Cap Stocks

3 days ago

In September 2019, I wrote “NFIB Survey Trips Economic Alarms,”  Of course, it was just a few short months later the U.S. economy fell into the deepest recession since the “Great Depression.” The latest NFIB survey is sending a strong warning to investors piling into small-cap stocks.
While the mainstream media overlooks the NFIB data, they really shouldn’t. There are currently 30.7 million small businesses in the United States. Small businesses (defined as fewer than 500 employees) account for 99% of all enterprises, employ 60 million people, and account for nearly 70% of employment. The chart below shows the breakdown of firms and jobs from the 2019 Census Bureau Data.

Despite all the headlines about Microsoft, Apple, Tesla, and others, small businesses drive the economy, employment,

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Everyone Is In The Pool. More Buyers Needed. 01-15-21

5 days ago

A Heat Map Of Valuations
By Michael Lebowitz, CFA
We talk a lot about valuations and their importance, but such discussions can be hard to put into context. Therefore, I have produced a series of charts that visualize various valuations of the S&P 500 companies. Not surprisingly, such also corresponds to the current behavior of Wall Street analysts and investors. Instead of cluttering up the commentary space on RIAPro.Net (30-day Risk-Free Trial), we thought you would better appreciate the charts and can share them more easily in an article format.
The charts below are called heat maps. What we like about heat maps is their ability to show two data points in one easy to read format. The following maps show the S&P 500 components market cap and along with a second factor. The larger the

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#MacroView: The Problem With Analysts Forecasts

6 days ago

We can’t predict the future. If we could, fortune tellers would all win the lottery.  They don’t, we can’t, and we aren’t going to try. However, this doesn’t stop the annual parade of Wall Street analysts from putting out forecasts on the S&P 500.
The Problem With Forecasts
In reality, all we can do is analyze what has happened in the past, weed through the noise of the present and try to discern the possible outcomes of the future.
The biggest single 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 persistently overly optimistic for 25 years. During the 25-year time frame, Wall Street analysts pegged earnings growth at 10-12% a

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#WhatYouMissed On RIA This Week: 1-15-21

6 days ago

What You Missed On RIA This Week Ending 1-15-21

It’s been a long week. You probably didn’t have time to read all the headlines that scrolled past you on RIA. Don’t worry, we’ve got you covered. If you haven’t already, opt-in to get our newsletter and technical updates.

Here is this week’s rundown of what you missed.

RIA Advisors Can Now Manage Your 401k Plan

Too many choices? Unsure of what funds to select? Need a strategy to protect your retirement plan from a market downturn? 

RIA Advisors now has the capability to manage your 401k plan for you. It’s quick, simple, and transparent. In just a few minutes we can get you in the “right lane” for retirement.

What You Missed This Week In Blogs

Each week, RIA publishes the research and thoughts behind the portfolio

Read More »

Shedlock: Reader Asks Why The Is Euro So Strong?

7 days ago

A reader from Brussels asks they the Euro is so strong.

Reader Question

Why is the Euro currency so strong? It is not that everything is hunky-dory here because it definitely isn’t. But this counterfeit currency was created with the one and only purpose: to benefit export-driven Germany.The euro is flawed. It’s a currency too weak for Germany and too strong for the other countries allowing them to ‘happily’ buy German products.

Fatally Flawed

The Euro is indeed fatally flawed.  But what about the US dollar?

I am asked far more frequently “What’s holding the US dollar up?“

Hated Dollar

The “dollar is so extremely oversold, over-hated, and over-shorted that it all but has to rally for a while at some point soon.”

Wrong. Maybe short term but dollar weakness is

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Technically Speaking: 2021 Investor Resolutions & January Stats

9 days ago

With 2021 already off to a good start, with the market up almost 2% in January, such is an excellent time to review our “investor resolutions.”
So Goes January
There is an abundance of “Wall Street Axioms” surrounding the first month of the New Year as investors anxiously try and predict what is in store for the next twelve months. You are likely familiar with the “Superbowl Indicator” to “So Goes The First 5-days. So Goes The Month.”
Considering that trying to predict the markets more than just a few days in advance is mostly an exercise in “folly,” it is nonetheless a traditional ritual as the old year passes into the new. While Wall Street espouses their always overly optimistic projections of year-end returns, reality has often tended to be somewhat different.
However, from an

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Yes, Virginia. There Is A Stock Market Bubble.

10 days ago

“Yes, Virginia. There is a stock market bubble. “
In 1897, an 8-year girl named Virginia O’Hanlon sent a letter to the New York Sun questioning Santa Claus’s existence. Why? Because her friends had all told her that Santa Claus didn’t exist.
As we enter 2021, there are two myths told to investors to support the bull market narrative. The first, as we debunked recently, is that low-interest rates justify high valuations. The second is that since valuations are not as high as the “dot.com” crisis, there is no “stock market bubble.”
Both of these views are rationalizations by investors to continue overpaying for assets during a liquidity-fueled bull market. Unfortunately, as investors pile further into risk assets, driven by herd mentality and confirmation bias, the eventual outcomes have

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Bulls Loving The “Heads I Win, Tails I Win” Market 01-08-21

12 days ago

Portfolio Positioning Update
With January kicking off with a bang, we are maintaining our long bias with reduced hedges at the moment. 
We made some changes to align our portfolio more with our equal-weighted benchmark index during the past week by reducing some of our overweight in technology, healthcare, and communications. While many other sectors of the market are grossly overbought short-term, we added a 5% weighting of RSP (S&P Equal Weight ETF) and SPY (S&P Market Weight) to our portfolios for the time being as placeholders.
We are currently slightly overweight equities and underweight our hedges in fixed income as interest rates press higher.
As noted last week, the rally this week was not unexpected:
“With the stimulus bill passed, and checks going out, we won’t be surprised to

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#MacroView: El-Erian & The Two Primary Risks In 2021

13 days ago

In 2019, I discussed the disconnect between the markets and the economy. After years of Central Bank interventions, stock markets have soared to record highs, while economic growth has remained weak. Mohamed El-Erian recently discussed the two primary risks heading into 2021.
El-Erian began his article by asking the most relevant question.
“What, if anything, will happen to the great disconnect between Wall Street and Main Street?”
The Great Disconnect
Currently, Wall Street analysts are projecting record stock markets in 2021, with stock prices rising another 10% and earnings surging toward record levels.

Main Street, however, believes the economy is heading in the wrong direction.

Such is the question we have discussed previously, given that the “stock market is ultimately a reflection

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#WhatYouMissed On RIA This Week: 1-8-21

13 days ago

What You Missed On RIA This Week Ending 1-8-21

It’s been a long week. You probably didn’t have time to read all the headlines that scrolled past you on RIA. Don’t worry, we’ve got you covered. If you haven’t already, opt-in to get our newsletter and technical updates.

Here is this week’s rundown of what you missed.

RIA Advisors Can Now Manage Your 401k Plan

Too many choices? Unsure of what funds to select? Need a strategy to protect your retirement plan from a market downturn? 

RIA Advisors now has the capability to manage your 401k plan for you. It’s quick, simple, and transparent. In just a few minutes we can get you in the “right lane” for retirement.

What You Missed This Week In Blogs

Each week, RIA publishes the research and thoughts behind the portfolio

Read More »

Technically Speaking: S&P 500 – Trading At Historical Extremes

16 days ago

Welcome to 2021. As we kick off a new year, we begin with the S&P 500 trading at historical extremes. It is essential to have some perspective to set reasonable expectations for future returns and quantify the “risk” of something going wrong.
As we discussed with our RIAPRO.NET subscribers yesterday, the real risk to the market in 2021 is over-confidence.
“Currently, Wall Street analysts are wildly exuberant on expectations of explosive economic growth, rising interest rates, and inflation. The problem with those expectations is that in an economy that is $85 Trillion in debt, higher rates and inflation are a ‘death knell’ to economic growth.
Yes, while the Fed may come to the rescue with more QE, with markets already trading at 36x times earnings it is becoming increasingly difficult to

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Why There Is Literally No “Cash On The Sidelines.”

17 days ago

In the later stages of a bull market advance, the financial media and Wall Street analysts start seeking out rationalizations to support their bullish views. One common refrain is “there are trillions of dollars in cash sitting on the sidelines just waiting to come into the market.” 
For example, Barron’s recently penned the following:
“There is record amounts of cash sitting in checking accounts of American households—and for optimistic investors, it’s just one more reason the stock market should keep pushing higher. 
Yahoo! Finance also jumped on the claim:
“It should also come as no surprise that there’s never been so much cash sitting on the sidelines — nearly $5 trillion, as a matter of fact. This is significantly above the record $3.8 trillion in cash set back in January 2009 during

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So Far, The Bulls Are Disappointed In “Santa” (Full Version)

20 days ago

Portfolio Positioning Update
With the “Santa Claus” rally wrapping up next week, we are maintaining our long bias with reduced hedges at the moment. 
We made no changes to our portfolio mix during the past week except for adding a 5% weight of SPY to our current holdings. Once we pass the end of the next week, we will most likely reduce that position and rebalance the rest of our holdings.
With the stimulus bill passed, and checks going out, we won’t be surprised to see a short-term pop in economic activity. However, given the checks are 50% smaller than the first round, along with extended unemployment benefits, the economic bump will be short-lived. The real question going into 2021 is whether President Biden can spend further into debt to do more stimulus. Or, will a shift toward

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#WhatYouMissed On RIA This Week: 12-31-20

20 days ago

What You Missed On RIA This Week Ending 12-31-20

It’s been a long week. You probably didn’t have time to read all the headlines that scrolled past you on RIA. Don’t worry, we’ve got you covered. If you haven’t already, opt-in to get our newsletter and technical updates.

Here is this week’s rundown of what you missed.

We Need You To Manage Our Growth.

Are you a strong advisor who wants to grow your practice? We need partners we can work with to manage our lead flow. If you are ready to move your practice forward, we would love to talk.

What You Missed This Week In Blogs

Each week, RIA publishes the research and thoughts behind the portfolio management strategy for our clients. The important focus is the risks that may negatively impact our client’s capital. These are

Read More »

Technically Speaking: Navigating Market Lingo In 2021

23 days ago

In February, Institutional Investor published a brilliant piece entitled “Asset Manager B.S. Decoded.” As we approach the year-end of 2020, succeeding in 2021 may come down to navigating the “market lingo” successfully.
“A handy translation guide to the sales jargon and IR excuses that one family office chief is sick of hearing.” – Institutional Investor 
What They Say Versus Mean
Now is a good entry point = Sorry, we are in a drawdown.
We have a high Sharpe ratio = We don’t make much money.
We have never lost money = We have never made money.
We have a great backtest = We are going to lose money after we take your money.
We have a proprietary sourcing approach = We invest in whatever our hedge fund friends do
We are not in crowded positions = We missed all the best-performing stocks.
We

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Shades Of 1999 As “Market Mania” Returns In 2020

24 days ago

Retail “Investor” Or “Speculator?”
In today’s market, the majority of investors are simply chasing performance.
But, this isn’t “investing,” it’s “speculation.”
Think about it this way.
If you were playing a hand of poker and dealt a “pair of deuces,” would you go “all-in.”
Of course, not.
The reason is you intuitively understand the other factors “at play.” Even a cursory understanding of the game of poker suggests other players at the table are probably holding better hands, which will lead to a rapid reduction of your wealth.
Ultimately, investing is about managing the risks that will substantially reduce your ability to “stay in the game long enough” to “win.”
Robert Hagstrom, CFA penned a piece discussing the differences between investing and speculation:

“Philip Carret, who wrote

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All I Want For Christmas Is A Bull Market (Full Version) 12-25-20

27 days ago

A Record High In Overvaluation
SentimenTrader had a great post out this past week, with some more data showing the more extreme overvalued conditions in the market currently.
“Sentiment and valuation go hand-in-hand. One impacts the other and creates a self-reinforcing loop until something happens to break the cycle.
Over the past 40 years, there have never been more mild, moderate, or severely overvalued companies within the S&P 500.”

Bubbles Are Psychological
What is essential to understand is that excessive bullish sentiment and overvaluation are the two required ingredients for a “bubble.”
“Since stock market ‘bubbles’ are a reflection of speculation, greed, and emotional biases; valuations are only a reflection of those emotions.”
However, it isn’t just P/E’s showing elevated

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#WhatYouMissed On RIA This Week: 12-25-20

27 days ago

What You Missed On RIA This Week Ending 12-25-20

It’s been a long week. You probably didn’t have time to read all the headlines that scrolled past you on RIA. Don’t worry, we’ve got you covered. If you haven’t already, opt-in to get our newsletter and technical updates.

Here is this week’s rundown of what you missed.

We Need You To Manage Our Growth.

Are you a strong advisor who wants to grow your practice? We need partners we can work with to manage our lead flow. If you are ready to move your practice forward, we would love to talk.

What You Missed This Week In Blogs

Each week, RIA publishes the research and thoughts behind the portfolio management strategy for our clients. The important focus is the risks that may negatively impact our client’s capital. These are

Read More »

Why The Second Stimulus Won’t Have Much Economic Impact

29 days ago

In October, I discuss how the “2nd Derivative Effect” would mute the impact of future stimulus programs. With the passage of the $900 billion stimulus package, we can update the estimates for the economic impact heading into 2021.
While most hope more stimulus will cure the economy’s ills, the “2nd derivative effect” will be problematic. Of course, since vast portions of the stimulus package went to everything but “helping out the average American,” such ensures the impact will be far less.
Let me recap.
NOTE: This article was written prior to Trump’s rejection of the stimulus bill. The analysis is based on the bill as is currently written. I will update the analysis if the bill changes. 
Making Some Assumptions
As the economy shut down due to the pandemic, the Federal Reserve flooded the

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Technically Speaking: Charting 2020 – A Year Of Speculative Mania

December 22, 2020

As we prepare to wrap up the year, 2020 will go down in the record books as a year of the “unexpected.” While no one expected the world to get besieged by a raging pandemic, equally, no one expected the year to end in a “speculative mania.”
In February, before the world recognized the pandemic, we updated our 2019 report on rising “recession” risks. At that time, the media and Wall Street analysts were cavalier that there was “no recession” on the horizon, and S&P earnings would rise to $170/share by the end of 2021.
As we noted then:
“The risk to the market, and the economy, is not “sick people.” It is the shutdown of the global supply chain.
The compilation of the data all suggests the risk of recession is markedly higher than what the media currently suggests. Yields and commodities

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A Major Support For Asset Prices Has Reversed

December 21, 2020

In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed.
While markets have certainly been on a tear this year, due to massive amounts of Federal Stimulus, it has been an advance solely on valuation expansion. While the decline in 2020 earnings was no surprise given the pandemic, earnings were already declining in 2019. The chart shows this in the return attribution of the S&P 500.

Notably, while investors are willing to “pay more for less” in earnings, revenue growth deteriorated more.

Overpaying For Earnings
Such is not a new phenomenon. Since 2009, sales per share, what happens at the top of the income statement, has cumulatively grown by just

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Overly Bullish Speculators Front-Run “Santa Claus” 12-18-20

December 19, 2020

Stuffing Stockings
As noted in the chart above, it isn’t just “retail” investors getting overly exuberant about the market, but “institutional investors” are jumping in the pool with them. As I noted last week, portfolio managers are not only entirely long but have leveraged up portfolios to over 100% exposure to equities.

While investment managers are “all in,” Wall Street strategists are rushing to ramp up price targets on stocks to lure more retail investors into the market. The “Fear Of Missing Out” is a powerful force few retail investors can resist.

As noted by SentimenTrader:
“Analysts on Wall Street have been busy upgrading the price targets on their stocks, too. Strategists tend to work from the top down; analysts from the bottom up. From both directions, Wall Street is

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#MacroView: Yellen’s “Arranged Marriage” To The Fed

December 18, 2020

Recently, President-Elect Joe Biden named Janet Yellen to be his administration’s Treasury Secretary. Yellen quickly proclaimed the reason “I became an economist was because I was concerned about the toll of unemployment on people, families, and communities.” Such provides excellent commentary, but her track record as Federal Reserve Chairman shows she is more for the top 10% of the economy than the bottom. In reality, and what the markets already suspect, her appointment is an “arranged marriage” to the Fed.
Janet Yellen, along with every Fed Chairman since Paul Volker, has almost single-handedly destroyed the bottom 90% of the American economy.
The one lesson that we have learned since the 2008 “Great Financial Crisis” is that monetary and fiscal policy interventions do not lead to

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#WhatYouMissed On RIA This Week: 12-18-20

December 18, 2020

What You Missed On RIA This Week Ending 12-18-20

It’s been a long week. You probably didn’t have time to read all the headlines that scrolled past you on RIA. Don’t worry, we’ve got you covered. If you haven’t already, opt-in to get our newsletter and technical updates.

Here is this week’s rundown of what you missed.

We Need You To Manage Our Growth.

Are you a strong advisor who wants to grow your practice? We need partners we can work with to manage our lead flow. If you are ready to move your practice forward, we would love to talk.

What You Missed This Week In Blogs

Each week, RIA publishes the research and thoughts behind the portfolio management strategy for our clients. The important focus is the risks that may negatively impact our client’s capital. These are

Read More »

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

December 15, 2020

As we start moving into the last two weeks of the trading year, investors everywhere are hopeful that “Santa Claus” will visit “Broad & Wall.” 
The actual Wall Street saying is that “If Santa Claus should fail to call, bears may come to Broad & Wall.” The Santa Claus Rally, also known as the December effect, is a term for more frequent than average stock market gains as the year winds down. However, as is always the case with data, average returns are sometimes different than reality.
Stock Trader’s Almanac explored why end-of-year trading has a directional tendency. The Santa Claus indicator is pretty simple. It looks at market performance over a seven day trading period – the last five trading days of the current trading year and the first two trading days of the New Year. The stats are

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Shiller: ECY & Justification For Sky-High Stock Prices

December 14, 2020

In a recent interview, Dr. Robert Shiller justified “sky-high” stock prices by using a measure called the “Earnings CAPE yield” or ECY. To wit:
“There has been much puzzlement that the world’s stock markets haven’t collapsed in the face of the COVID-19 pandemic. Especially in the United States, which has recently been setting record highs for new cases. But maybe it isn’t such a puzzle. A measure we call the Excess CAPE Yield (ECY) puts the long-term outlook for the world’s stock markets in better perspective.” – Shiller
Before we dig further into his analysis, it is essential to review what we have previously stated about valuations. As discussed earlier in “Shiller’s CAPE – Is It Just B.S.”
The problem is that valuation models are not, and were never meant to be, ‘market timing

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Irrational Exuberance – The Bulls Remain In Control 12-11-20

December 12, 2020

Calculating The Madness
Let me repeat something which seems apropos currently:
Sir Isaac Newton once said:

“I can calculate the motions of the heavenly bodies, but not the madness of the people..” 

As we head into year-end, we will be navigating the risk of overly extended and bullish markets against the seasonally strong end of year period. 
We believe that over the long-term, capital preservation and risk management leads to better outcomes. However, sometimes, in the short-run, managing risk can undoubtedly be a frustrating endeavor as the “Fear Of Missing Out” overrides common sense and logic. 
If you disagree, that is okay.
When the opportunity presents itself, and the “madness has subsided,” these are the questions we will ask ourselves before we add exposure to portfolios:

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#MacroView: Earnings Growth Will Disappoint In 2021

December 11, 2020

It’s that time of year when Wall Street analysts started trotting out the predictions for earnings growth and stock market targets for the coming year. Unfortunately, each year these overly optimistic estimates are ground down as the year progresses. Next year will be no different as earnings growth will disappoint in 2021.
Setting The Bar High
Goldman Sachs hit the ground running this year by putting a 2021 price target on the S&P 500 of 4300 and 4600 by the end of 2022. If we use their “current level” of 3551, such would be a gain of 21.1% for 2021 and roughly 7% for 2022.

To support that growth in stock prices, you need strong earnings growth to keep expensive valuations at some “less crazy” level. To accomplish this feat, Goldman stretched reality to $175 in EPS for 2021 and $195 in

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#WhatYouMissed On RIA This Week: 12-11-20

December 11, 2020

What You Missed On RIA This Week Ending 12-11-20

It’s been a long week. You probably didn’t have time to read all the headlines that scrolled past you on RIA. Don’t worry, we’ve got you covered. If you haven’t already, opt-in to get our newsletter and technical updates.

Here is this week’s rundown of what you missed.

We Need You To Manage Our Growth.

Are you a strong advisor who wants to grow your practice? We need partners we can work with to manage our lead flow. If you are ready to move your practice forward, we would love to talk.

What You Missed This Week In Blogs

Each week, RIA publishes the research and thoughts behind the portfolio management strategy for our clients. The important focus is the risks that may negatively impact our client’s capital. These are

Read More »