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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: The Markets Next “Minsky Moment”

6 days ago

PRINTER FRIENDLY VERSION
In this past weekend’s newsletter, I discussed the issue of the markets next “Minsky Moment.” Today, I want to expand on that analysis to discuss how the Fed’s drive to create “stability” eventually creates “instability.”

In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, discussed the idea of a “Minsky Moment.”  At that time, this idea fell on “deaf ears” as markets were surging higher amidst a real estate boom. However, it wasn’t too long before the 2008 “Financial Crisis” brought the “Minsky Moment” thesis to the forefront.

So, what exactly is a “Minskey Moment?”

Economist Hyman Minsky argued that the economic cycle is driven more by surges in the banking system and credit supply. Such is different from the

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Earnings, Multiples, & Untold Truths About Forward Valuations

7 days ago

PRINTER FRIENDLY VERSION
Earnings up, multiples down. Such seems to be a straightforward rationale for why investors should pile into markets as it enters a “new phase.” 

Such was the suggestion made recently by Yahoo! Finance anchor Myles Udland.

“The stock market is entering a new phase. Investors right now are faced with a simple question: how much? How much do they want to pay for earnings growth that continues to blow away expectations but might also be peaking?”

It’s a good question. 

With wealth investors expecting to earn 17% average annual returns, there currently does seem to be little concern about valuations.

“According to a new survey from Natixis that surveyed households that have over $100,000 in investable assets in March and April of 2021. Those same

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Bulls “Buy The Dip” But Is The Risk Really Over? 07-23-21

9 days ago

PRINTER FRIENDLY VERSION
In this 07-23-21 issue of “Bulls Buy The Dip But Is The Risk Really Over?”

Bulls Buy The Dip & The Next Minsky MomentTrading SardinesThe Fed Is DeflationaryPortfolio PositioningSector & Market Analysis401k Plan ManagerFollow Us On: Twitter, Facebook, Linked-In, Sound Cloud, Seeking Alpha

Are you worried about the potential for a market correction, a surge in inflation, or are you unsure how to invest for your retirement? We can help. If you are not yet a client and would like to discuss your portfolio construction, please schedule a time to meet with one of our advisors below.

Bulls Buy The Dip

Last week, we discussed that as the market hit new highs and the index returned to more extended and overbought conditions, a correction was likely. To wit:

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#MacroView: Shortest Recession In History Sets Up Next Recession

10 days ago

PRINTER FRIENDLY VERSION
It’s now official that the recession of 2020 was the shortest in history. 

According to the National Bureau of Economic Research, the contraction lasted just two months, from February 2020 to April 2020. However, during those two months, the economy fell by 31.4% (GDP), and the financial markets plunged by 33%. Both of those declines, as shown in the table below, are within historical norms.

Here it is graphically. The chart shows the historical length of each recession and the corresponding market decline.

However, while the effects of the “recession” were all within historical norms, the recession itself was not. 

Let me explain.

A Non-Standard Recession

The statement from the NBER is as follows:

“In determining that a trough occurred in

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Technically Speaking: Hedge Funds Ramp Up Exposure

13 days ago

PRINTER FRIENDLY VERSION
The “Fear Of Missing Out” has infected retail and hedge funds alike as they ramp up exposure to chase performance.

We have previously discussed the near “mania” of retail investors taking on exceptional risk in various manners. From increasing leverage, engaging in speculative options trading, and taking out personal loans to invest, it’s all evidence of overconfident investors.

However, that “risk appetite” is not relegated to retail investors alone. Professional managers, institutions, and hedge funds are “all in” as well.

Money Flows Are Huge

The evidence of “professional investor” exuberance is the massive inflows of capital. The first half of 2021 outpaced every year since the Financial Crisis lows.

That surge in inflows came from a rotation of

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Knowledge Vs. Experience: Why Most Investors Wind Up Losing

14 days ago

PRINTER FRIENDLY VERSIONKnowledge vs. experience. When it comes to investing, such is what separates long-term success from failure.
Amid a “market mania,” retail investors believe they have “knowledge” as every investment they make seems to be successful. As the bubble inflates, continued success breeds over-confidence to the point where it is widely believed “this time is different.”
I previously discussed Charles Mackay’s book “Extraordinary Popular Delusions And The Madness Of Crowds.” As noted, that book was an early study in crowd psychology. To wit:
“Essential is the understanding of the role psychology plays in the formation and expansion of financial manias. From the 1711 ‘South Sea Bubble’ to the 2000 ‘Dot.com crash,’ all bubbles formed from a similar ‘panic’ by investors to

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Earnings Kick Off With Markets Priced For Perfection 07-16-21

16 days ago

PRINTER FRIENDLY VERSION
In this 07-16-21 issue of “Earnings Kick Off With Markets Priced For Perfection.”

Market Pulls Back As Signals TurnEarnings Season Has A High BarMarkets Priced For PerfectionPortfolio PositioningSector & Market Analysis401k Plan ManagerFollow Us On: Twitter, Facebook, Linked-In, Sound Cloud, Seeking Alpha

Are you worried about the potential for a market correction, a surge in inflation, or are you unsure how to invest for your retirement? We can help. If you are not yet a client and would like to discuss your portfolio construction, please schedule a time to meet with one of our advisors below.

Market Pulls Back As Signals Turn

Last week, we discussed the market hit new highs with the index getting back to more extended and overbought conditions. To

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#MacroView: Monetary Policy Is Not Expansionary.

17 days ago

PRINTER FRIENDLY VERSION
Monetary policy is not expansionary despite widespread belief otherwise.

The general assumption by the Federal Reserve is that by providing excess reserves to the banking system, the banks would then lend to businesses and individuals to expand economic activity. Furthermore, as discussed previously, the Federal Reserve’s entire premise of inflating asset prices was the subsequent boost to economic activity from an increased “wealth effect.”

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more

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Technically Speaking: Bubbles Are Evident After They Pop

20 days ago

PRINTER FRIENDLY VERSION
Bubbles are evident and only get acknowledged after they pop. Such is because, during the inflation phase of the market bubble, investors rationalize why “this time is different.” 

We have seen many examples of this rationalization over the last couple of years. Such as stocks are cheap based on economic growth, low-interest rates justify high valuations or the “moral hazard” of the “Fed put.” Other examples come from the analysis of stock prices, such as this tweet recently.

The average stock in North America went nowhere for 5 years and is up just 14% from the 2018 high. Not exactly what I would call a bubble. pic.twitter.com/H8JuOVm4Qt— Danny Merkel (@ChartingTrends) July 4, 2021While the analysis is correct, average stock prices do not solely define a

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Infrastructure Spending Could Be Good, But It Won’t Be.

21 days ago

PRINTER FRIENDLY VERSION
Infrastructure spending can be economically beneficial. But, unfortunately, the type of “spending” the Democrats are proposing will not be.

We must begin our discussion with the textbook definition of “infrastructure.”

“Infrastructure is the general term for the basic physical systems of a business, region, or nation. Examples of infrastructure include transportation systems, communication networks, sewage, water, and electric systems. These systems tend to be capital intensive and high-cost investments, and are vital to a country’s economic development and prosperity.” – Investopedia

Now, we must break that definition down into its most essential points:

Basic Physical SystemsTransportation, Communication, Sewage, Water, and ElectricCapital

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Yields Plunge. Dollar Surges. The Reflation Trade Unravels. 07-09-21

23 days ago

PRINTER FRIENDLY VERSION
In this 07-09-21 issue of “Yields Plunge Dollar Surges The Reflation Trade Unravels.“

Market Pulls Back As Signals TurnYield Plunge, Dollar SurgeThe Reflation Trade UnravelsPortfolio PositioningSector & Market Analysis401k Plan ManagerFollow Us On: Twitter, Facebook, Linked-In, Sound Cloud, Seeking Alpha

Are you worried about the potential for a market correction, a surge in inflation, or are you unsure how to invest for your retirement? We can help. If you are not yet a client and would like to discuss your portfolio construction, please schedule a time to meet with one of our advisors below.

Market Stumbles But Rallies Back

Last week, we discussed the market hit new highs with the index getting back to more extended and overbought conditions. To

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#MacroView: Bond Yields Send An Economic Warning

24 days ago

PRINTER FRIENDLY VERSIONBond yields are sending an economic warning as this past week 10-year Treasury yields dropped back to 1.3%.  With the simultaneous surge in the dollar, there is rising evidence the economic “reflation” trade is geting unwound.

Such is despite overly exuberant expectations of strong economic growth by the mainstream media. As we suggested in 2019, bonds generally have the outlook correct more often than stocks.

Such is not surprising as the long-term correlation between economic growth and rates remains high.

We remain in the camp that, due to the rising debt and deficits, rates must remain low. However, given most people don’t understand bonds, we will recap our previous analysis. 

If you don’t understand what bonds are and what they can do for your portfolio,

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Technically Speaking: Is The Retail Investor Rampage Over?

27 days ago

PRINTER FRIENDLY VERSIONIs the retail investor rampage over?
Since the crash in March 2020, the “retail investor army” marched propelled by chat rooms and social media channels. As discussed previously in “Blind Leading The Blind:”
In all, 46% have used social media for investing information in the past month.
22% of Gen Z investors say they were younger than 18 when they started investing, versus 8% of millennial investors. 
Only 36% of young investors plan to use that money for retirement. 35% will make additional investments, while 19% will use the funds to pay for a major purchase.

“Considering that many of these individuals have never seen an actual ‘bear market,’ such is the very definition of the ‘blind leading the blind.’”
Of course, with fresh stimulus checks in hand, and sports

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As Good As It Gets. Will Q2 Mark Peak Reporting? 07-02-21

July 3, 2021

The biggest problem for investors is the “herding effect” and “loss aversion.”
As markets are rising, individuals believe that the current price trend will continue to last for an indefinite period. The longer the rising trend lasts, the more ingrained the belief becomes until the last of “holdouts” finally “buy-in” as the financial markets evolve into a “euphoric state.”
Once the market begins to decline, there is a slow realization it is more than a “buy the dip” opportunity.  As losses mount, the anxiety of loss begins to climb until individuals seek to “avert further loss” by selling.
Such is the basis of the “Buy High / Sell Low” syndrome.
However, by understanding what drives market returns over the long term, you can mitigate the risk of making psychological errors.
It is

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#MacroView: Capitalism Does Not Equal Corporatism – Pt. 2

July 2, 2021

PRINTER FRIENDLY VERSIONIn Part-2 of “Capitalism” does not equal “Corporatism,” we delve into why bailouts support corporatism and how to fix the system.
(Read Part 1 Here – The Repeal Of Glass-Steagall & Stock Buybacks)
Capitalism Is Darwinian
Capitalism, if allowed to operate, is a “Darwinian System.” As with Darwin’s theory of evolution, corporate evolution has the same essential components as biological evolution: competition, adaptation, variation, overproduction, and speciation. In other words, as an economic system, companies either adapt, evolve, and survive or become extinct. 
In 2008, the Government and Federal Reserve began a process of “bailing” out companies that should have been allowed to go “bankrupt.” Instead, a decision got made to stop “capitalism” from proceeding with

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#MacroView: Confusing Market Crashes & Bear Markets. (Part-1)

May 21, 2021

During the downturn, I made these points in an article about the history of market crashes. I showed that the 150-year record of U.S. market returns is littered with bear markets (downturns of 20% or more)—and in each case, the market eventually recovered and then went on to new heights.”

Not A Bear Market
The problem with the analysis is that March was a “correction” and not a “bear market.”
Let me start with an insightful note from Sentiment Trader:
“Using the completely arbitrary definition of a 20% decline from a multi-year high, it has taken the index only 110 days to cycle to a fresh high. That’s several months faster than the other fastest recoveries in 1967 and 1982.”
Such was a point I discussed on May 20th in “Just A Big Correction:”
“Price is nothing more than a reflection of

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#WhatYouMissed On RIA This Week: 05-21-21

May 21, 2021

PRINTER FRIENDLY VERSION
What You Missed On RIA This Week Ending 05-21-21

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

Read More »

Technically Speaking: Yardeni – The Market Will Soon Reach 4500

May 18, 2021

PRINTER FRIENDLY VERSION“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives
After discussing BofA’s view of why the market could drop to 3800,  I thought it fair to discuss a more optimistic view.
BofA’s view of a market correction was a function of the more exuberant “optimism” in the market. To wit:
“This analysis is interesting, particularly when analysts are rushing to upgrade both economic and earnings estimates.”

“More importantly, investors are incredibly long-biased in portfolios, with equity allocations reaching some of the highest levels in history.”

What Subramanian questioned is whether all the “good news” is already “priced in?”

“Amid increasingly euphoric

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The Most Profitable Company In The World

May 17, 2021

PRINTER FRIENDLY VERSIONYou can thank the most profitable company in the world for the recovery in corporate profits. More importantly, with asset prices near record highs, just how much are investors willing to pay? Unsurprisingly, the answer is quite a lot, as per a recent CNN Money article:
“Investors are pouring money into unprofitable companies more than any time since the dot-com bubble. This according to a recent report by Scott Opsal, director of research at The Leuthold Group.
Of the largest 1,500 companies by market capitalization today, around 200 weren’t profitable during any of the last three years. But instead of punishing them, investors have rewarded them with a total market value of more than $2.3 trillion. Wall Street hasn’t been willing to attach such high market values

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Despite Surging Inflation, The Bulls Shake Off Weakness 05-14-21

May 15, 2021

The MacroView

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Model performance is a two-asset model of stocks and bonds relative to

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#MacroView: NFIB Data Says It’s Only An Economic Recovery

May 14, 2021

PRINTER FRIENDLY VERSIONThe recent NFIB survey suggests we are only in an economic recovery, not an expansion. Such was a point I made with Daniel Lacalle in a recent podcast.
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.

We understand the importance of the data, which is why we regularly report on it. For example:
Our most recent report was at the end of January entitled: “NFIB Survey Warns About Small-Cap Stocks” Starting a little over a month

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#WhatYouMissed On RIA This Week: 05-14-21

May 14, 2021

PRINTER FRIENDLY VERSION
What You Missed On RIA This Week Ending 05-14-21

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

Read More »

Technically Speaking: If Everyone Sees It, Is It Still A Bubble?

May 11, 2021

PRINTER FRIENDLY VERSION“If everyone sees it, is it still a bubble?” That was a great question I got over the weekend. As a “contrarian” investor, it is usually when “everyone” is talking about an event; it doesn’t happen.
As Mark Hulbert noted recently, “everyone” is worrying about a “bubble” in the stock market. To wit:
“To appreciate how widespread current concern about a bubble is, consider the accompanying chart of data from Google Trends. It plots the relative frequency of Google searches based on the term ‘stock market bubble.’ Notice that this frequency has recently jumped to a far-higher level than at any other point over the last five years.”

What Is A Bubble?
“My confidence is rising quite rapidly that this is, in fact, becoming the fourth ‘real McCoy’ bubble of my investment

Read More »

The Problem Of Pulling Forward Sales & Revenue

May 10, 2021

PRINTER FRIENDLY VERSIONThere is a problem of pulling forward sales and revenue when it comes to future outcomes.
Currently, analysts are incredibly exuberant about earnings for the S&P 500 index. In just the last month, they sharply increased 2021 earnings. The chart below shows where 2021 estimates were in January 2020 versus the previous two months.

The near $20 jump in EOY estimates for 2021 over the last month is highly optimistic. The increase was a function of expectations for a “sugar rush” of economic activity from the stimulus. Of course, after the surge, the growth rate of earnings quickly fade.

But are analysts too optimistic?

A Fading Support
One of the potential issues over the next few quarters is 3-successive rounds of financial stimulus led to a spending spree by

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Poor Jobs Report Gives Bulls A Reason To Charge 05-08-21

May 8, 2021

As we noted last week,

“Another reason we don’t expect a lot of upside to markets because the recent “consolidation” failed to work off any of the overbought conditions. Notably, the market remains more than 5% above its 50-dma, which is historically extreme. Such gets corrected, usually through a price decline or a consolidation.” 

Our “sell signals” have kept us somewhat underexposed to equities and slightly overweight cash. However, the deterioration of “money flows” concerns us and aligns with hedgefund liquidations over the last several weeks. 

Given the more extreme selling pressure and the current short-term oversold condition of the market, we have begun nibbling at exposures that we like. There is also a reasonable expectation we will start to see the major tech companies

Read More »

#MacroView: Are Stocks Cheap, Or Just Another Rationalization?

May 7, 2021

PRINTER FRIENDLY VERSIONAre stocks “cheap,” or is this just another bullish “rationalization.” Such was the suggestion by the consistently bullish Brian Wesbury of First Trust in a research note entitled “Yes, Stocks Are Cheap.” To wit:

“The Fed remains highly accommodative, there are trillions of dollars of cash on the sidelines, vaccines have reached over 50% of Americans, and the economy is expanding rapidly. Some valuations have been stretched, but the market as a whole remains undervalued. As a result, we remain bullish and are lifting our targets.”

Yes, it is true the Fed remains highly accommodative, which has undoubtedly pushed asset prices higher. In fact, financial conditions recently reached a historic low, which suggests elevated asset valuations ironically.

We have busted

Read More »

#WhatYouMissed On RIA This Week: 05-07-21

May 7, 2021

PRINTER FRIENDLY VERSION
What You Missed On RIA This Week Ending 05-07-21

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

Read More »

Technically Speaking: Doug Kass’ 50-Laws Of Investing

May 4, 2021

PRINTER FRIENDLY VERSIONOver the years I have published numerous articles with “investing laws” from some of the great investors in history. These laws, or rules, are born of experience, tested by markets, and survived time.
Here are some of our previous posts:
Throughout history, individuals have been drawn into the more speculative stages of the financial market under the assumption that “this time is different.” Of course, as we now know with the benefit of hindsight, 1929, 1972, 1999, and 2007 were not different. They were just the peak of speculative investing frenzies.
Most importantly, what separates these individuals from all others was their ability to learn from those mistakes, adapt, and capitalize on that knowledge in the future.
Experience is an expensive commodity to acquire,

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The Adverse Consequences Of A $15/Hour Wage Hike

May 3, 2021

PRINTER FRIENDLY VERSIONWhat’s the big “hubbub” over raising the minimum wage to $15/hour? After all, the last time the U.S. lifted the minimum wage was in 2009. The argument for increasing the minimum is to create a “livable wage” for those working at that level. However, is that the best way to help “the poor?”
The Biden Administration wants to include an increase of the minimum wage in the proposed “Infrastructure” plan. Many may forget the attempt to hike the minimum wage during his tenure as Vice-President with the Obama Administration. At that time, there was such an immense level of table-pounding you would assume a majority of Americans got trapped at minimum wage. However, let’s take a look at some numbers.

How Many Work For Minimum Wage?
According to the latest available annual

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All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21

May 1, 2021

As noted above, we will trigger the next short-term “buy signal,” likely next week. As we have discussed regularly, given the daily “sell signal” was offset by a weekly “buy signal,” there was little downside risk. Such turned out to be the case.
We can now start adding some additional exposure to areas that we need, but with equity holdings at near target weights, only minor adjustments need to get done. We still carry a very short-duration bond portfolio currently as interest rates continue to push towards our target of 1.8-1.9%. At that level, we will start accumulating long-duration bonds and increasing portfolio hedges.
Another reason we don’t expect a lot of upside to markets because the recent “consolidation” failed to work off any of the overbought conditions. Notably, the market

Read More »