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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

Bear Markets: Understand Them, Don’t Fear Them 06-14-19

1 day ago

Is The Sellable Rally Done?
Some Comments On The Fed Cutting Rates
Sector & Market Analysis
401k Plan Manager

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Wednesday, June 26th from 12:30-1:30 pm.
Review & Update
This week I want to step back and talk about some misconceptions with concerning markets, cycles, and investing. However, before we get to that, let me give you a quick review and update on where we are following the “sellable rally,” we have discussed over the last couple of weeks.
In review, we said last week: 

“We remain primarily long-biased in our portfolios, but are also slightly overweight in cash, and portfolio weight in fixed income. We are also carrying some hedge by having overweighted “defensive” stocks a couple of months ago which have

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One Trick Pony: The Fed Is Pushing On A String

4 days ago

Last week, I discussed the Fed’s recent comments suggesting they might be closer to cutting rates and restarting “QE” than not.

“In short, the proximity of interest rates to the ELB (Effective Lower Bound) has become the preeminent monetary policy challenge of our time, tainting all manner of issues with ELB risk and imbuing many old challenges with greater significance.  
“Perhaps it is time to retire the term ‘unconventional’ when referring to tools that were used in the crisis. We know that tools like these are likely to be needed in some form in future ELB spells, which we hope will be rare.”
After a decade of zero interest rates and floods of liquidity by the Fed into the financial markets, it is not surprising the initial “Pavlovian” response to those comments was to push

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Technically Speaking: The “Sellable Rally” Chart Review

6 days ago

Over the past couple of weeks, we have been discussing a “sellable rally” following the sell-off during the month of May. To wit:
“This week we are going to look at the recent sell-off and the potential for a short-term ‘sellable’ rally to rebalance portfolio risks into.
The markets only need some mildly positive news at this point to spur a ‘short-covering’ rally. I would encourage you to use it to reduce risk, rebalance holdings, and raise cash until the ‘trade war smoke’ clears.
The market did indeed rally last week. While the initial sell-off in the market was attributed to potential tariffs on Mexico, which were indefinitely suspended on Friday, the real reason was the dismal employment report of just 75,000 jobs.”
As I said, there was more room to go on the upside, and yesterday the

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Socialism Rises Due To The Great American Economic Growth Myth

7 days ago

There is little denying the rise of “socialistic” ideas in the U.S. today. You can try and cover the stench by calling it “social democracy” but in the end, it’s still socialism.
Since 1775, millions of Americans have given their lives in defense of the American “idea.” The tyranny and oppression which arise from communism, socialism, and dictatorships have been a threat worthy of such sacrifice. I am sure those patriots who died to ensure the “American way of life” would be disheartened by the willingness of the up and coming generations adopt such ideals.
But such shouldn’t be a surprise. It is the cycle of all economic civilizations over time as we “forget our history” and become doomed to repeat. it.
Scottish economist Alexander Tytler, who, in 1787, was reported to have commented on

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Is The “Sellable Rally” Done? 06-07-19

8 days ago

Is The Sellable Rally Done?
Some Comments On The Fed Cutting Rates
Sector & Market Analysis
401k Plan Manager

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Is The Sellable Rally Done?
In last weeks missive, I noted the oversold condition of the market and the likelihood of a bounce:

“This week we are going to look at the recent sell-off and the potential for a short-term ‘sellable’ rally to rebalance portfolio risks into.
The markets only need some mildly positive news at this point to

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The Fed, QE, & Why Rates Are Going To Zero

11 days ago

On Tuesday, Federal Reserve Chairman Jerome Powell, in his opening remarks at a monetary policy conference in Chicago, raised concerns about the rising trade tensions in the U.S.,
“We do not know how or when these issues will be resolved. As always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”
However, while there was nothing “new” in that comment it was his following statement that sent “shorts” scrambling to cover.
“In short, the proximity of interest rates to the ELB has become the preeminent monetary policy challenge of our time, tainting all manner of issues with ELB risk and imbuing many old challenges with greater significance.  
“Perhaps it is time to retire the term ‘unconventional’ when

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Technically Speaking: Tops Are Processes, Bottoms Are Events

13 days ago

In April of 2018, I posted an article laying out 10-reasons why the “bull market” had likely ended for a while. To wit:
“I highly suggest you use any substantial rally to reduce risk and rebalance portfolios accordingly. Why? Because I am going to out on a limb and making a call.’I think the 9-year old bull market may have ended in February.’” 
As I stated then:
“In 2015, the market plunged as Fed Chair Janet Yellen brought QE3 to its conclusion and started hiking interest rates for the first time in 9-years. Again, this correction would likely have been substantially deeper as the Eurozone faced ‘Brexit’ which sent shocks through the market. The well-timed phone calls to the Bank of England and the European Central Bank by then Fed Chairman Yellen, to take over liquidity operations

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Hope For The Best, Plan For The Worst

14 days ago

Around 46 BC, Cicero wrote to a friend saying, “you must hope for the best.” To be happy in life we must always have “hope.” It is “hope” which is the beacon that lights the pathway from the darkness that eventually befalls everyone at one point or another in their life.
However, when it comes to financial planning and investing we should consider Benjamin Disraeli’s version from “The Wondrous Tale Of Alroy:”
“I am prepared for the worst, but hope for the best.” 
During very late stage bull markets, the financial press is lulled into a sense of complacency that markets will only rise. It is during these late stage advances you start seeing a plethora articles suggesting simple ways to create wealth. Here are a few of the most recent ones I have seen:
The Power Of Compounding
The New Math

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Selloff Overdone, Looking For A Sellable Rally 05-31-19

15 days ago

Selloff Overdone, Looking For A Sellable Rally
Sector & Market Analysis
401k Plan Manager

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Selloff Overdone, Looking For A Sellable Rally
On Friday morning, we posted the following commentary for our RIA PRO subscribers:

“In a surprising move Thursday night, Donald Trump slapped Mexico with a 5 percent tariff on all goods and set in place a schedule to ratchet it up to 25% over the next four months. The new tariffs are not in retaliation for trade, but a punishment designed to get Mexico to halt illegal immigration into the U.S. The dollar index is relatively flat, but the Mexican peso is down 3 percent versus the dollar, and bond yields have declined by 5-6 percent.
Mexico is the United States third largest trade

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Powell Channels Bernanke: “Subprime Debt Is Contained”

18 days ago

I recently discussed one of the biggest potential “flash points” for the financial markets today – corporate debt.
What I find most fascinating is how quickly many dismiss the issue of corporate debt with the simple assumption of “it’s not the subprime mortgage market.”
Correct, it’s not the subprime mortgage market. As I noted previously:
“Combined, there is about $1.15 trillion in outstanding U.S. leveraged loans (this is effectively “subprime” corporate debt) — a record that is double the level five years ago — and, as noted, these loans increasingly are being made with less protection for lenders and investors. Just to put this into some context, the amount of sub-prime mortgages peaked slightly above $600 billion or about 50% less than the current leveraged loan market.”

Every bubble

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Technically Speaking: Rothschild’s Investing Rule

20 days ago

Since the markets were closed yesterday for “Memorial Day,” there isn’t much for us to update technically from this past weekend’s missive. 
However, I did provide an update yesterday for our RIAPRO subscribers (Try 30-days FREE) with respect to where the S&P 500 is currently trading and why we expect a short-term bounce. To wit:
As noted previously, SPY tested, and failed, at the bottom of the uptrend line from both the 2017 post-election bounce and the 2016 lows.
SPY has now corrected the overbought condition and is testing support from the January highs with the 200-dma close below.
The “buy” signal in the lower panel was also massively extended, as noted several weeks ago, suggesting the reversal we have seen was coming as we warned then.
The correction last week has set up a tradeable

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The Bulls Continue To Bet On The Fed 05-24-19

22 days ago

Market Review & Update
The Bulls Continue To Bet On The Fed
Sector & Market Analysis
401k Plan Manager

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Market Review & Update
Over the last several weeks, we have been discussing the potential for a market correction simply due to divergences in the technical indicators which suggested near-term market risk outweighed the reward. As is generally the case, bonds have been warning the bullish bias of equity investors was likely misplaced. I have updated last week’s chart for reference.

The increase in risks has had us rotating exposure in our portfolios to a more defensive tilt. We previously trimmed back our overweight exposure to Technology, Then, two weeks ago, we noted we further tweaked client portfolios by

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10 Illustrated Truths About Investing & The Markets

25 days ago

Over the last eighteen months, stocks have whipsawed within a massive trading range as “trade wars,” “tariffs,” and monetary policy actions from the Fed have lit up headlines. Despite the strong rally from the beginning of the year, investors are no better off today than they were at the beginning of 2018.

Does this mean the bull market is over? Or, is it just a pause before a continuation higher? Has the Federal Reserve figured out how to “end recessions?” Or, has the low interest rate environment over the last decade spurred another credit bubble?
Honestly, no one knows for sure where we are within the current cycle, but it is understood it will end.
As a portfolio manager, I must stay invested during rising markets as our clients need returns in order to meet their investment goals.

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Fundamentally Speaking: 7-Measures Suggest A Decade Of Low Returns

27 days ago

“Price is what you pay, value is what you get.” – Warren Buffett
Just recently, I discussed the importance of valuations as it relates to investors who are close to retirement age. To wit:
“Unless you have contracted ‘vampirism,’ then you do NOT have 90, 100, or more, years to invest to gain ‘average historical returns.’ Given that most investors do not start seriously saving for retirement until the age of 35, or older, they have about 30-35 years to reach their goals. If that period happens to include a 12-15 year period in which returns are flat, as history tells us is probable, then the odds of achieving their goals are severely diminished.
What drives those 12-15 year periods of flat to little return? Valuations.”
Despite commentary to the contrary, the evidence is quite unarguable.

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The 5-Laws Of Human Stupidity & How To Be A “Non-Stupid” Investor

28 days ago

This past weekend, I was digging through some old articles and ran across one that needed to be readdressed on “human stupidity” as it relates to investing.
The background was a study done in 1976 by a professor of economic history at the University of California, Berkeley. Carol M. Cipolla published an essay outlining the fundamental laws of a force he perceived as humanity’s greatest existential threat: Stupidity.
Stupid people, according to Cipolla, share several identifying traits:
they are abundant,
they are irrational, and;
they cause problems for others without apparent benefit to themselves
The result is that “stupidity” lowers society’s total well-being and there are no defenses against stupidity. According to Cipolla:

“The only way a society can avoid being crushed by the burden

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The Bulls Are Betting On A “Long Shot” 05-17-19

29 days ago

Market Review & Update
Bulls Are Betting On A “Long Shot”
Sector & Market Analysis
401k Plan Manager

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Market Review & Update
Over the last several weeks, we have been discussing the potential for a market correction simply due to divergences in the technical indicators which suggested near-term market risk outweighed the reward. Then, the White House reignited the “trade war” with China. To wit:

“The “Trade War” is not a good thing for markets or the economy as recently suggested by the President. David Rosenberg had an interesting point on this as well on Friday:
‘Tracing through the GDP hit from a tariff war on EPS growth and P/E multiple compressions from heightened uncertainty, the downside impact on the S&P 500

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The Run For The Roses

May 17, 2019

The recent running of the Kentucky Derby marks the time of year of horse racing’s prestigious Triple Crown and everything that goes along with it. Temperate spring weather, increasingly beautiful spring foliage, ostentatious hats, parties, and of course, the impressive physical prowess of the horses and the jockeys are all part of the season.
It is also a reminder of another race that has been going on, albeit with considerably less pageantry: The race to fund pension plans. This is a different kind of race because it is ongoing and because there aren’t distinct winners. There definitely are losers, however. It is also a race that has driven considerable interest in risky assets such as stocks and private equity.
In a sense, investors are accustomed to racing because it is something of a

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Strike Three: The Next Bear Market Ends The Game

May 16, 2019

At the beginning of this year, I was at dinner with my wife. Sitting at the table next to us, was a young financial advisor, who was probably in his mid-30’s, meeting with his client who appeared to be in his 60’s. Of course, the market had just experienced a 20% correction from the previous peak and the client was obviously concerned about his portfolio.
“Don’t worry, there is always volatility in the market, but as you can see, even bear markets are mild and on average the market returns 8% a year over the long-term.” 
Here is the chart which shows the PERCENTAGE return of each bull and bear market going back to 1900. (The chart is the S&P 500 Total Return Inflation-Adjusted index.)

Here is the narrative used with this chart.
“The average bear market lasts 1.4 years on average and falls

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Technically Speaking: The Drums Of Trade War – Part Deux

May 14, 2019

In June of 2018, as the initial rounds of the “Trade War” were heating up, I wrote:
“Next week, the Trump Administration will announce $50 billion in ‘tariffs’ on Chinese products. The trade war remains a risk to the markets in the short-term.”
Of course, 2018 turned out to be a volatile year for investors which ended in the sell-off into Christmas Eve.
As we have been writing for the last couple of weeks, the risks to the market have risen markedly as we head into the summer months.
“It is a rare occasion when the markets don’t have a significant intra-year correction. But it is a rarer event not to have a correction in a year where extreme deviations from long-term moving averages occur early in the year. Currently, the market is nearly 6% above its 200-dma. As noted, such deviations

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Valuations, Returns & The Real Value Of Cash

May 13, 2019

Since the beginning of 2019, the market has risen sharply. That increase was not due to rising earnings and revenues, which have weakened, but rather from multiple expansion. In other words, investors are willing to pay higher prices for weaker earnings.
The issue, of course, is that while it may not seem to matter in the short-term, valuations matter a lot in the long-run.
I know what you are thinking.
“There is NO WAY cash will outperform stocks over the next decade.” 
I understand. After a decade-long market advance, it’s hard to fathom a period where stocks fail to perform. However, despite what you have been told, this time is not different, valuations do matter, and “no,” Central Banks do not have it all under control. (In reality, the Federal Reserve are the “Firemen” in Fahrenheit

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Game Of Thrones: Winter Is Coming 05-10-19

May 11, 2019

Market Review & Update
Game Of Thrones
Sector & Market Analysis
401k Plan Manager

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Market Review & Update
As we discussed last Saturday it was important for the markets to hold within to consolidation band, or break out to the upside, if the bulls were going to maintain control of prices in the short-term. The return of “Tariff Man” put the markets back on edge. 
As I noted then:

“The market’s stellar run is set for a breather over the next couple of months. Specifically, as we approach the end of the seasonally strong period, the odds of a ‘reset’ rise markedly.”

I also discussed our portfolio actions with respect to our clients:

“This brings me to what we did with our equity portfolios last Tuesday and

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What Could Go Wrong? The Fed’s Warns On Corporate Debt

May 9, 2019

“So, if the housing market isn’t going to affect the economy, and low interest rates are now a permanent fixture in our society, and there is NO risk in doing anything because we can financially engineer our way out it – then why are all these companies building up departments betting on what could be the biggest crash the world has ever seen?
What is more evident is what isn’t being said. Banks aren’t saying “we are gearing up just in case something bad happens.” Quite the contrary – they are gearing up for WHEN it happens.
When the turn does come, it will be unlike anything we have ever seen before. The scale of it could be considerable because of the size of some of these leveraged deals.” – Lance Roberts, June 2007
It is often said that no one saw the crash coming. Many did, but since

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3-Ways To Be Your Own Financial “Superhero”

May 8, 2019

The latest in the Marvel movie portfolio – Avengers: Endgame has blown away every theatre attendance record. The film has earned $1.48 billion on a global level (as of this writing).  
There’s little doubt that humans love heroes, especially super-human types. We relish the conflict between good and evil. We cry when our heroes face setbacks and applaud when they gain the upper hand on the enemies because if we were superheroes, we’d fight dark forces and win, too.
We also get a bit overzealous and scream “take our money!” when our Avengers with all their special talents, are also all too human. They love, feel loss deeply, they’re sort of funny, seek revenge and as passionately overcome obstacles to right the wrongs which hurt their own and innocent people.
To become a financial

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Technically Speaking: “‘Trade War’ In May & Go Away.”

May 7, 2019

Over the weekend, President Trump decided to reignite the “trade war” with China with two incendiary tweets. Via WSJ:
“In a pair of Twitter messages Sunday, Mr. Trump wrote he planned to raise levies on $200 billion in Chinese imports to 25% starting Friday, from 10% currently. He also wrote he would impose 25% tariffs ‘shortly’ on $325 billion in Chinese goods that haven’t yet been taxed.
‘The Trade Deal with China continues, but too slowly, as they attempt to renegotiate,’ the president tweeted. ‘No!’”
This is an interesting turn of events and shows how President Trump has used the markets to his favor.
In January of 2018, the Fed was hiking rates and beginning to reduce their balance sheet but markets were ramping higher on the back of freshly passed tax reform. As Trump’s approval

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Has The Fed Done It? No More Recessions?

May 6, 2019

“Wow!”
That is all I could utter as my brain spun listening to an interview with Chamrath Palihapitiya on CNBC last week.
“I don’t see a world in which we have any form of meaningful contraction nor any form of meaningful expansion. We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there’s a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality that we can’t forecast.”
It is a fascinating comment particularly at a time where the Federal Reserve has tried, unsuccessfully, to normalize monetary policy by raising interest rates and reducing their balance sheet.  However, an almost immediate upheaval in the economy, not to mention reprisal from the

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Never Hurts To Ring The Cash Register 05-03-19

May 4, 2019

Market Update & Review
Never Hurts To Ring The Cash Register
Portfolio Management Guidelines
Sector & Market Analysis
401k Plan Manager

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Market Update & Review
Fortunately, the market rallied on Friday as traders scrambled to hold important support levels following confirmation from Richard Clarida that the Fed has no intention of moving interest rates anytime soon. Via Bloomberg:
CLARIDA: INFLATION PRESSURES MUTED, EXPECTED INFLATION STABLE
CLARIDA: WE’LL WEIGH `WHAT, IF ANY, FURTHER ADJUSTMENTS’ NEEDED
CLARIDA: FED FUNDS RATE NOW IN RANGE OF NEUTRAL ESTIMATES
CLARIDA SAYS FED CAN AFFORD TO BE DATA DEPENDENT
FED’S CLARIDA SAYS U.S. ECONOMY IS IN A `VERY GOOD PLACE’
Despite headlines to the contrary, the employment

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The Great Stock Buyback Debate

May 2, 2019

I recently wrote about stock buybacks in our weekly newsletter. However, a recent report from Axios noted that for 2019, IT companies are again on pace to spend the most on stock buybacks this year, as the total looks set to pass 2018’s $1.085 trillion record total.

“By the numbers: Companies so far have spent $272 billion on buybacks, data compiled by Mike Schoonover, COO of Catalyst Funds, for Axios shows.
Between the lines: The amount of spending on buybacks announced by companies in the IT sector has fallen significantly this year as other industries, particularly energy and industrials, have picked up the slack. Companies in those sectors have about doubled their percentage of announced buybacks.
The top 5 sectors for buybacks this year accounted for 76% of the total. Last year, the

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Technically Speaking: A Warning About Chasing This Bull Market

April 30, 2019

This past weekend, we discussed the breakout of the markets to all-time highs.
The question I asked this past weekend was simply;
“The bull market is back, but can it stay?”
When I was growing up my father, probably much like yours, had pearls of wisdom that he would drop along the way. It wasn’t until much later in life that I learned that such knowledge did not come from books, but through experience. One of my favorite pieces of “wisdom” was:
“Exactly how many warnings do need before you figure out that something bad is about to happen?”
Of course, back then, he was mostly referring to warnings he issued for me “not” to do something I was determined to do. Generally, it involved something like jumping off the roof with a queen-sized bedsheet convinced it was a parachute.
My argument was

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Boomers Are Facing A Financial Crisis

April 29, 2019

The rest will be faced with tough decisions in the years ahead.
The good news is that if Alexandria Ocasio-Cortez is correct, none of this will be a problem if climate change kills everyone in the next 12 years.

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The Bull Is Back…But Will It Stay? 04-26-19

April 27, 2019

Oh…you are just being bearish.

Maybe, but as I stated in Q2 of 2018:

“The deterioration in earnings is something worth watching closely. While earnings have improved in the recent quarter, due to the benefit of tax cuts, it is likely transient given the late stage of the current economic cycle, continued strength in the dollar and potentially weaker commodity prices in the future. Wall Street is notorious for missing the major turning of the markets and leaving investors scrambling for the exits.

Of course, no one on Wall Street told you to be wary of the markets in 2018. While we did, it largely fell on deaf ears.
Currently, there is “no perceived risk” in the markets as represented by the second highest levels of VIX shorts on record.

However, “risk” is like grabbing the tail of a

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