Adam Taggart
Two weeks ago, I issued a report to Peak Prosperity's premium subscribers, warning of an immiment downwards re-pricing of the FAANG stocks. I even made a rare recommendation for taking an active short position against them (one now up 18%).
That report proved quite timely. Over the past 10 days:
- Netflix (NFLX) is down 10% after issuing disappointing subscriber growth and Q3 guidance
- Facebook (FB) is down 20% after delivering lower user and revenue numbers than the Street was expecting
- Amazon (AMZN) is flat despite posting blowout Q2 EPS, offset by a revenue miss
- Google/Alphabet (GOOGL) has managed a meager 3% rise, as earnings & revenue beats were tempered by rising costs and a record $5 billion EU anti-trust fine
This sudden weakness among key FAANG members is extremely significant. Much more so than most investors realize.
The FAANG-nary In The Coal Mine
Two weeks ago, I issued a report to Peak Prosperity's premium subscribers, warning of an immiment downwards re-pricing of the FAANG stocks. I even made a rare recommendation for taking an active short position against them (one now up 18%).
That report proved quite timely. Over the past 10 days:
- Netflix (NFLX) is down 10% after issuing disappointing subscriber growth and Q3 guidance
- Facebook (FB) is down 20% after delivering lower user and revenue numbers than the Street was expecting
- Amazon (AMZN) is flat despite posting blowout Q2 EPS, offset by a revenue miss
- Google/Alphabet (GOOGL) has managed a meager 3% rise, as earnings & revenue beats were tempered by rising costs and a record $5 billion EU anti-trust fine
This sudden weakness among key FAANG members is extremely significant. Much more so than most investors realize.
Our good friend John Rubino over at DollarCollapse.com just released an analysis titled US Housing Bubble Enters Stage 2: Suddenly Motivated Sellers.
He reminds us that housing bubbles follow a predictable progression:
- Stage 1: Mania — Prices rise at an accelerating rate as factors like excess central bank liquidity/loose credit/hot foreign money drive a virtuous bidding cycle well above sustainably afforable levels.
- Stage 2: Peak — Increasingly jittery owners attempt to sell out before the party ends. Supply jumps as prices stagnate.
- Stage 3: Bust — As inventory builds, sellers start having to lower prices. This begins a vicious cycle: buyers go on strike not wanting to catch a falling knife, causing sellers to drop prices further.
Rubino cites recent statistics that may indicate the US national housing market is finally entering Stage 2 after a rip-roaring decade of recovery since the bursting of the 2007 housing bubble:
Trouble Ahead For The Housing Market
Our good friend John Rubino over at DollarCollapse.com just released an analysis titled US Housing Bubble Enters Stage 2: Suddenly Motivated Sellers.
He reminds us that housing bubbles follow a predictable progression:
- Stage 1: Mania — Prices rise at an accelerating rate as factors like excess central bank liquidity/loose credit/hot foreign money drive a virtuous bidding cycle well above sustainably afforable levels.
- Stage 2: Peak — Increasingly jittery owners attempt to sell out before the party ends. Supply jumps as prices stagnate.
- Stage 3: Bust — As inventory builds, sellers start having to lower prices. This begins a vicious cycle: buyers go on strike not wanting to catch a falling knife, causing sellers to drop prices further.
Rubino cites recent statistics that may indicate the US national housing market is finally entering Stage 2 after a rip-roaring decade of recovery since the bursting of the 2007 housing bubble:
So, we're in the midst of (yet) another rally in the markets. But this one feels different…
For those sitting on large cash positions, it's increasingly looking like the long-overdue and long-awaiting end to the secular bull market may indeed arrive this year.
There is NOTHING wrong with remaining 100% in cash and simply letting your cash appreciate realtive to stocks/bonds/etc when the correction hits.
But, if you want to have some upside exposure to the correction, now is a good time to consider how much of your portfolio to allocate to that strategy. And what to put it in. And to start putting small positions in place.
Technically, it continues to look like something broke at the start of 2018. The ruler-straight run-up in the major stock indeces seen over the past decade suddenly stopped as the year began. Since then, we've seen more price volatility than in the past several years combined.
And despite the most recent price action, both the Dow and the S&P 500 remain below their all-time-highs set in early January. And while the NADAQ is now higher, there are many reasons to be concerened about its ability to rise much further — a rationale I'll lay out shortly below.
Technical Red Flags
This latest rally is rising two important red flags.
The first is volume-related. This most recent rally has occured on exceptionally low volume, near the lowest levels seen over the past year.
This indicates that the optimism represented by today's buyers is not widespread across market participants (i.e., there's not a horde of buyers eager to keep pushing prices higher). This hints that the rally may soon run out of steam.
Low volume driving a rising market also suggests fewer buyers willing to step in to defend today's price levels if they start falling.
The second warning sign is that we're seeing Rising Wedge formations appearing in the major equity indices as we see in this chart…
The Case For Starting To Build A (Small) Short Position
PREVIEWSo, we're in the midst of (yet) another rally in the markets. But this one feels different…
For those sitting on large cash positions, it's increasingly looking like the long-overdue and long-awaiting end to the secular bull market may indeed arrive this year.
There is NOTHING wrong with remaining 100% in cash and simply letting your cash appreciate realtive to stocks/bonds/etc when the correction hits.
But, if you want to have some upside exposure to the correction, now is a good time to consider how much of your portfolio to allocate to that strategy. And what to put it in. And to start putting small positions in place.
Technically, it continues to look like something broke at the start of 2018. The ruler-straight run-up in the major stock indeces seen over the past decade suddenly stopped as the year began. Since then, we've seen more price volatility than in the past several years combined.
And despite the most recent price action, both the Dow and the S&P 500 remain below their all-time-highs set in early January. And while the NADAQ is now higher, there are many reasons to be concerened about its ability to rise much further — a rationale I'll lay out shortly below.
Technical Red Flags
This latest rally is rising two important red flags.
The first is volume-related. This most recent rally has occured on exceptionally low volume, near the lowest levels seen over the past year.
This indicates that the optimism represented by today's buyers is not widespread across market participants (i.e., there's not a horde of buyers eager to keep pushing prices higher). This hints that the rally may soon run out of steam.
Low volume driving a rising market also suggests fewer buyers willing to step in to defend today's price levels if they start falling.
The second warning sign is that we're seeing Rising Wedge formations appearing in the major equity indices as we see in this chart…
As the Federal Reserve kicked off its second round of quantitative easing in aftermath of the Great Financial Crisis, hedge fund manager David Tepper predicted that nearly all assets would rise tremendously in response.
History proved Tepper right: financial and other risk assets have shot the moon. Equities have long since rocketed past their pre-crisis highs, bonds continued rising as interest rates stayed at historic lows, and many real estate markets are now back in bubble territory.
And everyone learned to love the 'Fed put' and stop worrying.
But as King Louis XV and Bob Dylan both warned us, what's coming next will change everything.
A Hard Rain’s a-Gonna Fall
As the Federal Reserve kicked off its second round of quantitative easing in aftermath of the Great Financial Crisis, hedge fund manager David Tepper predicted that nearly all assets would rise tremendously in response.
History proved Tepper right: financial and other risk assets have shot the moon. Equities have long since rocketed past their pre-crisis highs, bonds continued rising as interest rates stayed at historic lows, and many real estate markets are now back in bubble territory.
And everyone learned to love the 'Fed put' and stop worrying.
But as King Louis XV and Bob Dylan both warned us, what's coming next will change everything.
As older guys in our forties and fifties, Chris and I realize that we’re probably not the most compelling messengers to the Millenials and the generations behind them. So we’re constantly looking for others who can be.
In that vein, this short video below from Prince Ea recently caught our attention. It delivers a hard-hitting emotional call-to-action for sustainability and resilience using much of the same data we frequently cite here at Peak Prosperity.
Making It To The 4th Second
As older guys in our forties and fifties, Chris and I realize that we’re probably not the most compelling messengers to the Millenials and the generations behind them. So we’re constantly looking for others who can be.
In that vein, this short video below from Prince Ea recently caught our attention. It delivers a hard-hitting emotional call-to-action for sustainability and resilience using much of the same data we frequently cite here at Peak Prosperity.
Executive Summary
- Creating (Or Reviewing) Your Will
- Creating (Or Reviewing) Your Living Trust
- Other Key Complementary Documents
- Advance Health Care Directive
- Power Of Attorney
If you have not yet read Part 1: If You Die From The Coronavirus, What Will Happen To Your Assets? available free to all readers, please click here to read it first.
If you’re married, have children, or if your assets exceed your debts, having an estate plan in place is highly advised, as detailed in Part 1. In my opinion, not having one is just plain irresponsible, and unjust to those you’ll leave behind when you die.
Here in Part 2, I’ll walk you through the key elements to consider including in your will and living trust, the bedrock components of most estate plans. This information will be useful whether you already have these legal documents in place or not.
Before I do though, let me make a few things absolutely clear. This is NOT personal legal/financial advice. I’m not an estate lawyer nor a tax accountant. And while much of the material presented below will be applicable to the vast majority, your own unique personal situation may require customizations and complexities that are best determined by a licensed professional. Also, estate law differs from state to state. So treat the direction within this article as instructive education only.
As always, we recommend working with professional advisers when building important legal/tax/financial plans customized to your own needs and objectives. When the stakes are high, the relatively small fees you pay for expert advice is well worth the price.
As an FYI, Peak Prosperity’s endorsed financial advisor is well-versed in the estate planning process. If you’d like to tap their expertise about your personal situation, or enlist their guidance in determining how to select the right estate law and tax professionals to help you, you can schedule a free consultation with them here.
Suffice it to say, we recommend your estate plan, however it ultimately gets created, undergo review by a professional before you finalize it. Am I being excessively repetitive here in order to drive this point home? Good.
With that clarification, here’s what you need to get started… (Enroll now to continue reading)
A Primer On The Essentials For Your Will & Living Trust
PREVIEWExecutive Summary
- Creating (Or Reviewing) Your Will
- Creating (Or Reviewing) Your Living Trust
- Other Key Complementary Documents
- Advance Health Care Directive
- Power Of Attorney
If you have not yet read Part 1: If You Die From The Coronavirus, What Will Happen To Your Assets? available free to all readers, please click here to read it first.
If you’re married, have children, or if your assets exceed your debts, having an estate plan in place is highly advised, as detailed in Part 1. In my opinion, not having one is just plain irresponsible, and unjust to those you’ll leave behind when you die.
Here in Part 2, I’ll walk you through the key elements to consider including in your will and living trust, the bedrock components of most estate plans. This information will be useful whether you already have these legal documents in place or not.
Before I do though, let me make a few things absolutely clear. This is NOT personal legal/financial advice. I’m not an estate lawyer nor a tax accountant. And while much of the material presented below will be applicable to the vast majority, your own unique personal situation may require customizations and complexities that are best determined by a licensed professional. Also, estate law differs from state to state. So treat the direction within this article as instructive education only.
As always, we recommend working with professional advisers when building important legal/tax/financial plans customized to your own needs and objectives. When the stakes are high, the relatively small fees you pay for expert advice is well worth the price.
As an FYI, Peak Prosperity’s endorsed financial advisor is well-versed in the estate planning process. If you’d like to tap their expertise about your personal situation, or enlist their guidance in determining how to select the right estate law and tax professionals to help you, you can schedule a free consultation with them here.
Suffice it to say, we recommend your estate plan, however it ultimately gets created, undergo review by a professional before you finalize it. Am I being excessively repetitive here in order to drive this point home? Good.
With that clarification, here’s what you need to get started… (Enroll now to continue reading)
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