Economy

Note:  Below is an article that I was asked to submit to Financial World for their July/August issue.  The editor heard me speak at the CSFI gig in London in January.  I am posting this so that you can read it early, but it is not to be distributed outside of this enrolled-member firewall in any way until after publication. 

I chuckle to think that I now get to put such an “off the reservation” message out to a very wide audience of financial professionals.  Enjoy, and let me know if you have any feedback or advice on how to improve it.  (Note that this is just a couple of words shy of the 1,800 word limit so there’s not a lot of room to add more without subtracting).

Best,
Chris

Investing Made Hard

There are enormous structural changes related to oil-based energy and other natural resources that could completely upend everything we think we know about investing and how it works.   In this article I will present the view that a historical shift is upon us.   The prudent investor or financial professional needs to consider the possibility that a period of disappointing financial returns, if not profound disruptions to our ‘way of life,’ will be the new normal for the next several decades.

Here I sit on Tuesday morning at 6:40 a.m. looking at what promises to be an extremely rough open for the US stock markets.  Unless another opening-bell miracle rally in the cash market ensues, like it did last Friday, today is going to be a very bad day on the US stock markets.

Currently futures for the Dow are down -227 points from yesterday’s close, and the S&P 500 futures are down -27.

Note that in the futures charts offered by FinViz.com (below), which I really like to use, mysteriously do not record the change in reference to the prior close.  I’m not entirely sure what they base off of…perhaps midnight?

Time to open up another daily discussion thread.

Dow futures are currently pointing to an open below the 10,000 mark (currently 9,961), which I expected to put up more of a fight as it is an important round figure.  S&P 500 futures are currently off by -10, which, importantly, places the market open below yesterday’s close.

While there’s still time for the market to bounce before the open, this continued weakness in the pre-market arena speaks to some still-unresolved issues in the big world of liquidity.

European equities started the day with a strong push up, but have sagged along with US futures, although which is the horse and which is the cart is hard to say.

Here we are, about an hour from the market open in the US, and European markets are down hard, while US stock futures point to a miserable open.

I’m opening this thread to follow the day’s activities.

As I write this, S&P futures are down -23.50 and Dow futures are down -156.

Gold is down a further -$15 to $1179/oz, and oil is down a full -$2.17 to $67.70.

In this Insider Report, I am going to connect a very oddly-matched set of data points in the housing market to recent events here on the site.

The first housing data point is in the very bullish-sounding news that housing starts increased for the second straight month and surged to an 18-month high.  Sounds like we’re out of the woods, right?  This is a fascinating story, in which a little context goes a long way.

Here’s the first piece of news:

It was recently announced that the Fed planned to re-open lines with other central banks, allowing them to swap for dollars.  We’ve been down this path before.  I want to review what happened last time, because if that pattern repeats, we are about to begin a brand-new stage of financial system stress and stock market losses.

Well, it’s another day with another bout of exceptional volatility.

As I type this, the S&P 500 is down -23 points, the Dow is off by -240, no -183, no-210, no -91….oh never mind.  Let’s just watch while sitting on our trading thumbs.

Meanwhile, gold is stubbornly hanging around the $1200 mark and the news out of Europe is awful.

This is the news that makes me the most worried: