Market Mayhem Update: Eye Of The Storm

adam-taggart-2 · April 18, 2020, 5:35am

A mind-blowing 22 million people have filed for unemployment benefits over the past four weeks:<img class=“aligncenter size-medium” src=“https://peakprosperity.com/wp-content/uploads/2021/09/2020-04-16-2.png” alt="“initial jobless claims” width=“1320” height=“742” />

And as we approach corporate Q1 earnings season, the expected losses look absolutely terrible:

Yet stocks continue rebounding. So much so that, insanely, the FANG-stock complex is back to an all-time high:

So, is the market correction over and done with? Are we back on our way to new highs? For those sitting in cash, is it time to get back into the market? Or is this a sucker’s rally?

As we’ve been doing throughout the recent market volatility, we just reached out to the lead partners at New Harbor Financial, Peak Prosperity’s endorsed financial advisor, to get their latest perspective on these questions.

They strongly advise not being duped by the recent return of investor exuberance, and predict the current rising optimism will soon be dashed by a coming reversal:

Anyone interested in scheduling a free consultation and portfolio review with Mike and John can do so by clicking here.

And if you’re one of the many readers brand new to Peak Prosperity over the past few weeks, we strongly urge you get your financial situation in order in parallel with your physical coronavirus preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.

SCHEDULE YOUR FREE CONSULTATION

This is a companion discussion topic for the original entry at https://peakprosperity.com/market-mayhem-update-eye-of-the-storm/

wotthecurtains · April 19, 2020, 3:03am

The Fed’s corporate bond buying program strikes me as a game changer.
I realize they wont buy all bonds issued by all companies but if they are buying bonds as a general proposition, I’m starting to wonder if bankruptcy is even possible anymore among politically well connected firms.
The equity investors wait in line behind the debt investors in a bankruptcy right? That’s the textbook reason that bonds are considered the more mature big brother of the markets and equities are the bucking bronco that can make you rich (or poor) in a hurry relative to stable bonds.

But if the Fed has a program allowing corporations to sell newly created bonds directly to it in exchange for newly created money (the Fed doesn’t even need to buy from secondary markets), then what risk would equities even have?
Im asking that rhetorically and awkwardly but I hope Im getting my point across.

It reminds me of the bank bail-in provisions that happened around 10 years ago. Many a blogger said it proved you were crazy to be a depositor in a bank, but their stocks went up as if they had suddenly acquired a lot of new “implied reserves” (ie. your deposits were now known to be their property in extrimis). So in the short term, the banks were seen as more stable (not less) and their value increased which is the opposite of what econ 101 type thinking would lead you to.

mki-2-2 · April 19, 2020, 5:22am

then what risk would equities even have...asking that rhetorically

Fully agree here. We saw this in 2008 so clearly I'm puzzled people don't seem to get it. What am I missing? Because it's seems a no-brainier. So I just keep doubling my NW sticking to stocks and I don't see much downside using careful monitoring and judicious stop-losses. But it's a mental change for me, since stocks clearly wouldn't be worth much if the US didn't prop them. Bonds did great before 2008 but stocks post-2008 really seem to have no downside at all (I mean blue-chip , A-rated, dividend paying) since the government won't let them go down where they belong, & they are shedding cash to dividends in the 2-3% range. Where's the downside? IMO, blue-chip US multinationals are the new T-Bond: it has the faith and backing of the US printing press and US military PLUS are practical monopolies. All I look for is book value & low debt & fat dividends, and don't really care what it does. I just hold my nose and buy.

mki-2-2 · April 19, 2020, 5:50am

Case in point on equities & risk: in this latest Covid 19 debacle, which should have been a serious blow due to the uncertainty alone, I just looked over my stocks/PM portfolio, and at its very worst point it was only down 3% from prior 12 months. WTF? Now it’s UP well over 3% from 12 months…and this doesn’t even include dividends, which add another 2.5%! So I’m 5% up YOY in the “bear market” we’ve been waiting for? Look, it’s flat out criminal how the government is playing to the fat cats, but it the Fed is gonna sing, I’m gonna dance along with them. I’m wondering why I even to bother with stop losses anymore (just kidding!).
Now, I still am a coward on FANG. But why even take the risk? The cash-earning blue-chip A rated firms are doing fine too, so why get adventurous?

wotthecurtains · April 19, 2020, 3:57pm

Re: Not wanting the FAANG stocks.

For me the FAANG stocks are companys that practice “new kinds of evil on a grand scale” whereas the blue-chips are practicing the sort of “regular every day” chicanery that we are all used to. It makes them easier to stomach I guess.

I always felt “moral” about investing in the PMs and (lately) the miners because it feels like an area where if I’m wrong Ill lose money like I deserve to, and if I’m right I not only make money like I deserve but I defend myself from “the destroyers” and keep my capital out of their hands as well.

Still I can’t go “all in” on metals. I sold my “regular equities” just as the markets were starting to break down and people around me talked like I was a genius, but if I had just stayed in my VGRO units I would have been down maybe 10% at bottom and almost entirely recovered by now anyway.

And like you said, thats supposedly the biggest fastest collapse in the history of markets.

Strange days indeed. I think we go full Venezuala in due course. Those in the broad markets will lose less but at least end up with something.

mki-2-2 · April 20, 2020, 12:07am

I always felt “moral” about investing in the PMs

I can't see any currency being more "moral" than another. It's just a law. Sure using PM clamps down on the government's ability to print. But so what? They can tax and kill and imprison at will anyway. So I follow the law and play the game. It's like somebody not using electricity or plastic to "protest" wrecking the environment; would prob cause more damage to the environment than doing nothing. Re: investing - every stock has some immorally, as does every bond, every gold mining company, every ounce of gold that has been mined. Look, I'm not claiming morality doesn't matter. I try to avoid investing in genocidal and evil states like China, but I won't ruin my day to avoid it to obsession. And to me this has no place in choosing between gold or IBM or buying a home. It's all part of the same economy.

judith-ny · April 21, 2020, 1:10pm

Would you please address the health of U.S. Treasuries? With the Fed aggressively buying bonds, I would expect dollar devaluation and future inflation. However, as the quality of the bonds they are purchasing declines, what impact are you expecting? How do you hedge against this, without being in equities?