August 21, 5:00 pm EST

With the S&P 500 finally returning to new record highs today, fully recovering the price correction this year, let’s take a look back at the correction, and where stocks can go from here.

As I said in my January 30 note “experience tells us that markets don’t go in a straight line. And with that, we should expect to have dips along the way for this bull market. Since 1946, the S&P 500 has had a 10% decline about once a year on average. A correction here would be healthy and would set the table for hotter earnings and hotter economic growth (coming down the pike) to ultimately drive the remainder of stock returns for the year.

Fast forward eight months, and we’ve now had a 12% correction.  And we’ve since had back-to-back quarters of 20%+ earnings growth, with an economy that is finally growing at better than 3% four-quarter average annualized growth.

Meanwhile, stocks remain cheap.  The 10-year yield is still under 3%.  And historically, when rates are low (sub 3% is still VERY low), stocks tend to trade north of 20 times earnings.  The forward P/E on stocks at the moment is just 17.  If we apply a 20x multiple to $170 in forward S&O 500 earnings, we get 3,400 in the S&P.  That’s 19% higher.

With that in mind, let’s also revisit my chart on the long term growth rate of the S&P 500.


In the orange line, you can see what the S&P 500 looks like growing at 8% annualized (the long-run average growth rate) from the pre-crisis peak in 2007. This is where stocks should have gone, absent the near global economic apocalypse. And you can see the actual path for stocks in the blue line.

Bottom line: Despite the nice run we’ve had in stocks, off the bottom in 2009, we still have a big gap to make up (the difference between the blue line and the orange line). This is the lost decade for stocks.

This argues for another 28% higher in stocks to fill that gap.

If you haven’t joined the Billionaire’s Portfolio, where you can look over my shoulder and follow my hand selected 20-stock portfolio of the best billionaire owned and influenced stocks, you can join me here.

June 26, 5:00 pm EST

While the media continues to be stuck on the global jawboning about trade. We’ve been talking about the continued domestic “leveling of the playing field.”

We’ve seen the verbal and Twitter shots taken by Trump at the tech giants since he’s been in office.  And the threats have slowly been materializing as policy.

Late last year, we talked about the repeal of the Net Neutrality rule.  And now we have the Supreme Court ruling that subjects internet sales to state tax.

Before you know it, the tech giants (Facebook, Amazon, Netflix, Google …) may actually be held to a similar standard that their “old economy” competitors are held to.  They may have to pay for real estate (i.e. bandwidth). They may be liable for content on their site, regardless of who created it. And they may be scrutinized more heavily for anti-competitive practices.

That means, the costs may go UP for these companies.  And the cost may go UP for consumers.  But a more balanced and stable economy and society may come with it. 

So, the balance of power is shifting, just as people were becoming convinced that Amazon was taking over the world.  As we’ve discussed, if the market starts pricing OUT the prospects of Amazon becoming a monopoly, then the jaws may be closing on this chart …

Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more. 


August 7, 2017, 4:00 pm EST               Invest Alongside Billionaires For $297/Qtr

James Bullard, the President of the St. Louis Fed, said today that even if unemployment went to 3% it would have little impact on the current low inflationevironment. That’s quite a statement.  And with that, he argued no need to do anything with rates at this stage.​And he said the low growth environment seems to be well intact too — even though we well exceeded the target the Fed put on employment years ago.  In the Bernanke Fed, they slapped a target on unemployment at 6.5% back in 2012, which, if reached, they said they would start removing accomodation, including raising rates. The assumption was that the recovery in jobs to that point would stoke inflation to the point it would warrant normalization policy. Yet, here we are in the mid 4%s on unemployment and the Fed’s favored inflation guage has not only fallen short of their 2% target, its trending the other way (lower).

​As I’ve said before, what gets little attention in this “lack of inflation” confoundment, is the impact of the internet. With the internet has come transparency, low barriers-to-entry into businesses (and therefore increased competition), and reduced overhead. And with that, I’ve always thought the Internet to be massively deflationary. When you can stand in a store and make a salesman compete on best price anywhere in the country–if not world–prices go down.

And this Internet 2.0 phase has been all about attacking industries that have been built upon overcharging and underdelivering to consumers. The power is shifting to the consumer and it’s resulting in cheaper stuff and cheaper services.  And we’re just in the early stages of the proliferation of consumer to consumer (C2C) business — where neighbors are selling products and services to other neighbors, swapping or just giving things away.  It all extracts demand from the mainstream business and forces them to compete on price and improve service.  So we get lower inflation.  But maybe the most misunderstood piece is how it all impacts GDP.  Is it all being accounted for, or is it possible that we’re in a world with better growth than the numbers would suggest, yet accompanied by very low inflation?

Join our Billionaire’s Portfolio and get my most recent recommendation – a stock that can double on a resolution on healthcare. Click here to learn more.  


In the past month, U.S. stocks had the biggest one day spike in volatility on record, and while the percentage swing in stocks didn’t rank in the top five of biggest days, it wasn’t far off.

Since then, there have been violent swings across global stocks, and heightened uncertainty about what lies ahead.

Keep in mind, there was a lot of damage to investor psychology in the early days of this decade-long economic downturn. That has created a contingent of investors that have been fearing another shoe to drop.

That fear leads to under participation in stocks, and it also leads to weak hands in the stock market. The “weak hands” are those that may own stocks, but have little conviction (and likely a lot of fear). It’s this dynamic that has created the sharp swings we’ve seen a few times in recent years, and this most recent decline fits the bill. While the current decline was sharper and more extreme than anything we’ve seen since 2008, the reasons are far from the same. Bear markets in stocks are driven by recession or a major economic event that can lead to recession. We have neither.

In the U.S., fundamentals are solid and improving. For those that argue the economy is fragile, the bond market disagrees with you. The yield curve is the best predictor of recessions historically. Yield curve inversions (where short term rates move above longer-term rates) have preceded each of the last seven recessions. Based on this analysis, the below chart from the Cleveland Fed shows the current recession risk at virtually nil.

With no recession risk on the horizon, this dip in stocks looks like yet another valuable buying opportunity. We’ve had seven declines of close to 5% or more in the S&P 500 since late 2012. In each case, the decline was fully recovered in less than two months. In most cases, the decline was recovered inside of one month. This is an amazing fact, yet many people have been trying to pick tops, rather than preparing to buy the dip. We still have global central bank policies that continue to defend against shocks and promote global recovery (from Japan and Europe) and the Fed should continue its plan to slowly remove the crisis-driven emergency policies that have been in place for the better part of 10 years. Moving away from emergency policies is positive! With that, this broad correction looks healthy and could kick off another leg of a strong run for stocks.

Warren Buffett has famously said a simple rule dictates his buying: “Be fearful when others are greedy, and be greedy when others are fearful.” No surprise, he publicly said today that he’s on the prowl to deploy $32 billion of fresh capital to buy stocks on sale.

At our specialty is following the lead of billionaire investors. Many will speculate on what Buffett might buy with a fresh $32 billion. But to find stocks on sale, we look no further than his current portfolio. There, we find stocks that have the “wide moat” characteristic Buffett covets. And after the recent sell-off, some have dividend yields higher than treasury bonds, and P/Es well below the market average.

Below are four blue-chip stocks owned by the great Warren Buffett, each of which is cheap, and with a catalyst at work that can reprice the stock higher:

1) American Express (AXP) is one of Buffett’s “four horseman,” yet American Express is down 20% over the past year, leaving it with a current P/E of only 13. Recently one of the top activist hedge funds, ValueAct Capital (an $18 billion hedge fund run by Jeffrey Ubben) took a $1 billion position in AXP. ValueAct takes a private equity approach to investing and many are predicting that ValueAct will shake up the current management of American Express. The last blue chip stock ValueAct targeted, Microsoft, is up almost 50% since ValueAct took a position — a good sign for American Express investors.

2) IBM (IBM) is another one of Buffett’s core holdings. Buffett owns 8% of IBM or almost $13 billion worth. Right now you can buy IBM at a much cheaper price than Buffett paid for his shares (Buffett paid around $162). Buffett rarely makes mistakes, so this is a once in a lifetime opportunity being able to buy Buffett at a discount. IBM is also dirt cheap with a P/E of 9 (almost half the P/E of the S&P 500) and has a dividend of 3.6%, well above the current yield on the 10-year Treasury note. The stock is so cheap any positive news could send IBM flying. Earnings could be the big catalyst for this stock. They report in October.

3) Wal-Mart (WMT) – Buffett currently owns more than $4 billion of Wal-Mart. The stock is down 24% in 2015. It trades at only 13 time earnings with a dividend yield of 3%. One could argue Wal-Mart is the cheapest “blue chip stock” at a price-to-sales of .42 (the lowest of any Dow component). Consumer discretionary is the strongest sector in the market this year, the only sector that has a positive gain for the year. With unemployment nearing “normal” levels, and with gasoline prices at 11-year lows it is only a matter of time before consumers start spending more, and Wal-Mart is usually one of the biggest beneficiaries of this trend.

4) General Electric (GE) is another large Buffet stake that has a huge dividend (3.8%) and sells for a forward P/E of 15. The real catalyst with GE is that the company expects to return a whopping $90 billion to shareholders over the next couple of years, which will mean a dividend increase and a stock buyback, all positive catalyst’s to reprice GE higher in the future.

To follow the hand-selected stock picks of the world’s best billionaire investors, subscribe at