July 30, 5:00 pm EST

The Nasdaq continued to slide today.  Stock indices tend to go down a lot faster than they go up.  The tech giant-driven Nasdaq was up over 15% year-to-date, just a few days ago, and has now given up more than 4% from the highs.

Not surprisingly, as people run for the exit doors on the big tech giants (taking profits), we’re seeing money rotate into the blue-chip value stocks.

The Dow and S&P 500 did much better than the Nasdaq today, which continues to slowly correct the big performance gap of the year (where the Nasdaq was up 15% at one point, while the DJIA was flat on the year).

Now, the biggest event of the week for markets may take place tonight.  We hear from the Bank of Japan on monetary policy.  We’ve discussed, many times, the role that Japan continues to play in our interest rate market.

Despite seven hikes by the Fed from the zero-interest-rate-era, our 10-year yield has barely budged. That’s, in large part, thanks to the Bank of Japan.  Japan’s policy on pegging its 10-year yield at ZERO has been the anchor on global interest rates.

As I’ve said, when they finally signal a change to that policy, that’s when (our) rates will finally move.  And that may be tonight.  There is speculation that they may adjust UP that target on their 10-year yield.  That would represent a dialing back of the BOJ’s QE program, which would signal the initial steps of exiting the crisis-era QE program.

What would that do?  If the BOJ does indeed adjust their “yield curve control” policy, it should send global interest rates higher.  That would put our ten-year yields back above 3%, which has been a level that has caused some uneasiness in markets.   This time around, a move back above three percent would reflect a steepening U.S. yield curve which may be perceived as a positive, especially for those that have been concerned about the potential of seeing an inverted yield curve (i.e. a recession indicator).

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March 16, 2017, 3:30pm EST               Invest Alongside Billionaires For $297/Qtr

Following the Fed yesterday, we heard from the Bank of Japan overnight, and the Bank of England this morning.  As for Europe, we heard from the ECB last week.

Coming into this week we’ve had this ongoing dynamic, for quite some time, of the Fed going one way on rates (up) and everyone else going the other way (cutting rates, QE, etc.).

That’s been good for the dollar, as global capital tends to flow toward areas with rising interest rates and better growth prospects. That combination tends to mean a rising currency and rising investment values.  What really determines those flows though, is the perception of how that policy spread, between countries, may change.  Most recently, that perceived change in the spread has been in favor of it growing, i.e. Fed policy tighter or at least stable, while other spots of the world considering even easier on monetary policy.

That divergence in policy has been bad for currencies like the euro, the pound and the yen. But that hit to the currency is part of the recipe. It promotes higher asset prices, better exports and growth.  And as Bernanke says, QE tends to make stocks go up, which helps.

Still, those stocks have lagged the strength in U.S. stocks.  With that, over the past six months or so, I’ve talked about the opportunities in European and Japanese stocks for a catch up trade.

While U.S. stocks have continued to set new record highs, stocks in Europe and Japan have yet to regain the highs of 2015 — when the global economy was knocked off course, first by slowing China and a surprise currency devaluation, and later by a crash in oil prices.

With that, if you think Trumponomics marked the end of the decade long deleveraging period (post-financial crisis), and that the Fed is signaling that by ending emergency level monetary policy, then the rest of the world should follow.  That means the next move in Europe, Japan, the UK will be toward normalization, not toward more emergency policies.

That means the expectations on the policy gap narrows.  With that, we may have seen the bottom in the euro.  If negative interest rates and an election cycle that has parties that are outright promising to destroy the euro can’t push it to parity, what can? If it can’t go lower, it will go higher.


And if the euro has bottomed and the next move for the central bank in Europe is tapering, the first step toward ending emergency policies, then this stock market in Europe looks the most intriguing for a big catch up trade – still about 20% off of the 2015 highs and well below the pre-crisis all time highs.

mar16 ibex

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March 13, 2017, 4:15pm EST                                                                                           Invest Alongside Billionaires For $297/Qtr

This week will be a huge week for markets. Stocks continue to hover around record highs. Rates (the 10 year yield) sit at the highest level in three years.

This snapshot alone suggests a world that continues to believe that pro-growth policies “trump” all of the risks ahead.  At the very least, it’s pricing in a world without disruptions.  But disruptions look likely.

Here’s a look at stocks as we enter the week. Still in a 45 degree uptrend since the election.

But if we take a longer term look, this trendline looks pretty vulnerable to any surprise.

Let’s take a look at the disruptions risks:

There was a chance that the official execution of Brexit may have come as soon as tomorrow — the UK leaving the European Union by triggering Article 50 of the Treaty of Lisbon. That looks unlikely now, but could come in the coming weeks.  To this point the Bank of England has done a good job of responding and promoting stability which has led to financial markets pricing in an optimistic outcome.

We have the Fed on Wednesday. They will hike for the third time in the post-financial crisis era. We don’t know at what point higher interest rates, in this environment, might choke off growth that is coming from the fiscal side.

This next chart looks like rates might run to 3% on the 10-year.  That would do a number on housing, IF tax reform and an infrastructure spend out of the White House come later than originally anticipated (which is the way it looks).

We also have the Bank of Japan and Bank of England meeting on rates this week. Let’s hope they have a very boring, staying the path, message. That would mean extremely stimulative policies for the foreseeable future 1) in the case of Japan, to continue to promote global liquidity and anchor global yields, and 2) in the case of the UK, to continue to promote stability in the face of uncertainty surrounding Brexit.

Keep this in mind:  The Bank of Japan’s big QE launch in 2013 is a huge reason the Fed was able to end QE in the first place, and start its path of normalization.  The BOJ launched in April of 2013.  Bernanke telegraphed “tapering” a month later.  The Fed officially ended tapering on October 29, 2014.  Stocks fell 10% into that official ending of Fed QE.  On October 31, 2014 (two days later), the BOJ surprised the world with bigger, bolder QE (a QE2). Stocks rallied.

Finally, to end the week, we have a G-20 finance ministers meeting.  This is where all of the trade and dollar rhetoric from the new administration will be front and center. So the news/event outlook looks like some waves should be ahead.  But any dip in stocks would be a great buying opportunity.

In our Billionaire’s Portfolio, we’re positioned in a portfolio of deep value stocks that all have the potential to do multiples of what broader stocks do — all stocks owned and influenced by the world’s smartest and most powerful billionaire investors.  Join us today and we’ll send you our recently recorded portfolio review that steps through every stock in our portfolio, and the opportunities in each.


February 10, 2017, 4:00pm EST                                                                                Invest Alongside Billionaires For $297/Qtr

Stocks finished the week on record highs.  We talked earlier in the week about Trump’s meeting with Japan’s Prime Minister and his economic and finance advisors.

I suspect that Trump will come away, after a weekend in Palm Beach with Abe, learning that Abenomics is good for the U.S., and good global growth and stability (in the current global economic environment).

And one of the keys to success in Abenomics is a weaker yen, which translates to a stronger dollar.  As I’ve said, the weak yen has been pulled into the fray with Trump’s tough talk on trade imbalances, but his beef on currency advantage is really directed toward China – not Japan, not Mexico, not even Europe.

With that, and with the assumption that the yen may be pardoned for a while, the dollar bouncing against the yen as we head into the weekend. And it looks like we may see a technical breakout and an even higher dollar, lower yen in our future.

usdjpy feb10

And Japanese stocks look set to break out too, to catch up to the strength of U.S. stocks. The Nikkei is 8% off of the 2015 highs, while U.S. stocks are on record highs, and 8% ABOVE its 2015 highs.

nikkei feb10

Another catch up trade: German stocks.  Despite the growing attention given to the French nationalist candidate, Le Pen, who has been anti-euro and anti-European Union, right or wrong the bond market isn’t showing any new interest in disaster insurance in Europe, nor is the euro.

german dax feb 10

With that, German stocks look very good, still about 8% from the 2015 highs, and the technical correction clearly ended last summer.

Lastly, let’s take a look at another big sleeper stock market, China…

china stock feb 10

You can see how Copper is on a big run (up 10% ytd).  That typically correlates well with expectations of global growth.  Global growth is typically good for China.  Of course, China is in the crosshairs of Trump’s fair trade movement, but if you think there’s a chance that more fair trade terms can be a win for the U.S. and a win for China, then Chinese stocks are a bargain here.

Have a great weekend!

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Over the past two days, we’ve looked back at a couple of the six marketthemes I expected to dominate in 2016. Back in January, I said “central banks are in control, be long stocks.” That was theme number one. And I thought “China’s currency manipulation would come home to roost.” That was theme number six. Both have clearly materialized. As for China, its currency manipulation has become center stage with the incoming President Trump.

Among the six themes we discussed back in January, I also expected the dollar to continue on a big run. I said…

“The dollar is in a long term bull cycle—Be Long Dollars

When we look back at the long term cycles of the dollar over the past 40 years, we see five distinct cycles for the dollar. And these cycles have lasted, on average, about seven years. The most recent cycle is a bull cycle, started in March 2008, yet has underperformed the average of the past six cycles. While the bull cycle appears to be long–in–the–tooth, in terms of duration, the fundamentals for dollar strength have just recently swung massively in favor of the dollar. We have an historic divergence in the monetary policy path of the U.S. relative to Europe and Japan—a very rare occurrence to have the Fed going one direction (toward raising rates) and two major economic powers going the opposite direction, aggressively.

This huge monetary policy divergence dynamic creates the potential for a sharp extension in the dollar over the coming months.”

The dollar has indeed been strong, but only after a correction earlier in the year. In the past week, the dollar index has reached a 14–year high.

With the Fed projecting three hikes next year and Europe and Japan still going the opposite direction (full bore QE), the dollar trend doesn’t look like it will slow anytime soon. And despite what many are warning about what a stronger dollar might do to growth, a strong dollar tends to accompanystrong growth historically (and it doesn’t kill it). On the other hand, it should be fuel for the rest of the world, as cheaper foreign currencies give the weaker global economies a chance to export their way out of an economic rut.

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