BALTIMORE – The U.S. stock market broke its losing streak yesterday.
After five straight losing sessions, the Dow eked out a 92-point gain.
The financial media didn’t know what to say about it. So, we ended up with the typical inanities, myths, and claptrap.
“Brexit panic may be your big chance to buy the S&P 500,” says a headline at MarketWatch.
The article claims investors have pushed down the value of the S&P 500 in fear of a so-called “Brexit.”
Next Thursday, in a national referendum, British voters will decide whether to end Britain’s 43-year membership in the European Union.
But there are a number of problems with this…
First, there has been no big rout in the S&P 500; it’s only a few hundred points below its all-time high.
Second, Brexit is a mystery to most U.S. investors, not a cause for alarm.
Third, nobody knows which side will win… or what it will mean.
Would a Brexit be good for Britain? Would it be bad for stocks?
Nobody knows![Editor’s Note: Bill’s experts on the ground in London shared their takes on the potential impact of a Brexit in yesterday’s Inner Circle titled “Britain Is About to Crash Out of the EU… Here’s What to Do.” Paid-up subs can catch up here.]
Meanwhile, the Financial Times focuses on “slowing job growth and risk of Brexit…”
It notes that a possible Brexit next week is one reason Fed chief Janet Yellen cited for holding off on raising U.S. interest rates at this week’s monetary policy meeting. The newspaper also notes that the Fed has left “the door open” to rate increases.
We’ve been saying the same thing for years: The Fed will NEVER follow through on its pledge to return interest rates back to “normal.”
Never is a long time; but so far, so good. The door is still nailed shut.
First, the Fed waited until last December to pry open a single quarter-point rate increase.
That took the federal funds rate – the base lending rate of the entire economy – to all of 0.5%.
When that set the world’s nerves on edge, the Fed did as we warned it would: It put away the crowbar… procrastinated… hesitated… mumbled… and dragged its feet.
Every month brought a new meeting of the Fed’s monetary policy committee… and each meeting brought forth an effluent rich in waffle and hocus-pocus.
The Fed’s chief witch doctor, Janet Yellen, says the committee will make its decision based on the incoming data. The next move toward normalization of interest rates will be “data dependent,” she insists.
That idea is preposterous, too. These are markets we’re talking about; they go up and down. After so many years of a bull market on Wall Street, Mr. Market must be planning for a change. Stocks gotta go down sometime.
Can the Fed raise rates in the face of falling stock prices?
We don’t think so.
And with the annual rate U.S. GDP growth falling below 1% in the first three months of the year, a prudent investor should prepare for a little backsliding in the economy, too.
Will the Fed cling to its “normalizing” program when a recession sets in?
Bear markets and recessions are facts of life. Because mistakes are facts of life. That’s why markets go up and down. People pay too much for stocks; they need to take a breather until their companies are worth what they paid for them.
Businesses invest too much… hire too many people… produce more than they can sell. Occasionally, they, too, need to slow down… work down their inventories… lay off workers… and prepare for the next growth spurt.
There is no magic to this… nothing new to these patterns. Yet investors are surprised every time!
The headline news is still relatively good – positive GDP growth, high stock prices, and presidential candidates who will “Make America Great Again.”
What more could we want?
And yet, even with these benign conditions, the Yellen Fed is fearful. It won’t take a chance. It won’t make a move. The door is not open; it’s closed.
Of course, the Fed knows that the headlines mask the real weaknesses in the economy.
Industrial production has been falling for nine months in a row. Factory orders have been going down for the past 18 months. Commercial bankruptcies are rising. And tax receipts are beginning to fall, as they typically do before a recession.
More than $10 trillion of government bonds now trade at negative yields. And another $10 trillion or so worth of U.S. stocks trade well above their long-term average valuations.
And there’s more than $200 trillion of debt in the world – with about $60 trillion added since the global financial crisis.
All of this sits on the Fed’s financial applecart. Does Janet Yellen dare upset it?
Nah. It will have to upset itself.
Coming up next week:
The Donald… explained!
The Fed’s real strategy….
Further Reading: That $200 trillion of debt is hanging over our heads like a cartoonishly gigantic weight… And one day soon, it’s going to come crashing down.
That’s the disturbing scenario Bill explains in his latest online presentation. It’s a story you need to hear, so you’ll know exactly what’s coming… and how to protect yourself and your family. Watch here now.
BY CHRIS MAYER, CHIEF INVESTMENT STRATEGIST, BONNER PRIVATE PORTFOLIO
When the world was falling apart in 2008, I advised readers to avoid the luxury sector. “Stick with the essentials,” I warned.
I used iconic jeweler Tiffany & Co. as an example of exactly what you didn’t want to own.
It was a mistake.
By early 2009, Tiffany shares had sunk to under $20 a share. But by late 2014, the stock had rebounded to $107 — a five-bagger — even with a tepid economic recovery.
Today, the luxury goods market is in a funk again. The Wall Street Journal recently summed up why:
The Chinese clampdown on corrupt gift-giving hit sales in 2012. Since then, a series of macroeconomic and geopolitical problems, from commodity-price falls to terrorist attacks, have dulled the appetite of luxury shoppers all around the world.
This is exactly why you should be interested in the sector…
It’s easy to scoff at the luxury market. I’ve done it myself. But there’s an important distinction between true luxury and something merely fashionable.
In Supertrends: Winning Investment Strategies for the Coming Decades (2010), author and investor Lars Tvede writes that luxury is about tradition and uniqueness. A true luxury good may increase in value over time:
Old Louis Vuitton suitcases, old Patek Philippe watches or old Bugatti cars may, for instance, sell for more than their first owner paid, corrected for inflation, because they are testimony to the finest a culture could produce during a given époque.
Many of the world’s most valued luxury brands are very old. There are watchmakers that go back centuries, for example. They also are often from Europe – wines, yachts, aircraft, cars – again reflecting age, tradition, and a unique creation process. (Rolls-Royce, for example, tests the sound of the car’s doors closing. It has to be just so.)
There is another reason to pay attention to luxury goods just now…
According to Capgemini, a French consulting firm that tracks this data, the world’s population of high-net-worth individuals (HNWIs) hit a new record in 2014. (The 2015 report will be out soon.) HNWIs are people with at least $1 million in investable assets. (This calculation excludes collectibles, a primary residence, and durables, like cars.)
The population of HNWIs in the Asia-Pacific region is now the largest in the world. Chinese money, Silicon Valley money, hedge fund money… There are always those with deep pools of cash. And they like to buy luxury goods.
For now, luxury stocks are down. Burberry, LVMH (Louis Vuitton), and Richemont (Cartier) haven’t delivered a positive return in several years.
Longer-term, luxury will bounce back. If you’re seeking solid returns over the next two to three years and beyond, give this sector a look. The stocks are undervalued today.
Editor’s Note: Next Tuesday, Chris and Bill are teaming up with Porter Stansberry – Bill’s longtime friend and business partner and one of the most powerful names in financial research.
They’ll reveal their thoughts on today’s top-heavy market… how to position your portfolio when you’re skeptical about the world’s current political, social, and economic problems… and how to create a wealth-generating portfolio that will support your family for years to come.
It’s all happening Tuesday, June 21, at 8 p.m. Eastern Time. To register for this free event, go here.
Advice for Every Gold Investor
Bill says “yes” to gold. Most PhD economists say “no.” So what should gold investors do? One longtime currency expert explains what their next step should be…
British Politician Murdered Ahead of Brexit Vote
Yesterday, a man shouting “Britain first!” – the name of a far-right, anti-immigrant organization – murdered a 41-year-old politician who was campaigning against Britain leaving the European Union.
“Fear Index” Signals Trouble Ahead
The Volatility Index – or VIX – is often referred to as the stock market’s “fear index.” Fear is a necessary component of bear markets. And right now, the VIX is warning that fear is running high.
After a tirade of criticism in yesterday’s Mailbag over Wednesday’s issue on mass murder in the Bible, we asked whether you thought Bill should steer clear of commenting on religion.
Here are some of the responses we got…
Hell, no! That’s my answer to the idea that Bill should just stick to talking about economic issues. For Heaven’s sake don’t let the PC police bully you into avoiding conversations that might offend the “chosen people” or anyone else.
I love your writing and your questioning of the status quo on all things social, political, economic, and religious. If a few loud complaints are able to muzzle your voice on this issue, then we know the thought police have successfully shackled one more elegant free thinker.— Scott B.
I think Bill can write whatever he wants to write as long as he is sincere. He surely won’t threaten or surprise God. And surely, God can take care of Himself without readers’ help!— Bobby C.
I love how Christians are only “Christian” to each other. You can’t have an opinion?
God created “wicked" people just to destroy them to make a point? Men wrote the Bible. They picked the books they wanted. Who thinks that wasn’t political?
So, you talk about God, finances, wars – it’s your Diary! Pants in a wad over burnt toast. There a whole lot more to worry about!— Michele W.
People need a sense of humor. And if God doesn’t have one, where does it come from?— Brian B.
Bill should write about what he damn well pleases. After all, the Diary is HIS creation!— Alfred C.
I understand and appreciate your right and ability to print whatever you want. But, please, please stay on subject – facilitating our financial wellbeing.
When you comment on God – sarcastically or with deep conviction (sometimes it is hard to tell the difference) – you bring the nut cases and fruitcakes out of the woodwork and waste a bunch of time and bandwidth.
Unless you want to run followers off, as “The Donald” appears good at, let’s get back to concentrating on relevant financial issues and how to avoid being crushed by the Deep State. Thanks for listening.— Paul F.
Politics, war, religion, love, and back to money. At least you have the courage to toss it out there to the very wide, very mixed crowd of us “older and wiser.”
If we all thought the same way and did the same things it would be a mighty boring place. The First Amendment freedom we have (though watered down like so much of the Constitution with the state monitoring and categorizing us based on no-no words) at least allows you spur debate… as does it those who wish to permanently not participate by “canceling.”
I don’t always agree with you. But your comments on your observations give me a good grounding to weigh other sides and be wiser because of it. Not the spoon-feeding of propaganda that the mass media dish out.— Brad H.
I found it amusing to read the comments of readers that were upset because you quoted passages out of the very Bible Christians and Jews believe in. Religion is about control and power and they’re all nuts if you ask me!— Doug S.
Loved your comments regarding the Old Testament. I’m sure you knew what some of the response would be. I know I did and was waiting for the explosion.
I have to say, even knowing what was coming, I laughed to tears through the responses [catch up here]. It was so predictable. Keep doing what you do, and don’t back off. Honesty is the best policy. I’m sure those few who cancel won’t hurt the bottom line.— Cal P.
Do what you do. Don’t worry about people who are offended about what you say about the Bible. You can’t please everybody. Some people are too waited up in their own dogma they have decided to believe than to critically analyze it.
There’s little critical thinking being done in the world today. And none of these responses to your article are evidence of it.— D.D.
Not sure why everyone gets so fired up about your opinions on God… and everything else for that matter. I may disagree with you, but I won’t stop reading what you write. I will eat the meat (finance) and spit out the bones (your interpretation of God) and live my life.— Heath R.
Comments and opinions of all sorts are welcome – that’s how we can personally arrive at conclusions and make personal decisions. I greatly appreciate your insight and analysis, Bill. No complaints here.— Philip I.
I shake my head again at the consistent beauty of your prose. For 16 years, your writings have been a highlight of my day for their lucidity, their insight, and their humor… even though you occupy a rather distant ideological space compared with mine. Thanks for all the work.— Gary M.
Thank you for your continuing thoughtful analysis of real world events. I value your insights into the world as it is… not as politicians, the media, religious fanatics, and the Deep State advertise it. Never mind the naysayers. Keep up the good work!— Steve T.
Enjoying Bill’s writing is, to me, a very personal thing. It’s not meant for everyone. I wonder if he does the controversial stuff to sort the sheep from the goats, and to encourage folks toward the exercise of critical thinking.— Tom H.
I am outraged! OUTRAGED! You poke a stick at Christians. You make fun of Muslims. You question Atheists. But you never say anything about Buddhists!
Come on, Bill, can’t you at least be an equal opportunity offender? If you don’t start calling out more groups I might threaten to cancel my subscription.— Scott S.
Save the date!
What: Bill Bonner, Chris Mayer, and Porter Stansberry join forces to discuss their top investing strategies.
Where: Our RSVP-only website.
When: Tuesday, June 21, at 8 p.m. ET.
How: Go here to register for this free event.