Are we going to have another financial crisis? Absolutely, but we will survive it, just like all the others. More importantly, are we going to have another financial crisis in the near future? A month ago, I was worried. Today, I am less so. My concern was that a perfect storm of a commodity crisis, a credit crisis, and a currency crisis were hitting us…
Everybody knows about recessions, as we normally have one every 4-8 years and are due for another. The conventional definition is that GDP must drop two consecutive quarters, usually at an annualized rate of about 3%. Despite the fact that investors invariably over-react to the first hint of a recession, the really scary thing out there is not a recession . . . but a…
The novice investor tries to buy a stock when it hits a low and sells it when it hits a high. What could be wrong with that? After all, doesn’t everybody say “buy low and sell high?” As wonderful as that sounds, numerous studies have shown that “market timing” seldom works in the short-term term and never works in the long-term. As Warren Buffett has…
Some of us are expected to be mind-readers at best or soothsayers at worst. Because of that, we are usually more forgiving when others in our profession are proven wrong . . . unless it is the legendary Goldman Sachs, of course. On January 28th, Russia called for talks with other oil-producing nations to limit production in order to raise the price of oil. Goldman…
At first, I felt guilt . . . then quite quickly, I felt relief . . . great relief. I had forgotten to watch the presidential debates at 9PM on Saturday night. I wasn’t surprised by the guilt, as I’ve always tried to be an analytic, dispassionate voter and do try to watch such events. But, I was surprised at the sense of relief. It…
Excess emotions produce bad decisions. Did you feel bad when the Dow lost 300 points on Thursday? How bad?Did you feel good when the Dow rose 300 points yesterday? How good? I’ll bet the strength of your bad feelings on Thursday was greater than the strength of your good feelings on Friday. That’s because the pain of loss far exceeds the joy of gain. You…
Readers know I have no fear of recessions nor bear markets. We have experienced many of both and know they always end. There is no “sky is falling” concern to recessions or bear markets. However, I have been very worried about a financial crisis, which is like a heart attack. It comes suddenly, and recovery is slow. The usual channel for a financial crisis is…
What’s the difference between a doctor and a financial advisor? The obvious difference is that the doctor is worried about your physical health, while the financial advisor is worried about your fiscal health. Another difference is that doctors are frequently asked for free advice at cocktail parties and other places. Financial advisors are also frequently asked for free advice. The difference is that there is…
An old rule of thumb on Wall Street is that corrections (down 10%) can end with a roar, while bear markets (down 20%) end with a whimper. In other words, there has to be capitulation or surrender by the investors, when they can no longer take the pain. Getting to capitulation sooner rather than later means the pain ends sooner rather than later. Bring it…
I attended a disturbing lecture on Saturday. About 30 minutes into the lecture, the speaker stopped abruptly, producing an awkward silence. His facial expression became trance-like. Finally, he said “I’ve been diagnosed with stage 4 cancer.” There was an audible gasp among the hundred or so attendees. He went on to say that, while he recently learned the cancer is in-remission, his doctor also told…
Tucker Carson is an industrial-strength Republican, and Paul Begala is an industrial-strength Democrat. While I hold no great respect for partisans of either flavor, I did attend a debate between them recently and actually enjoyed the experience. There was the obligatory hyperbola, of course. Carlson predicted Trump would never win the nomination, because he is “emotionally incontinent,” meaning his ego will eventually overwhelm political good-sense.…
There are lots of geopolitical “experts.” Ian Bremmer is one of them — the one who created The Eurasia Group, a highly regarded consulting firm, However, he specializes in that intersection between geopolitical events and stock markets, worldwide. I had the pleasure of attending a lecture by him today. In no particular order, here are some of the things I learned about the Mideast: 1.…
The “wild and crazy” stock market is testing some critical support limits. Take a look at this chart: From a technical viewpoint, if it pierces the green line, it will go much lower. My expectation is that it will pierce the line and go lower, almost entirely because we pay too little for gas at the pump. The oil industry is huge and hurting. More…
Now that the Iowa caucus is over, I have only one question — is it November 8th yet?? It would be refreshing to see news coverage again, without such breathless coverage of The Election!
Shall we think about the “January Effect” on Wall Street, which says the stock market, for the full year, will mimic the stock market during the month of January. I hope not! Or, shall we think about the historical performance of the stock market during years of a presidential election, which average a gain of 11%. While I would prefer to think about that, this…
Just as some thought-leaders are actually thought-heroes, like Jeremy Siegel, some are just thought-clowns, whose serious message is cleverly disguised behind a funny facade. Marc Faber is a Swiss-born and Swiss-educated economist living in Thailand. I had the pleasure of listening to him yesterday, as he predicted the future economy was so dismal that he wanted to drain his swimming pool and fill it up…
One of my longest-running “thought-heroes” is the brilliant and affable Dr. Jeremy Siegel of Wharton. By happenstance, I walked with him from our hotel into the conference center for his presentation yesterday morning. It was the highlight of the conference for me! He fairly described himself as the “token bull” in a conference dominated by bears, but he has also been described a “perma-bull” because…
I have a great deal of respect for Jeffrey Gundlach, who is head of Doubleline and has become known as the “bond king,” supplanting Bill Gross of Janus (now) and PIMCO (formerly). At a lecture Monday morning, he discussed the latest actions of the Fed, which he thinks are unfortunate, to say the least. While he made a number of comments, including an unnecessary comparison…
Doctors, lawyers, (not Indian Chiefs) and financial advisors all practice in continually changing professions. Therefore, they are required to get a certain number of continuing education hours each year to maintain their license or certification or registration. Naturally, an industry has developed to supply those continuing education hours, and it is no small coincidence that conferences providing those educational hours are held in Florida during…
What does the stock market do? No, I’m not talking about financial intermediation or about bringing buyer & sellers together or price discovery or any of that academic stuff. What does the stock market do? It worries! It is often said that Wall Street is forever climbing a Wall of Worry, and it is true. Sometimes, unfortunately, the Wall is a taller than normal (like…
The Internal Revenue Code makes a big distinction between earned income and investment income. Earned income is what you get for actually working — actually sweating for income to live on. The popular impression of investment income is what some fat millionaire sitting on a beach gets for nothing, just for having investments. That’s not fair to fat millionaires! During times of market turmoil like…
Steve Schwarzman is CEO of private equity giant Blackstone (not Blackrock). He is attending the world’s most exclusive think-fest in Davos, Switzerland, and I watched an interview with him this morning on CNBC. He touched on an interesting subject. Is the anger in U.S. politics spilling over and polluting the world? He seemed to think that it is scary for the rest of the world,…
Despite being famously called “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” I nonetheless do respect and appreciate Goldman Sachs . . . well, their research department anyway! Their latest predictions are interesting. While their narrative seems somewhat sanguine, their conclusions are not. They still expect the S&P 500 to end the…
I’m proud of my clients! Even though the stock market has been historically awful so far in this young year, not a single client has panicked and wanted to sell everything. There were a few who wanted to increase their level of cash, just to help them sleep, which is fine. But, I have been getting a lot of questions – two in particular. First,…
For the terminally bored who cannot wait to read my column when they receive their copy of Inside Business, here it is: http://pilotonline.com/inside-business/jim-flinchum-fourth-quarter-financial-review/article_3792f69d-648e-5990-bd0b-07d280e87a87.html
One of the more interesting human behaviors is called “anchoring,” which is the tendency to view things in a strict relationship with other things. When we think of the Crash of 1929 in the stock market, we think of utter destruction, of stocks becoming worthless, of investors suddenly becoming penniless. Now, when we see stocks plunge, we instantly associate it with the Crash of 1929.…
It can be difficult to separate the message from the messenger. Legendary investor Jim Rogers is not my kind of guy – more Donald Trump than Warren Buffett. While I would not have lunch with him, I am glad that I read his 2004 book titled Hot Commodities, which predicted the super-cycle in commodities began in 1998 and would continue at least fifteen years. Here’s a…
Last August, the Chinese stock market tanked, and the rest of the world followed it down. The Dow dropped almost 10% but then rebounded. This chart shows the Dow bouncing off its long term trend line, but we are now back to that green trend line. According to technicians, if the Dow continues down, we can expect another scary bear-market slide. If it bounces off…
British banking giant has just issued their advice to investors to NOT PANIC but to sell everything anyway. I understand what they are saying, because I am also worried about the increased possibility of a financial crisis. But, unless you are sleepless with worry, this is bad advice! In behavioral finance, we know there is a behavioral tendency called “anchoring,” whereby a person makes decisions…
I have no fear of recessions. They are a normal part of the business cycle. They come and they go. If anything, they are good for the economy and the stock market in the long run. Still, it is good news that there is little economic data suggesting a recession is approaching us any time in the near future. However, I have great fear of…
Although often characterized as dour fatalists, existentialists normally have a good sense of humor, as well as a highly-sensitive nose for absurdity. I can now pronounce that, with all existential authority, the debate over gun control has officially entered the realm of absurdity. JOKE: Why did God invent Ziploc plastic bags?ANSWER: So that good God-fearing Americans can bury some of their guns in the back…
The Communists, who are trying to run a capitalistic stock exchange in China, are making worldwide stock markets quite seasick. They don’t know what they are doing! Or, they may not be allowed to do the right thing? Either way, investors are definitely “woozy” . . . Most people think the stock market predicts the state of the economy, as it usually does in this…
This is the third trading day of the year, and we’ll looking at our third geopolitical crisis. First, a cold war broke out between Saudi Arabia and Iran. Second, China’s stock market rattled our stock market by rigging their market, as only an ignorant Communist could. Now, North Korea has exploded a hydrogen bomb. Futures predict the Dow will lose over 250 points at the…
