Many people seem to believe that history began when they first became aware of the world around them. At least, that’s how everyone acts. In some areas, we never seem to learn from history. Too many of us believe everything we see is unprecedented. While that may truly apply to a few things — I, for one, cannot find a historical precedent for the idea of “Keeping Up with the Kardashians” — much of what we are seeing now has happened before. In the stock market, we also see familiar patterns. Stocks are overvalued — certainly not the first time… Read More

Many people seem to believe that history began when they first became aware of the world around them. At least, that’s how everyone acts. In some areas, we never seem to learn from history. Too many of us believe everything we see is unprecedented. While that may truly apply to a few things — I, for one, cannot find a historical precedent for the idea of “Keeping Up with the Kardashians” — much of what we are seeing now has happened before. In the stock market, we also see familiar patterns. Stocks are overvalued — certainly not the first time that’s happened. However, this time, we are seeing a rather extreme valuation. Below is a chart comparing the value of the stocks in the S&P 500 to the gross domestic product (GDP). That ratio is shown as the red line. The blue line is a broader indicator that compares the value of exchange-listed stocks to GDP.  Both measures show stocks are more overvalued now than then they were even before the 2008 bear market. Valuation is not a timing tool. Stocks can remain overvalued for years. But it is a warning. History tells us that, when stocks do… Read More

When it comes to legislation and its effects on society, I try to forget about “party lines” and partisanship… You could almost say I’m agnostic to that kind of thing. That’s especially true of hotly debated healthcare issues. The Affordable Care Act (ACA) — better known as “Obamacare” — is, unfortunately, one act that’s divided many Americans. As we try to improve on its framework, I find it humorous that pundits on both sides get the argument wrong over and over again. No matter what you think about the ACA, I think it’s fair to say that all of us… Read More

When it comes to legislation and its effects on society, I try to forget about “party lines” and partisanship… You could almost say I’m agnostic to that kind of thing. That’s especially true of hotly debated healthcare issues. The Affordable Care Act (ACA) — better known as “Obamacare” — is, unfortunately, one act that’s divided many Americans. As we try to improve on its framework, I find it humorous that pundits on both sides get the argument wrong over and over again. No matter what you think about the ACA, I think it’s fair to say that all of us want quality healthcare that’s truly affordable — both insurance premiums and the cost of treatment. Lawmakers seem to think throwing money at the growing problem of uninsured Americans and soaring costs would help, but the biggest issue isn’t with the premiums themselves… it’s something totally different. The good news is that the part of the healthcare puzzle that’s missing is going to be found, even if part or all of the legislation is repealed — the best part is that we can profit from it! —Sponsored Link— Bill Gates’ Prediction Will Give You Goosebumps One… Read More

Alan Greenspan is back in the news. The former chairman of the Federal Reserve is now 91 years old but still sounds just like he did 30 years ago when he burst onto the world stage. I’ve always found that he speaks in a reassuring tone, which was important back in 1987, when he was beginning his tenure at the Fed. You see, in October of that year — just months after Greenspan’s nomination was confirmed by the Senate — the market suffered a major crash. While investors were reacting, Greenspan reassured the world that the Fed would be the lender of… Read More

Alan Greenspan is back in the news. The former chairman of the Federal Reserve is now 91 years old but still sounds just like he did 30 years ago when he burst onto the world stage. I’ve always found that he speaks in a reassuring tone, which was important back in 1987, when he was beginning his tenure at the Fed. You see, in October of that year — just months after Greenspan’s nomination was confirmed by the Senate — the market suffered a major crash. While investors were reacting, Greenspan reassured the world that the Fed would be the lender of last resort, ensuring the financial system didn’t fail. In the end, Greenspan never needed to act because the stock market stopped its decline as quickly as it began. Maybe the markets calmed down because Greenspan jumped in front of the news so quickly. We’ll never know what caused the panic selling to end but we know Greenspan continued to exert a calming influence on the markets. —Sponsored Link— Buy These 5 Stocks To Cash In On The Marijuana Megatrend Legalization of marijuana for medicinal and recreational use is creating a multibillion-dollar industry. But don’t think… Read More

Change can be difficult. I was reminded of this when I saw Spencer Johnson’s obituary in The New York Times.  I didn’t recognize the name at first, but after reading the headline, I immediately knew who he was:  If you’ve ever worked for the government or in a large company, you probably read one of the 28 million copies that have been sold.  This was a short book — 94 pages of very large type. According to the article, the book “told the story of two mice, Sniff and Scurry, and two tiny people, Hem and Haw, looking… Read More

Change can be difficult. I was reminded of this when I saw Spencer Johnson’s obituary in The New York Times.  I didn’t recognize the name at first, but after reading the headline, I immediately knew who he was:  If you’ve ever worked for the government or in a large company, you probably read one of the 28 million copies that have been sold.  This was a short book — 94 pages of very large type. According to the article, the book “told the story of two mice, Sniff and Scurry, and two tiny people, Hem and Haw, looking for cheese in a maze. When the cheese supply runs out at Cheese Station C, the mice leave without angst to find more. But Hem and Haw resist, refusing to accept change. Haw overcomes his anxiety and ventures out of his comfort zone — at first timidly, but then, gradually, with more confidence — in search of a new supply of cheese.”  “Before long, he knew why he felt good,” Mr. Johnson wrote about Haw. “He stopped to write again on the wall: ‘When you stop being afraid, you feel good!'”  Johnson’s obituary noted that although the book was short,… Read More

The current housing market in the United States is undergoing dramatic changes, and there are very few ways for the average American to capitalize on it. Today’s trade is one of them. Most of you probably know that real estate prices have been on the rise for the past few years. Just take a look at the below chart of the S&P Case-Shiller 30 City Index, which recently made a new all-time high. And yes, you are seeing that correctly… real estate prices have now exceeded their previous 2006 highs… the height of the housing boom. Unfortunately, the… Read More

The current housing market in the United States is undergoing dramatic changes, and there are very few ways for the average American to capitalize on it. Today’s trade is one of them. Most of you probably know that real estate prices have been on the rise for the past few years. Just take a look at the below chart of the S&P Case-Shiller 30 City Index, which recently made a new all-time high. And yes, you are seeing that correctly… real estate prices have now exceeded their previous 2006 highs… the height of the housing boom. Unfortunately, the average American isn’t celebrating this achievement, as wage increases haven’t kept up with these costs. For many, the American Dream of owning your house has become exactly that — a dream. ––Recommended Link— Clues From The Ultra-Rich To Grow Your Wealth Billionaires and institutional investors are dumping hedge funds. They’ve already pulled a record $100 billion. What they’re doing with their money now could be the one clue you need to secure your wealth forever… Full story here. In fact, only the wealthiest of the wealthy are seeing their household income increase on the same trajectory as real estate… Read More

Over at Profit Amplifier, my premium options newsletter service, we’ve taken a decidedly bearish stance over the past month — even as stocks seem to be making new highs. As I’ve stated in many of my alerts, I’m not bearish on the entire market… just those companies that are at risk of slowing growth or are currently overvalued.  And while I see weakness in many areas, there is one sector I believe is undervalued and could continue to flourish despite the coming volatility I’ve forecasted. But before we dive into this sector, there are some important… Read More

Over at Profit Amplifier, my premium options newsletter service, we’ve taken a decidedly bearish stance over the past month — even as stocks seem to be making new highs. As I’ve stated in many of my alerts, I’m not bearish on the entire market… just those companies that are at risk of slowing growth or are currently overvalued.  And while I see weakness in many areas, there is one sector I believe is undervalued and could continue to flourish despite the coming volatility I’ve forecasted. But before we dive into this sector, there are some important market mechanics you must understand. At first glance, most retail investors seem to believe that the election of President Trump has lifted most stocks. While the market’s general performance seems to support that theory, it couldn’t be further from the truth. Many stocks and sectors, such as brick-and-mortar retailers and energy, have had a rough go in the first half of 2017. As I write this, the Energy Select Sector SPDR Fund (NYSE: XLE) is down 13% year to date, and Macy’s (NYSE: M) and many of its peers are down 40%, 50% or more from their recent highs. So… Read More

  Federal Reserve officials are great at making forecasts. Unfortunately, their forecasts aren’t always very good. That’s probably why their forecasts attract so much attention.  Earlier this week, John Williams, the president of the San Francisco Federal Reserve Bank, said, “The stock market seems to be running pretty much on fumes. It’s something that clearly is a risk to the U.S. economy, some correction there — it’s something we have to be prepared for to respond to if it does happen.” This can be read as a warning from a Fed president that stocks are due for a decline. Read More

  Federal Reserve officials are great at making forecasts. Unfortunately, their forecasts aren’t always very good. That’s probably why their forecasts attract so much attention.  Earlier this week, John Williams, the president of the San Francisco Federal Reserve Bank, said, “The stock market seems to be running pretty much on fumes. It’s something that clearly is a risk to the U.S. economy, some correction there — it’s something we have to be prepared for to respond to if it does happen.” This can be read as a warning from a Fed president that stocks are due for a decline. This is the latest in a long line of stock market forecasts from the Fed. —Sponsored Link— The Greatest Commodity Shortage In History  It’s no secret the world faces shortages in many commodities. The world’s diminishing supply of everything from cocoa to coffee… Lithium to lumber… Phosphate to plutonium… Silver to sugar… Is of great concern. But there’s an even bigger and more imminent commodity shortage at hand that no one is talking about. Details here… The most famous warning that stocks could fall probably came from former Fed chairman Alan… Read More

When setting up a covered call trade, it is important to estimate ahead of time what that trade is likely to return. Not only will this allow you to evaluate the expected return on your current trade, but it will also give you a benchmark for comparing this trade with other opportunities that may be on your radar. I have set up a simple spreadsheet that allows me to input the necessary data to determine what a covered call setup will return if the position is called away at expiration. The sheet also tells me the amount of risk that… Read More

When setting up a covered call trade, it is important to estimate ahead of time what that trade is likely to return. Not only will this allow you to evaluate the expected return on your current trade, but it will also give you a benchmark for comparing this trade with other opportunities that may be on your radar. I have set up a simple spreadsheet that allows me to input the necessary data to determine what a covered call setup will return if the position is called away at expiration. The sheet also tells me the amount of risk that the covered call protects me against should the stock trade lower. Below is a screen shot of the spreadsheet, which can be easily replicated in Microsoft Excel. The blue cells represent numbers that are entered manually, and the white cells represent data calculated by the formulas. The first three cells are fairly clear. For a covered call setup, we will enter the market price of the stock, the strike price of the call option that we are selling, and the premium (or price) of the option. So, for the example above, we are interested in buying… Read More

Compared to the past, there’s something fundamentally different about the challenges central banks face today — further proof that we’re in uncharted economic waters. Low interest rates, even negative rates in some countries, are a prime example. A couple of years ago, a chart of interest rates over the past 5,000 years began to circulate. One version of that chart, shown below, highlights that rates fell to a nearly 400-year low in the Great Recession. One noted economic commentator, James Grant, asked, “If these are the first sub-zero interest rates in 5,000 years, is this not… Read More

Compared to the past, there’s something fundamentally different about the challenges central banks face today — further proof that we’re in uncharted economic waters. Low interest rates, even negative rates in some countries, are a prime example. A couple of years ago, a chart of interest rates over the past 5,000 years began to circulate. One version of that chart, shown below, highlights that rates fell to a nearly 400-year low in the Great Recession. One noted economic commentator, James Grant, asked, “If these are the first sub-zero interest rates in 5,000 years, is this not the worst economy since 3,000 BC?” I don’t believe this is the worst economy in history, but I am seeing more and more indicators that this is an unprecedented economy. Within the past few years, we have seen many longstanding economic relationships change. Among them is the number of unfilled jobs. Historically, we’ve come to expect that there will be more job seekers than jobs. That relationship changed in 2015. Now, there are more job openings (the blue line in the chart above) than jobs (the red line). In theory, this should lead to higher wages… Read More

Earnings season is an emotional time on Wall Street, and I think it’s the perfect time to revisit Ben Graham’s famous description of “Mr. Market.” Ben Graham was Warren Buffett’s business school professor. Graham wrote several books explaining how he thought about the markets, and in one of those books, he compared the market’s price swings to the lunatic ravings of Mr. Market. In Graham’s description, when Mr. Market is happy, he will bid the price of stocks up. But suddenly and often for no apparent reason, Mr. Market will fall into a deep fit of despair. Then he wants… Read More

Earnings season is an emotional time on Wall Street, and I think it’s the perfect time to revisit Ben Graham’s famous description of “Mr. Market.” Ben Graham was Warren Buffett’s business school professor. Graham wrote several books explaining how he thought about the markets, and in one of those books, he compared the market’s price swings to the lunatic ravings of Mr. Market. In Graham’s description, when Mr. Market is happy, he will bid the price of stocks up. But suddenly and often for no apparent reason, Mr. Market will fall into a deep fit of despair. Then he wants to sell all of his holdings at low prices, and he won’t take no for an answer. Graham explained that it’s important to ignore Mr. Market and make buy and sell decisions based on value. This can be difficult to do because it’s easy to get caught up in the market’s reaction. But both Graham and Buffett achieved success by ignoring the market swings and focusing on value. Sometimes, Mr. Market’s judgment is entirely rational. Selling may seem to come from nowhere and be extreme, but it may actually be the right response. This is especially true during earnings season. Read More