Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: S&P 500 Index

Dow Crosses 23,000 for the First Time in History

Performance of the Dow Jones Industrial Index ...

Performance of the Dow Jones Industrial Index during Black Monday

This article appeared online at TheNewAmerican.com on Tuesday, October 17, 2017:

The Dow Jones Industrial Average (DJIA), colloquially called “The Dow,” crossed over the 23,000 benchmark level early Tuesday morning for the first time in history. The Dow, which tracks the stocks of 30 major corporations, has gained 25 percent since the election while the NASDAQ (which tracks the stock performance of a vastly larger and more diversified range of companies across the globe) is up 27 percent. The S&P 500 Index (which tracks the stock performance of 500 American companies) is up 19 percent.

The Wall Street Journal had no trouble finding money managers who were willing to comment positively on the news. Mark Freeman, chief investment officer and portfolio manager at Westwood Holdings Group (which invests $22 billion for its customers), told the Journal:

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Shiller’s CAPE, Harvey, Irma, and now Jose: How Much More is Needed for a Stock Selloff?

This article was published by The McAlvany Intelligence Advisor on Friday, September 8, 2017:

English: (left) and meeting shortly after the ...

Republicans Smoot and Hawley

Wall Street prognosticators have watched Robert Shiller’s CAPE – “cyclically adjusted price-to-earnings” ratio – for years for signs that stocks are becoming overvalued. It’s now at a nosebleed level reached just before the October 1929 crash. The good news is that CAPE has been at that level ever since Shiller said that stocks were overvalued earlier this year. It is not a market timing tool, but more of an early warning indicator.

Short sellers have gotten smashed as the stock market continues to defy gravity. Bets against the SPDR S&P 500 exchange-traded fund, the largest ETF tracking that index, fell to lows in July not seen since May 2013.

But Hurricanes Harvey, Irma, and now possibly Jose may finally bring things back to earth. The jump in unemployment claims for the week ending September 2, caused by Harvey and reported by the Department of Labor (DOL) on Thursday, not surprisingly exceeded economists’ consensus. The increase of 62,000 for the week to

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Jump in Jobless Claims Following Harvey Is Just the Beginning

This article appeared online at TheNewAmerican.com on Thursday, September 7, 2017:

View of the eyewall of Hurricane Katrina taken...

View of the eyewall of Hurricane Katrina taken on August 28, 2005 as the storm made landfall on the United States Gulf Coast.

The jump in unemployment claims for the week ending September 2, as reported by the Department of Labor (DOL) on Thursday, not surprisingly exceeded economists’ consensus of just 241,000. The increase of 62,000 for the week to 298,000 nearly broke a claims record that has been in place for 131 weeks: 300,000.

That record will surely be broken in the weeks to come. The unemployment claims are just beginning to come in, and they are a predictor — a proxy — for job layoffs. Some workers

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Has Janet Yellen Tripped the Bernanke Indicator?

This article was published by The McAlvany Intelligence Advisor on Friday, July 14, 2017:

Official portrait of Federal Reserve Chairman ...

Official portrait of former Federal Reserve Chairman Ben Bernanke

During a question and answer period following her talk at the British Academy in London on June 27, Federal Reserve Chair Janet Yellen was asked if there could possibly be a repeat of the 2007-2008 financial crisis. She answered:

I think the system is much safer and much sounder [today]. We are doing a lot more to try to look for financial stability risks that may not be immediately apparent, but to look in corners of the financial system that are not subject to regulation, outside those areas in order to try to detect threats to financial stability that may be emerging….

 

Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.

Historians will remember similar assurances from then-Fed Chairman Ben Bernanke just before the real estate crash that led to the financial crisis back in 2007:

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Goldilocks Stock Market Making Forecasters Nervous

This article appeared online at TheNewAmerican.com on Thursday, July 13, 2017:  

At the moment, Wall Street investors are enjoying a “Goldilocks” economy: not so hot that it pushes prices up and not so cold that it causes a recession. Translation: Unemployment is low, wages are rising, interest rates are still near record lows, the gross domestic product (GDP) continues to grow (although not as fast as President Trump would like), and inflation is under control.

It isn’t a perfect world, but to Wall Street investors it’s close.

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More “Fake News?” Trump Behind Wednesday’s Stock Market Dump

This article was published by The McAlvany Intelligence Advisor on Friday, May 19, 2017:

Cover of "The Intelligent Investor: The D...

It’s almost too trite to say that the mainstream media engages in “fake news,” but its nearly unanimous claim that Wednesday’s selloff in stocks was due to Trump’s troubles borders on fake news. It certainly violates a primary rule of logic: post hoc, ergo propter hoc – after this, therefore because of this.

Here is a perfect, but certainly not the only, example. From Marketwatch one learns that “The sell-off came in the wake of a bombshell report in the New York Times that notes from fired FBI Director James Comey revealed President Donald Trump had asked Comey to stop the FBI’s investigation into fired National Security Adviser Michael Flynn’s ties to Russia.”

The tortured logic is this: Trump’s controversies, including those concerning Comey, are going to distract him and his administration from accomplishing many of the policy goals upon which the stock market was banking. Hence, the market will be disappointed.

Other MSM outlets lined up:

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Trump Didn’t Cause Stock Market Decline

This article appeared online at TheNewAmerican.com on Thursday, May 18, 2017:  

According to nearly every major news outlet, Wednesday’s 372-point decline in the Dow Jones Industrial Average was Trump’s fault. CNN Money said “Trump drama rattles market” while CNBC blamed the selloff “on Trump fears.” NPR said the decline was because “Trump remains embroiled in controversy” with CBC News saying it was due to “uncertainty around Trump.”

Precious few deviated from their mission to blame everything on Trump to look at the real reason behind Wednesday’s modest selloff:

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Stock Market’s Complacency Index Highest in 24 Years

This article appeared online at TheNewAmerican.com on Monday, May 8, 2017:  

Wall Street’s “complacency index” — a measure of confidence that stock prices will continue to rise — hit the highest level since 1993 on Monday. Alternatively called the VIX (for volatility index), it is often referred to as Wall Street’s “investor fear gauge.”

Translation: Investors presently appear to have no fear. The index compares investors betting, through their purchases of options, that the market will go up, to those betting to the contrary. When investor fear is high, the VIX will move above 30 or even higher. When fear declines, the VIX trades below 20. During the day on Monday the VIX touched 9.72, a level not seen in 24 years.

So complacent have investors become that the VIX has dropped by 45 percent just since April 13. By comparison,

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Pew Research: Gap Between Promises and Assets Widens for State Pensions

This article appeared online at TheNewAmerican.com on Monday, April 24, 2017:

A RETIRED COUPLE FROM CALIFORNIA STOP TO FISH ...

After reviewing the investment results for 230 public pension plans for the last two years, Pew reported last Thursday that, despite strong recent stock market performance, the gap between liabilities (promises) and assets for those plans widened by 17 percent, to $1.4 trillion. Put another way, those plans should have nearly $4 trillion in assets to enable them to keep their promises. The latest data shows them with just over $2.5 trillion instead.

Said Greg Mennis, director of the project,

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Three Stock Market Indicators Spell Trouble for Pension Fund Managers

This article was published by The McAlvany Intelligence Advisor on Monday, April 24, 2017:

Warren Buffett speaking to a group of students...

Warren Buffett

Michael Lombardi is a bear. Canadian-born, Lombardi has been dishing out investment advice for decades. He is getting nervous. And so should pension fund managers trying to make up for lost time.

In his March newsletter, Lombardi looked at the Warren Buffett Indicator:

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Wall Street Facing Headwinds as Boomers Forced to Liquidate Their IRAs, 401Ks

This article appeared online at TheNewAmerican.com on Tuesday, March 28, 2017:

New York Stock Exchange on Wall Street in New ...

Under the law those reaching age 70 and a half must start taking their “required minimum distributions” (RMDs) from their various tax-deferred accounts. These include IRAs, 401Ks, profit-sharing plans, and SEPs. The trouble is that there are so many of them, and they control so many assets, that their RMDs are going to put enormous pressure on the stock market, according to Chris Hamilton, writing at his Econimica blog.

The Baby Boom population cohort is nearly 80 million people, and those born in 1946 are now 71, with millions following right behind. The top one percent own or control about one-third of that cohort’s assets, while the top 10 percent own more than two-thirds, according to the Congressional Budget Office.

The real question, according to Hamilton, is this:

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Update on Warren Buffett’s “The Bet” (or How Your Money Finds Its Way to Wall Street)

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 1, 2017:

Warren Buffett speaking to a group of students...

Warren Buffett speaking to a group of students from the Kansas University School of Business (Photo credit: Wikipedia)

In the latest shareholder letter just released by Berkshire Hathaway, Warren Buffett brought his fans up to date on “The Bet.” On its face it seems simple: Buffett was willing to bet good money that any S&P 500 index fund would beat, over a period of time, the performance of the best money managers in the business. But no one took him up on his wager:

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Harvard’s New Endowment Manager Shakes Things Up After Dismal Performance

This article appeared online at TheNewAmerican.com on Tuesday, February 28, 2017:

English: Harvard University Harvard Yard Harva...

Harvard University Harvard Yard

The new CEO of Harvard Management Company (HMC), N.P. “Narv” Narvekar, fired half of his staff last December, and in a letter announcing the moves, stated:

Major change is never easy and will require an extended period of time to bear fruit. Transitioning away from practices that have been ingrained in HMC’s culture for decades will no doubt be challenging at times.

 

But we must evolve to be successful, and we must withstand the associated growing pains to achieve our goals.

To each of those approximately 115 staffers who were let go, Narv offered his condolences: “It is exceptionally difficult to see such a large number of our colleagues leave the firm, and we will be very supportive of these individuals in their transition. We are grateful for their committed service to Harvard and wish them the very best in their future endeavors.”

Narvekar is the eighth permanent or interim chief executive in the last decade at the helm of HMC as returns from its $35 billion endowment continue to under-perform not only the stock market in general but its peers at Yale, Columbia, and other Ivy League schools, as well.

The company’s performance was so bad that

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Large Pension Plans Adjusting Their Targets Downward

This article appeared online at TheNewAmerican.com on Wednesday, December 21, 2016:  

English: Jerry Brown's official picture as Att...

California Governor Jerry Brown

Heading into negotiations this past weekend between the California governor’s office, teachers’ unions, and pension plan trustees managing the California Public Employees’ Retirement System (CalPERS), Governor Jerry Brown spoke the truth: “There’s no doubt CalPERS needs to start aligning its rate of return expectations with reality.”

Coming out of the meeting, the gap between the plan’s target rate of return and reality remained immense.

The last time CalPERS faced reality and flinched was in 2012 when

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U.S. Steel Latest to Bring Jobs Back to the United States

This article appeared online at TheNewAmerican.com on Thursday, December 8, 2016:  

U.S. Steel

In an interview with CNBC on Wednesday, U.S. Steel’s CEO Mario Longhi said he’d like to bring back up to 10,000 jobs to the United States:

We’re already structured to do some things, but when you see in the near future improvements to the tax laws, improvements to regulation, those two things by themselves may be a significant driver to what we’re going to do….

 

I’d be more than happy to bring back the employees we’ve been forced to lay off during [the Great Recession].

His company used to employ 37,000 people but that dropped to just 21,000 as of last December, thanks not only to the Great Recession and its almost immeasurably small recovery but also due to excessive regulations:

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Three Election Models Pick Trump to Win on Tuesday

English: Donald Trump at a press conference an...

This article appeared online at TheNewAmerican.com on Monday, November 7, 2016:  

Poll-watching junkies are having a field day. There is one poll or another publishing its results on an almost hourly basis. As this is being written on noon Sunday, for instance, Investors Business Daily (IBD), which touts its survey as “the most accurate poll in recent presidential elections,” has Donald Trump ahead of Hillary Clinton by one point. The USC Dornsife/Los Angeles Times’ “Daybreak” poll shows Trump ahead of Clinton by five points.

Nate Silver, in his FiveThirtyEight 2016 Election Forecast, has Clinton’s chance of winning at 64.7 percent versus Trump’s 35.3 percent. Silver predicts Clinton will win 48.4 percent of the popular vote (versus Trump’s 45.5 percent, which will give her 291 Electoral College votes to Trump’s 246.

In its running summary of other polls, Real Clear Politics shows Clinton up by 1.8 percent over Trump in the popular vote, while in the Electoral College it’s Clinton with 216 and Trump with 164, leaving 158 votes as “toss ups.”

There are at least two other prognosticators who don’t rely on polls at all, and they are predicting Trump will win on Tuesday. The first was explained by Tyler Durden at ZeroHedge back in January when he said that the stock market would predict November’s winner:

This relationship occurs because the stock market reflects the economic outlook in the weeks leading up to the election. A rising stock market indicates an improving economy, which means rising confidence and increases the chances of the incumbent party’s re-election.

 

Therefore, your time might be better spent from August through October watching the stock market rather than the debates if you want to know who will be President for the next four years.

Right on cue the stock market has declined nine days in a row (through last Friday), the first time that has happened since 1980. But more importantly is how it has behaved since Monday, August 1. The S&P 500 Index has declined by 4.5 percent which, according to Durden, translates into an 86 percent chance of Trump’s winning on Tuesday.

And then there’s the professor from Stony Brook University, Helmut Norpoth, and his “Primary Model”. Writes Norpoth on his website:

Winning early primaries is a major key for electoral victory in November. Trump won the Republican primaries in both New Hampshire and South Carolina, while Hillary Clinton and Bernie Sanders split the Democratic primaries in those states….

 

For the record the Primary Model … has correctly predicted the winner of the popular vote in all five presidential elections since it was introduced in 1996….

 

For elections from 1912 to 2012 the Primary Model [has retroactively picked] the winner … every time except in 1960.

 

Accordingly, Norpoth gives Trump an 87 percent chance of winning Tuesday’s election.

There’s also his “pendulum” model:

What favors the GOP in 2016 as well … is the cycle of presidential elections. After two terms of Democrat Barack Obama in the White House the electoral pendulum is poised to swing to the GOP this year….

 

Donald Trump is predicted to defeat Hillary Clinton by 52.5 percent to 47.5 percent.

In the “for what it’s worth” category, as this is being written, futures for Monday’s open are also turning negative. If the market closes down again on Monday, the 10th day in a row, it will only add validity to both Durden’s and Norpoth’s prediction: Trump will win on Tuesday.

Also, Professor Norpoth has such confidence in his models that he is using his own money to bet on Trump to win.

The S&P 500 is Picking Trump to Win

This article was published by The McAlvany Intelligence Advisor on Monday, November 7, 2016:

Back in January, Tyler Durden (a pseudonym), writing at ZeroHedge, said one would be far better off watching the markets than the debates if one wanted to know who the next president would be:

This relationship occurs because the stock market reflects the economic outlook in the weeks leading up to the election. A rising stock market indicates an improving economy, which means rising confidence and increases the chances of the incumbent party’s re-election.

 

Therefore, your time might be better spent from August through October watching the stock market rather than the debates if you want to know who will be President for the next four years.

Right on cue, the stock market has declined nine days in a row (through last Friday), the first time that has happened since 1980. But more importantly

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California’s Pension Plans Report Dismal Results, Increasing Shortfalls

This article appeared online at TheNewAmerican.com on Wednesday, July 20, 2016:  

Ted Eliopoulos, the chief investment officer of the country’s largest pension plan, the California Public Employees Retirement System (CalPERS), did the best he could with the bad news: “Positive performance in a year of turbulent financial markets is an accomplishment that we are proud of.” That “positive performance” was a measly 0.61-percent return from July 1, 2015 through June 30, 2016, on his $300 billion pension plan. That means that the fund is now about $100 billion short of meeting its future obligations.

But that $100 billion number greatly understates the real liability because it’s based on a pixie-dust assumption that the plan can earn an average

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Markit Ltd. Says U.S. Economy Is Faltering

This article appeared online at TheNewAmerican.com on Tuesday, March 22, 2016:  

Markit Ltd., the London-based global financial information behemoth, issued an early warning about signs of the coming recession in late February when it published its services purchasing managers’ index. It went negative for the first time in more than two years. At the time, Chris Williamson, Markit’s chief economist, said:

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Stocks to Fall Further, Say Market Bears

This article was published by The McAlvany Intelligence Advisor on Wednesday, August 26, 2015:  

Marc Faber, the bearish financial commentator from Thailand whom financial talking heads in the media love to hate, really doesn’t care what people think. He’s old enough to know his own mind (he’s 69), and he’s been right often enough that his opinions carry plenty of weight. He’s also a curmudgeon. In his June 2008 newsletter, following the arrival of $600 “stimulus” checks in everyone’s mailbox, Faber wrote this, belittling the idea that much if any of that free money would help stimulate the US’s moribund economy:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.