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Shawn Langlois

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If investors are freaking out about the election and the stock market, you certainly wouldn’t know it from the latest bull run, which saw Wall Street turn in its best weekly performance since April.

The Dow Jones Industrial Average DJIA, -0.23% rallied 6.9% over the five-day period, while the S&P 500 SPX, -0.02% jumped 7.3%. The tech-heavy Nasdaq Composite COMP, +0.03% outperformed both of the other major benchmarks with a 9% surge.

Despite the strong stretch, the mood remains rather bleak, according to Robert Shiller’s U.S. Crash Confidence Index. In the survey, investors are asked of the likelihood that “a catastrophic stock market crash in the U.S., like that of October 28, 1929 or October 19, 1987, is probable in the next six months, including the case that a crash occurred in the other countries and spreads to the U. S.”

The Crash Confidence Index is the percentage of respondents who think that the probability is strictly less than 10% and right now that number is near historic lows.

Shiller, a Nobel Prize-winning economist and Yale professor, flagged the results in a recent a op-ed for the New York Times. “The coronavirus crisis and the November election have driven fears of a major market crash to the highest levels in many years,” he wrote. “At the same time, stocks are trading at very high levels. That volatile combination doesn’t mean that a crash will occur, but it suggests that the risk of one is relatively high. This is a time to be careful.”

While Shiller warns it’s time for caution, J.C. Parets of the All Star Charts blog says just the opposite. He used this chart to hammer home his point:

XAU/USD 4-hour chart

“Whenever we’ve been down near these levels in the Crash Confidence Index, not only did crashes not come at all, but these were actually historic buying opportunities in the stock market,” Parets wrote in a blog post on Sunday. “I think today is no different.

In fact, Parets, taking the contrarian approach, says he’s never been more confident that investors are wrong that a crash is coming, so he’s loading up on stocks.

“For me, there is no holy grail. There is no one magic indicator that tells us when to buy and when to sell. It’s a weight-of-the-evidence approach that we take here,” he explained. “This just further evidence that buying stocks is still a better idea than selling them.”

Buyers had the clear upper hand Sunday night, with futures on the Dow YM00, 6.22%, S&P ES00, 4.57% and Nasdaq NQ00, 1.20% all in rally mode.

Author: Shawn Langlois

Source: Market Watch: Fear is in the air, but here’s why investors could be looking at an ‘historic’ buying opportunity

Warren Buffett has long been critical of gold as an investment, saying that it “has no utility” and that the “magical metal” is no match for “American mettle.” He once wrote, “Anyone watching from Mars would be scratching their head” over how we treat the shiny stuff on this planet.

Yet the Berkshire Hathaway BRK.A, -0.58% BRK.B, -0.31% boss just acquired nearly 21 million shares of Barrick Gold GOLD, 10.86% worth $563 million, while selling shares of Wells Fargo WFC, -1.40% and J.P. Morgan Chase JPM, -0.50%, according to 13-F filings released Friday afternoon.

The move kicked up buzz among gold bugs and other Wall Street watchers across the internet, who saw Buffett’s trades as perhaps signalling a shift in his views on the market.

The popular Zero Hedge blog took a deep dive into Buffett’s repositioning, saying that it’s “a signal that none other than the Oracle Of Omaha appears to now be quietly betting against the United States,” because “the famously anti-gold investor has abandoned banks — the backbone of America’s credit-driven economy — in favor of a gold miner.”

Of course, while gold bugs and staunch market bears come up with their own conclusions, Berkshire is still, nevertheless, deep into the banks, including Bank of America BAC, -0.94% , where it’s been pouring its money into over the past month.

Mike Shedlock of Sitka Pacific Capital Management took exception to the interpretation of the news, explaining in a blog post that it’s as simple as “Buffet [sic] knows financials are struggling due to COVID. And Barrick pays a dividend.” Furthermore, Barrick is merely a tiny piece of his overall pie, and Buffett didn’t back off his stakes in Amazon AMZN, 0.69% or Apple AAPL, 0.39%.

“This is neither a huge cave-in nor a fundamental sea of change regarding gold,” Shedlock wrote. “Potentially it is a short-term sell signal that corresponds to the recent pullback.”

Meanwhile, the stock market continues to stalk record highs. The Dow Jones Industrial Average DJIA, 0.03% closed with a 1.8% weekly gain, while the S&P 500 SPX, 0.38% briefly traded at a record before ending the week up less than 1%. The Nasdaq Composite COMP, 0.68% finished barely higher for the week, as well. The index has posted 32 records so far in 2020.

Barrick Gold, at last check, was up more than 8% after hours.

Author: Shawn Langlois

Source: Market Watch: Did Warren Buffett just bet against the U.S. economy? His latest investment raises some questions

‘Just as these stocks pulled up the entire market, they can pull down the entire market by their sheer weight’

If it weren’t for the “Giant 5,” your money would have been better off sitting in cash than the stock market over the past few years, according to Wolf Richter of the Wolf Street blog.

Yes, investment gains since early 2017 have been completely dominated by Apple AAPL, 3.60% , Microsoft MSFT, 0.31% , Amazon AMZN, 3.50% , Alphabet GOOG, 1.55% and Facebook FB, 1.07% to the point where the broader market, despite some wild fluctuations, has delivered virtually nothing without the upward push of those stocks.

For some perspective on how this has played out, here’s what the Wilshire 5000, a market-capitalization-weighted gauge of all U.S. stocks, has done since January 2017, minus the Giant 5:

That’s right… nothing.

“A miserable savings account would have outperformed the overall stock market without the Giant 5,” Richter said, “and would have done so without all the horrendous volatility of the two sell-offs.”

In contrast, he said the Giant 5 Index has exploded for a gain of 184% over the same time frame, which has led to “breathtaking” market capitalizations and dominance.

But, as Richter explained, this can cut both ways. “That’s a scary thought — that this entire market has become totally dependent on just five giant stocks with an immense concentration of power that have now come under regulatory scrutiny,” he wrote. “And just as these stocks pulled up the entire market, they can pull down the entire market by their sheer weight.”

The stock market certainly wasn’t pulled down in Friday’s upbeat trading session, with the Dow Jones Industrial Average DJIA, 1.31% surging 369 points to end at 26,075 and the S&P 500 Index SPX, 1.04% adding 33 points to 3,185. The tech-heavy Nasdaq Composite https://www.marketwatch.com/investing/index/COMP?mod=MW_story_quote banged out a third consecutive record close.

Author: Shawn Langlois

Source: Market Watch: Investors face ‘a scary, out-of-whack’ scenario — just look at this chart

‘I’m better than he is. That’s a fact’

Did we just witness “an epic signal of a blow-off top”… ?

Yes, says Gary Evans of the Global Macro Monitor blog, who pointed to the recent action on Barstool Sports founder Dave Portnoy’s Twitter feed as the reason why.

On Monday, Portnoy slammed Berkshire Hathaway’s BRK.A, -2.74% Warren Buffett for unloading airline stocks as the coronavirus epidemic took its toll. He also went off on how he made almost $300,000 on the day but missed out on an even bigger number by getting out too soon.

“I’m just printing money,” Portnoy said. “Why take profits when every airline goes up 20% every day. Losers take profits. Winners push the chips to the middle… I should be up a billion dollars.”

Watch the clip:

Evans compared Portnoy’s rant Monday to one of the most-quoted market top signals in history.

Back in the fall of 1929, Yale economist Irving Fisher famously said “Stock prices have reached what looks like a permanently high plateau.” We all know what happened in October of that year.

“Frame it,” Evans said of Portnoy’s take. “Then run like hell.”

After Portnoy’s tweet spread across Finance Twitter TWTR, -1.96% , he doubled down on his Buffett-bashing on Tuesday, calling him a “washed up” investor who’s no longer relevant.

“I’m not saying I had a better career… He’s one of the best ever to do it,” he said. “I’m the new breed. I’m the new generation. There’s nobody who can argue that Warren Buffett is better at the stock market than I am right now. I’m better than he is. That’s a fact.”

Look out, below?

Meanwhile, the stock market is taking a breather on Tuesday, with the Dow Jones Industrial Average’s DJIA, -1.08% six-day winning streak at risk. The S&P 500 SPX, -0.78% was also lower while the tech-heavy Nasdaq COMP, +0.29% managed to break into positive territory.

Author: Shawn Langlois

Source: Market Watch: Warren Buffett is ‘an idiot,’ says investor who claims daytrading is ‘the easiest game I’ve ever played’

The coronavirus death toll continues to rise across the U.S., as do the number of job losses, with an increasing number of companies reporting on the deep damage the pandemic has already inflicted. Yet the stock market, despite its volatile stretches, continues to hold up relatively well.

This viral tweet captured the disconnect last month:

Doug Ramsey, the chief investment officer of The Leuthold Group, warned clients that the day is coming when the dire state of the economy catches up with equity investors. “The stock market punishment doesn’t fit the economic crime,” he said. “We expect it eventually will.”

Ramsey explained that buy-and-hold investors have mostly dodged serious damage even though we’ve seen a “cataclysmic” hit, considering those who own only the S&P and reinvest dividends have seen no more than a peak-to-trough loss of 19.6%.

“The depth and duration of this economic calamity are unknowable, but values don’t yet reflect it,” he told clients in a recent note. “S&P 500 valuations are 30-40% higher than seen at even the comparatively-shallow market low of 2002.”

Ramsey went on to show that the median S&P 500 stock is still historically pricy based on several metrics, including price-to-sales and price-to-earnings.

“If the median S&P 500 stock traded down to the average valuation seen at the last three bear market bottoms, it would have to decline another 46% from April 30th levels” he said. “If we play along and assume that valuations bottom at the ‘richest’ levels ever seen at a bear market low, there’s still 32% downside remaining in the median S&P 500 stock.”

He posted this chart and said that the “eventual retribution for a full decade of negative real interest rates” will be “much more severe” than the downturn earlier this year.

“Not only does the setback look rather mild, it has so far been insufficient to drive VLT Momentum even close to its oversold zone!” Ramsey wrote. “And that follows an entire decade in which VLT spent only five months in negative territory.”

Yet the market keeps holding up nicely, with the Dow Jones Industrial Average DJIA, -0.95% closing up 455 points in Friday’s trading session. The S&P 500 SPX, -0.62% and tech-heavy Nasdaq Composite COMP, 0.02% also staged strong rallies.

Author: Shawn Langlois

Source: Market Watch: A ‘much more severe’ selloff looms in the stock market, strategist warns

Paul Singer, the hedge-fund billionaire behind Elliot Management, warned last month that the ultimate path of global stock markets is a drop of at least 50% from February highs. What’s an investor to do in the face of that grim outlook? Buy gold.

Story continues

Author: Shawn Langlois

Source: Finance. Yahoo: The stock market may get cut in half, but this ‘most undervalued’ asset is about to surge, billionaire investor says

Bill Ackman had a hunch back in February that the coronavirus pandemic would have a greater impact on the stock market than investors were pricing in, so he essentially made a wager that the bubble would burst and started setting up a $27 million hedge.

The Pershing Square hedge-fund manager then watched as the virus spread and the market tanked, turning his small bearish bet into a $2.6-billion winner.

He cashed out on March 23.

In an op-ed for the New York Times, author and former investment banker, William Cohan called Ackman’s move perhaps “the single best trade of all time.”

Ackman explained the thinking behind the hedge in a recent podcast.

“We said, ‘you know what we’ve got this massive position… which maybe has the potential to double if credit spreads widen to where they were during the financial crisis,” he told The Knowledge Project. “‘But if they don’t, and the government takes the right steps, this hedge could be worth zero and the stock market could go right back up to where it was.’ So we made the decision to exit.”

At that point, Ackman explained, he got out with his tidy profit and started buying stocks. He then invested more than $3 billion in risk assets, a move that also proved prescient as the Fed started pumping money into the system and stocks rallied hard off the coronavirus bottom.

Aside from dishing on his big windfall, the billionaire said he admires Tesla’s Elon Musk but questioned whether he should perhaps lay off Twitter TWTR, +7.98% for awhile.

“I don’t know that Elon Musk has been the ideal public company CEO,” Ackman said on the podcast. “He had a challenging period there with his tweets.”

Ackman also talked about Warren Buffett and how Berkshire Hathaway BRK.A, +1.47% likely bought back its own shares as well as other stocks during the market drop.

“I’m surprised they haven’t done anything yet that’s visible, but my guess is they’ve been buying stocks a lot,” he told host Shane Parrish. “The big opportunity for Berkshire is Berkshire itself.”

Listen to the full interview:

Author: Shawn Langlois

Source: Market Watch: Ackman also shares some thoughts on Elon Musk, Warren Buffett

The Dow Jones Industrial Average DJIA, -1.35% ended a four-week stretch Friday with a total return approaching 30%, bouncing back from its worst first-quarter performance in history.

As the worst pandemic in a century continues to take its toll on the global economy, investors, with no clear end in sight, are left to assess what’s next and place their bets accordingly.

Perhaps what happened in the stock market 100 years ago can offer clues.

Bespoke Investment Group recently posted this chart of the stock market during the Spanish flu from 1918-1919, in which an estimated 50 million people died.

As you can see, there were essentially three different waves of the Spanish flu. The first and third waves were relatively mild, but that second one in the fall of 1918 was devastating, with the mortality rate running as high as 24 per 1,000 people.

“During that wave of the pandemic, which also came in the thick of a post-WWI recession, the DJIA peaked just as the wave was getting underway and fell for the next three months,” Bespoke said, pointing out that even with the severity of that outbreak, the Dow never dropped more than 11%.

Amid the coronavirus pandemic, however, the S&P 500 SPX, -0.66% is still down about 15% from its high, even after the rebound it’s enjoyed in recent weeks.

Also, as you can see from the chart, optimism in the stock market began to take hold after the deadly second wave, even as the third wave was getting underway. From that low, the Dow embarked on a three-month rally of more than 25% as the world healed form the pandemic.

“Obviously, comparing two periods more than 100 years apart is hardly an apples to apples comparison,” Bespoke said. “But it’s still interesting that during what was an even deadlier pandemic in 1918, the DJIA never even approached anything close to a bear market.”

The good times didn’t last long however. A recession hit the U.S. less than a year after the mortality rate for the Spanish flu hit zero, with unemployment topping 10% and deflation hitting 18%, according to Bespoke. The bear market took the blue chips down 46% during that period.

“Imagine coming out of a pandemic with nothing more than an 11% correction and then getting socked with that!” Bespoke wrote.

The current version of the stock market started off the week deep in the red, with the Dow off more than 400 points in Monday action. The S&P and Nasdaq COMP, 0.05% were firmly lower, as well.

Author: Shawn Langlois

Source: Market Watch: What will the stock market look like in a post-coronavirus world? The bulls are hoping history repeats itself

‘If you think you want to live in New York in the future, now’s the time to buy’

‘There’s good reason the market is going up… but I still think we have a leg down, so I’ve gone to cash.’

That’s outspoken billionaire Mark Cuban giving some insight on “The Pomp Podcast” this week into how he’s approaching the sketchy investing climate.

The Dallas Mavericks owner explained that, before his move into the relative safety net of cash, he lost a ‘s**tload of money” in his entertainment business. Fortunately for Cuban, his core holdings, Amazon AMZN, -3.24% and Netflix NFLX, -4.75% , helped to balance out those losses, he said.

His bearishness on the market, however, is mostly short term.

“Three years, five years from now, the market will be up from where we are today,” Cuban said. “When we look back in 10 years, there’s going to be some amazing companies created, and having access to cash, or having cash, is going to give me an opportunity to invest in them.”

As for now, beyond just moving completely to cash amid the coronavirus pandemic, Cuban sees opportunities in both commodities and real estate. He didn’t go into details on which commodities, but he pointed to big, dense cities as having some areas where bargains could pop up.

“If you think you want to live in New York in the future, now’s the time to buy,” he said.

Watch the full interview:

Cash was a good place to be in Thursday’s trading session, with the Dow Jones Industrial Average DJIA, 1.70% off triple-digits, while the S&P SPX, 1.56% also struggled to break higher.

Author: Shawn Langlois

Source: Market Watch: Mark Cuban is moving to cash ahead of what the billionaire sees as another rough stretch for the stock market

The founder of Equity Group Investments said he has added to his ownership stakes in a couple companies, including one in the beaten-down energy sector, which was under heavy selling pressure even before the recent drop in the broader stock market. The S&P 500 energy sector is the only sector in an outright bear market, according to Dow Jones Market Data. “We think the energy space is really cheap,” Zell said without naming specific companies.

Story continues

Author: Shawn Langlois

Source: Finance. Yahoo: Billionaire Sam Zell says he’s buying at ‘ridiculously low’ prices in one particular sector amid market volatility

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