Commentary for the Week of March 8

We wrote here recently that Wall Street seems to be revving up for The Mother of All Blowoffs. The banks are evidently trying to stoke a mania of their own, judging from the mail we get each day. A typical batch now includes no fewer than three or four teaser offers to borrow money for practically nothing.  Just today we heard from Wells Fargo (“Enjoy 0% APR on balance transfers for 15 months…”);  Discovery (“Get a fresh start on your home loan. Refinance and lock into a rate as low as 3.09% APR today!”); AT&T Universal Card (“0% Promotional APR on transferred balances until 6/01/2014”); and Chase Freedom (two fabulous offers: “0% promotional APR through your billing cycle that ends in 08/2014’;  or, “1.74% promotional APR through your billing cycle that ends in 01/2015”).  And that’s just a single day’s worth.  Add up all of the offers we’ve received in the last month and they tally more than a half-a-million dollars’ worth of instant borrowing power – all at interest rates ranging from zero to 3.09%. It’s tempting to imagine all of the things we could do with the money.  For starters, we could trade in a 13-year-old Lexus for a new model. Buy new ski equipment while it’s on sale. Build a new patio in the back yard. Take the family to Europe this summer. And there’s plenty of room in the basement for a home entertainment center and a billiard table. What’s left could help defray the awesome after-tax expense of having two boys in college. Maybe the best play would be to parlay the entire sum in the stock market. With 11,000 stocks to pick from, surely there is at least one surefire winner in the bunch. When Rates Turn Lethal Alas, the banks, more desperate than

Permabears who have waited patiently for The Mother of All Corrections should take encouragement from the blithe demeanor of yesterday’s 87-point rally in the Dow. It left the Indoos sitting above 15,000 for the first time and the network anchors oohing and aahing as though they understood what it means. Our take is that the little guy has not only returned, but that he is ready to party. And what better signal could there be that the end is nigh?  With yields on fixed-incomes at historical lows, there was nowhere else to go for the mullet-topped investor with a small wad of cash. Nor can you blame him for taking the plunge so belatedly, even if out of frustration. After all, the blue chip average had gained nearly 130% percent since March 2009 without a single correction worthy of the name. Now, for most investors, the stock market has become the only game in town, even as the supposedly smart money levers up real estate in Phoenix, Tampa, Las Vegas and other by-now giddy redoubts of America’s induced housing recovery . Will John Q. Public’s desperate scramble for yields end badly? Of course it will. Any bull market that takes its inspiration solely from a government-sponsored housing bubble and fraudulent employment data is surely headed for trouble. But for the time being, at least, the individual investor can enjoy the H.M.S. Titanic’s amenities as it plows through a darkening economic tide at full steam. Yellow Flags Everywhere From a technical standpoint, but also a contrarian one, we see yellow flags all over the place. For at these heights, Mr. Market has a commanding opportunity to spring the Mother of All Bull Traps.  Accordingly, we have prepared subscribers for an imminent top in the broad averages, advising them to lay out

[Our friend Doug Behnfield, the savviest financial advisor we know, says stocks are extremely vulnerable now but that long-term bonds, far from being in a bubble, are about to explode and send yields below two percent. He explains why in the letter below. It went out to clients in mid-April, and although the S&Ps have since continued their surreal rise into record territory, little else has changed. RA] In many ways, 2013 has started off like 2012. Long term Treasury bond rates started 2012 at 2.9% and spiked to 3.5% by April 19. That was the peak and they finished the year practically unchanged. We began this year with the yield at 2.95% and by April 11 they hit 3.28%. Rates have already tumbled to 2.84%. The S&P500 rose 12% in Q1 2012, peaking on April 2 and making practically no progress for the rest of the year. This year the S&P 500 rose 10% in Q1 and peaked (so far) on April 11. At this time last year my most important question from an investment standpoint was: Is the back up in rates a mere correction or a slippery slope? Is the almost unanimous opinion that the Great Bull Market in Bonds is over correct? A secondary (and closely related) question was: What is the outlook for the economy and the stock market? Apparently, no matter how much things change, the questions remain the same. First, I will try to tackle the generally accepted view that we have a bond bubble. Here is a recent quote from Robert Shiller; the famed Yale economist and author of Irrational Exuberance in USA Today on April 4, 2013: "Irrational exuberance is the psychological basis of a speculative bubble. I will define a speculative bubble as a situation in which news of price

We’ll lighten up today with something I’ve wanted to do for a long time – i.e., help propel a great new word into common English usage. The word is “sneak” -- as in “he’s a sneak guy (or gal)” -- but it doesn’t mean what you’re thinking.  For far from describing someone of low character, a “sneak guy” is someone who is supremely accomplished but who would never boast about it. Typically, one would find out about the person’s amazing background in an off-handed way -- perhaps from a relative or third party, but never from the person himself. As far as I can recall, the word was coined in the 1960s by a ZBT fraternity brother of mine, Dave “the Ripper” Shaw.  I have never heard the word used by anyone but a Zeeb who attended University of Virginia during the late 1960s.  Dave was a year ahead of me, and there were some unusual success stories in his Class of ‘70. “Scheins”  went on to become a movie producer of, among other films, For a Few Good Men, The Princess Bride and When Harry Met Sally. And another Zeeb, “Bob K,” managed Bjorn Borg’s tennis career before going on to even bigger things as CEO of the top sports-talent agency in the world. Both were sneak guys, but not because of their spectacular careers. Bob was sneak because he had been a yo-yo champion as a child. He and his brother used to travel to tournaments on one bicycle, so certain were they that one of them would win a second bike for the trip home. And Scheins, a skinny little runt-of-a-guy, was a supremely gifted tennis player, baseball shortstop and touch-football quarterback. Strong as an Ape As for Shaw, he was an athlete, built like a lowland

As if Wall Street’s sleazy, quasi-criminal ways were not proof enough that Western civilization is crumbling, we now have the sordid story of Farrah Abraham to remind us of oh-so-many other ways in which America is rapidly going to hell in a hand basket.  Ms. Abraham, 21, a reality TV star as well as the mother of four-year-old Sophia, has sold the rights to a sex tape she made to pornmeister Steve Hirsch for just under $1 million. If, as H.L. Mencken famously said, no one ever went broke underestimating the taste of the American public, then Hirsch stands to make back 20 times his investment. How can he miss? For in this case, “taste” embraces the voyeur’s fondness for anal sodomy. Clearly, Hirsch believes the audience for such entertainment is both eager and large. “I think many fans will be shocked at how truly explicit it is, including stunning backdoor scenes,” he told a panting press after closing the deal. As an aside, readers might be comforted to know that Ms. Abraham’s rectum would likely have suffered little damage during the shoot, since her sexual partner in the film, porn star James Deen, evidently has a small penis. This detail, seemingly at odds with Mr. Deen’s choice of careers, was revealed by Ms. Abraham herself, reportedly to get back at him for “leaking” the existence of the video before she was able to cut a deal. Exhibitionism’s Trail-Blazers Following a path to fame and riches blazed by heiress-cum-sodomist Paris Hilton and the miscgenating Kim Kardashian, Ms. Abraham took the high road in interviews by not citing either of those women as an inspiration.  Rather, she seems to be positioning herself somewhere between Joan of Arc and Hester Prynne, vowing to use the proceeds to complete her “Masters degree and

No one ever looks back with nostalgia on Wall Street’s good old days; for in fact, there never were any “good old days.” The stock market was always the same sleazy carnival game that it is today, a hoop-toss rigged to make the rubes think that winning is easy. Of course, the easier it looks, the harder it is. So it goes for investors sauntering along the global midway. You’d think that with equity shares in their fifth year of the most powerful bull market in history, every Tom, Dick and Harry would be a winner by now.  What we find instead is that the individual investor has yet to recover from the dot-com crash, and that some of the savviest players in the game have left it, unable to beat the averages. Soros folds Quantum fund, embarrassed by his failure to deliver even modest returns.  Buffett sinks $23 billion into…the food chain. Jimmy Rogers kisses off the American Dream and relocates to Singapore, while Steve Wynn heads to Macao. Don Trump and Jim Cramer seek, not wealth from investing, but ego gratification from over-exposing themselves on television. Meanwhile, the trading pros who have elected to stay behind lead the lives of wild dogs, fighting for scraps as they nip at each other’s hinds.  Dreaming of hell, they snarl in their sleep, eyelids open just a slit. They dare not drift off, since the partially eaten carcass next to which they lie would surely be gone by morning, stolen by even wilier predators. Such primal fears must have entered the minds of prop desk traders last Tuesday, after the Associated Press reported on Twitter that there had been an explosion in the White House. In literally the blink of an eye, stocks plunged violently on the news. Moments later, however,

Our friend Chuck Cohen, a gold timer with a proven gift for knowing when to bet against the crowd, phoned the other day with urgent advice. Almost no one sees it coming, he said, but bullion is getting ready to explode. “It’s time to jump in head-first!”  Chuck has been wrong before, and we’d all but tuned him out for the last eight months or so, since his bullish drumbeat went against the asphyxiating weight of bullion charts that have shouted “lower” since last October.  Now, he says, the winning bet is to be short stocks and long gold and silver. Will he be right? From a technical standpoint, it’s still too early to tell. To be sure, some key vehicles, including gold futures and the Gold Bug’s Index (HUI), have turned higher from levels that coincide with Hidden Pivot correction targets of our own. But the bounce so far, especially in Comex quotes, seems tentative at best. Moreover, this is occurring at a time when  the juggernaut of deflation is threatening to overwhelm the central banks’ desperate efforts to thwart the collapse of a quadrillion dollar financial-asset bubble. All things considered, we’re inclined to give Chuck the benefit of the doubt right now.  Here are some persuasive points that he makes: Sentiment indicators suggest that gold is the leper of the investment world, with Rydex bulls currently at an astounding 2%. Shares of mining companies with real gold and silver in the ground, juniors in particular, have collapsed beyond the point of despair. As the price of paper gold has fallen in recent weeks, physical supplies have tightened sharply. Mining-share options are trading at giveaway volatilities. In addition, Chuck notes some troubling signs on Wall Street: Bull-mania has been brazenly flouting weaker corporate earnings, stagnant incomes and fizzling retail

Trading profitably can be harder than it looks. Many who have struggled toward this goal think that just because they’ve figured out a way to hold losses down to $30 of $40 a day, that only a small improvement is needed to turn those losses into steady, daily profits. This is in fact a deception, like the carnival midway game where one gets three pitches to knock down some milk cartons. Lots of players manage to scatter one or two of the cartons with the first pitch. But try knocking down the last and you’re likely to come away thinking that a Category 5 hurricane couldn’t do the job. So it goes with trading. Anyone with even rudimentary risk management skills can find a way to lose “only” $50 a day. But making $50 on average? That’s quite a trick. So how do we get our students over the hump?  Since 2001, more than a thousand traders have learned the Hidden Pivot Method, currently taught in a six-hour webinar over two consecutive evenings. (Click here for details concerning the next. Or here for a free trial subscription to Rick’s Picks so that you can ask webinar grads for yourself.) We tell each student up front that it will take patience, diligence and practice to achieve consistent profits. Immediately after taking the course, most students, even novices, are capable of trading stocks, options or futures without getting hurt too badly. Mainly, it is a matter managing risk with “impulse legs” rather than with conventional stop-losses, and of initiating trades using a “camouflage” strategy that’s designed to reduce the stress of trading. Of course, not getting hurt too badly is hardly succeeding.  That takes considerable practice, and the best way to get it is by attending the online tutorial sessions offered each

Forum discussion generated by our last topic, The FBI Will Get Them, was starting to stink worse than week-old fish.  We'll leave it to the Alex Jones crowd to determine whether the Tsarnaev brothers were in fact double agents who betrayed their U.S. and Saudi handlers, as is now being plausibly claimed. Meanwhile, below is something new and different for you to ruminate on:  Yeats' always timely The Second Coming, arguably the greatest poem of the last hundred years. Your comments will have a better chance of being published if you stay on-topic and show some imagination.