“Are you bull or bear?”
That’s a question my former colleague and good friend Yiannis Mostrous – with whom (along with Elliott Gue) I co-authored this book – used to pose on a regular basis, back when we both plied our trades for another financial newsletter publishing company.
I always replied, “Neither.”
That answer, on more than one occasion, may indeed have been more aspirational than realistic. No investor is absolutely immune to human emotion. Being aware of and right-sizing irrational responses is a critical element of long-term market success.
And my goal is and has always been to navigate a middle course, focused on good ideas backed by sound reasoning and robust data versus aligning myself according to oversimplified tribal identities.
It’s my job as Wall Street Daily’s Editorial Director to ensure that our analysts are communicating with our readers on a regular basis – generating new investment ideas, providing context for day-to-day action, and, sometimes, simply holding hands until storms pass.
You can be sure, particularly in moments when markets are in turmoil, that we’re digesting as much data as possible, evaluating it in terms of the mission we’ve defined for our premium services, and navigating a course toward capital preservation and long-term profits.
Now, getting a little allegorical here: There is what reputable forecasters consider a historical winter storm bearing down on the Mid-Atlantic region of the U.S. as I type.
My wife and I have stocked provisions – including food, water, and other libations – for humans and canines alike.
We’ve stacked the wood in an easily accessible and covered part of our deck. We’ve loaded the gas cans and tested the generator.
We even have a floodlight ready to go once the snow stops – hopefully in a volume sufficient to support the construction of a backyard luge for our daughter and her neighborhood friends to enjoy.
Of course there’s uncertainty, and with it fear. Will snow and ice take down power lines? Will our more vulnerable friends and family be able to ride it out? Have we indeed accounted for all the variables?
“Panic” Is the Main Enemy
In today’s Saturday Spotlight, Senior Analyst Greg Miller offers some useful insights on stock market volatility, bear markets, and the major trend right now… which, obviously, is “down.”
“I think we’re in a classic market panic,” he notes.
Amid this gut-wrenching anxiety, however, the last thing you want to do is take yourself out of the game by succumbing to fear.
Greg has very sound advice for those who are spooked (by the markets of course, but also by the storm bearing down on the East Coast): Don’t panic.
Don’t Fail to Plan
As Wall Street Daily Founder and Publisher Robert Williams recently noted in an Alert for subscribers to his premium trading service Extreme Alpha, troubling signs of U.S. economic weakness persist.
Headline employment figures appear solid. But a deeper look reveals substantial cracks in the foundation of our economy.
The U.S. Federal Reserve, following years of mushy monetary policy designed to stimulate activity in the aftermath of the Global Financial Crisis and the Great Recession, finally raised interest rates last December.
That’s likely to prove a one-off move, as inflation expectations remain subdued. And economic growth is likely to continue on its slow, sluggish track.
Meanwhile, China – the primary engine of global economic growth during the first decade of the 21st century – is slowing rapidly.
The Middle Kingdom is making the necessary transition away from an investment-driven to a consumption-led growth model. That doesn’t mean it will be easy.
At the same time, although ours is to a degree an interdependent relationship, China represents a relatively minor factor when it comes to U.S. economic health.
The developed world, notably the U.S., remains mired in debt and deficit.
Robert and his research team, led by Greg Miller, are doing the work and generating the ideas that will help not just insulate your portfolio but also generate profits.
Even amid this chaos, there is a bull market somewhere. Bob and Greg will find it.
The Blizzard of 2016
Hard as it may seem right now, establishing even the tiniest bit of perspective is absolutely essential to your long-term success as an investor.
It’s therefore encouraging, on this score, to read that institutional investors such as hedge funds, are leading the market retreat. Individuals seem to be keeping their heads.
And as the consistently entertaining and ever-informative Joshua Brown (a.k.a. The Reformed Broker) notes, we’re just not used to these types of selloffs. Recent history has softened us, and our guard is down.
This is also a global correction, one that, “by any historical standard,” has been especially severe and nauseatingly steep.
“But as disorienting as all this feels,” notes The Reformed Broker, “the truth is that double-digit drawdowns from prior highs in the S&P 500 are not an anomaly – they are the norm, statistically speaking.”
Don’t panic. This happens all the time.
Senior Analyst Greg Miller, also starring in this weekend’s Saturday Spotlight, takes a fresh look at four stocks that collectively form the FANG group: Facebook Inc. (FB), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Google Inc. (GOOGL), now known as Alphabet Inc.
All four crushed the three major U.S. equity indices in 2015.
Greg assesses FANG prospects for 2016, based on value, growth, and competition, answering the key question for each: Buy or sell?
It’s never a bad idea to reassess old ideas, no matter how sacred they may have become.
That’s what Global Markets Analyst Martin Hutchinson does with the so-called Dividend Aristocrats, that august group of publicly traded companies that have raised their regular payouts to investors for 25 or more consecutive years.
The bottom line: Beware “survivorship bias.”
Martin looks abroad to answer a compelling question amid this global market selloff: Which countries can investors trust?
Right now, the world is mired in debt. There are, however, multiple markets worthy of further inquiry.
Martin suggests you focus on “markets with low valuations, sound policies, low debt, and favorable (or at worst, neutral) trade balances.”
Our Global Markets Analyst also takes account of rising tensions in the Middle East, emphasizing the now-come-to-boil Sunni/Shia conflict and the nation-states competing in it, Saudi Arabia and Iran.
These are, respectively, the second- and third-largest economies in the Middle East. Together they account for a large portion of the global oil market. And their religious differences have both economic and political implications.
Finally, Senior Analyst Jonathan Rodriguez provides technical context for recent market action, evoking memories of my former colleague George Kleinman, a highly respected commodities trader whose favorite mantra is, “The trend is your friend.”
Jonathan makes the necessary but often forgotten observation that, “price action…always occurs in waves. It doesn’t matter whether we’re talking about a stock, a commodity, or a currency.”