All In

  • “Readying for a major stock sell-off” despite “a wave of optimism”
  • A curious outbreak of “FOMO” (for many investors, it’s a mofo!)
  • Recession fears abate for small-biz owners
  • “Defecating on the floor” and other acts of securities regulators
  • “Chilling”: Readers respond to our civil war scenario
  • Muted inflation numbers (officially)… good news for the privacy of business travelers (and everyone else)… the &frac nuisance… and more!

On Monday, our Zach Scheidt told his readers, “I’m SO excited about our current breakout in the market!”

Within the last three weeks, all three of the major U.S. stock indexes have broken out to record highs.

That’s despite literally a world of worries — the European slowdown, the U.S.-China trade war, the Middle East powder keg, the 2020 elections.

It’s a classic case of the market climbing the “wall of worry,” Zach said.

“Worried investors keep money out of the market,” he explained. “In some cases, these investors have sold all their stocks and are sitting on a mountain of cash. In other situations, investors simply buy more ‘conservative’ investments or just keep a larger portion of their net worth away from the stock market.

Yesterday brought the eye-catching headline on the Drudge Report: “Rich Readying for Major Stock Sell-Off.”

It was a Bloomberg News story about a survey of high-net-worth individuals conducted for UBS Global Wealth Management: “A majority of rich investors expect a significant drop in markets before the end of next year, and 25% of their average assets are currently in cash, according to a survey of more than 3,400 global respondents.

“The U.S.-China trade conflict is their top geopolitical concern, while the upcoming American presidential election is seen as another significant threat to portfolios.”

Wall of worry, indeed.

It was a weird story, though. Nowhere was the squishy term “significant drop in markets” defined. By the standards of the last decade, that could be a mere 20% bear-market drop — as happened late last year and in 2011.

Today? “The bulls are back,” says Michael Hartnett, chief investment officer at Bank of America.

BofA released its own survey of investors. Despite that world of worries, they increased their stock holdings by an average one-fifth over the past month.

As the Financial Times summarized, “Investors are abandoning bearish bets and piling into stocks as pessimism over the global economy fades, injecting fresh vigor into the decade-old equity market rally.”

Over the survey’s two-decade history, this is the single biggest monthly jump.

Hartnett elaborates: “Investors are experiencing FOMO — the fear of missing out — which has prompted a wave of optimism and a jump in exposure to equities and cyclicals.”

That’s how bull markets go: The wall of worry turns to FOMO — giving the market fuel for still more all-time highs. And it’s all happening in real time this week.

Back to Zach and his prescient words to readers on Monday: “I can tell you there’s nothing worse for an investor than watching the market march higher without you.”

And even with some investors returning to the market, Zach points out the assets in money market funds have grown by $1 trillion over the last three years — approaching their highest level in the last 10 years.

“And so all these ‘worried’ investors sitting on the sidelines with trillions in cash are dealing with a growing urge to put their money back into the market. And the higher the market climbs, the stronger this urge becomes.”

It’s not outrageous to think this breakout will finally get the market out of its “range-bound” pattern of the last two years, the S&P 500 stuck between 2,400 on the low side and 3,000 on the high side.

FOMO Chart

Around here, we know all the bearish arguments. We know how by some measures, stocks are crazy overvalued. We know why the market “should” fall.

But we deal with the world as it is, not as it “should” be. And right now it looks as if we’re in for quite a few more record highs going into the end of this year and early next.

It’s not just well-heeled investors who see clear sailing ahead despite that world of worries. So do small-business owners.

The National Federation of Independent Business is out with its monthly optimism index. It jumped in October from 101.8 to 102.4 — a respectable recovery from a September stumble.

“A continued focus on a recession by policymakers, talking heads and the media clearly caused some consternation among small businesses in previous months, but after shifting their focus to other topics, it’s become clear that owners are not experiencing the predicted turmoil,” says NFIB president Juanita Duggan.

“Small-business owners are continuing to create jobs, raise wages and grow their businesses, thanks to tax cuts and deregulation, and nothing is stopping them except for finding qualified workers.”

Indeed. “Quality of labor” is cited by 25% of survey respondents as their single most important problem. Nothing else comes close — with taxes at 15% and regulations at 13%.

Not much movement in the markets today: The major U.S. stock indexes have barely budged on a day after the Dow closed literally unchanged.

Perhaps it’s because traders are keeping one eye on the impeachment hearings held by the House Intelligence Committee… and another eye on Federal Reserve Chairman Jerome Powell’s testimony to the congressional Joint Economic Committee. Doesn’t leave a third eye to watch screens, does it?

At least gold is perking up a bit at $1,464.

Of course, traders are looking to Powell for clues about another interest rate cut when the Fed’s Open Market Committee meets a month from now. Going into this morning’s testimony, futures markets indicated only a 4% probability the Fed will cut.

But if the Fed wants an excuse to cut, it’s there in today’s inflation numbers.

The October consumer price index jumped 0.4% — more than expected. But Fed policymakers pay more attention to the “core” inflation number that excludes food and energy prices (on the theory that they’re “volatile”). And core CPI rose a more modest 0.2%.

The official year-over-year inflation rate is 1.8% and the core rate is 2.3%.

As always, any resemblance to your own cost of living is purely coincidental. The real-world inflation rate from Shadow Government Statistics — using the government’s methodology from 40 years ago — is running 9.5%.

Now for a 5 business travel alert… and reassurance that constitutional government isn’t totally dead.

ACLU Tweet

Of course your Fourth Amendment rights against unreasonable searches and seizures have always been compromised at the border. But in the laptop-and-smartphone era, the question has become whether the feds have a right to snoop through the equivalent of a huge file cabinet stuffed with your most personal information.

Yesterday in Boston, U.S. District Judge Denise Casper ruled they do not.

Customs and Border Protection conducted around 5,100 of these searches during 2012 — a number that grew sixfold to 33,000 by last year.

True, this ruling probably isn’t the last word on the subject. The feds can and likely will appeal.

But for now, Sophia Cope from the Electronic Frontier Foundation says, “This is a great day for travelers who now can cross the international border without fear that the government will, in the absence of any suspicion, ransack the extraordinarily sensitive information we all carry in our electronic devices.”

What in the world is the problem with financial-market regulators?

A bigwig at the United Kingdom’s Financial Conduct Authority just issued an internal memo reminding employees about proper conduct on the job.

“This kind of behavior is unacceptable and will not be tolerated here,” writes Chief Operating Officer Georgina Philippou — who lashed out against (get this) “leaving cutlery and crockery in the kitchen areas, overflowing bins, stealing plants and charging cables from desks, catering and security teams being subject to verbal abuse.”

But here are the offenses that stopped us cold: “defecating on the floor in toilet cubicles on a particular floor, urinating on the floor in the men’s toilets and leaving alcohol bottles in sanitary bins.”

Good grief.

This case reminds us, however, that bad conduct by securities regulators is not limited to limeys.

“Report: SEC Staffers Watched Porn as Economy Crashed” was a CNN headline from 2010.

Thirty-three SEC employees and contractors were caught surfing porn during a five-year time frame that included the Panic of 2008. More than half of them were earning six-figure salaries. One senior lawyer at SEC headquarters admitted to downloading adult pics and videos up to eight hours a day.

As we said here at the time, the disclosure went a long way toward explaining why the SEC ignored all those whistleblower warnings about Bernie Madoff…

“Whoa. This entire edition of The 5 is chilling,” writes one of our regulars after we spun a civil war scenario yesterday. “Unfortunately, there seem to be several plausible scenarios for how a new American civil war might break out.

“In my opinion it’s an understatement to say that most wars aren’t worth fighting. This damn perpetual-war thing is a nightmare. But the bankster-financed globalists never met a conflict they didn’t like. They always profit (regardless of whether it’s foreign or civil), and so we have the malignant MICIMATT you described the other day.

“I know, I sound like a ‘conspiracy theorist.’ Lately I take this as a compliment. The alternative is to be a ‘coincidence theorist’ — and I have noticed that most of those people are either mental midgets or flat-out evil.

“Here’s to hoping that America will soon return to being a normal country in a normal time. Translation: Let’s get back to our origin as a pro-liberty constitutional republic where wannabe tyrants are no longer destroying our rule of law.

“Thanks as always for fighting the good fight! The closer we get to a flash point, the harder it is to find real truth warriors.”

“The way that I see the third civil war starting is different than this,” a reader writes.

“Since the country is officially flat broke with over a $22 trillion deficit, I expect that at some point in the near future the federal government will simply not return to the states any of the tax money it collects and normally gives to the states and will keep it for the ‘necessary’ federal programs, which are always increasing in size.

“The state governments will rightfully conclude that if its taxpayers continue to fund the feds and leave them with next to nothing, then what is it doing even being in the United States in the first place?

“Once the governors put it all together, that’s when I expect to see state National Guard troops and federal troops engaging in combat and the federal government denying that it ever signed in the first place the United Nations’ Universal Declaration of Human Rights guaranteeing that individuals have the right to establish their own countries and live their lives as they see fit.”

The 5: See, there’s a reason we stirred the pot with the whole “taker states” thing last month…

Thank you for yesterday’s 5!a reader enthuses. “This is the first I’ve heard of the Bring Our Troops Home movement (likely self-inflicted, since the only news I get is here and from a couple of mainly financial newsletters).

“I will support this effort in any way I am able. It is unconscionable that politicians send National Guard troops to fight and possibly die in an undeclared ‘war’ that is not winnable!”

The 5: They’re victims of awful timing: They scheduled their big event today at the National Press Club many weeks ago… and now the impeachment circus is consuming all the available media oxygen.

Meanwhile, we appreciate the trust you put in us, but we’ll say it once more: The 5 is only part of a well-balanced news and informational diet.

Maybe on a slow day soon I’ll describe my own informational intake as a sort of reader guide…

Last, on a different topic: “For months, if not years, I have periodically seen this odd sequence of characters in The 5. Yesterday it appeared at timestamp 2:45…

Recall how the Iraq War hollowed out the National Guard.

Donald Rumsfeld’s Pentagon envisioned a 30,000-troop engagement for a few months in 2003. Instead, it dragged on for 8½ years, peaking at 160,000 troops.  [Emphasis mine.]

“Screw up? Super-double secret code?”

The 5: No, just a quirk of HTML coding. That should have read “8 1/2.” A fraction can appear perfectly normal in a Word document, but once it’s made internet-ready, the goofy “frac” thing shows up.

We try to catch it and fix it on the final look-see before hitting the send button, but obviously we miss it and not just occasionally.

We’ll knock heads with our web team to figure out a long-term fix. Surely websites that specialize in Fellini movies have it figured out, if they’re always going on about “8 1/2,” right?

Best regards,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. One more reader note, clearly from a longtimer: “Can’t wait to see what Bill and Addison say. Keep the good stuff coming.”

It’s true. Agora founder Bill Bonner and our own fearless leader Addison Wiggin are “reuniting” as it were to take part in a panel discussion next week — along with a couple other luminaries whose names we’ll reveal tomorrow.

This event is titled 2020 Survival Summit: The No. 1 Money Move to Prepare for the 2020 Elections.

The date and time is now set, too: next Tuesday, Nov. 19, at 7:00 p.m. EST. More to come tomorrow.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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