Bubbles are easy to spot – pinpointing when they’ll pop – is quite another.
I coined that phrase a while back which is nothing more than adding my own spin combining two very old catch phrases used by seasoned traders and investors. I use the word “seasoned” for a reason. Why?
Because they’re the ones that have been around (and been burned themselves) yet lived to trade, or invest, another day. Those who remained wedded (usually the novice or one who’s never experienced true volatility) to the more prominent and specious claims of “you can’t tell when you’re in a bubble” followed with “you can always get out in time” for the most part are long gone. i.e.,The bubble popped into the ether – along with their money.
Nowhere was this phenom more apparent than the real-estate boom of the early 2000’s, which followed the prior phenom only 10 years prior (e.g., the dot-com crash) that should have seared into people’s memory for millennia just how “bubbles” take shape – and the resulting financial devastation that happens rapidly once they’ve popped.
Guess what? (actually you already know) nobody seems too care. Yet, here’s something you may not know, but should: It’s all happening again, and in the same time frame.
We are once again (you’re going to see that phrase a lot) hovering in and around the all-time highs in the “markets.” And, once again, all the warning signs are coming into place that should be the tell-tale signs for prudence and caution. Here are three, but they’re a very big 3 when combined. Ready?
- Tony Robbins has authored another financial book.
- Suze Orman has once again reemerged to deliver her brand of financial advice.
- They’re both delivering their insights at a venue titled (wait for it) Real Estate Wealth Expo™, where you too can learn how to become a millionaire via real estate.
So, let me make this statement right-off-the-bat: This isn’t a hit piece about either Tony, Suze, or The Expo. What I’m strictly relating my argument too is the phenom and psychology that reemerges with a vengeance during what is known as “the topping process.” aka “The late stages of a bubble mentality.”
This is the moment in time where generic, over simplified advice, that sounds so good (and too good) shouted too an adoring crowd – should be taken as the siren, and clarion call to those who are diligent in preserving their wealth to buckle up, buckle down, and prepare in earnest. For once this show is over? “Over” is going to be something many of those attending these types of seminars are going to pray for – as in “Please make it stop!”
To re-aquaint you with a little ancient history, let’s remember Tony’s first book (Money: Master the Game) and when it emerged: November 2014. Do you remember what else took place at that point? Hint: QE (quantitative easing) ended in earnest.
Remember what followed for the next 2 full years? Again, hint: The “markets” ping pong’d between “all time highs” and “Holy S–t! This thing is all about to collapse – again!” Which is precisely why we now have something called the “Bullard Bottom.”
What were the markets doing prior to this?: A straight up, one-way, rocket-ship ride since the origination of the “Bernanke Put” then reiterated in 2010 by its namesake chairman in his now famous (or infamous) 2010 Jackson Hole speech, where he basically announced QE “forever” would remain under his tutelage until he retired in late 2014.
Since then what’s remained and is still prevalent today (maybe even more so) is that other phenom now known as “Buy The F’n Dip” (BTFD.)
When Tony’s book first emerged I made my opinion of it quite clear in the article, “Why Tony Robbins Is Asking The Wrong Questions” One of the main points I tried to express was the following. To wit:
“The real issue at hand from my point of view is this: Looking for answers to both financial safety as well as financial freedom in the same light or viewpoint where it seems one only needs to “think like a billionaire” or “tweak” or “slightly modify” perceptions on how one approaches these financial markets today – will hurt more than it will help.
The markets for all intents and purposes are no longer for the “average” person looking to make gains in any form today. What is needed now more than ever is a direct understanding that safety – safety above all else – is paramount. And exactly how one can achieve it. Or get as close to the proverbial “cash in the mattress” understanding of it as humanly possible.
The idea of “diversification” is a great sounding idea in principle and theory. However, it is one of the greatest myths when it comes to protecting one’s assets in today’s financial market place aka Wall Street.”
Not only do I still feel the same today as I did then. My opinion has become far more steadfast.
I had even expressed this a year later in Nov. of 2015 when (once again) Tony was appearing on many of main stream financial/business media outlets as the “markets” kept up the appearance of “gains” as they ping pong’d between “near death” experiences and ” new all time highs.” Even if those “highs” many times were only by a mere point or such, yet, the headline was the only thing that seemed to matter.
In the article “Why Tony Robbins Is Still Asking The Wrong Questions” I laid out my argument using charts, and current data, as to try to drive this singular point across. Again, to wit:
“First: The answers to the questions Tony realized are far from groundbreaking. They’ve been around for some time. Yet, it’s the second part that has the most troubling aspect in my view, and that problem is this: Although fees are a very important aspect of financial planning at any level. Where prudence in reducing them should always be sought with vigor. In markets such as these, just one year since Tony’s book “Money Master The Game: 7 Simple Steps to Financial Freedom,” (2014 Simon & Schuster) The most probing questions that should remain front-of-mind, everyday, with no respite should be focused squarely to: The surety for the return of one’s money. Then the proverbial “on.” Period. Confusing that sequence today is a recipe for financial disaster waiting to happen in my view.
Safety today is paramount. I am ever-the-more resolute of the opinion: Everything else is playing around the edges. And as I watched or listened – I heard nothing addressing the preponderance of possible systemic failures or upheavals. Let alone how one might safeguard themselves from one.
Oh wait, yes there was one: “diversification.” All I’ll point to on that note, is what I pointed to last time – 2008. For diversification in the markets was, for all intents and purposes; a meaningless exercise during the panic. Why? Lest I remind you during the panic how everything was going down the drain simultaneously?”
As illustrative of what the “markets” were doing back then. What I would like to remind you of is this:
During this period (e.g., 2015-16 and still present today) there’s a very little discussed fact: Many of the experts couldn’t do the one thing the least informed “investor’s” been doing in spades and “winning!” e.g., BTFD horns-over-hooves, forget fundamentals, forget diversification, forget the experts, forget everything. Just buy an ETF or Index (just make sure if has a central bank’s bullseye on it) and spend the rest of that time once used for “research” in researching and picking out your desired options in your new Rolls!” Bam!
For those who are questioning my assertions, may I remind you that even Paul Tudor Jones during 2016 was battling losses (yes – losing great amounts of money resulting in $2.1 Billion in redemptions alone.) The reason? (in my opinion)
Hedge funds (you know, where that term “diversification” is the root of its meaning) can’t hedge in a “market” without amassing losses for those hedges. Combine that with fees and more? And the best of the best can’t compete with a chimp throwing darts at a board full of ticker symbols supported via central bank intervention. Making the whole idea that one can simply “diversify” to safety pure poppycock. Period.
To repeat – if hedging is now pretty much a losing battle (see preceding paragraph) and hedge ultimately means diversify, as to hedge against losses – where even the professional money manager can no longer “hedge” without incurring losses (even those once considered “the best”) what does “diversify” currently mean to the unskilled or average investor? Where even going to “cash” which was once thought the ultimate “safety” as in a “Money Market” account no longer applies to that once thought “safety” zone.
Why some might ask? Easy…
Your “Money Market” fund today is basically nothing more than a stock with a different name. In other words: it can be gated without notice other than telling you – it’s been gated. (e.g.,you won’t be able to get at it. And who knows for how long, if ever.) Since the rule change.
Also: it can “break the buck” e.g., It’s no longer guaranteed to be worth what you’ve deposited. e.g., $1.00 can now fluctuate to be worth what ever the “market” states it to be. Just like a stock. Hint: Think Snapchat™ for clues.
As alarming as the above might sound. (And I’ll bet dollars-to-donuts you wont hear that coming from the stage) You know who else was perplexed and calling for any help no matter how stupefying it sounded? You guessed it – today’s (once again) “financial expert” Suze Orman.
For those who may not remember how precarious and outright terrifying the “markets” were gyrating back during 2015 (you know, back in the ancient history) it was none other than Ms. Orman that took the Twitter-verse to call for the one. and only, great hope the “markets” seemed to have left, when she called to the heavens for none other than CNBC™ host James Cramer to plead with Janet Yellen as to not raise interest rates.
From the article, “The Week That Laid The Experts Bare” To wit:
“Then there was Suze Orman’s taking to Twitter™ pleading to none other than the Fed. and Jim Cramer.
Of Fed. Chair Yellen she pleads “help us out. Commit to no rate increases.” And to Mr. Cramer, “Jim do something” and more. This is coming from someone who self describes themselves as “America’s Most Trusted Personal Finance Expert.” I’ll let this stand on its own, and let you be the judge. I’m at a loss for lost for words, and for anyone who knows me – that’s saying something. For one can only surmise by her pleads, those that were taking her advice of late were caught and blindsided by the events of the day much like she appears to have been.”
I guess time heals all wounds, and BTFD investing advice heals all 401K balances. That is – until it doesn’t – but no one cares. Why? Let me express it this way for this is what now seems to be the current meme for creating wealth. Ready?
“Just BTFD, or flip that house! It’s so darn easy, and the music is playing so loud I can hardly hear myself think, but that’s the point – I don’t have too! It’s a win-win!! And Yes -you too! can become a millionaire easy-peasy. The only hard part? Are you willing to take the risk – and decide today?”
That’s about it as far as I can tell. However, since I’m also in the business/motivation business let me offer you up this little tidbit of caution if you’re planning on attending one of these so-called “wealth” seminars. And it’s this…
As you jump, cheer, and shout as Tony or any other speaker there screams from the stage for you to shout in unison, or to the person directly adjacent to you, “I own you!” as some mantra for you to remember as to help solidify your reasoning, and wherewithal as to commit to your decision making process. Let me add this one note of caution…
That is precisely what the banks, mortgage holders, credit card companies, city, and county real estate tax authorities, IRS, bankruptcy courts, lawyers, and more will be shouting at you if there’s even a hiccup in this current BTFD “market” stampede.
And if you think there’s no true “market” indigestion forth coming? Here’s just two as of late to consider.
First: Canada (you know, where the latest “Wealth Expo” just concluded March 18th in Toronto) is showing the beginning effects when “hot money” flows are seen (as in confused) as “proof” of investment prowess. Yes – Toronto is booming. But there’s a reason, and it’s not a good one. That reason? Because Vancouver values are collapsing. Now down some 40% and growing as Chinese “hot money” needed to find another spot to park, and quick!
How do you think all those newly minted “investors” in Vancouver currently feel?
Second: The Federal Reserve has now openly stated not only are they going to raise rates – they are going to raise far faster than anyone just 4 months ago thought plausible, while also openly discussing the need (and want) for balance sheet reduction to go hand in hand, all while the economic reports such as Atlanta Fed. estimates Q1 GDP have crashed to now below the previously revised down 1.2%, to now just .9%.
And if that wasn’t enough to make one think twice? Add to that the now professed answer by Minneapolis Fed. president Neel Kashkari when questioned about Fed. responses to any potential sell-off. To wit:
“Don’t care about stock market fall itself. Care abt potential financial instability. Stock market drop unlikely to trigger crisis.”
Remember: He was the only dissenter in the latest March hike. And appears to be not worried in the least.
Which is precisely why you should, for “History doesn’t repeat, but it often rhymes” no longer appears purely anecdotal with the above for context, does it?
© 2017 Mark St.Cyr