Why Buffett, Dalio Et Al Are Holding Cash and Other Safe Havens

Why Buffett, Dalio Et Al Are Holding Cash and Other Safe Havens

07/31/2018 2:30 PM
smart

Every day you don’t lose everything, you’ve made a 100% gain.

Compared to the alternative, of course.

Very few people think like this … except for the best investors.

Everyone should think this way.

We feel great when a position makes a gain. We’re bummed when it loses. But if you turn the investing equation on its head … look at it upside down … the same logic should apply.

We should feel the same way about avoiding losses as we do about gains. But many people don’t.

As I said, the best investors do. Warren Buffett, for example, says his No. 1 rule is not to lose money … and his No. 2 rule is not to forget No. 1.

So, what are the best investors doing right now … the smartest of smart money?

The answer will shock you … and chances are, it’s not what you’re doing.

Safe Havens for Mega Investors

Institutional and big investors pulled $30 billion from global equity funds in June — the highest level since October 2008. Emerging market debt and equity funds have suffered major withdrawals for 10 straight weeks.

Remember October 2008? Lehman Brothers had collapsed a few weeks before. Major stock indexes lost 60% of their value in short order.

So where is this global money going? Into the U.S. market?

Nope. Outflows from U.S. equities and exchange-traded funds totaled $24.2 billion in June … the third-highest ever and the biggest since 2008.

On the other hand, private investment bank clients — the big guns with millions at stake — poured money into Treasury bills at the fastest clip since 2008, surging to a 10-year high:

Private client chart

A recent survey of investors with $5 million or more in investable assets shows that the smart money is fleeing equities and moving into safer assets. Only 17% said they will add to stock exposure in the next year.

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Ted Bauman - The Bauman Letter IN Wealth Building Strategies

This Is Going To Cost You Big Time

This Is Going To Cost You Big Time

07/31/2018 1:37 PM

  The BC government has taken a page straight out of Donald Trump's protectionist playbook by decreeing that only unionized workers can work on infrastructure projects thereby raising the cost to taxpayers by hundreds of millions. But that's not all - wait til you...

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Michael Campbell IN Mike's Daily Comment

The FAANG-nary In The Coal Mine

The FAANG-nary In The Coal Mine

07/30/2018 2:24 PM

canary.jpgTwo weeks ago, I issued a report to Peak Prosperity’s premium subscribers, warning of an immiment downwards re-pricing of the FAANG stocks. I even made a rare recommendation for taking an active short position against them (one now up 18%).

That report proved quite timely. Over the past 10 days:

  • Netflix (NFLX) is down 10% after issuing disappointing subscriber growth and Q3 guidance
  • Facebook (FB) is down 20% after  delivering lower user and revenue numbers than the Street was expecting
  • Amazon (AMZN) is flat despite posting blowout Q2 EPS yesterday, offset by a revenue miss
  • Google/Alphabet (GOOGL) only managed a meager 3% rise after reporting earnings & revenue beats that were tempered by rising costs and a record $5 billion EU anti-trust fine

This sudden weakness among key FAANG members is extremely significant. Much more so than most investors realize.

Confidence In The FAANGs Ran Supreme (Until Now)

Over the past few years, investor capital has been increasingly concentrating into the FAANGs while the rest of the market has been deteriorating: 

ETF With FAANG Equities Within Top 15 Holdings

2018: 605
2017: 501
2016: 430
2015: 332
2014: 277
2013; 230
2012: 175
2011: 101
2010: 62
2009: 14
2008: 9

Source: Lawrence McDonald

As portfolios have become more and more FAANG-dominated, more and more investors have come to see those five stocks as “unstoppable”. They have unnaturally performed as both “risk-on” and “risk-off” havens for years — delivering consistent share price growth when markets move higher, while holding steady when they don’t.

As a result of this piling-in by investors, the five FAANG stocks collectively now have a whopping market capitalization of $4 trillion.

They comprise nearly half of the NASDAQ index’s market cap.

The FAANGs are the largest five companies in the S&P 500. And they were responsible for ALL of that index’s growth over the first six months of this year (without them, the S&P 500 would have had a negative return in H1 2018):

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Adam Taggart - Peak Prosperity IN Stocks & Equities

Spotlight on the Timing of Treasury Shorts

Spotlight on the Timing of Treasury Shorts

07/30/2018 2:13 PM

    September 5, 2017 with the 10-year yield at 2.04%, was an excellent time to short 10-year treasuries. The number of speculative net short contracts was only 62,634.  On January 2, the speculative net short position rose to 292,210 contracts with the yield up to...

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Mike Mish Shedlock IN Bonds & Interest Rates

Endgame Strategizing

Endgame Strategizing

07/30/2018 1:47 PM
  • screevTake a Deep Breath
  • Too Much Protection
  • Behind the Door
  • Cracks in the Wall
  • The Best Strategy for the Great Reset
  • Grand Lake Stream, Maine and Moving On

We are all on a debt-filled train that is eventually going to crash, and if you are on it, it won’t stop to let you off first. Jumping at the last minute is not a good option, either. So what do you do? You take action now, while you have time.

Last week I gave you some rules to follow with your investments. They were necessarily general because I’m writing to a broad audience. Today, I will get more specific by discussing some possible strategies for high-net-worth “accredited investors.”

However, you should read this important information even if you aren’t wealthy. You might get there someday and it will help prepare you for it. “Someday” could be sooner than you think, too. The Great Reset will rearrange much of the world’s wealth and some people will see their financial condition change quickly, either for worse or better. There will be some enormously positive opportunities.

And as we will see, many strategies that are currently available only to accredited investors are slowly showing up in lower-cost, publicly accessible ETFs and other instruments around the world. There is truly a fintech-driven revolution going on in the financial industry. For we who make our living in that world, the changes seem to intensify almost daily. As I will discuss at the end of this letter, these changes are forcing me to update my own business model. So opportunities not available to you today may very well be available next quarter or next year. You and your advisors need to stay in the loop.

The broader point: Whatever our current circumstances, we can all do things to prepare for the radically different world I think will unfold in these years. You need to make the most of what you have. I want to help by meeting you where you are. Fortunately, I have multiple ways to do that, as you’ll see below. Stick with me and we’ll get through this together.

Take a Deep Breath: It’s Going to Get Better

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John Mauldin - Mauldin Economics IN Bonds & Interest Rates

Top Analyst Issues a Warning

Top Analyst Issues a Warning

07/29/2018 2:46 PM

The world economy has one foot on a banana peal and the other on thin ice thanks to the massive build-up of debt - investors should beware. One the world's most respected analysts, Greg Weldon talks interest rates, gold and...

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Michael Campbell Interviews Greg Weldon IN Interview of the Week

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