Michael Lombardi: Is it just me, or have investors completely abandoned the concept of risk and reward?

The reality of the situation is that the key stock indices are treading in shark-infested waters and the risks are piling up daily. I see bearish signals all over, but the theme among investors, even conservative investors, continues to be “keep buying.”

Margin debt—that’s the amount of money borrowed to purchase stocks—on the New York StockExchange (NYSE) reached its all-time high in April. Margin debt on the NYSE registered at $384.3 billion as the key stock indices hit new record-highs. (Source: New York Stock Exchange web site, last accessed May 29, 2013.) The highest margin debt ever reached prior to this was in July of 2007, when it stood just above $381.0 billion. At that time, just like today, the key stock indices were near their peaks and “buy now before it’s too late” was the prominent theme of the day

Looking ahead, corporate earnings, which ultimately drive the direction of the key stock indices, don’t look so good. So far, 106 companies in key stock indices like the S&P 500 have provided their corporate earnings outlooks for the second quarter, and more than 80% of them have issued earnings outlooks that are negative! Corporate earnings growth for the second quarter is now projected to be only 1.4%—and the estimate keeps going down! (Source: FactSet, May 28, 2013.)

And this chart doesn’t look good either:

The above chart shows the performance of the S&P 500 utilities stocks through an exchange-traded fund (ETF) called the Utilities Select Sector SPDR (NYSEARCA:XLU). Why is this chart important?

….read more HERE

It’s been said in investing, you can “insist on being RIGHT, or you can focus on making money.” It’s “gut-check time” yet again in the Precious Metals markets. And yes, I mean that quite literally.

Here’s the current context: Silver appears to be on the rise again after very recently testing its mid-April fall to $22ish (ignoring its mini-flash crash last week). Gold appears to be bouncing off a slightly higher low last week versus its mid-April low of $1325.

The big question on many people’s minds is how high can the PM’s run in the face of their own chart patterns, and perhaps more importantly the context of other risk-asset markets?

Following all the research and analysis I’ve down over the past few weeks, my personal opinion is that there is a little more upside in each of the PM’s over the next five to eight trading days, but that we are definitely NOT out of the woods yet. Two of my most reliable sources (Martin Armstrong and Charles Nenner) are being very clear that much more downside risk should show itself in the next two weeks or so.

That being the case, our recently purchased and SMALL PM-related positions have either been harvested, or have very tight stops under them. That’s just the nature of our investment style.

Of course, only time will tell if we have already made a meaningful bottom to rise from, or if there is still more downside left. Will they (and by extension will “I”) be right, or will we move higher from last week’s lows?

While most people are focused on the question noted above, this is a really great opportunity to re-assess your own appetite for risk and any biases that may be clouding your judgement. And the “elephant in the room” question is “Is your own ego getting in the way?”

Here are some questions for you to ponder:

• Is it more painful for you to a) admit you were wrong by selling at a loss, or b) for you to continue to lose money because you refuse to admit you were wrong?
• In the face of hard evidence (i.e. “Price”) that directly contradicts an investment thesis that you’ve fully committed to (by buying and then holding), do you tend to make excuses (e.g. “it’s manipulation!”) and/or change your intended time horizon for that particular position in order to avoid having to admit that your thesis is incorrect?
• Do you find yourself doing even more research to find additional sources that agree with your position so that your intellect (read: ego) gets soothed, thereby further entrenching your resolve to hold your current position?
• When you are faced with these types of financially and emotionally painful situations, do you do what most people do – go back into your head and try to re-gain perceived control over the situation via additional analysis?

The headline to this article makes reference to “gut-check time” specifically because we humans are so incredibly adept at being able to fool ourselves into believing the stories that constantly run through our heads. Unfortunately, developing complex intellectual narratives to explain – to ourselves and others – how and why we are “right” does NOT change the objective reality of PRICE patterns. This kind of stubbornness is yet another manifestation of the unhealthy parts of our personality, i.e. our ego.

So why do I refer literally to a “gut-check?” Our brains can fool us, but our bodies cannot lie. Here’s an extreme example: if you’ve ever had a near-death experience (e.g. in high-speed traffic), you can probably remember the physical sensations generated by your body in response to your fear. This is the electro-chemical reactions generated by your own hormones, in response to external sensory awareness (e.g. you saw a large oncoming truck veering into your lane). It’s an extreme example, but one which demonstrates beyond question how genuinely tuned-in our own body is with reality.

The risk of embarrassment from being wrong and/or experiencing financial loss generates similar – albeit less extreme – sensations, and these often manifest themselves – from just below the rib-cage in our solar-plexus and down as low as our naval…quite literally in our gut area. That knot in your gut is RARELY wrong.

Learning to pay attention to and actually trusting our own physical response to investment decision-making situations – and not relying solely on our “brain power” – is an important part of increasing self-awareness. It’s really learning to value and trust your own intuition, and that’s a pre-requisite to making more frequent profitable investment decisions.

This is all part of being much more mindful in everything we do…not just in investing.

Patience and Discipline are accretive to your wealth, health and happiness.

Cheers,

Andrew H. Ruhland, CFP, CIM

President, Integrated Wealth Management in Calgary and Portfolio Strategist with ETF Capital Management

Saut:  “We are currently involved in the longest buying stampede chronicled in my notes, and my notes run a little over 50 years.  I first discovered ‘buying stampedes’ and coined that phrase back in the 1970s.  They typically run 17 to 25 sessions, with only 1 to 3 session pauses or pullbacks before they keep going.

This one has lasted 102 sessions as of today….

…..read the other surprises Eric King extracts from Jefferey Saut HERE

September is the German Elections. However, the first week of August is the turning point on the Economic Confidence Model that the computer is starting to pick up in many markets. Look for those that make lows at that time will rally generally thereafter. The market marking high at the time in August, may then turn down into October.

One Reader Writes: Yes Europe in their summer,  for those that actually work(ed) in European institutions, the upper management — (parasites – say it the way it is), will take ALL of August off as vacation time (can you imagine 4 weeks!!!!!!!!!!!!!!…I mean WHO in the US gets the luxury of 4 weeks vacation???).  AND as the saying goes “when the cats out the rats/mice play”  So September might be too late MA..  August could be the fireworks month…

The Warns of Collapse are Coming from Inside Government Now

Posted on May 29, 2013 by Armstrong Economics

EU Energy Commissioner Günther Oettinger is part of a growing undertone within the European government that is finally getting real. He has warned that Europe is a one giant case destined for restructuring and that some countries in Europe have simply become ungovernable anymore. He has warned that Brussels does not have a clue what’s going on and still behaves as there is no crisis. They are living in a state of denial and the longer this continues the worse it will get. France is not prepared for what is coming and is way too far down the Marxist path with public spending ratio of 57% of GDP. The amount of government workers in France are double that of the EU average. There is just no hope as politicians stand in the way of saving Western Civilization.

Günther Oettinger’s recent remarks have been reported in the German newspaper:

http://www.welt.de/politik/ausland/article116606006/Oettinger-bezeichnet-die-EU-als-Sanierungsfall.html

Inside sources have been telling us that the bad-mouthing of especially myself is coming from both bureaucrats and bankers who realize that our proposal to stop borrowing and eliminate taxation to revive the economy and restore our liberty is against their self-interests. They are getting desperate to try to prevent anyone from looking at reform that goes against their self-interests. They would rather destroy society and try to be the richest men in the middle of a wasteland employed by a government that hunts down its citizens to feed the undeserved pensions of bureaucrats than consider what is best for everyone. The hatred hurled our way is amazing and it illustrates one thing – we hit the sweet-spot.

see: Cyprus Proposal

The Untouchables & Politics Come 2016

It is quite common for a bull market to last far longer than many would have thought, and even more so after the brutal economic downturn we had in 2008-2009. Only just recently did U.S. stocks surpass the previous market top reached in 2007. Although it does not mean that a correction is definitely imminent, the current stock market rally is the longest the U.S. has ever seen without a 5% correction. Ever. 

Dig deeper and we can begin to see some froth in many high-flying market darlings. Fortunately, we are not anywhere near the bubble conditions of the late 1990′s, when companies would see their share prices double within days just by announcing that they were launching an e-commerce web site. However, some of these charts have really taken off in recent weeks and I think it is worth mentioning, as U.S. stocks are getting quite overbought. 

…….Ed Note: go HERE for 6 Charts & Conclusion