No, I Can’t Fix Your Phone, But I Can Time The Markets

Thanks for keeping the great comments and questions rolling in.

Well, most of them are great.

Spoiler alert: I can’t fix your broken phone, and I really am “that ignorant.”

But I was able to field some excellent questions about what happens to all the money from Trump’s tax cuts, whether the Fed will really raid private bank accounts, and the myth that you “can’t time the markets.”

I hope you enjoy reading these as much as I enjoyed answering them – and please, drop me a line in the comments section. You may very well be featured in our next issue.

Chriss Street, October 12, 2017 at 3:46 p.m.: Lee Adler should be lauded for a terrific analysis. Momentum moves in big waves and there is still some “Mo” in the system. But over time, the fundamentals will catch up, and the optimists will find that the tide went out and left them on the sand.

Lee: Hi, Chriss. First, thank you for the kind words. That goes for everyone who has written a supportive comment. I deeply appreciate that. I’m here to help people preserve and grow their capital. I’m really glad you appreciate the work, and it’s always nice when that feedback comes through in positive comments. Thank you, everyone, for your warm welcome and good wishes!

You have a great point here about momentum. I’m both a liquidity analyst and a technical analyst. The TA came first. Ultimately TA is the only way to fine-tune timing, and timing really is everything. You can be right as rain on the fundamentals, and you can truly believe that the market will crash, and you may ultimately be right about that. But what the fundamentals tell us should be so is not reality. Reality is “the tape,” which is another way of saying the “price trend.”

It all comes back to Rule Number 1 (“Don’t fight the Fed”) and Rule Number 2 (“The trend is your friend”). In other words: “Don’t fight the tape.” We are at the point now where the Fed has blatantly told us that it is draining funds from the system and will do so at an increasing pace in the months ahead. If you are still buying stocks now, you are fighting the Fed.

However, as long as Rule Number 2 is in effect, buying stocks now isn’t so bad. But you are playing with fire, picking up nickels in front of a steamroller.

My technical work is showing that a transition is probably underway. For the first time since I started the Daily Trades List, there are now more shorts than longs. Longs have been taken out as trailing stops got hit, and my pattern recognition algorithm has been recognizing more and more short patterns lately. Some have begun to move in the right direction very quickly.

The time is at hand when the broad market averages will stop making new highs regularly. Then in a few months the market will start making new minor lows. That is how bear markets begin. By the time the media tells you that it’s a bear market when the Dow is down 20%, many stocks will be down 30-40%, and it will be too damn late to do anything about it. The time to act is NOW.

Martin Kinnaman, October 4, 2017 at 5:49 p.m.: Any discussion about politics or international politics/policy that does not include the world central banking scam as a variable is a moot point discussion. To not include that 800-pound gorilla in the room as a variable requires a level of disconnect with the obvious or complicity. I don’t know you, Lee. Are you really that ignorant or…?

Lee: Hi, Martin. While your point is made somewhat indelicately, I get it. In fact, I do cover foreign central banks in some depth in the Wall Street Examiner Liquidity Trader Pro. And I have definitely opined on it occasionally here at Sure Money. Here’s the latest post including a look at the ECB.

As to whether I am ignorant or not, I will leave that judgment up to you and other readers.

Shanna Y, October 13, 2017 at 3:42 a.m.: Checking in my phone does not work. Probably it’s being compromised.

Lee: Hi, Shanna, I’m sorry. The number you are calling is not in service.

Hannes, September 23, 2017 at 11:34 a.m.: In the case of President Trump succeeding with the tax cuts, will the “trillion USD” that apparently becomes available then just increase this “pool” again? Your articles are great.

Lee: Hi, Hannes. Thanks for the compliment!

In short, no, that money will not be available to the markets. In fact, I think it should be bearish because it will siphon money from the financial sphere.

Tax cuts will increase the deficit. Yes, that spending will goose the economy. But the money must come from investor cash. The Fed won’t be buying. It will be draining. So the Treasury must fund the increase in the deficit by selling more debt-more notes, bonds, and bills-to the investing public. That will force dealers, institutions, and other investors who buy Treasury debt to liquidate some paper, whether bonds or stocks, to pay for the new paper.

I see that as very, very bearish.

The HOA Detective, September 18, 2017 at 8:52 a.m.: I appreciate your work and feel strongly that The Wall Street Examiner is one of the best publications of its kind, but I would like to point out that the vast majority of Americans don’t have enough money to be concerned about whether their bank balance exceeds the FDIC insurance limits.

Lee: Hi, HOA Detective. Again, thank you for the kind words! True, most of us don’t have to worry about FDIC limits. What we do have to worry about is what happens in a systemic crisis when the FDIC runs out of money. Then we’re talking real chaos. There would be nowhere to hide, no way to avoid some kind of haircut. Either depositors would pay, or taxpayers would pay. Even gold might have some issues in convertibility to spendable cash.

These are existential questions. In the end, we are all beholden to public confidence in our governments and monetary institutions. There is very good reason to worry about that.

Nora, September 22, 2017 at 12:20 a.m.: I think the Fed will raid private bank accounts, regardless of the answers here. They flat out “need” the money more than the hard working American people, they think!

Lee: Hi, Nora. The Fed can print all the money it wants at will, and yet, yes, it already has raided private bank accounts, in the greatest mass theft in history.

It has done so by keeping interest rates near zero for nine years. People who worked hard all their lives, saved money, and avoided risk have been punished rather than rewarded. Rather than being able to depend on their interest income to supplement their social security income in retirement, they have been forced to either spend their principal to survive or drastically cut their spending, in some cases ruining their quality of life. Or, they have to speculate in risky investments.

That may have worked for a while, but it’s not suitable for people who are, and rightfully should be, risk averse.

In my opinion, Ben Bernanke committed financial genocide against America’s hard-working senior savers. ZIRP was immoral, and it was bad policy, transferring wealth and spending power from hard-working middle class savers to the banks and leveraged speculators like hedge funds and private equity raiders. Not to mention the fact that corporate CEOs bought back their own company stocks to help them exercise their stock option grants.

Had Bernanke left rates at normal levels, the useless, mindless, rapacious, self-dealing speculation would have been minimized.  Interest income would have supported broad-based personal spending that would have led to a healthy healing of the economy. Instead, Bernanke chose to punish those who least deserved to be punished. And he chose to reward those who least deserved to be rewarded.

When the incentives are perverse, the results will be perverse.

Terry Cerdas, August 28, 2017 at 8:03 pm: When the Fed increased interest rates a few months ago, did that 1/4-point go toward increased payments to the banks for the $2 trillion-plus they hold in reserves at the Fed? That would amount to $60 billion flowing to their bottom line.

Lee: Hi, Terry! Good to hear from you! (Terry owns a moving company that I have used.) You are absolutely correct. I don’t know if the math is accurate. That sounds like an annual figure, but the point is correct, and it is one that I have made here. And the worst part is that it will happen again and again as the Fed raises interest on excess reserves (IOER).  It’s a damn subsidy to the banks.

Joe sixpack, August 30, 2017 at 7:29 am: Great articles, but I think you are overthinking all of this stuff wayyyyyy too much. First of all, you can’t time the markets by looking at headlines or even what the Fed does. It’s nonsense. Really, all you need to do is buy a consumer staples mutual fund or ETF or even just an S&P 500 index fund, and never sell. Just call it a day. You will beat 99% of people out there. All these articles on Fed open market operations, etc., mean absolutely nothing when it comes to investing. I appreciate your articles, they are interesting, but they are useless when it comes to making money. Real hedge fund managers don’t time markets. They buy companies and hold for 20+ years. Only amateur investors time the wiggles from headlines.

Lee: Hi, Joe. I’ve been analyzing the market since I was a teenager 50 years ago. It does take some thought, but, by now, those thoughts are almost automatic.

It can all be boiled down to the two rules I learned from the old farts in the customer’s gallery at the Philly office of Walston and Company back in the late 1960s. “Don’t fight the Fed,” and “The trend is your friend,” a.k.a., “Don’t fight the tape.”

That said, I have run stock trading message boards for 17 years. I know quite a few traders who have used charts successfully to make handsome livings. It works for those who love doing it, who have some chart-reading talent, and who have discipline in following their own set of simple trading rules.

Only professional traders, both those working on behalf of major dealers and those working from home, “time the wiggles” successfully. Trading is not for amateurs and dilettanti. And you are correct: Successful traders don’t do it from the headlines. They do it from reading and understanding price charts with today’s ultra-sophisticated technical-analysis tools. They don’t fight the Fed, and they don’t fight the tape.

Have a great day, everyone. And head down to the comments section to keep the conversations going.

Till next time!


Lee Adler

13 Responses to “No, I Can’t Fix Your Phone, But I Can Time The Markets”

  1. Thank you so much for answering my question. Your perspective is indeed interesting and I agree with that. Your article on liquidity being reduced and that affecting markets in the near future refers. How investors are weaned off the stimilus drug will make for interesting studies in investor behaviour. I will not be surprised if there is a lot of kicking and screaming, especially after a proper correction (not a sideways move). Best regards from sunny South Africa.

  2. Brendan Valentine

    Hi Lee,

    Just wanted to say thanks for such an awesome publication. I’m a Money Map Press Passport Fellowship and Passport Select member and I wanted to say that I find equal value in your publication as I do in the ‘premium’ services. Market timing is so fundamentally important for trading – I actually just invested a hefty chunk of money in getting a professional education in market timing using supply & demand to follow institutional money flows. You just can’t be successful doing this if you can’t read a chart properly to see the hidden data.

    After reading your material for the last few months I attended a workshop where a really great trader provided his outlook on the macro cycle. He put together his own variety of the ‘Warren Buffet Indicator’ (Total Market Cap vs. GDP) and it is definitely the lowest outlook in about 40 years. He suspected the upcoming crash could be as severe as in the 1920’s – and this is a fellow who has studied bear markets in depth going back 100+ years and has done exceptional as a trader through 3 market cycles. It really resonated with what you are saying.

    Subsequently, I have hacked and slashed my stock portfolio apart, and surprise, it even performs better now! I trimmed down the value about 40-50% in equities and pulled out a bunch of cash. Everything I currently hold is secured by stops and since I do options and am getting into futures, I watch carefully every day for sell signals.

    One question for you if I might – I recently bought a great oil company. It is probably 10x undervalued and institutional investors have been piling in for months. Do you think these ‘ground floor’ positions are safe to hold through the crash? As a new investor / trader who hasn’t seen one full market cycle yet it is hard to discern what is worth holding out on and what should sell off. I suppose if it was purchased at a steep enough discount to intrinsic value then it would in theory be alright to hold through a crash?

    Let me know your thoughts – I’m lucky to be able to benefit from your years of experience and hard work.

    Thanks again and don’t sweat all the lunatics out there;

    Best regards,

    Brendan

  3. I think the market is setting itself up for a great crash, maybe a year or two from now. Reason: First the public is not
    in this market. In fact they are too scared to invest. Great bear mkts don’t end that way. When everybody gets in then you will get that 10 to 20 % drop in one day. Currently the only people in this mkt are the big financial interest.. They will continue to drive it higher until it finally goes into warp drive to higher levels sucking in almost everybody; but one will have to be very good to short it because the ones that are really dead will get great short squeezes driving them into orbit. I am 82 years old and have seen this play out several times going back to the 1960’s. Good luck shorting in January. I think you might better go long the ones you think you should short. My guess at time is maybe October 1978. Good luck with the shorts.

  4. I hope that the crash you are referring to doesn’t occur in the pot stocks I own. If so,that would really suck for me,as this is where I placed most of my bets! Also, I don’t know much about Janet Yellen, but I do know this: if anyone other than Trump put her there,she threatens all that would be good for us,and must go now or sooner,it’s taking far too long to “drain the swamp” and ride ourselves of people that stand in the way of progress for our fellow Americans….

  5. Let’s look at the situation through foreign eyes. Their assessment might go something like this.
    Thank you for coming to this meeting on such short notice. We are especially grateful to Fu Ling U from China and Schneider Von Dipstick from Germany for their long journey here.

    First, it is difficult to wrap our minds around the hugeness of the US dollar numbers we are dealing with. Perhaps this example will give you a feel for the size of our problem. If you could spend $1,000 US dollars per second, 24 hours per day, continuously without pause, it would take you 31 years and 8 months to spend just one trillion US dollars.

    We government economists, trading partners and international bankers are “on to the USA” about their financial policies. We know that their nation owes more debt to foreign creditors than the rest of the debtor nations combined, or about 60 percent of all debt on this planet. This includes the P.I.G.S. (Portugal, Ireland, Greece, and Spain) and now Italy. France is on the waiting list. We also realize that their US Government is committed to future payments of about $115 trillion in entitlements that are not actuarially sound.
    We observe with greatest concern that their Government insists on over-spending their income by anywhere from 42% to 48%, depending on who we ask. Their Federal Reserve is buying over $60 billion worthless securities from Fannie Mae and Freddy Mac per month. That is quantitative easing on steroids. Perhaps that explains why their outgoing Chair of the FED is nicknamed “Helicopter Ben.” Their Bureau of Statistics (BS) claims that unemployment is 7.2 percent. Gallup reports that it is actually somewhere north of 31 percent when one considers the decline in the size of their work force. In the face of that reality, the US government remains unwilling to balance its budget or spend within its means.
    We also notice that most of their member States also are in serious economic trouble for similar reasons. Their financial troubles are at least partially induced by unfunded federal mandates forced upon the member States by their central government.
    In other words, the US Government is borrowing more money to cover almost half of their current operating expenses. We also notice that their Federal Reserve central bank, nicknamed the FED, increased its holdings of US debt obligations by about $1 trillion in 2013 alone. This action expands the domestic money supply unless foreign banks absorb this by increasing their reserve currency holdings. As a result, the interest payments on their national debt are eating into more and more US Government revenue with no end in sight and leaving progressively less money to pay for operating expenses and debt retirement. When “Helicopter Ben” defined quantitative easing #3 as an indefinite monthly purchase agreement, that remark went over like a loose female skunk in the international space station everywhere except the United States.
    The FED is using its monetary policy tools to keep interest rates low, but that cannot last much longer. As US Treasuries mature, foreign governments are going to demand higher interest rates to roll over their debt holdings as they retire. This creates a problem for us because we exchange US Treasuries with US cash that we somehow have to get rid of. It also creates a problem for them because debt service consumes an ever larger portion of their operating revenue. How can we do that?
    Foreign banks and foreign-owned corporations with balance of payments surpluses are re-evaluating the usefulness of the US dollar as the favored reserve currency for international trade. This is important because foreign banks and corporations collectively hold trillions of US dollars in their accounts and the US pays no interest on that money. International banks also have a problem of their own. If they use another reserve currency instead of US dollars, how do they get rid of their US dollars?
    If they become harder to exchange, they get discounted in value, thereby causing monetary inflation through devaluation. If the financial herd starts a stampede, the dollar becomes worthless because there is no commodity to back its value in international commerce. The only way that these entities can collectively reduce their holdings is to buy something of commodity value from the United States. Their US currency has not been backed by anything of value since 1965 when the silver certificate became a Federal Reserve Note, called “fiat money.” Therefore, the FED is only obligated to trade one dollar bill for another dollar bill. So what can we buy from the USA with their dollars?
    Their trading partners are going to demand higher prices for imported goods. If we can move our dollar balance to some other trading partner by buying stuff from them with US dollars, we will do so as long as we can. We also will invest in ownership of US corporations, buy more of their country’s natural resources, farmland, mineral rights, and anything else of tangible value they own to get rid of our US dollars. This is already happening. If this continues, we will own their capital stock and they will be working for us. Instead of US corporate profits fueling their economic engine, it will sap their strength and fuel ours. Instead of being a member of the International Monetary Fund (IMF) the USA may become its largest client. If US Big Labor tries to mess with our manufacturers on their soil, we go somewhere else and take their jobs with us. If the unions get personal, we know how to let their threats fall on their own heads. Eventually, their soup kitchens run out of ingredients and cannot buy more. See Haiti for what happens next.
    Their only practical way out of this financial snake pit is to make things, flow stuff, mine stuff and grow things we foreign creditors want to buy for more money than it costs them to produce and deliver. However, the US has de-industrialized itself, so they have lost most of their manufacturing infrastructure to ours. That action created their balance of payments deficit with us because US corporations were over-taxed, over-regulated, and milked dry by Big Labor. They could not compete in the international marketplace. Their only survival option was to move their manufacturing jobs offshore to stop the bleeding. Their largest export is paper. Most of it is used to make packaging material for products made in China. If US citizens try to find a US made product that they need, they have to look very hard to find it.
    But the US work force is the most productive in the world, right? Then how can we make a profit on a product we can manufacture and ship to their door at a price below their cost of manufacture? There is something wrong with this scene.
    Their US Government continues to over-spend its income with no end in sight. The deadlocked Administration and Senate vs. the US Congress shows no sign of any financial remedy to their financial crisis. The US Treasurer does not control fiscal policy; he pays the bills with the money he has available and must borrow the rest, thereby increasing their National Debt. Their Federal Reserve central bank, unknown to most of their electorate, is forced by its charter to become the lender of last resort. In other words, the FED MUST BUY DEBT that the US Government cannot sell to pay its bills. It may elect to buy debt to keep interest rates low, but tax everyone’s savings and sap everyone’s purchasing power with monetary inflation that inevitably follows that action. That includes our US dollar holdings.
    Their political leaders say, “But we need to spend stimulus money to create jobs that put money into people’s pockets so they can buy stuff from employers to create jobs. Right?” Not if it has a label that says, “Made in China”, “German Engineering”, ”Made in Japan”, “Made in S. Korea”, “Product of Mexico”, “Product of Chile”, etc. Perhaps that is why their stimulus money does not create jobs. The only way I know of to raise a stagnant economy out of recession is through their own PRIVATE SECTOR INVESTMENT.
    Government cannot buy prosperity. It can buy poverty. When will their electorate and leaders realize that simple fact? Now I look forward to your questions and suggestions.

  6. First would like to say I appreciate your reports. My question is during the crash that is soon coming, the general advise is to get out of the stock market, but what happens if we own gold and silver mining stocks, do we sell them to or do we hang on to them since there is a good possibility that precious metals will increase in price – I’m 80 yrs old and I don’t want to have the same problems that I had in 2008- 2009 Yours Truly, Ron

  7. Just checking; As I understand it, the U.S. Federal Reserve Bank is not an entity of the U.S. Covernment. It is the banker’s bank, solely designed for their benefit. As such, the obscene flooding the banks with fiat money, was to benefit the big banks, who as designed, have profited handsomely by this insane “printing” of money, with the taxpayer left to hold the ‘bag’.

    Just saying.

    .Nick M.

  8. Like others here have already said, thank you for all your work. I especially appreciate your help timing markets. Since the 70’s I have foreseen the end of a bull market 1-2 years to early. Maybe this time I’ll only be a few months too early getting out thanks to your LAMPP indictor and news letter. I have also been to late getting in and so missed a large portion of this latest market. Timing is everything.

  9. Hi Lee, I’m a beginner, but I do have some common sense. I love to read your articles (don’t think I missed one) because the narratives you give are real, and your analysis is based on real data. I do follow your instructions by preparing to phase out. Please keep writing.

  10. Hi Lee – Two things to ask. One, What do you think of this Powell fellow as Fed Chair. It appears from an article I read that he is fond of the TBTF bailout. Two, will the government ever break up, or rein-in the TBTF banks? I enjoy your articles and insights immensely.

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