Free eLetters

May 2020

Are U.S. Equities the Second-Most Overvalued in History?

May 15, 2020John Banks

Are U.S. equities at their second-most overvalued point in history, behind only 1999? That is the opinion of multi-billionaire David Tepper, one of the top hedge -fund managers in the game. The U.S. equity market prior to the May 13 decline was “maybe the second-most overvalued stock market I’ve ever seen,” Tepper said in a CNBC interview this week. “I would say ’99 was more overvalued,” he added. Tepper went on to say valuations of certain Nasdaq stocks were “nuts,”

Read now

Conditions are In Place for an “Inflationary Depression”

May 14, 2020John Banks

Robert Skidelsky, an economic historian and member of the U.K. House of Lords, believes the conditions are in place for an “inflationary depression.” On May 6, he told Bloomberg the following: This is going to be a depression and an inflation at the same time, or an inflationary depression if you like, which is very, very unusual. It’s a bit like what we had in the 1970s, when we had something called stagflation — high unemployment and inflation at the

Read now

The Mechanics of Negative Interest Rates

May 13, 2020John Banks

Earlier this week we discussed the bond market’s ominous message, while emphasizing a forecast for negative U.S. interest rates. Scott Minerd is talking about negative interest rates, too. This is notable because Minerd, the chief investment officer for Guggenheim Investments, oversees $270 billion worth of assets. In a note published on May 10, Minerd said the following: I see the yield on the 10-year Treasury note falling to 25 basis points or lower very soon, with a possibility that it

Read now

The Bond Market Does Not See Quick Recovery — In Fact It Sees the Opposite

May 12, 2020John Banks

There is no V-shaped economic recovery. We won’t see a U-shape, either. Instead, there is greater likelihood America’s recovery will have an L-shape — a flat crawl after a hard drop. And that’s only if we’re fortunate, and do a better job in the virus fight. If we get the next part wrong, America could wind up looking like Europe or Japan, with a descent into negative interest rates. And if we really get it wrong, we’ll face a second

Read now

The Federal Reserve Does Not Have Magic Powers

May 11, 2020John Banks

Jerome “Jay” Powell, the Chairman of the Federal Reserve, is not a wizard, and the Federal Reserve does not have magic powers. We point this out because — based on arguments we are hearing as to why everything will be “back to normal” soon — a fair chunk of analysts and investors appear to think otherwise. Of course, they don’t spell out the “magic” part in so many words. But a popular v-shaped recovery argument relies on magical thinking just

Read now

What’s Going on With Sweden?

May 8, 2020John Banks

While the Western world zigged, Sweden zagged. The United States, Canada, the United Kingdom, and most of Europe — including Sweden’s Nordic neighbors, Norway and Finland — issued shelter-in-place orders to deal with COVID-19. Sweden did not. Meanwhile, in country after country, the virus is wreaking havoc. And yet Sweden appears to be floating above it all. No shelter in place, no problem. How is this possible? Due to this paradox, “Be like Sweden” has become a rallying cry for

Read now

In a Real Apocalypse, Bitcoin Beats Gold

May 7, 2020John Banks

A few weeks ago, your mild-mannered TradeSmith Daily editor did something out of character. At a private outdoor shooting range, we received tactical training instruction — from a professional firearms instructor, who is also a family friend — on the proper handling and use of a 12-gauge pump-action shotgun. The outing was fun, but the purpose was serious. We were taught how to handle the shotgun inside a house — or even in a hallway if need be. The training

Read now

Warren Buffett is Worried About the Future

May 6, 2020John Banks

If you had invested broadly in the U.S. stock market on Aug. 30, 1930 — the day Warren Buffett was born — it would have taken 20 years to get your money back. That gloomy anecdote was shared by Warren Buffett, the Oracle of Omaha himself, at the annual Berkshire Hathaway shareholder’s meeting on May 2. Normally the annual Berkshire meeting is a huge shindig — it is nicknamed “Woodstock for Capitalists” — with investors, journalists, and Buffett and Munger

Read now

Bitcoin is the Purest Form of “Hard Money” Ever Created

May 5, 2020John Banks

Bitcoin could be one of the greatest public investment opportunities in all of recorded history. That’s not hyperbole. We are serious about this — and we come to that view having studied Bitcoin intently for more than two years, and global markets overall for more than 20. There are venture-capital opportunities and private-investment opportunities that can deliver multi-thousand percent returns. But these opportunities are not public in the sense of being widely available and easily accessible for any investor at

Read now

How Silicon Valley is Helping in the Virus Fight

May 4, 2020John Banks

As we have explained in these pages, America — and the world — is at war with a virus. The novel coronavirus is an invisible foe that has penetrated all national defenses. It has established beachheads in every major city and every state, and it has resulted in more American casualties than the 19-year Vietnam War. As Balaji Srinivasan has pointed out, the virus has even disabled an American aircraft carrier, the U.S.S. Theodore Roosevelt. No foe has been so

Read now

How “Never Waste a Good Crisis” Applies to Public Company CEOs

May 1, 2020John Banks

Winston Churchill has been credited with saying, “Never waste a good crisis.” The idea is that, in times of turmoil, you can make big changes that otherwise would have been blocked. When the status quo dominates, it’s hard to get buy-in for radical proposals. But when chaos abounds and everything is in flux, what was once considered radical might now be considered acceptable (or appropriate to the situation at hand). “Never waste a good crisis” is thus a common rule

Read now

April 2020

“Black Swan” Funds Demonstrate Why Shorts Go Best with Longs

April 30, 2020John Banks

For so-called “Black Swan” funds, March 2020 was the best month in years. And yet, after a multi-year stretch of poor performance, a lone burst of gains underscores why bearish wagers should pair with bullish ones — that is to say, why shorts work best in a supporting role for longs. The term “Black Swan” was popularized by a best-selling book, The Black Swan, in 2007. In the book, author Nassim Nicholas Taleb described a black swan as an unexpected

Read now