Royal Bank of Scotland to investors: 'Sell everything'

What do you own in that 401(k)?

 

You're not an an all-time high. And your equity exposure is off much more than the fixed income and cash allocations, which are still making you some money.

Your S&P Fund peaked around 9 months ago -- about 5 percent ago. As did the Wilshire 5000 (total stock market) portion of the target fund. The international portion of the target fund tracks the MSCI Developed / EM index, and that peaked a long time ago. Around 2006 and probably 35 percent ago. But I suspect you know all of that.

For what it is worth, the IBB -- or whatever biotech basket LTL has been doubling his make-believe money in over the last few months, has been getting hit much worse than the broader market, down more than 35 percent since last July. It has been leading on the way down as the air comes out of the balloon. The highest flying things that get the farthest into Tulipmnia valuations usually lead the way down -- and give the earliest signal that things aren't right (although you didn't need a signal this time, because most people who actually trade these markets daily have known all along what has been making the casino go. This hasn't been 1927 or 1928.).

Here is what I don't get about the more ridiculous posts on here over the last week or two. If you think I am rooting for stocks to do whatever you think I root for. .. and let's say you really wanted to do an SJ-worthy, kindergarten-level post. ... why not wait to make sure? You are off equity highs. And stocks have gone absolutely nowhere for almost a year and a half. ... since they ended QE3 in October, 2014. Which, of course, is what should clue in anyone who cares to use their noggin about what inflated the market -- and what it needs to stay inflated in an environment where earnings are declining, and we have a very weak economy (what drives equity valuations when markets aren't being manipulated higher). This stock market -- at these valuations -- is entirely dependent on credit creation and cheap money fueling margin buying. It doesn't benefit regular people either, because most people don't own stocks (stock ownership has dropped off a cliff -- more people own cats today than own a share of stock). . ... Not since the stock market cratered the first time around this century due to the EXACT SAME THING (a central planner blowing bubbles!) -- and before they got to work reflating it afterward, and in the process stealing savings from anyone trying to save, and growth from the future, to create a phony economy that is onlys rewarding people who already had money with more and more paper wealth tied up in a bunch of asset bubbles (many of them will get caught holding the bag when it all ends and find out they never had anything REAL).

Unless they can keep finding ways to create more and more money out of thin air by keeping credit expanding (without something tripping defaults), I think it makes no sense to bet on stocks getting get back to their highs or much beyond. The probabilities are against that bet in a VERY extreme way -- that isn't a prediction or a blind bet. It's looking at a situation realistically and assigning probabilities to different outcomes.

If they don't step back on the gas and keep credit expanding, at best they will be able to maintain a lot of volatility while a slow leak continues to take hold. The best case (unless they find a way to start up more credit creation) is more of the last year and a half. The difference now is that there are signals that we are marching into a recession (if we are not already in one as much of the private economic data has been suggesting -- but either way, we are in the 8th year of a recover that is fizzling, even if it hasn't looked like a recovery with a measly 1.5 percent annualized real "growth" during the cycle. ... which is phony anyhow, because it has almost entirely been on the back of an insane amount of debt creation).

Or. ... we just get one of the credit events that are looming in dozens of areas as the slowing global economic conditions keep creating cracks. And it becomes the catalyst for a meltdown (a la credit default swaps in 2007 / 8). We have trillions of dollars of misallocated money that has been created out of thin air and is sloshing around in all of the phoniness. That is all that is left if they don't do more QE or something equally as insane to start the bubble machine back up. If they instead do the same act they tried last year where they fecklessly signaled normalization for close to a year (or at this point, if they even sound too hawkish for a minute, let alone a year), it's game over. As they found out when the stock market threw a hissy fit, and they walked their bullshit back (confusing the fuck out of everyone yet again).

For what it is worth, that too should clue in anyone who takes the time about how full of shit they are. It has clued in most people not on SJ.com

The Fed used this "data dependent" mantra -- while at the same time they try to signal in advance what they WANTED to do by flapping their gums over and over again. It's not data dependent, obviously, if you have a plan in advance. All the while, they waffle back and forth on what they are signaling -- depending on how much of a hissy fit the asset bubbles they have created throw in response to their smoke signals. If high-yield debt or equities start to buckle, as they did, they reverse course in a panic. And then when the data (which is bullshit data anyhow designed to misstate things for politicized reasons) says what they were saying would be the conditions for them to act. ... they don't act anyhow. ... because there is no data in the world now that could ever do what they know happens -- they pop their own bubble. So the stock market and high-yield debt markets are running "monetary policy."

For several years, I was pulling what little hair I had left out watching this farce. But now they are actually having a credibility problem -- more and more of the people sort of buying the fantasy in 2009 or 2010 or 2011 are now pointing out that the emperor has no clothes. You'd never know it reading this board. Cranberry is giving me the canned posts that maybe sounded a bit like the orthodoxy he might have been seeing in his news digest in 2011. But in 2016, most of the world in tune to them is asking "WTF"?

Anyhow. ... You have a retirement portfolio -- I assume it is appropriate for your age, in terms of risk / time horizon. The only equity investing (as opposed to trading, and I don't really trade equities for the most part) I normally do is in a retirement portfolio, too. And in normal circumstances, I would be ready to ride out anything -- up, down, sideways, in circles. Timing markets as a long-term investor is impossible.

But these are not normal circumstances, whether you realize it or not. If you do have that long horizon, you nonetheless are staring ridiculously expensive valuations relative to poor economic conditions that have never supported anything like it. Which isn't suprirsing, because the fundamental reason that stocks got blown up 200 percent over the last 7 years has been credit creation. So you should be VERY prepared to watch stocks get hammered and likely take a long time to get out of a long bear market when that ends. Which is fine. But a lot of people have trouble with that. Me? The probabilities got so great in terms of huge downside risk. ... relative to very little upside potential -- that I had to step aside and wait for what I think favors (by an insane probability) a great buying opportunity up ahead.

At best, though, the stupid posts (not as much yours, but still) are akin to waving pompoms at the Titanic as it leaves port. What is really dumb about it is that my problem with the mess they have created has much less to do with silly equity valuations than it does with the never-ending depression they have put us in -- the pain a whole lot of people without any equities are having to deal with as they work 2 or 3 part-time, low paying jobs at best, or have given up looking for work at worst and they collect SNAP benefits while they accumulate more and more debt. And the much worse pain that is yet to come because a massive deleveraging has to happen. If the stock market stays inflated -- at these levels -- it means that the idiots who got us here by cranking up a debt monetization machine are still maintaing a semblence of control and they are making an unprecedented credit problem even worse. It's already way too big of a problem. The longer it goes on, the worse of a problem we are going to be digging out from -- with regard to way more places than an equity market. It's not something anyone who wants to reason would be rooting for. In hindsight, would it have been funny to be rooting for what happened in 2007 / 2008 if someone had been trying to connect the dots for you in 2004 or 2005 or 2006 (I am asking that rhetorically)?

 

That one flowed right from the fingers as I was typing it, too!

 

I think Janet Yellen did a test run of QE4 today, cran: