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Lance Roberts

Lance Roberts

Chief Strategist/Economist for Clarity Financial, Editor , Talk Show host Lance Roberts Show @ksev700, Analysis without the spin.

Articles by Lance Roberts

Deviations From Long-Term Growth Trends Back To Extremes

18 days ago

In 2022, we discussed the market’s deviations from long-term growth trends. That discussion centered on Jeremy Grantham’s commentary about market bubbles. To wit:

“All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.

Today in the U.S. we are in the fourth superbubble of the last hundred years.”

Are we currently in a market bubble? Maybe. Honestly, I have no idea. The problem is that market bubbles are

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Retail Sales Data Suggests A Strong Consumer Or Does It

April 26, 2024

The latest retail sales data suggests a robust consumer, leading economists to become even more optimistic about more robust economic growth this year. To wit:

“It has been two years since forecasters felt this good about the economic outlook. In the latest quarterly survey by The Wall Street Journal, business and academic economists lowered the chances of a recession within the next year to 29% from 39% in the January survey. That was the lowest probability since April 2022, when the chances of a recession were set at 28%.

Economists don’t think the economy will get even close to a recession. In January, they, on average, forecast sub-1% growth in each of the first three quarters of this year. Now, they expect growth to bottom out this year at an

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Immigration And Its Impact On Employment

April 12, 2024

Is immigration why employment reports from the Bureau of Labor Statistics (BLS) continue defying mainstream economists’ estimates? Many are asking this question as the U.S. experiences a flood of immigrants across the southern border. Concurrently, many young college graduates continue to complain about the inability to receive a job offer. As noted recently by CNBC:

The job market looks solid on paper. According to government data, U.S. employers added 2.7 million people to their payrolls in 2023. Unemployment hit a 54-year low of 3.4% in January 2023 and ticked up just slightly to 3.7% by December.

But active job seekers say the labor market feels more difficult than ever. A 2023 survey from staffing agency Insight Global found that recently unemployed

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Blackout Of Buybacks Threatens Bullish Run

March 19, 2024

With the last half of March upon us, the blackout of stock buybacks threatens to reduce one of the liquidity sources supporting the bullish run this year. If you don’t understand the importance of corporate share buybacks and the blackout periods, here is a snippet of a 2023 article I previously wrote.

“The chart below via Pavilion Global Markets shows the impact stock buybacks have had on the market over the last decade. The decomposition of returns for the S&P 500 breaks down as follows:“

6.1% from multiple expansions (21% at Peak),

57.3% from earnings (31.4% at Peak),

9.1% from dividends (7.1% at Peak), and

27% from share buybacks (40.5% at Peak)
Yes, buybacks are that important.

As John Authers pointed out:

“For much of the last

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Digital Currency And Gold As Speculative Warnings

March 12, 2024

Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite. Such isn’t surprising given the evolution of the market into a “casino” following the pandemic, where retail traders have increased their speculative appetites.
“Such is unsurprising, given that retail investors often fall victim to the psychological behavior of the “fear of missing out.” The chart below shows the “dumb money index” versus the S&P 500. Once again, retail investors are very long equities relative to the institutional players ascribed to being the “smart money.””
“The difference between “smart” and “dumb money” investors shows that, more often than not, the “dumb money” invests near market tops and sells near market bottoms.”

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Presidential Elections And Market Corrections

March 10, 2024

Presidential elections and market corrections have a long history of companionship. Given the rampant rhetoric between the right and left, such is not surprising. Such is particularly the case over the last two Presidential elections, where polarizing candidates trumped policies.

From a portfolio management perspective, we must understand what happens during election years concerning the stock market and investor returns.

Since 1833, the S&P 500 index has gained an average of 10.03% in the year of a presidential election. By contrast, the first and second years following a Presidential election see average gains of 6.15% and 6.94%, respectively. There are notable exceptions to positive election-year returns, such as in 2008, when the S&P 500 sank nearly

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Fed Chair Powell Just Said The Quiet Part Out Loud

February 16, 2024

Regarding the surprisingly strong employment data, Fed Chair Powell said the quiet part out loud. The media hopes you didn’t hear it as we head into a contentious election in November.
Over the last several months, we have seen repeated employment reports from the Bureau of Labor Statistics (BLS) that crushed economists’ estimates and seemed to defy logic. Such is particularly the case when you read commentary about the state of the average American as follows.
“New Yorker Lohanny Santos publicly vented her frustration after her attempts to go door-to-door with her CV in hand in the hope of finally landing a job were unsuccessful.
It would appear that other young jobseekers could relate to Lohanny’s struggles. The USA and Canada rank fifth out of seven when it

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Giant Corporations Are Causing Inflation?

July 15, 2022

“Giant corporations are using inflation as cover to raise their prices & boost their profits. In industry after industry, we have too little competition & companies have too much power to increase prices. I’ve been calling out this corporate profiteering & price gouging” – Sen. Elizabeth Warren
Another version of this argument as of late is accusing “Big Oil” of price-gouging consumers to make record-profit margins at a time when consumers are struggling. As Andrew Wilford penned:
“High corporate profits are the smoking gun that proves businesses are using ‘inflation’ as a cover for driving up prices simply because they want more money. This vague finger-pointing even took the form of a messaging bill aimed at oil ‘price-gouging’ that would have done nothing to

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High Inflation May Already Be Behind Us

May 30, 2022

High inflation has captured the headlines as of late particularly as CPI recently hit the highest levels since 1981. Some are even suggesting we will face hyperinflation. However, while inflation is certainly present, the question to be answered is whether it will remain that way, or if the worst may already be behind us?
To answer that question, let’s define the difference between an inflationary increase and hyperinflation.
Not surprisingly, as Milton Friedman stated,
“Inflation is always and everywhere a monetary phenomenon. It is always and everywhere a result of too much money, of a more rapid increase of money, than of output.

Moreover, in the modern era, the important next step is to recognize that today the governments control the quantity of money so

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Market Perspective Is Important To Avoid Mistakes

March 16, 2022

Market perspective is essential in avoiding investing mistakes. With CNBC airing “Markets In Turmoil” every time the market dips, it’s no wonder investor sentiment is now the lowest we have seen financial crisis lows.

Of course, as shown, extremely negative investor sentiment tends to be the hallmark of the bottom of corrections and bear markets.
Nonetheless, now that we are connected constantly to financial media, we are inundated with headlines designed to get “clicks” more than delivering real news. As we discussed in “Investor Resolutions For 2022,” the biggest driver of investing failure over time is psychology.
“The investor’s chief problem – and even his worst enemy – is likely to be himself.” – Benjamin Graham.

The Anchoring Problem
“Anchoring is a

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Hiking Rates Into Peak Valuations Is A Mistake

March 4, 2022

Hiking rates into a wildly overvalued market is potentially a mistake. So says Bank of America in a recent article.

Optimists expecting the stock market to weather the rate-hike cycle as they’ve done in the past are missing one important detail, according to Bank of America Corp.’s strategists.While U.S. equities saw positive returns during previous periods of rate increases, the key risk this time round is that the Federal Reserve will be “tightening into an overvalued market,” the strategists led by Savita Subramanian wrote in a note.“The S&P 500 is more expensive ahead of the first rate hike than any other cycle besides 1999-00,” they said.” – Yahoo Finance

While many media experts suggest that investors should not be concerned about rate hikes, BofA

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Sell Energy Stocks? The Time May Be Approaching

March 1, 2022

“Sell Energy Stocks” Was Originally Published At

Sell energy stocks? Such certainly seems counter-intuitive advice given high oil prices, geopolitical stress, and surging inflation. However, some issues suggest this could indeed be the time to “sell high.”

Before we go further, it is essential to state that I am not recommending selling energy stocks in total. As is always the case, portfolio management is about minimizing risk and preserving capital. Reducing energy exposure by selling portions of existing positions is more prudent.

As shown, there is a high correlation between the price of oil, the energy sector as represented by SPDR Energy ETF (XLE,) and even oil stocks like Exxon Mobil (XOM.) Therefore, if oil prices decline,

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Market Selloff Into January

January 19, 2022

The market selloff into January rattled investors as concerns of “So Goes January, So Goes The Year” began to dampen expectations. Combined with a more aggressive stance from the Federal Reserve, rising inflation, and a reduction in liquidity, investor concerns seem to be well-founded.
As discussed last week in “Passive ETFs Are Hiding A Bear Market,” the “blood bath” in the high-beta stocks is particularly humbling for the retail crowd that piled into risk with reckless abandon last year.
“Probably one of the best representations of the disparity between what you see ‘above’ and ‘below’ the surface is the ARKK Innovation Fund (ARKK). While the S&P 500 index was up roughly 27% in 2021, ARKK is down more than 20%. That is quite a performance differential but

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#MacroView: MMT – When Theories Collide With Reality

August 8, 2021

Previously, we discussed Modern Monetary Theory (MMT) and its one limitation of inflation. However, as is always the case when “theories” collide with “reality,” the tenants of the theory are quickly discarded.
There is no doubt that since 2020 both Republicans and Democrats alike have shunned fiscal responsibility for the short-term gratification of MMT. Ms. Kelton tweeted such earlier this year.

The writing is hilariously on the wall here, but people want to pretend that a bipartisan, multi-trillion dollar climate-infrastructure package can and must be “paid for” with new tax revenue. Wake me when reality sets in.
— Stephanie Kelton (@StephanieKelton) March 15, 2021

From the $2.2 trillion CARES Act to the $900 billion HERO Act, to President Biden’s $1.9

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Technically Speaking: Hedge Funds Ramp Up Exposure

August 3, 2021

The “Fear Of Missing Out” has infected retail and hedge funds alike as they ramp up exposure to chase performance.
We have previously discussed the near “mania” of retail investors taking on exceptional risk in various manners. From increasing leverage, engaging in speculative options trading, and taking out personal loans to invest, it’s all evidence of overconfident investors.
However, that “risk appetite” is not relegated to retail investors alone. Professional managers, institutions, and hedge funds are “all in” as well.


Money Flows Are Huge
The evidence of “professional investor” exuberance is the massive inflows of capital. The first half of 2021 outpaced every year since the Financial Crisis lows.

That surge in inflows came from a rotation of foreign

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#MacroView: Capitalism Does Not Equal Corporatism – Pt. 1

June 28, 2021

“Capitalism” is not the same as “Corporatism.” Yet, whenever you mention capitalism, there is palpable anger arising from a fundamental widespread misbelief.
“‘Evil’ corporations are greedy and take advantage of the system for their benefit.”
I have two words for you – “No S***.”
Such does not mean capitalism has become “broken.” On the contrary, capitalism created the opportunity for corporations to exist. Things went wrong when corporations took advantage of the system.
However, that isn’t their fault. It is yours and mine. 
As the saying goes, “Don’t hate the player. Hate the game.”
Let’s explore the differences, the problem, and the solution.
Capitalism Isn’t Broken.
I recently took a poll about “capitalism.”

Is capitalism, as we know it, dead?
— Lance

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Interview: Candid Coffee – Mid-Year Market Review

May 27, 2021

Last weekend, I joined Richard Rosso, CFP and Danny Ratliff, CFP to discuss the outlook for the markets for the rest of this year and take questions from our attendees.
We cover a lot of ground from:
The financial markets now and what to expect. 
Inflation outlook.
The dollar.
Why Government actions are destroying the foundation of capitalism.
Plus some interesting questions on 
Why you shouldn’t put real estate in a tax-deferred account.
Better ways to build tax-free retirement funds
Cryptocurrencies and gold

Plus much more.

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The post Interview: Candid Coffee – Mid-Year Market Review appeared first on RIA.

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Technically Speaking: Yardeni – The Market Will Soon Reach 4500

May 18, 2021

“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives
After discussing BofA’s view of why the market could drop to 3800,  I thought it fair to discuss a more optimistic view.
BofA’s view of a market correction was a function of the more exuberant “optimism” in the market.
To wit:
“This analysis is interesting, particularly when analysts are rushing to upgrade both economic and earnings estimates.”
“More importantly, investors are incredibly long-biased in portfolios, with equity allocations reaching some of the highest levels in history.”
What Subramanian questioned is whether all the “good news” is already “priced in?”

“Amid increasingly euphoric

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Technically Speaking: If Everyone Sees It, Is It Still A Bubble?

May 11, 2021

“If everyone sees it, is it still a bubble?” That was a great question I got over the weekend. As a “contrarian” investor, it is usually when “everyone” is talking about an event; it doesn’t happen.
As Mark Hulbert noted recently, “everyone” is worrying about a “bubble” in the stock market. To wit:
“To appreciate how widespread current concern about a bubble is, consider the accompanying chart of data from Google Trends.
It plots the relative frequency of Google searches based on the term ‘stock market bubble.’ Notice that this frequency has recently jumped to a far-higher level than at any other point over the last five years.”

Concern of Stock Market Bubble, 2016 – 2021 – Click to enlarge

What Is A Bubble?
“My confidence is rising quite rapidly that this

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#MacroView: Are Stocks Cheap, Or Just Another Rationalization?

May 7, 2021

Are stocks “cheap,” or is this just another bullish “rationalization.” Such was the suggestion by the consistently bullish Brian Wesbury of First Trust in a research note entitled “Yes, Stocks Are Cheap.” To wit:

“The Fed remains highly accommodative, there are trillions of dollars of cash on the sidelines, vaccines have reached over 50% of Americans, and the economy is expanding rapidly. Some valuations have been stretched, but the market as a whole remains undervalued. As a result, we remain bullish and are lifting our targets.”

Yes, it is true the Fed remains highly accommodative, which has undoubtedly pushed asset prices higher. In fact, financial conditions recently reached a historic low, which suggests elevated asset valuations ironically.

We have busted

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All Inflation Is Transitory. The Fed Will Be Late Again.

May 2, 2021

In this issue of “All Inflation Is Transitory, The Fed WIll Be Late Again.“
Market Review And Update
All Inflation Is Temporary
The Fed Should Be Hiking Now
Portfolio Positioning
#MacroView: No. Bonds Aren’t Overvalued.
Sector & Market Analysis
401k Plan Manager

Follow Us On: Twitter, Facebook, Linked-In, Sound Cloud, Seeking Alpha

Catch Up On What You Missed Last Week
Market Review & Update
Last week, we said:

“The market is trading well into 3-standard deviations above the 50-dma, and is overbought by just about every measure. Such suggests a short-term ‘cooling-off’ period is likely. With the weekly ‘buy signals’ intact, the markets should hold above key support levels during the next consolidation phase.” 

“As shown above, that is what is currently

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A Major Support For Asset Prices Has Reversed

December 24, 2020

In 2019, we wrote about how corporate share repurchases, or “stock buybacks,” had accounted for nearly all buying in the market. A year later, that significant support for asset prices has reversed.
While markets have certainly been on a tear this year, due to massive amounts of Federal Stimulus, it has been an advance solely on valuation expansion. While the decline in 2020 earnings was no surprise given the pandemic, earnings were already declining in 2019. The chart shows this in the
return attribution of the S&P 500.
Notably, while investors are willing to “pay more for less” in earnings, revenue growth deteriorated more.


Overpaying For Earnings
Such is not a new phenomenon. Since 2009, sales per share, what happens at the top of the income statement,

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The Theory Of MMT Falls Flat When Faced With Reality (Part II)

July 6, 2020

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton.
As discussed previously, economic theory always sounds much better than how it works out in reality. The reason is that in “theory,” supply and demand imbalances always revert to previous norms. However, in “reality,” humans rarely act or react, according to theory.
We left off in Part-1, discussing the similarities between the U.S. and Japan. Most importantly, while MMT suggests that debt and deficits don’t matter in theory, economic realities have been vastly

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The Savings Rate Conundrum

November 8, 2017

The economy is booming.
Employment is at decade lows.
Unemployment claims are at the lowest levels in 40-years.
The stock market is at record highs and climbing.
Consumers are more confident than they have been in a decade.
Wages are finally showing signs of growth.

What’s not to love?
I just have one question. If things are so good, then why is America’s saving rate posting such a sharp decline?
The answer is not surprising. Despite the bullish economic optics, the reality for the majority of Americans is they simply have not yet recovered from the financial crisis. As the chart below shows, while savings spiked during the financial crisis, the rising cost of living for the bottom 80% has outpaced the median level

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The Psychological Impact Of Loss

January 22, 2017

For the third time in four weeks, the market was closed on Monday due to a holiday. Not only is this week shortened by a holiday,  it is also coinciding with the annual Billionaire’s convention in Davos, Switzerland and the Presidential inauguration on Friday. Increased volatility over the next couple of days will certainly not be surprising.
In this past weekend’s missive, I discussed a variety of “extremes” being registered in many areas of the market and particularly in prices. To wit:

“I have often compared market prices to the equivalent of “stretching a rubber band.” Prices can only deviate so far from the long-term trend line before a mean reverting event eventually takes place. Much like a “rubber band,” prices can only be stretched so far before having to be relaxed to provide the ability to be stretched again.
The chart below shows the long-term trend in prices as compared to its underlying growth trend. The vertical dashed lines show the points where extreme overbought, extended conditions combined with extreme deviations in prices led to a mean-reverting event.”

S&P 500 Large Cap Index(see more posts on S&P 500 Large Cap Index, ) – Click to enlarge

“This is shown a bit clearer below which compares the deviation of the S&P 500 from the long-term growth trend.

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End Of The Bond Bull – Better Hope Not

October 26, 2016

It’s been really busy as of late to cover all of the topics I have wanted to address. One topic, in particular, is the bond market and the ongoing concerns of a “bond bubble” due to historically low interest rates in the U.S. and, by direct consequence, historically high bond prices.
Bob Bryan, via Business Insider, recently penned the following note:
“Bond yields are low. Historically low. Yields on government bonds in the US, Europe, Japan, and beyond are at seriously depressed levels. Even corporate bonds are reaching multi-decade lows as more investors pour into the asset class.
While the serious flows into these debt instruments continue seemingly unabated, Scott Colyer, CEO, and CIO at Advisors Asset Management thinks that the continued support for the asset makes no sense stating:
‘Bond prices are the highest they’ve ever been, yields are the lowest they’ve ever been and we go back to 1776, this is such an anomaly it’s not even funny.’”
While many financial analysts, asset managers and the media have been quick to adopt the idea of a “bond bubble,” there are a few things to consider with respect to this concept. As I have discussed previously, we are currently in the midst of the third stock market bubble since the turn of the century, but a bubble in bonds is a bit of a different animal.

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Fed GDP Projections

October 23, 2016

“It is not surprising the Fed once again failed to take action as their expectations for economic growth were once again lowered. In fact, as I have noted previously, the Federal Reserve are the worst economic forecasters on the planet.
As shown in the table/chart below, not only are the expectations for economic growth now the lowest on record, the Fed has given up on 2% growth for the economy with the long-run economic projections now at just 1.9%.”

GDP – Estimates vs. Actual 2011-2017FOMC Economic Projections, GDP – Estimates vs. Actual 2011-2017 – Click to enlarge

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Weekend Reading: Another Fed Stick Save, An Even Bigger Bubble

September 23, 2016

As I noted on Thursday, the Fed non-announcement gave the bulls a reason to charge back into the markets as “accommodative monetary policy” is once again extended through the end of the year.
Of course, it is not surprising the Fed once again failed to take action as their expectations for economic growth were once again lowered. Simply, with an economy failing to gain traction there is little ability for the Fed to raise rates either now OR in December.

Click to enlarge.
However, it was the docile tones of the once again “Dovish” Fed that saved market bulls from a “bearish” rout. The recent test of the bullish trend line from February lows combined with a move back of the 50-dma clears the way for the markets to retest, and potentially breakout, to new highs.

S&P 500 Large Cap Index(see more posts on S&P 500 Large Cap Index, )S&P 500 Large Cap Index – click to enlarge.
With economic data remaining extremely weak, and leading indicators continuing to roll over, the “bad news is good news as the Fed stays on hold” scenario continues to play to investor’s favor….for now.
The question that remains, of course, is when does the reality of the weak economic environment begin to impact the fantasy of stock prices.

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Intriguing Eruditions: The weak month of the stock market

September 2, 2016

[unable to retrieve full-text content]On Tuesday, I noted the end of summer and the entrance into one of the weakest months of the year statistically speaking. “We can confirm BofAML’s point by looking at the analysis of each month of September going back to 1960 as shown in the chart below."

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