Asset protection
Elliott Wave International recently put together a chart (click here or on the chart to watch the accompanying video) that illustrates a recurring theme of financial bubbles: When good times have gone on for a sufficiently long time, people forget that it can be any other way and start behaving as if they’re bulletproof. They stop saving, for instance, because they’ll always have their job and their stocks will always go up.
Then comes the inevitable bust.
On the following chart, this delusion and its aftermath are represented by the gap between consumer confidence (our sense of how good the next year is likely to be) and the saving rate (the portion of each paycheck we keep for a rainy day). The bigger the gap the less realistic we are and the more likely to pay dearly for our hubris.
Where are we today? Worse than in 2006 and nearly as bad as 1999. Both of those years were followed by several really bad ones.
Before the middle of this century, the growth rates of our technology— which will be indistinguishable from ourselves— will be so steep as to appear essentially vertical. From a strictly mathematical perspective, the growth rates will still be finite but so extreme that the changes they bring about will appear to rupture the fabric of human history. That, at least, will be the perspective of unenhanced biological humanity.
Kurzweil, Ray. The Singularity Is Near: When Humans Transcend Biology, September 26, 2006
Massive debt is sealing the fate of governments and central banks. As the cards collapse, radical developments in diverse areas of technology, combined with free market entrepreneurship, will destroy and rebuild the existing social order.
Smith, George Ford. The Fall of Tyranny, the Rise of Liberty, January 21, 2017
My purpose in “Living with the Exponential” series is to get our thinking oriented to the supercharged future that awaits us. One sample of this future has already arrived when it was reported a month ago that AlphaGo Zero defeated AlphaGo in the game of Go, 100 games to none. A few months earlier AlphaGo had topped the best human player. Unlike AlphaGo, AlphaGo Zero taught itself to play Go.
In 2011, IBM’s Watson computer defeated the two best Jeopardy! players. Watson has since gone to medical school to assist doctors in their diagnoses.
Chess programs that run on desktop computers or even smartphonesroutinely beat human grandmasters.
The tech industry has spawned billionaires by selling to the masses. Tech titans aim to eliminate disease itself, including aging.
But the radical future isn’t limited to digits, as we’re seeing with Brexit and Catalonia.
The world is changing fast, and it will change much faster in the years ahead. Let’s try to stay on top of it.
Medicine
Gene Editing
“We cut your DNA, open it up, insert a gene, stitch it back up. Invisible mending,” said Dr. Sandy Macrae, president of Sangamo Therapeutics, the California company testing this for two metabolic diseases and hemophilia. “It becomes part of your DNA and is there for the rest of your life.”
It’s like sending a mini surgeon along to place the new gene in exactly the right location.
The experiment was done Monday in California on 44-year-old Brian Madeux. Through an IV, he received billions of copies of a corrective gene and a genetic tool to cut his DNA in a precise spot.
Signs of whether it’s working may come in a month; tests will show for sure in three months.
See AP Exclusive: US scientists try 1st gene editing in the body (11-15-2017)
Surgical Training using Virtual Reality (VR)
We wiil need to double the number of surgeons by 2030 to meet the needs of the developing world.
Dr. Shafi Ahmed wants to train them simultaneously using VR.
“Ahmed made a splash back in 2014 when he reached 14,000 surgeons across 100 different countries by using Google Glass to stream a surgical training session. In 2016, Ahmed took this a step further by live-streaming a cancer surgery in virtual reality that was shot in 360-degree video while he removed a colon tumor from a patient.”
He also streamed Twitter’s first live operation.
Ahmed: “Forget one-to-one. My idea is one to many. I want to share knowledge with the masses.”
See Virtual Reality Is Reshaping Medical Training and Treatment (11-12-2017)
Treating babies born with jaundice
About 60 percent of babies are born with jaundice—a yellow tint to the skin and whites of the eyes.
The color is a sign that the baby’s blood has too much bilirubin—a byproduct of the body replacing old red blood cells.
The liver normally flushes bilirubin out of the body, but a newborns’ organ often can’t get the job done efficiently.
Newborns being treated for jaundice must often lie naked under therapeutic blue light for hours at a time.
New light-emitting pajamas could give parents a more comfortable, portable option for their babies.
See Light-Up Pajamas to Treat Babies With Jaundice (11-8-2017)
Reversing Aging
A team led by Dr. Dongsheng Cai from the Albert Einstein College of Medicine pinpointed a critical source of aging to a small group of stem cells within the hypothalamus.
Like fountains of youth, these stem cells release tiny fatty bubbles filled with mixtures of small biological molecules called microRNAs. With age, these cells die out, and the animal’s muscle, skin and brain function declines.
However, when the team transplanted these stem cells from young animals into a middle-aged one, they slowed aging.
In a groundbreaking paper published in 2013, Cai found that a molecule called NF-kappaB increased in the hypothalamus as an animal grew older. Zap out NF-kappaB activity in mice, and they showed much fewer age-related symptoms as they grew older.
The animals also better preserved their muscle strength, skin thickness, bone and tendon integrity.
See Breakthrough Stem Cell Study Offers New Clues to Reversing Aging (8-6-2017)
Artificial Intelligence
Ray Kurzweil:
[When] a girl in Africa buys a smartphone for $75, it counts as $75 of economic activity, despite the fact that it’s literally a trillion dollars of computation circa 1960, a billion dollars circa 1980. It’s got millions of dollars in free information apps, just one of which is an encyclopedia far better than the one I saved up for years as a teenager to buy. All that counts for zero in economic activity because it’s free. So we really don’t count the value of these products.
Technology is always going to be a double-edged sword. Fire kept us warm, cooked our food, and burned down our houses. . . It’s only continued progress particularly in AI that’s going to enable us to continue overcoming poverty and disease and environmental degradation while we attend to the peril.
I’m a believer that the Turing Test is a valid test of the full range of human intelligence. . . I’ve been consistent in saying 2029 [will be the year an AI passes the Turing Test].
See Ray Kurzweil on Turning Tests, Brain Extenders, and AI Ethics (11-13-2017)
Integrated Circuits
Most wearable electronic devices that are currently available rely on rigid electronic components mounted on plastic, rubber or textiles. These have limited compatibility with the skin, are damaged when washed, and are uncomfortable to wear because they are not breathable.
University of Cambridge researchers have developed a process that is scalable and according to the researchers, there are no fundamental obstacles to the technological development of wearable electronic devices — both in terms of their complexity and performance.
The printed components are flexible, washable, and require low power — essential requirements for applications in wearable electronics.
The technology is being commercialized by Cambridge Enterprise, the University’s commercialization arm.
See Integrated circuits printed directly onto fabric for the first time (11-10-2017)
Government
The United States was founded upon the concept of secession. Not once, but twice. First, in 1783, when colonies seceded from the British Empire. Second, in 1788, when states seceded from the United States.
Within eight years of the ratification of the U.S. Constitution, the first secession movement arose.
It flared up, again, in 1800 when Jefferson was elected the third President of the United States.
And, again, in 1803 when President Jefferson purchased the Louisiana Territory from Napoleon.
New England States would seek secession from the United States again in 1811 over the admission of the State of Louisiana into the Union, and again in 1814-1815 over “Mr. Madison’s War.”
In the 1850s, New York, New Jersey, Pennsylvania, Delaware, and Maryland, called “the middle states”, represented 40 percent of the U.S. economy. A powerful secessionist movement arose in these states calling for them to form a separate country.
When the seven “Deep South” states seceded in 1860-61, many Northern newspapers upheld their legal right to secede and advocated a peaceful separation.
Secessionist movements continue in the United States to this day.
See Secession is as American as apple pie (11-6-2017)
Never argue with an idiot. They will drag you down to their level and beat you with experience.
Mark Twain
Over the past several years the Naysayers have predicted the Market would crash and burn; we blatantly disagreed and opted instead to state that the market would continue to soar higher and higher. Despite the severe beating these naysayers have taken, they insist on regurgitating the same trash over and over again in the blind hope that by some miracle their insane ramblings come to pass. As soon as October was upon us, these experts started screaming at the top of their lungs. What was their latest prediction; a repeat of the 1987 Stock Market Crash. We immediately repudiated these predictions. Here is a brief excerpt from the article we posted in October.
They never seem to let up on pushing this sewage onto the unsuspecting masses. This is a clear example of insanity in action; mouthing the same thing over and over again with the desperate hope that this time the outcome will be different. The outcome will not be different this time, at least not yet. These guys should focus on writing fiction for reality seems to elude them completely. For years we have stated (and rightly so) that until the sentiment changes, this market will continue to soar higher and higher.
The latest nonsense is to state market omens that have a terrible record of coming to pass are about to trigger a crash; ones odds are better if one looks at tea leaves, plays with skull bones or hires some monkey to throw darts at a board with the words up or down plastered on it. One has to determine the trend first and look at several underlying forces before one can attempt to predict where the market is headed. However, these fools read a book or two, memorisesomeone else’s theories and assume all of a sudden they are experts. Fundamentals and technical’s are both useless when used in isolation. One has to look at the emotion driving the markets. In other words, what are the masses thinking or doing? When one looks at the sentiment data, the conclusion is inescapable. Stock markets always crash on a note of euphoriaand the masses are far from being happy.
Masses are not embracing one of the Most Hated Bull Markets in History
The images below speak a thousand words, so there is no need for us to add any commentary.
The Technical Outlook
While the Dow is trading in the extremely overbought ranges, any pullback will most likely end in the 21,000-21,500 ranges. For the correction to pick up steam, it would need to close below this level on a weekly basis. As the trend is still positive, the odds of the Dow crashing are very low. At the most, the Dow would test its breakout point which falls in the 18,900-19,200 ranges unless the trend were to turn negative suddenly or the masses suddenly embraced the market with gusto. At this point, the trend is strong and showing no signs of weakening. Remember that the markets can remain irrational for much longer than most traders can remain solvent by betting against it.
Inflation remains a non-issue on a worldwide basis
Central banks worldwide are either standing down or opting for rate cuts. This indicates that while the economy is improving somewhat, the global economy is far from healthy and low rates will continue to dominate the scene. In a lower rate environment corporations borrow more money and the new game is to use this money to buy back shares and in doing so magically improve the EPS.
Conclusion
When the Dow was trading below 20K, we stated that the next target was 21K; this target was struck in a few short months. After that, we raised the target to 22 and 23K. Now we will go on record and state that the Dow is likely to test 28,000-28,500 with a possible overshoot to 30K before it crashes. We will be providing our subscribers with an in-depth analysis of the path the Dow will traverse to achieve this target. We don’t expect the Dow to just shoot to these targets, certain requirements have to be fulfilled, but so far the Dow is following the path we expected it to take.
Before you listen to these so-called experts who seem quite happy to dish out faulty information, take a look at their track record. A simple search will reveal that over 90% of them are full of hot air and had any of these Dr’s of Doom followed even a sliver of their advice, they would have been blown out of the game long ago. The fact that they are still here tells you that they are trying to pan their sage advice to you in return for a certain fee; advice they would never follow.
A simple game plan
View strong corrections through a bullish lens. This game plan will remain valid until the masses turn bullish or the trend turns negative. The stronger the deviation, the better the opportunity.
You can’t make anything idiot proof because idiots are so ingenious.
Ron Burns
Today’s videos and charts (double click to enlarge):
SFS Key Charts & Video Update
SF60 Key Charts & Video Update
SF Juniors Key Charts & Video Analysis
SF Trader Time Key Charts & Video Analysis
Morris
Friday, Nov 17th 2017 Super Force Signalswebsite: www.superforcesignals.com
The latest issue of Street Freak came out on Tuesday. Street Freak is a bit of an aggressive stock-picking newsletter, where we come up with a new idea every month. I try to keep the ideas a secret—if you want them, you have to subscribe! But I’m going to let you in on this month’s idea for free. Are you ready? Here it is:
Pay down your mortgage.
Yes, that’s a bit unorthodox for a financial newsletter. But people spend too much time thinking about the next get-rich-quick idea and not enough time thinking about their overall financial well-being. I’m willing to bet that in addition to having a successful portfolio, many investors reading this also have a lot of debt.
Going into what might be a downturn, I’m uncomfortable having a lot of financial leverage. If you think the market is going to go down, then you should stop thinking about buying inverse VIX ETNs and start thinking about how to deleverage in a smart fashion.
Better Risk-Reward
Paying down your mortgage is part of that. It is part of an overall exercise in balance sheet repair, which includes—
- Building a cash position
- Paying off debt:
- Margin debt
- Credit card debt
- Car loans
- Mortgage debt
Financial leverage cuts both ways. It can help you on the way up, and it can hurt you on the way down.
Funny thing about paying down debt—technically, you are “making” whatever the interest rate on your loan is. If you are paying down a 4% mortgage, you are actually earning a 4% return (on a pre-tax basis). Given that high-yield ETFs yield about 5% these days (and are circling the drain), it seems like a much better risk-reward.
Also, I would not get too caught up in thinking about your mortgage interest deduction. Chances are, it is going away anyway in the tax reform bill, and besides, that is a terrible reason to have debt. There is nothing quite like the peace of mind of having a house that is paid for, or nearly so. Trust me, I’ve been there.1
As for credit card debt… there is no reason to have credit card debt unless you are experiencing temporary financial stress, in which case a stock pick from a newsletter is not going to help you.
And I would not worry too much about your credit score suffering because you do not have any debt. That’s the wrong reason to take out debt.
Freedom
Bernie Sanders likes to talk about how the US isn’t really a free country because people don’t have freedom from financial stress. Well, financial stress is just a part of life in a free market economy.
But take a page out of the Bernie Sanders playbook and… eliminate your financial stress! All this money going out the door in monthly payments—you can make it stop. There is no freedom in the world quite like freedom from debt.
If you don’t do this, and we get the downturn I think we are going to get, your balance sheet is going to deteriorate as the asset side of the ledger gets smaller. So the goal here is to deleverage when you can, not when you have to. Forced deleveraging (i.e., margin calls) is never any fun.
I am half-descended from flinty New Englanders. You have never met a cheap b****** like a Connecticutian, so part of this is in my DNA. New England is the land of the good credit scores.
Don’t worry, I’m taking my own advice. The goal is to get the house paid off in 2-3 years. When I look in the mortgage amortization spreadsheet I built and add up all the interest I’ve paid since I bought the house in 2015, it just makes me mad. I told the loan officer when I got the mortgage that I was going to prepay the hell out of it. He didn’t seem to mind. Not his problem.
The heuristic on paying down your mortgage is that you shouldn’t do it when interest rates rise. To use an extreme example, if interest rates rose to 10% and your mortgage was 4%, you would be better off keeping the money in a savings account than paying down your mortgage. But one thing that is not factored into that calculation: less debt is always better than more debt.
My guess is that when the market turns, we are going to be hearing about a lot of hidden leverage that we never even knew was there. It is like that old Warren Buffett quote: “You only find out who is swimming naked when the tide goes out.”
One final thing. Early bird registration for Mauldin Economics’ Strategic Investment Conference opens today. If you’re planning on going, now is the time to get your ticket—because you can get it at a discount of more than 20%. Last year was terrific (Matt Ridley was a personal favorite) and SIC 2018 will be too. Get your ticket here.
1 One wrinkle: if your house is nearly paid off and you do run into financial trouble, the bank will foreclose on a low LTV mortgage first. But this shouldn’t really be a consideration—just something to keep in the back of your mind.
Jared Dillian
Editor, The 10th Man
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