Bank of America speculators become latest warning of coming market bust

Bank of America speculators become latest warning of coming market bust

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Bank of America reports that a growing number of U.S. money managers are warning of hard times ahead for corporate earnings and bond markets on the heels of months of positive activity in the market. 

Bloomberg Markets reported Tuesday:

Just 33 percent of managers in the bank’s latest survey say corporate profits profits will improve, down from 58 percent at the start of the year.

The drop represents a “warning sign for equities over bonds, high yield over investment grade, and cyclical sectors over defensive ones,” chief investment strategist Michael Hartnett wrote in a note Tuesday. “Further deterioration is likely to cause risk-off trades.”

At the same time, a record 46 percent said equity markets are overvalued. Still, positioning by managers is “pro-risk” despite persistently high cash levels. The S&P 500 trades just above 21 times trailing 12-month earnings after touching above 22 in March, about 23 percent higher than the 10-year average.

This is a pretty similar story to what we’ve been hearing from a number of other market watchers in recent weeks. The bottom line of most of the warnings is this: Economic activity and recent stock optimism unfortunately aren’t moving in a positive direction in tandem — optimism is far outpacing actual growth. Historically, that’s a harbinger of a coming bust.

Earlier this month, I told you about a similar bond bubble warning from former Fed Chairman Alan Greenspan:

The current level of interest rates is abnormally low and there’s only one direction in which they can go, and when they start they will be rather rapid,” Greenspan told CNBC’s “Squawk Box.”

While Greenspan said he has no timeline for exactly when the markets will falter, current trends stacked against historic economic data suggest Americans are currently witnessing the calm before a big financial storm.

“I have a chart which goes back to the 1800s and I can tell you that this particular period sticks out. But you have no way of knowing in advance when it will actually trigger,” he said.

The finance expert added that a bursting bubble always “looks stronger just before it isn’t stronger.”

Why does it look strong? Because government expends great effort to manipulate the money supply to cover up massive financial mismanagement.

The only problem with all the central bank money manipulation that’s gone down via quantitative easing and the like is that the money manipulators keep foisting unsustainable solutions to an un-fixable situation. Sure, they’ll continue to try to create a solution — but the truth is, only a return to sound money (backed by something other than Fed promises) and free markets are going to right the U.S. economy. Sadly, those things will not occur without a massive crash, ugly inflation and national economic pain not seen since the Great Depression.

Just yesterday, I was a little shocked to find on our news wire service a story signaling growing concern for the federal financial situation from state and local lawmakers throughout the country. I wasn’t shocked to hear about the concern. The lower down the political ladder you go, the more likely you are to hear an honest telling of the nation’s financial disrepair… but I was shocked that the report made it onto the national wire. 

So I published it on Personal Liberty®.

Via Tribune News Service’s report “Economic anxiety, distrust of government fuel gold rush”:

The whole scene may sound like something from an earlier era. But it’s part of a growing, modern movement across the United States, brought on by economic anxiety and distrust of the Federal Reserve, to make gold and silver legal tender.

Since 2003, lawmakers in 27 states have considered bills to recognize gold or silver coins issued by the federal government as legal tender or to authorize a precious metals bullion depository in the state, according to the National Conference of State Legislatures. So far only Utah in 2011, Oklahoma in 2014 and Arizona this year have recognized gold and silver coins as legal tender, while Texas in 2015 and Tennessee last year approved measures allowing bullion depositories.

It’s anyone’s guess how long the central planners can stave off the inevitable pain of correction — but it’s never too early to understand how we got where we are and learn to recognize the signs which will precede the next steps in our national economic journey. And it’s worth noting that stories like the one above show us that the cracks are becoming more noticeable.

Of course, there are those who will say this is all tired economic doomsday-ism. In fact, those folks are solidly in the majority.

Just like the unprepared masses financially ruined in previous U.S. economic disasters…

On the other hand, previous economic disasters also have some pretty interesting success stories. And they always have one of two things (sometimes both) in common: insider connections or a devotion to contrarian economic thinking. Either way, the characters at the center of financial success stories which unfolded amid economic calamity almost always saw it coming. Many used the information they gathered via contrarian research to protect assets they already had by identifying economic safe-havens. Others got filthy rich… usually by positioning themselves to jump at economic opportunity as financial hardship affecting wealthier Americans leveled the playing field. Sounds unlikely, doesn’t it? Just Google “people who got rich during the Great Depression.” Or watch the 2015 Hollywood blockbuster “The Big Short.”

If you find inspiration in the stories of folks whose success came from swimming against the current despite being accused of sky-is-falling thinking, there’s plenty of useful information floating around the internet for the aspiring financial contrarian. But it can be overwhelming. Start down the internet’s link-to-link economic research rabbit hole today, and you’ll be on to something else tomorrow. I’ve been there myself.

That’s why I’d start my research adventure with this series of reports. I’ve read them cover-to-cover and have no reservations telling  you that they’re filled with eye-opening information and actionable advice for investors, savers and planners of all ages and income brackets.

Notice, however, that I say “start.” This isn’t the financial planning guide to end all guides by any means — but it’s definitely one you’ll want to peruse highlighter in hand. The solid background information and advice provided therein is organized in such a way that makes follow-up research a breeze. And follow-up research is the financial contrarian’s best friend — anyone who tells you otherwise probably hasn’t done enough of their own.

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