A Rolling Recession Means the Market Is Fine

Ed Yardeni is still bullish on the market, and there’s not much reason to doubt him. [The Rude Awakening] April 19, 2023 [WEBSITE]( | [UNSUBSCRIBE]( A Rolling Recession Means the Market Is Fine - Noted economist Ed Yardeni says the recession is “rolling” and not economy-wide. - He’s still bullish on the stock market. - Yardeni thinks October 2022 low will hold. [America’s #1 Economist Bets Big On Gold, Says Now Is The Time To Buy!]( [Click here to learn more]( Jim Rickards is widely considered to be the #1 living economist in America. Throughout the years, he and his team have issued a number of bold calls which turned out to be 100% accurate: - They predicted the 2008 housing crisis years in advance… - They predicted Brexit and Trump’s 2016 victory… - They predicted Covid-19, months before the first case originated in China… - And much, much more. But none of that compares to Jim’s urgent new prediction… [Jim predicts gold is now entering into a super boom phase, one which could last for years and push the price of gold to $15,000 an ounce or higher.]( In fact, Jim is so certain that he’s already bet a significant amount of his own money on gold – and today, he’s on a mission to show everyday investors like you how to get started. [To see the exact steps to take to profit as gold soars higher, click here now.]( [Click Here To Learn More]( [Sean Ring] SEAN RING Good morning from a lovely sunny day in Asti! I watched this [CNBC interview with economist and market watcher Ed Yardeni](. Ed Yardeni has forgotten more about the market than I’ll ever know. He’s a treasure trove of financial and economic history. I find his analysis cogent and fascinating. And he’s unabashedly bullish. So it made me reconsider my current misery about the markets and the economy. Yardeni disagrees with the Fed and does *not* see a mild recession in the second half of this year. Yardeni thinks Jamie Dimon, JPM CEO, was too bearish when he called a “financial hurricane” last year. And he applauded JPM’s stunning results, as well. If my analysis is entirely different from Ed Yardeni’s, it’s time to rethink my research. So that’s what we’ll do today. The SPX First, let’s update our look at the SPX. We initially drew this chart for the January 24, 2023, Rude edition called “[One More Test For the SPX]( Here’s the new, updated chart: [SJN] The Recap This is the daily candlestick chart of the S&P 500. The blue line running through the candles is the 50-day moving average. The red line swooping over the top of the candles is the 200-day moving average. I put two blue dotted horizontal lines on the charts at 4,100 and 4,300. Second, the real test is not getting above the 200-day moving average. We’ve done that already. The real test is the 4,100 resistance level. To be sure, a resistance level is a price at which an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price. For completeness, a support level refers to the price level that an asset does not fall below for a period. The 4,300 level isn’t as big a deal for the reasons I’ll show you. Ok, let’s begin. [“The Supply Chain Crisis Is About To Get A Lot Worse”]( Hi, Jim Rickards here. According to Wired, “the supply chain crisis is about to get a lot worse.” That’s why I’m announcing a big new project… to help you prepare for what’s coming. [Click here for the details.]( [Click Here To Learn More]( Walking Through the Story Let’s start with the purple “A” on the chart. At this point, the SPX had fallen through 4,300. But then it hovered between 4,100 and 4,300 for about two weeks. It made three attempts (the arrows) to break to the upside but couldn’t get it done. It subsequently fell through 4,100 and bottomed out at 3,900. From there, we move to magenta #1. This is a consolidation pattern in the box - hovering around the 4,100 level. It looked like it would resolve itself to the upside for a time. But that wasn’t meant to be. There was too much selling pressure, around 4,100. We bottomed out this time at 3,650. Two months later (magenta #2), we saw a similar consolidation pattern which finally resolved to the upside. Alas, a week later, the SPX met resistance at the crossroads of the 200-day moving average and the 4,300 level (purple B). After a steep sell-off, the SPX challenged the 4,100 level at magenta #3. And it failed once again. Following that failure, a furious sell-off ensued. The SPX bottomed out at 3,500 (magenta #4), the secular low for this period. This is the level Ed Yardeni thinks will hold. By mid-November, the SPX rallied again above the 50-day moving average. Then, at magenta points 5 and 6, it again challenged the 4,100 level and failed both times. But then something different happened. We made a higher low. This was the first time in a long time we had some sort of technical confirmation that something had changed. You’ll also notice that the higher low was itself a consolidation pattern that resolved itself to the upside. And once the SPX got above the 3,900 resistance level, that resistance turned into a support level that the SPX had just bounced off of. In technical terms, that’s called a “reverse of polarity.” What’s Next? We ended our analysis in January at magenta point 8. We weren’t sure if that break of 4,100 was for good. And it wasn’t. We hit another snag and headed back down to about 3,825 (magenta point 9), which was a higher low once again. Now we’re back up at magenta point 10. We’re at 4,154. But this may be another false breakout. Here’s why I think it’s not… - The SPX price > SPX 50-day moving average (DMA) - The SPX 50 DMA > The SPX 200 DMA This is characteristic of a bull market. And those averages look like they’ll be upward-sloping soon, another positive sign. The next stop looks to me like 4,300. Interestingly, if we look at volume by price, we get this: [SJN] To explain: The green bars show where the most volume has occurred by price level. The longest green bar is between the 3,900 to 4,000 levels. We’re pretty well above that now. The second longest green bar is right where we are now. That’s roughly between 4,075 and 4,175. If we get above there, you can see little overhead supply. With that said, the first resistance level will probably be 4,300. I think this can be surmounted quickly. After that, the upside target right now is 4,899. Why is that so high? Here’s the point-and-figure chart for the SPX: [SJN] I won’t get into the weeds for the P&F charts today. But quickly, every time we go up a block, the block gets an “X.” When we go down three squares, each one gets an “O” in the next column, but not before that move is completed. (And when we go up again, the Xs go in the next column after that.) The blue lines on this chart are the trendlines. According to the P&F chart, the SPX never signaled to get short. That is, it never broke its uptrend line. In fact, according to P&F’s special counting techniques, the target for the SPX is way up at 4,899. I show you this because I use P&F charts to identify upside and downside targets. And this means we’ve got much, much higher to go (potentially) in the SPX. Wrap Up De-dollarization is still a thing. We’re wasting blood and treasure in Ukraine. Congress can’t spend enough money it doesn’t have to buy votes for its re-election. But none of that matters… yet. The market is looking up. Perhaps way up. And until we’ve got a definitive sell signal from somewhere, I’d hang on… tight. We still love gold, silver, Bitcoin, and natural resources. That hasn’t changed. Just add the broad stock market to that list. Have a great day ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening In Case You Missed It… We’re Screwed If We Don’t Do the Math [Sean Ring] SEAN RING Good morning from a gorgeous Asti! First, my internet is wonky. So I will reprint a piece I wrote for the Morning Reckoning last Thursday. You see, I can’t tell if you’ve read that piece. And since the Rude is my first responsibility, you deserve to get my best writing. Honestly, I wasn’t sure what to write for Thursday’s MR piece, so I just put together a few simple math formulas I use in my financial life and wrote about them. The feedback was unexpected and overwhelmingly positive. Eric V. called it “...by far the most useful piece you have written in the past two years.” Eric, I hope some of my other stuff has been useful, too… You gave my publisher Matt Insley and me a good laugh over this! H wrote, “This [4/12] Morning Reckoning is a 5* piece; supremely useful to young & old alike!” T.J. wrote, “I thought the article this morning was outstanding! Great job, Mr. Ring. I'm kind of a math geek, but even I learned a couple of things. I forwarded it to several friends...Hopefully, you will pick up a few more email subscribers.” Ellen wrote, “Thank you for today's column. I'm a PAW who's been investing for 40 years after going broke 3 times and relying on others. Anyone who thinks they've learned it all is ready to trip and fall. Your column today about 'Rules & Tools' for investing was a useful review and not offensive at all. You have a knack for simplifying complex subjects with just a few concise phrases that everyone can grasp quickly. Your columns are refreshing, direct, insightful, and easy to read. Please keep it up.” Leslie G. wrote, “Good morning! I enjoyed today's email. I didn’t know about The Net Worth Indicator, so I appreciate you sharing this. I needed to hear about the 50-30-20 Rule, as this was a refresher. This simple information is helpful. Please keep them coming. Thank you!” Thanks also to Sergio M., Mike in Jersey Shore PA(!), Jim C., Yvon, and Bill for your kind words! Let’s get to it. We’re Screwed If We Don’t Do the Math Most economists agree that there’s an inverse relationship between women’s literacy and birth rates. Economists concluded that the more women read (and are educated), the less they want children. I’ve always thought that conclusion didn’t match reality. I believe the more women can do the math, the fewer children they want (for lifestyle reasons). That is, numeracy, rather than literacy, drives decision-making. There are many examples of career women who can afford – and have – more children. Sara Blakely, Victoria Beckham, and Amy Coney Barrett come to mind. But this column isn’t about demographics. It’s about innumeracy, which we’ll define as incompetence with numbers. It’s what I think society’s big problem is. But instead of whining about the causes, symptoms, and cures of innumeracy, I will give you a few rules of thumb. You can use them to see if your decision-making changes. For my part, these simple equations and rules gave me a target. Specifically, I knew how far ahead or behind I was and how far I had to go to reach my goal. I won’t bombard you today, as the fewer and the simpler, the better. So let’s start with five simple rules to see if they change how you think. The Rule of 72 The Rule of 72 is one you’ve probably heard of. And you might be wondering why I’d even include such a rule. Well, let me first state the rule, and then we’ll talk about how to use it. For most people, the Rule of 72 tells them how long it will take to double their money if it’s invested at a constant rate of return. For example, if you’re earning 10% per year on your portfolio, it’ll take 72/10 or 7.2 years to double your portfolio. If you wanted to back out the math, assume you had a $100,000 portfolio. $100,000.00 x (1 + 0.10) ^ 7.2 = $198,622 The Rule of 72 isn’t perfect. But near enough is good enough in this case. If you’ve got a superstar financial advisor earning you 20% per year, then it’ll only take 3.6 years to double your portfolio. Now, let’s use this rule to look at inflation… something Sleepy Joe doesn’t want you to do. Historically, central banks have tried to keep interest rates around 2%. That meant a currency lost half its purchasing power in 72/2 or 36 years. You’d barely notice the loss in purchasing power, as it’d take so long to rear its ugly head. You’d probably go to the grocery store and wonder why eggs are “suddenly” double what they used to cost in 1983. We’ve all done something like that, haven’t we? But with inflation hitting 10% as it recently has, a currency loses half its value in only 72/10 or 7.2 years. Realistically speaking, let’s say Chairman Pow comes out and says, “We’d love rates to go back down to 2%, but that’s just not realistic. We’re now happy with a 4% target.” In that case, the dollar would lose half its purchasing power in 72/4 or 18 years. If you think eggs are expensive now, just you wait until 2041! The Rule of 72 is not only a great way to look at returns but also at purchasing power erosion. [New Biden Bucks Follow-Up Available Now]( Hey, it’s Jim Rickards. Since posting my original Biden Bucks presentation online, millions of people have viewed it. Snopes and the Associated Press have even attempted to “fact check” me and claim my warnings are false: [Click here to learn more]( Point being, my message has raised a storm and caused a lot of controversy. But in the time between my message and now, a lot of new developments have come to light. That’s why I’ve just released an update to my original prediction… one which will likely be even more controversial. [>> Click here now to access my new 2023 Biden Bucks follow-up](. [Click Here To Learn More]( Net Worth Indicator This is a great targeting mechanism and one I’ve regrettably only just found. It’s from The Millionaire Next Door by Thomas J. Stanley and William D. Danko. Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be. If you hit this number, you’re an AAW or average accumulator of wealth. According to the authors, to be considered a PAW, or prodigious accumulator of wealth, you “should” have at least twice this number. What I like about this indicator is that it’s simple to calculate. And it gives you a target. Full disclosure, I’m a UAW, which is an under-accumulator of wealth. But I won’t use this number to feel bad. What I choose to do is to think bigger and get better results. If you’re unhappy with what this number tells you, I suggest you do the same. Julian H. wrote in with this great question about the formula: I'm familiar with The Millionaire Next Door book and always wondered what's the logic behind the formula age x income / 10. Do you have any knowledge about that? In the book, there are no specifications about that, and I can't find anything valuable on the Internet. Thanks in advance. Best. Julian H. Julian, as far as I can see, this formula is produced with linear regression. That is, the authors took net worth, age, and income, and produced a line of best fit. The 50-30-20 Rule Tweaked This is a great way to allocate your monthly paycheck. And it’s super simple: - 50% of your income goes to paying your “needs.” These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities. - 30% of your income goes to paying down your debt. Once that’s done, this becomes discretionary entertainment expenses.* - 20% of your income goes to future investment. *In the original formulation, 30% go to your “wants.” That’s fine, but I think paying down your debt to zero takes priority. I couldn’t believe how fast my debt disappeared. It took about six to twelve months. But it was gone and gone for good. I’ve run a monthly credit card balance maybe once or twice in the last twenty years. And it’s thanks to this little system. 3x Rule for Buying a House Another one I love, and that would keep many rich people out of trouble, let alone those of lesser means. Never spend more than three times your gross annual income on a house. I’m in the process of buying a home right now, and I’m well within this rule. My down payment is ready and won’t empty my account, and my monthly payments are easily manageable. Far too many people only calculate what their monthly payments would be at the current rate of their mortgage. But if you’ve got an adjustable-rate mortgage, that could easily end in tears. There’s no need to overpay for a McMansion. The Normal Distribution (Bell Curve) Finally, we get to simple probabilities. [SJN] Again, this is just a rule of thumb. Nothing in finance is “normal.” But this can help you distinguish investing realism from fantasy. Let’s do an example. Let’s say Stock ABC has earned, on average, 5% per year. But that return is accomplished with a standard deviation around that 5% average of 2%. If we assume normal returns – a dangerous thing in finance, but we do it all the time – then ABC has a 68% chance of returning between 3% and 7%. It has a 95.6% chance of returning between 1% and 9%. And it has a 99.7% chance of returning between -1% and 11%. Here’s the thing, though: it certainly can crash far below a -1% return. And it may moonshot 45% on the FDA approving its new drug. But the probability of either of those scenarios happening is very low. Knowing this distribution is essential for setting your expectations as an investor and gauging what the market thinks of your potential investment. If you can adjust your thinking to being more probabilistic, you’ll be shocked at how different the world looks. Wrap Up The absolute last thing I wanted to do was to patronize you. But I also don’t want to assume you know things you may not know. So I hope, at the very worst, this was just a refresher of things you may have put on the back burner. But if there is a lot of new material here, I can’t encourage you enough to deploy this new knowledge as early and as often as you can. If this is the sort of thing you’d like to see more of, please let me know here. And if you found this the least bit unhelpful, do let me know that as well. Have an excellent rest of your week! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. 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