Time for a Reality Check
  • June 17, 2017 10:28 am
  • by Bill Cara

Is our financial system and capital market going to collapse any minute? Is the price of Gold going to $5,000 an ounce? Is the price of WTI Crude Oil going to $20-30 a barrel?

These are the stories that fill media today. Those and the ones of Trump.

Well, I think it’s time for a reality check, not more of today’s reality show.

Of the status of the capital market, I agree with technical analyst Colin Twiggs who wrote this weekend: “We are in stage III of a bull market, but this can last for several years.”


No argument from me on the Bull versus Bear status; but, Financials (XLF) will have to continue strong and Oil&Gas (XLE) will have to pick it up from here. Technology (XLK) must at least hold these levels.

In fact, I believe the US market (S&P500 or the DJIA) will remain in the long-term Bull trend until the Fed Funds Rate moves above 3.0% in 2019. The Fed moved their inter-bank lending rate this week up from 0.91% to 1.16% and set a target rate of 1.40% by year-end 2017, so the Fed is moving in that direction. After the Fed Rate moves above say 2.5% there will be a chorus of media, intended for small investors, telling us that cash is king. Wait for it. Of course, wealthy investors are already accumulating cash in advance of a “Buyers” market.

As the Fed Rate ratchets higher, we will be getting closer to the end of the current “Sellers” market, which is my way of referring to this late-stage Bull.

With the Fed extractive rate-rising policy, I anticipate starting at some point early in 2019 there will be a rolling top in the stock market that will last for many months until the Fed Funds Rate hits a trigger point that I believe would be up around 3.5%. I call it a trigger because that’s when the commercial bank lending and mortgage rates — the ones that affect you and me — will exceed a sustainable level, and some of us will be watching for it.

At the trigger point, companies and individuals in debt will panic and sell assets before their judgment day (i.e., the day when HB&B legally seizes assets of the owners who cannot make their regular principal and interest payments). Those assets may be automobiles or homes or securities holdings. It’s the latter case that will be most obvious to the world because the whole market crashes at that point — not one auto or one home on a street — but the whole equity market.

In a normal market cycle — the type that happened routinely before 2007-2008 — the Bull-Bear trend was typically a 2/3-1/3 deal. In today’s market, however, computer algorithms and Inverse ETFs will cause a Bear Market (i.e., market index losses of 25-40%) to take a couple months at most to unfold. In fact, as I see it, the next Bear will destroy about 50% or more of most portfolios in just a couple weeks.

In the Energy sector, the approximate -17% drop in Oil&Gas (XLE) that has occurred over the past six months is not a Bear –it’s  just one for the small caps in that sector, but these too will soon rally. As you know, I am expecting a return to a Bullish trend any day now for the Energy sector, and probably the Goldminers. Be wary of Gold and Goldminers just yet. Gold might drop to a 1205-1235 range before the Gold Bull kicks in. Those new Bull trends will continue and likely only terminate in the final stage of the broad market Bull some time in 2019 or 2020.

You recall my saying from years ago that late in the market cycle — at the very end — it’s typically the Oilers first and then the Goldminers the last ones off the dance floor, ending the party. That’s because the Fed lets the market go risk-on until they don’t. A Fed Funds Rate up near 3.5% will stop the party because at that point the smart money — those who actually invest and not trade using technical analysis — will know the highly cyclical Oilers and Goldminers would simply be taking their inflated profits and handing them to the Bankers and tax collectors.

A warning sign of the long-term market cycle top that I believe will happen in 2019 will be a series of huge share buy-backs of these companies, the point where HB&B will be telling the public that buy-backs are indicative of great times ahead for the market because earnings per share are rising, dividends making you rich, yada yada.

Not at all true. What they won’t be telling you is that these humongous share buy-backs are emptying the corporate treasuries, weakening the financial condition of these companies that will soon be needing that cash to keep the HB&B wolf from seizing their assets after inter-bank and commercial lending rates have reached a trigger point that sends prices crashing. And, HB&B will not be telling you that their personal friends and family and best clients will be selling out their stock positions in large 100,000 share blocks they could never get off to the public without these purchase arrangements made directly with corporate treasuries.

That’s what friends on corporate boards of directors are for, right?

History lesson for some of you:

Do you know the name Bear Stearns, the once great investment bank that was gobbled up by the 2008 market crash? Well, the Bear Stearns stock plunged from $159 to $2 in under 365 days, right after it did what many at the time said was a nonsensical $1 billion share buy-back. Except the Banker’s friends, family and best clients that garnered the top price never saw the episode as nonsense.

September 20, 2007:  http://www.wikinvest.com/stock/Bear_Stearns_Companies_%28BSC%29/Including_Corporate_Share_Buyback

Do you know the name Lehman Brothers, another once great investment bank? Lehman also went bankrupt and was even blamed by some for the almost destruction of the global financial system in 2008? Well, a couple months before that market crash they made a massive mega-billion dollar purchase of shares from friends, family and best clients that depleted their treasury. Hmm.

January 29, 2008: https://www.streetinsider.com/Dividends/Lehman+Brothers+(LEH)+Raises+Dividend%3B+100M+Share+Buyback/3302830.html

June 3, 2008: http://www.reuters.com/article/us-lehman-stake-idUSNWEN602720080604

But, Lehman Brothers also did the same thing a couple months before the previous Bear market in 2000-2002 when they bought back a massive 20% of their shares.

January 27, 2000: http://www.nytimes.com/2000/01/27/business/lehman-brothers-sets-a-buyback.html

On March 11, 2015, HB&B announced more humongous share buy-backs: https://www.usatoday.com/story/money/2015/03/11/stress-tests-part-2-banks-federal-reserve-bac/70150998/

Did you see how HB&B that same day phrased their move as shoveling money to us (via dividend increases) when really they were in the process of buying in $23 billion in stock from friends, family and best clients.


After that deal was done, the broad market topped out and then dropped close to -10% several months later. Once again, HB&B’s friends, family and best client accounts were flush and ready to buy the stocks that interested them at fire sale prices.

Many of us recall these events; but, too many of us forget.

So, I say to all of you, watch out for the next great share buy-back from HB&B, telling you things are great, but more likely are not.

It’s all a game. I have watched it repeat from the 1960s. HB&B now for the most part, through their nefarious actions, controls our governments and our capital markets and they are using our money to do it. They are ubiquitous today and even so arrogant as to tell us we are “richer than we think”.

The “richer than we think” tagline in Bank of Nova Scotia advertising is recognized by close to 90% of all Canadians. The promotion was started in 2006 and used to suck Canadian borrowers dry until the crash of 2008. Having ripped off the assets of the individuals and families with the asset seizures that followed, Scotiabank then kept the pressure on by saying that our riches had more to do with precious life than money. What hypocrisy.

I’m just amazed that our society has been so dumbed down as to not see through these shams.

Humongous Bank & Broker is the enemy. They are allowing this Bull market to continue until they have filled their coffers, taking that income at our expense, ready to strike back at their debtors by seizing the assets of those who cannot continue to pay. Worse still, right at the top of the market cycle, they’ll use the shareholder money — yours and mine — to put humongous funds into the hands of the ones they hold dearest.

I’d like to say that what goes around later comes around, but with Bankers it just keeps going around and around while they get bigger and more powerful.

That’s reality.

Like to give your opinion? Go to Comments


Disclaimer: billcara.com is a website published by Greenfield Capital Inc and neither Greenfield Capital nor billcara.com is a registered broker-dealer or a registered investment adviser. You understand that this web site and its content is furnished for non-commercial, informational purposes only, and that no mention of a particular security in this website constitutes a recommendation to buy, sell, or hold that or any other security, nor any particular portfolio of securities, transaction or investment strategy as suitable for any specific person. Information regarding trading and investment as provided by this website is not tailored to the investment needs of any specific person. Greenfield Capital and billcara.com services will not advise you personally concerning the nature, potential, value or suitability of any particular security, securities portfolio, transaction or other matter. You acknowledge that you are responsible for your own financial decisions and should seek a registered agent depending on your own risk tolerance to advise you on your personal trading activities.