November 2018 - Week 4 Edition
The Stock Market Suffered its Third Worst October-November Since 1946
We have been saying since August that this is the perfect time to take some stock profits off the table and put some of that money into gold and silver bullion coins and rare coins. As it turns out, the three major stock market indexes peaked on three different dates, a few weeks apart. The tech-heavy NASDAQ index peaked first, on August 29. Then, the broad S&P 500 peaked on September 20, and then the Dow Jones Industrial index peaked on October 3. As of last Friday, November 23, the Dow and S&P are down about 10%, while the NASDAQ is down 14.4% on a closing basis and over 16% from its intra-day peak.
Over the last century, September and October have been the two worst months for stocks, but in the last 20 years, October and November have been positive months in the stock market and the fourth quarter has been very strong, delivering more gains than in the other three quarters combined. In 2018, however, this is clearly NOT happening. Many reasons have been brought forward to explain this. Most market pundits point to financial causes – the rising trade tariffs with China, the odds of another rate increase from the Federal Reserve in December, a rising debt crisis with Italian banks, slowing global growth, escalating federal budget deficits, rising bond yields, and a slowing real estate market due to higher mortgage costs. There is also the political risk of impeachment fears, discussed below.
As it turns out, this is the worst October-November since 2008 and the third worst since World War II. Long-time stock market observer Sam Stovall wrote on the day before Thanksgiving that “the S&P 500’s quarter-to-date return through November 20 (down 9.3%) was the third worst since 1946,” behind only 2008 and 1987. Over the last 20 years, the stock market was weak during the fourth quarter only in the years 2000 (after a disputed election) and 2007-2008. Each case marked the start of a big bear market.
On Monday of this week, CNBC’s Jim Cramer stated that we are already in a “bear market,” not just a correction, arguing that some individual stocks are already down 40 or 50 percent. (A “bear market” is generally defined as a major index declining 20% or more from its recent high, and a “correction” is defined as a 10% or greater decline – which we have already seen.) He also said, “I have tremendous contempt for this market, because every time you try to make money with it, it cuts your heart out!”
If this is indeed the start of the third big bear market of the 21st century, it’s time to diversify into gold and rare gold coins now! We’re here to assist you, so please don’t hesitate to call us today!
Threats of Impeachment Escalate, Perhaps Leading to a Repeat of the 1973-74 Markets
A “Meet the Press” interview with billionaire hedge fund manager (and fanatical anti-Trump campaign investor) Tom Steyer opened with Steyer looking deeply into the eyes of the camera and saying, “This President is a Clear and Present Danger. He is mentally unstable and armed with nuclear weapons.”
Such radical views from the other side, by the likes of the billionaire Koch brothers, might be greeted with scorn or even calls for a Congressional investigation into libel laws, but Tom Steyer was greeted with a friendly interview by Meet the Press host Chuck Todd, who gave Steyer a platform for his views.
Steyer has spent tens of millions of dollars on a televised ad campaign to impeach the President, and he plans to spend millions more on a digital ad campaign to call for Trump’s impeachment. In these ads, he says Trump “brought us to the brink of nuclear war, obstructed justice at the FBI and, in direct violation of the Constitution, has taken money from foreign governments and threatened to shut down news organizations that report the truth.” It’s hard to point to any serious threat of nuclear war under Trump. I suppose JFK could have been charged with that in 1962, but nobody thought of impeaching him over the Cuban Missile Crisis. The Clinton Foundation clearly took money from foreign governments when Hillary Clinton was Secretary of State, and several Presidents have tried to muzzle the press. President John Adams actually jailed 25 opponents under the Sedition Act in 1799, but there is no evidence President Trump has tried to “shut down” any news outlet or reporter, at least not to the same degree President Obama tried to shut out Fox News reporters and spied on a New York Times reporter.
In 1972 through 1974, it took about two years from the Watergate break-in to Nixon’s resignation for the forces of Congress and two investigative journalists at the Washington Post to bring a sitting President to resign, avoiding the inevitable vote against him in a Senate impeachment trial. Today, the Washington Post (owned by Amazon’s Jeff Bezos) is even more anti-Trump than the 1970s Post was anti-Nixon, with teams of dozens of reporters looking for every possible misstep by Trump, his staff, his family, his past businesses, his every word (through fact-checking armies), policies, meeting and personnel choices. We now have a Democratic majority in the House of 38 to 40 seats, enough for a majority impeachment vote.
If the impeachment process continues next year, we may see a replay of the 1973-74 markets in 2019-20. In 1973-74, the Dow Industrials declined 45% from 1051.7 on January 11, 1973 to 577.6 on December 6, 1974. That coincided with one of the biggest bull markets in gold and rare coins. Gold more than tripled, from under $60 to over $180, while the Rare Coin CU 3000 index rose 348% -- more than four-fold.
Bitcoin Nosedives
Gold maintained its price last week -- which is better than you can say about any other investment last week! We can all be thankful for our family, friends and faith around Thanksgiving, but nearly every investment lost money during Thanksgiving week – led by double-digit declines in crude oil (-10.7%). For the first time this year, both stocks and metals are below zero, with the Dow (-1.8%) and S&P (-1.5%) losing money for 2018 through Friday. But that’s nothing compared to Bitcoin. After peaking at $19,300 last December, Bitcoin is down 80% in a year, trading at $3,740 on Monday, November 26.
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