Dear Reader,
Hedge funds are dumping more stocks than at any time in the past year…
That headline caught my attention on CNBC.
Here are some facts:
The stock market’s now worth $63.8 trillion – close to an all-time high and to where it was just a month ago.
The U.S. stock market’s market cap has doubled in the last four and a half years.
Hedge funds are increasing their short positions.
The S&P 500’s price-to-book ratio hit 5.3, officially exceeding the level it was at right before the dot-com crash.
Now, if you really want to understand, price-to-book ratio is a valuable metric when buying stocks…
In our Midnight in America book we published on how to handle the coming next great crash, we really talk about how I used the price-to-book ratio to do very well in the 2009 market crash.
I urge you to get yourself a copy.
Back to our list…
The 10-year note, which I’ve been talking about nonstop has jumped over 4.7%...
Mortgage rates look like they’re going to hit 8%...
And since the Fed pivot began 111 days ago, interest rates are up more than 110 basis points.
Here’s an interesting little factoid I captured for you…
Buying a home in 2021 with a 30-year mortgage meant spending $473,000 in principal and interest…
But right now, you’re spending $873,000.
That’s a lot.
U.S. existing home sales closed at 4.15 million in 2024, making it the worst year for home sales since 1995.
Bank reserves dropped by $326 billion ending the week January 1st, to $2.9 trillion – the largest weekly decline since April, 2022.
U.S. credit card serious delinquency rates for subprime borrowers have risen to 22% in Q3 – the highest in over 12 years.
This is significant.
Consumer credit card debt has plunged the most since COVID as banks are pulling back from lending as they see what’s happening.
We’ve talked about gold rising, of course, ad infinitum.
U.S. big bankruptcies hit 686 in 2024 as of December 23rd – the most in 14 years – the year after the financial crisis.
It’s really surprising.
Bankruptcies are rising as if a recession is here!
U.S. hires as a percentage of unemployment also tumbled to 3.3%.
So, underneath the data, we’re seeing the job market get weaker.
We’re seeing unemployment start to really tick up.
Openings are going down.
Corporate bankruptcies are starting to really shake things up.
Lenders are pulling back from consumers.
Subprime borrowers are in trouble.
Ally Financial is walking out of the mortgage business and laid off hundreds of employees.
These are signs the economy is slowing down.
Of course, Warren Buffett’s sitting on $325 billion in cash.
Look, at Behind the Markets we really talk about all of this.
And we’re acting accordingly…
All our portfolios have been trimmed.
We’ve gone out there and clipped the hedges… we’ve closed the shutters… we have a few windows open but we’ve closed some of them and feel pretty prepared for this.
One thing we’re not doing and I urge you not to do, is go out there and pull the trigger on a risky stock you’re thinking about.
When in doubt, just don’t do it.
There are some great, exceptional opportunities out there. (Especially in Biotech). And we’re talking about them.
We’ve really dug hard to find the diamonds in the rough.
But don’t swing at pitches outside your strike zone.
And if you haven’t picked up a copy of Midnight in America…
That is where you’ll find my playbook for how to manage your money through a coming market crash – a real bear market.
I am telling you – this is the playbook I am passing down to my kids.
It’s the playbook I have used to make a ton of money.
Specifically, in the financial crisis in 2008-09.
So that’s my message for this Monday.
We are on cautious alert.
We play the ball where it is, not where we want it to be.
If things change, we will change.
We’re not going to be fixed position fighters.
We’re going to move like water.
This is how we do it.
That’s all I have for today. See you tomorrow.
Again, if you haven’t picked up your copy of Midnight in America… if you were waiting for the 11th hour – it’s here.
Now is the time to act. Take these four steps to prepare now.
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