November 5, 2019
By Mish Schneider
Ray Dalio has some interesting things to say about the state of the world.
He says that investors are getting free money but are investing it rather than spending it.
Hence, global growth and inflation are not budging higher.
He also says that “the prices of financial assets have gone way up, and the future expected returns have gone way down.”
Furthermore, he comments on the widening gap between the wealthy and the poor with, “money is essentially free for those who have money and creditworthiness; it is essentially unavailable to those who don’t have money and creditworthiness.”
His bottom line is that with this new paradigm shift of printing money while debt increases could threaten the viability of the world’s reserve currency.
If so, the current environment is unsustainable.
I reference Mr. Dalio’s words as they reflect many of the ideas I have brought forth to you.
The dollar could be at risk.
The artificial stimulus prompting corporations to buy back their own stocks without investing in their own R & D is why we see such disparity between the S&P 500 and the Russell 2000.
One reflects manufacturing supply in the US while the other is the playground of the wealthiest investors.
What I hope to do is educate the public on why passive investing is dangerous.
Moreover, I hope to continually point out why the Economic Modern Family is so important.
The Russell 2000 IWM still needs to clear the April highs.
With SPY, QQQs and DIA at new all-time highs, IWM’s lack of momentum is disconcerting unless that changes.
Regional Banks KRE cleared the April highs, but not the 2019 highs and definitely nowhere near the all-time highs.
Transportation IYT tackled the April highs at 200.42 with an intraday high today of 200.41. Now, whether it holds 195 or clears 200.42 will be telling.
Retail XRT has at least cleared the weekly moving averages. However, for perspective, the April highs are still far away.
Biotechnology IBB, or the place we see investor sentiment, is also well below April highs.
Only Semiconductors SMH, is sitting with a breakaway gap at new all-time highs.
And that is precisely Mr. Dalio’s point.
“Because investors have so much money to invest and because of past success stories of stocks of revolutionary technology companies doing so well, more companies than at any time since the dot-com bubble don’t have to make profits or even have clear paths to making profits to sell their stock because they can instead sell their dreams to those investors who are flush with money and borrowing power.”
But without the Modern Family, remember that dreams can turn into nightmares.
This will be my last Daily of the week as we head to Las Vegas to teach a Master’s Class at Traders Expo.
I will be back Monday, November 11th.
Russell 2000 (IWM) 155-156 Key support 158 pivotal 161.11 resistance.
Dow (DIA) Made a new all-time high at 275.51
Nasdaq (QQQ) All-time highs at 200.55. 198.20 support.
KRE (Regional Banks) 55.74 July high now pivotal support 57.52 next resistance
SMH (Semiconductors) 134.02 new all-time high and done with a breakaway gap. Must hold 130
IYT (Transportation) 195 support and must clear 202.42
IBB (Biotechnology) 110.93 the July high which this could not get to. 107 nearest support
XRT (Retail) 44 now the pivotal support. 45.68 May high.