Alibaba: 2 Other Mega IPOs Marked Disastrous Stock Market Tops

In late 1999, an Italian Energy company named Enel SpA set a record as the largest IPO in US stock market history. They raised more than $16 billion. During this time, the infamous Dot Com Bubble was just beginning to brew. A few months later, the market crashed.

In 2008, Visa entered the public markets. They raised nearly $18 billion. That amount set a new record, and their IPO timed the market perfectly. The devastating Financial Crisis hit our economy not long after.

Last Friday, Alibaba crushed Visa’s 2008 IPO record. The Chinese e-commerce company raised more than $21 billion, and its market cap is already $220 billion. That means it’s worth more than Facebook and Amazon. Does this giant IPO mark another impending crash?

The chart above paints a stunning picture depending on your interpretation. After all, we are a pattern seeking species. In the eyes of some, it is a clear signal that major IPOs mark tops in the stock market. Perhaps the huge increase in supply severely distorts the market’s equilibrium.

But in the eyes of others, charts like this will only be seen as coincidence. Maybe even demonstrating how fortuitous investment bankers can be at timing their initial public offerings.

What do you think?

Source: Charting Major IPOs and Market Tops

The Illustrated Guide To Keynesian Vs Austrian Economics

There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy. The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well). In order to get a full understanding of the two schools of economic thought, the following infographic should help…

Home » Market Analysis » Financial System Upside Down-Blame Game on Coming Crash-Bill Holter Financial System Upside Down-Blame Game on Coming Crash-Bill Holter

Financial analyst and writer Bill Holter thinks the powers that be know how shaky the system is and will play the blame game for the coming crash.  Holter contends, “I believe that they know the financial system is upside down and there is no bringing it back, so they do need to have something to point at.  It could be a war with Russia.  We are trying as hard as we can to create a war, and it looks like Russia; and Mr. Putin is trying as hard as he can not to have a war.  There could be any number of things to point at.  It could be the Ebola virus outbreak.  It could be the Saudi Arabians accepting euros, gold, yuan and it could be anything.  There are dozens of topics.”  Holter goes on to say, “Truth is the first casualty of all wars.  So, we are getting bad information from our press, and we are getting bad information from the Russian press.  When a war starts, you will never get the truth.”

On the U.S. dollar, Holter says, “It’s a 100% confidence game.  The dollar is based on the full faith and credit of the U.S… . We know from a credit standpoint we are over 100% of debt to GDP.  So, there is the credit part of it.  Faith is whether your word is good or not.  Our allies don’t know whether we are going to back them up, and our enemies don’t know if we are going to do what we say we are going to do, or not do what we say we are going to do.”

On recent terror warnings from the Saudi Arabia that there might attack on an EU or US city, Holter, once again, says, “Would that be something to point at?  If the City of London had a dirty bomb go off or Chicago or New York, that would cripple the financial system within a day or maybe even less.  Banks wouldn’t open.  What about the news of Russians hacking our big banks all last week?  Is that something you can point at?  If all of a sudden we woke up one day and if there were hundreds of billions of dollars in digital credit gone, what would that do?  Banks wouldn’t open, and it would be something to point at… . They know that it’s upside down, and they need something to point at and say our policies were working.  Our policies would have worked if it weren’t for such and such, whether it be war, or an attack on a major financial city or the Ebola virus.  You name it.”

So, what happens to people’s wealth after the coming crash?  Holter says, “I believe that many things that are real will be revalued many multiples higher.  Silver and gold I see being revalued eight to ten times higher or more if we have a closure of the banking system and the stock market, a reset so to speak.  You are going to be stuck until everything reopens.  There have been bail-ins discussed.  In a bail-in, let’s say you have $200,000 in your bank account.  You would wake up Monday morning and it may only be $50,000.  In Cyprus, the depositors lost 87% of their funds from the time the banks closed to the time they re-opened.  You also have to worry about these brokerage houses where you are carrying a margin account and they have lent your certificates out, and all of a sudden, the system closes.  Where’s your certificate?  Who owns it?  What if your brokerage company goes out of business?  It may be five years or more to get your paper certificate back.”

How likely is a crash in the financial system?  Holter thinks, “From a probability standpoint, whether it’s tomorrow morning or next week, or next month, or next year, mathematically, ask yourself this question: Is the U.S. broke?  The answer is yes, the U.S. is broke.  There is no way the U.S. can pay the promises, the interest and etcetera on everything that is out there.  I’ve seen a number of $240 trillion in total promises and debt.  There is no way that can be paid.  So, from a mathematical standpoint, sooner or later, there is going to be an all-out collapse.  That is a mathematical equation.  It is no longer if, it is only a question of when.”

Join Greg Hunter as he goes One-on-One with gold and silver expert Bill Holter of MilesFranklin.com. 

(There is much more in the video interview.)

After the Interview:
Bill Holter says there is a “high likelihood” that a real or false flag terror attack will cause the next financial crisis.  Holter thinks an upcoming attack will involve some sort of nuclear device which could be a suitcase nuke.  Holter is a prolific writer at MilesFranklin.com.  If you would like to check out one of the four original articles he writes each week, please click here for Holter’s archives.

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Chart Talk 9-22-14

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Economic Mayhem Coming for U S-Craig Hemke

Financial expert Craig Hemke is founder of the popular website TFMetalsReport.com.  Hemke says, “We are all preparing for the end of the Keynesian experiment.  We are all in the same boat.  The Keynesian experiment means this idea that government can simply print money and go into greater and greater debt.  Increase the money supply year over year, and we are at a point where that is in the terminal phase… . It’s unsustainable, and we are preparing for what’s going to happen next.” Hemke goes by the name Turd Ferguson online, but don’t let the funny name fool you.  Hemke is a 25 year financial professional who managed wealth and traded securities before he started his website.  Hemke says what is accelerating the coming financial calamity is the Ukraine crisis.  Hemke contends, “This is simply not protecting the Kiev government.  First and foremost, this is about protecting the hegemony of the U.S. dollar as world reserve currency status.  Russia, and by extension, the Chinese, Indians Brazilians and the South Africans are moving toward the financial structure of the 21st century.  The U.S dollar was what it was in the 20th century and here in the early years of the 21st.  We are doing everything we can do to defend that… . The folly of this is the U.S., or the Obama Administration, falsely believes that we hold the cards in this. The Russians and their allies are the ones who really do hold all the cards because they are our creditors.  Should Russia and China decide to offer an alternative world reserve currency, and at some point they will, when that happens, it’s going to be economic mayhem for the U.S and the West.”  Hemke goes on to say, “We are pushing this issue in Ukraine, and we are just speeding up that process.  Now, whether it’s intentional so they can create a boogie man to blame it all on, I don’t know, but we don’t hold any cards.”

When it all come crashing down, Hemke says, “I fear civil unrest.  Psychologists have done studies that in the first 24 hours in some type of disaster, everybody gets along pretty well and there is hope… . After three days, it’s full on anarchy and that, ultimately, is the direction we are headed.”  Hemke also points out, “We’ve beenable to control, if you will, inflation, but it’s not two percent like the Bureau of Labor Statistics wants you to believe.  It’s really closer to about 10% in the essential items that are all dollar based.  Rent, food, gasoline, health care, all that kind of stuff and people are just getting squeezed more and more.  When the U.S. finally loses its reserve currency status, all these extra dollars that have been printed are going to come washing back to our shores.  I don’t know if it will be hyperinflation, but it will be significant inflation.  It will get to the point where people simply can’t feed their families anymore.  I fear that level of civil unrest, and what comes after that, I am not certain.” 

On the price suppression and manipulation of precious metals the government turns a blind eye to, Hemke charges, “I consider them to be criminal co-conspirators with the big banks, especially JPMorgan, with this ongoing manipulation scheme.  It’s not going to end anytime soon.  It’s going to end when there is not enough physical metal anywhere in the West to cover all of these paper contracts issued.  I wish it would happen tomorrow.  It’s not, but it will happen eventually, and in the meantime, we will just have to take advantage of the lower prices given to us by the suppression scheme and add to our own personal protection.”  Hemke goes on to predict, “This whole thing is going to blow up … It’s like pressing on a spring or holding a beach ball under the water.  Eventually, that’s going to fail, and as this fails, things will accelerate to the upside.” Join Greg Hunter as he goes One-on-One with Craig Hemke, founder and creator of TFMetalsReport.com. 

(There is much more in the video interview.)


After the Interview:

Hemke added one closing point on price suppression of precious metals through market manipulation.  Hemke says, “People who say there is no price suppression or manipulations are protecting their own businesses because it delegitimizes what they do for a living.  Gold manipulation delegitimizes the entire financial system.”  TFMetalsReport.com has a paid subscription of $10 per month, but the site also has free information, too.  Check it out at TFMetalsReport.com.

Not Your Grandfather’s Market: The Evolution of Liquid Alternatives

Liquid Alternative Investments have exploded over the past decade. Post 2007-2009 financial crisis individual investors, their advisors, and institutional investors alike sought investment opportunities to provide risk diversification, return enhancement and inflation hedging characteristics without sacrificing liquidity or transparency. Many investors, both professional and individual, believe that liquid alternatives are a new commodity; however they have been around for quite some time. It is true that the explosive growth in alternative mutual and exchange traded funds has largely taken place over the past half-decade or so, but the liquid alternative market, as a whole, is much broader than simply alternative mutual and exchange traded funds. Liquid Alternatives, by definition, are any investment funds that are tradable, on a daily or intraday basis, that provide investors’ exposure to assets that fall outside the traditional “box” of stocks, bonds & cash.


When past generations wanted to make investments, they had very few options. Publicly listed stocks or bonds, bank products such as CDs, cash like investments such as money market funds, and private investment opportunities. The final being high risk, typically carrying no liquidity, no transparency, and the need for expertise in the sector. Over the past 4 decades there have been vast strides made to bring alternative investments such as real estate, commodities, active investment funds, private equity funds, and non-traditional real estate holdings such as oil & gas properties, farmland, timberland, etc. to the mainstream public, in a liquid, regulated, transparent package.


While the investment company act of 1940 has long allowed for the creation, operation, marketing and thus investment in mutual funds that provide alternative asset exposure, the first Liquid Alternative Funds to gain traction were Publicly Listed Real Estate Investment Trusts, or REITs. REITs began being offered at the end of the 1950s, however they were widely unknown investment opportunities. In 1971 there were only 34 REITs in total, carrying assets under management, as measured by market capitalization, of $1.494 Billion. Since the 1970s, the REIT market has grown 60-fold in AUM to over $670 billion in total AUM, and 6-fold in number of REITs offered to 202 in 2013, according to NAREIT. Other real estate opportunities have gained popularity as well, such as Timberland Investment Management Organizations (TIMOs), though not nearly the popularity of REITs. Below are two charts, first showing the growth in the number of listed REITs, followed by one showing growth in AUM of REITs.

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Listed REITs offer investors exposure to the vast, global, real estate market, with intraday tradability. Listed REITs also offer investors, who seek real estate exposure, professional asset management. The demand for liquid real estate exposure was, and remains elevated, particularly after the lack of liquidity and lumpiness of private real estate ownership burned a large number of real estate investors in the 2007-2009 financial crises. As mentioned earlier, other investment opportunities in real estate, or real assets for a broader definition, have long existed, only recently to garner popularity in a liquid, transparent, regulated and accessible package.


Oil and gas opportunities have always intrigued investors, as the demand, globally, for energy commodities have, and will continue to increase as the world develops. Dependency on fossil fuels creates an opportunity to generate healthy returns, with inflation hedging characteristics. Publicly listed Master Limited Partnerships (MLPs) have made these opportunities accessible to all investors. The Listed MLP market has exploded over the past 2 decades, and particularly since the financial crisis of 2007-2009. In 2000, there were only 20 listed MLPs, with a total AUM, measured by market capitalization, of $16billion. At the beginning of 2014, that market had grown to over 120 MLPs with over $590 Billion in AUM. Since 2008, AUM in MLPs, which bottomed at $89billion, has grown more than 6-fold and the number of funds has increased by over 75%, from 68 at the end of 2008, to current levels.

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There are a number of reasons for the explosive growth in this market, however the two most compelling are the inflation hedging benefits and the tax-advantaged status of the MLP vehicle. Listed MLPs are one of the best inflation hedges, providing investors both an infrastructure and commodity exposure. Listed MLPs distribute a lot of cash, as a mandate of their existence, providing investors a stable income investment opportunity, but they also carry significant tax advantages, and with the majority of current US investors entering, or getting close to their retirement tax advantaged income is in high demand. Factors, such as diversification, liquidity and transparency in a market that previously had little opportunity to diversify due to very few funds with high minimum investments, no liquidity, and a significant lack of transparency add to the appeal of listed MLPs, and have drawn individual investors, investment advisors, and institutional investors to increase their allocations to listed MLPs. The charts above highlight this demand in a visual format.

Liquid alternative investment opportunities are not confined to the real estate/real asset sectors. The private equity market, a traditionally highly complex and non-transparent asset class with virtually no liquidity, has begun its shift into the liquid alternative space with the listing, increased awareness towards, and growing popularity of Business Development Companies (BDCs). Listed BDCs are the first publicly listed private equity funds, accessible by individual and institutional investors alike. While not all BDCs are listed, many more are choosing a public stock exchange as an outlet to not only raise capital and garner a public valuation, but offer investors liquidity and transparency.


BDCs are not as broad of a private equity exposure as many investors would like, focusing mostly on middle market growth companies that are preparing for strategic sale of public offering, however it is an exposure to private equity, particularly for those investors that have been shunned from the market due to high minimum investments and investor qualification rules. The listed BDC market is young, and still growing, but just since 2008, the number of listed BDCs has nearly doubled, and the assets under management in the listed BDCs has nearly tripled. BDCs are the liquid alternative to private structure private equity funds, and are a liquid alternative investment, offering liquid exposure to private equity through public stock exchanges.


Below are two charts, the first shows the growth in the number of listed BDCs in 2008 and again in 2013, the second highlights the growth in listed BDC assets under management.

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As can clearly be seen, the number of, the popularity of and the awareness towards listed BDCs as a liquid private equity fund has grown significantly, and likely will continue to, as institutional investors intend to increase their private equity allocations to nearly double their current level by 2030, according to Preqin, one of the premier private equity research firms in the US.

Liquid alternatives serve a useful purpose in both the individual and institutional portfolio. As discussed in this posting, Real Estate, Real Assets & Private Equity has become significantly more accessible with the listing of REITs, MLPs and BDCs, however, most non-institutional investors have also suffered from a lack of exposure to actively managed alternative investment funds that employ sophisticated trading strategies, developed and operated by “Wall Street” professionals with significant knowledge. These funds, commonly known as hedge funds, have always lacked accessibility, carried high minimum investments, complex fee structures, and only provided liquidity when the manager of said funds was willing. Both Pre & Post financial crisis, investors in hedge funds sought better alternatives, the alternative mutual and exchange traded fund business exploded. Alternative mutual & exchange traded funds offer investors exposure in actively managed, long/short commodity, equities, & fixed income strategies, domestically, region specific and/or globally. There is a broad range of various strategies, whether simply value oriented and actively managed, or focused on a specific situation such as merger arbitrage, or some other specialty. In 2003 there was only $9billion in AUM in alternative mutual funds & ETFs, by 2008 it had grown 10 fold, at the end of 2012, total AUM in alternative mutual funds & ETFs reached over $300billion. This chart demonstrates the enormous growth in popularity of these liquid alternative funds.

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As has been detailed throughout this post, investors today have the ability to build a truly diversified portfolio, gaining exposure to asset classes such as real estate, real assets (oil & gas land, timberland, commodities, infrastructure), private equity & hedge funds, without sacrificing the liquidity of their portfolio. Capital markets today are far more competitive than they were when our parents and grandparents were building their wealth through investing. For generations, the only investment options were stocks, bonds, bank products, cash-like investments such as money market funds, and private investment deals. This presented a massive challenge to the average investors attempting to build a diversified, long-term portfolio, particularly maintaining a high level of liquidity.

Today, there is no excuse, whether you’re an individual investor, retail advisor, or institutional investor, for maintaining a portfolio that lacks asset or strategy diversification. There are many options that provide investors the ability to expose their portfolio to a broad spectrum of both traditional and alternative assets, as well as traditional and alternative strategies. Here in the new millennium, capital markets have evolved, and the inclusion of liquid alternative strategies allow investors of all size and sophistication to take a long-term diversified asset allocation approach, building a stable portfolio focused on delivering returns, minimizing risk, and meeting the goals of the portfolio.

The evolution of the liquid alternatives market has been significant, beginning in the late 1950s, investors have seen the continuous addition of new opportunities that provide new asset and strategy exposure, and have, for the most part, taken advantage of such opportunities. Investors that have not yet participated in these new opportunities have not missed out. It is not too late for investors of all sizes to take advantage of liquid alternatives. It would be prudent of all investors to seek advice from a professional, or conduct adequate research to determine the best way to include liquid alternative opportunities in their portfolio.

The growth in this market is expected to continue and new products seemingly emerge every month. While traditional investments still serve their purpose within the portfolio, it will become increasingly important, as markets become increasingly efficient from an information standpoint, to utilize alternatives if seeking to outperform or stabilize returns when investing. Liquid alternatives will likely become the preferred option for all investors, as they have already for so many. It is likely that liquid alternatives will replace the private structure funds of old, if not entirely, significantly, due to the increase in transparency and the ability to redeem funds quickly and easily, as needed.

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Optimal Round Number Forex Strategy
1 IN 5 UNEMPLOYED WORKERS CAN’T FIND JOBS

46% who found jobs said it came with a pay cut and 44% reported a drop in status

More than 20% of workers laid off in the last five years haven’t found new jobs, according to a Rutgers University survey released Monday.

That’s about the same proportion of people who said they had been laid off in that time, and it illustrates how difficult the recovery has been for the unemployed.

Among laid-off Americans who say they’ve found a new job, 46% said it came with a pay cut and 44% reported a drop in status.

The survey also found increasing pessimism among the unemployed. Thirty-six percent said the economy will never fully recover from the recession, up from 29% last January, when they were asked the same question. Likewise, 40% said that the availability of good jobs for those who want to work will never return to pre-recession levels, up from 34%.

 

One in three unemployed respondents said they’ve been looking for a job for more than seven months. The survey defines long-term unemployed as someone who has been looking for a job for more than six months.

The Rutgers team talked to 1,153 workers, about a quarter of whom were unemployed for more than six months, between July 24 and early August.

The results also paint a demographic picture of the unemployed.

The typical out of work person is likely to be a southern white male between 18 and 29 with a high school degree who makes less than $30,000.

A typical long-term unemployed person is also likely a white male with a high school degree from the South who makes less than $30,000 a year. But the long term unemployed tend to be older, normally between 45 and 59.

Considering buying into the Alibaba IPO?

If you want to buy into the world’s second-largest economy without paying such a lofty price-earnings ratio, you have other options, though — particularly if you’re looking for dividends. You can choose from plenty of Chinese companies with a global footprint and a commanding presence in China itself that sell at far cheaper prices than Alibaba. (We include Taiwanese companies, as many Chinese mutual funds do, because of Taiwan’s close links to the mainland.) Many of these companies trade in the U.S. as American depositary receipts. Here are three that look appealing.  

Southwest Airlines Co (NYSE:LUV) had an engulfing, reversal candle on Friday. When this occurs at the top of a chart, it is extremely bearish.  Today, further downside is confirming the move. Southwest should have put in a top. Please also note the mega sized volume that accompanied the engulfing candle on the daily chart. This adds more credence to the reversal. While small bounces will happen, the likely outcome of this chart is a move to $30.00.

Get our live and detailed trade alerts, like these which earned members profits like this +20k gain and more in the Research Center. Click here to enter right now and get the latest trade alerts!

 

Gareth Soloway

Chief Market Strategist

www.InTheMoneyStocks.com

 

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