Articles About Wall Street

Markets Aren’t Out of the Woods Yet

0 | By Shah Gilani

After a heart-pounding seven-day slide, stocks staged a spectacular rally yesterday.

The first question investors need to ask themselves is, “was it a dead cat bounce?”

Then they need to ask themselves, “will central bank rate cuts be enough to stop another market downturn?”

And last, but not least, investors need to ask, “How will they know it’s safe to be 100% invested again?”

Here are the short answers.

What Happened to ETF Investors in the August 2015 Flash Crash Will Happen Again

0 | By Shah Gilani

In Part III of my It’s All Good Until It Isn’t series on ETFs, I remind ETF investors of the pain and losses the August 2015 Flash Crash caused, make clear what really happened, and explain why it will happen again.

And, I offer advice on how to avoid the same mistakes and losses next time.

Because it will happen again.

Reminiscences of a stock operation gone bad.

The morning of August 24, 2015 provided the industry, exchanges, ETF sponsors, their authorized participants, regulators, and investors with their first opportunity to observe how market protections implemented in recent years would behave during times of significant stress.

Capital Wave Forecast: The Coronavirus is a Black Swan Event – What Now?

0 | By Shah Gilani

A “black swan” event refers to something unexpected happening. It’s called a “black swan” because everyone knows swans are white.

At least everyone thought swans were white until 1697. That’s when a Dutch explorer discovered black swans in Australia. It was completely unexpected, hence the name.

And these black swan events can – and do – descend on capital markets.

The coronavirus is an example.

However, this coronavirus isn’t the first to descend on humans and markets.

In 2003, another coronavirus, tagged with the name SARS (severe acute respiratory syndrome), descended on mankind and markets – like a black swan.

More than 800 people were infected and almost 800 died.

U.S. and global stocks fell until SARS was declared contained in March 2003.

While some sectors of the market, namely airlines, fell as much as 30%, the market as a whole fell only 10% from when SARS was first identified in November 2002 until the following March.

Coincidentally, in March 2003, the U.S. invaded Iraq.

By the end of 2003, with SARS and the Iraqi army vanquished, stocks ended the year 26% higher than where they started.

So, what now? How are markets going to react to this black swan?

Here’s Why Big Companies Getting Bigger Might Be a Problem for the Entire Market

0 | By Shah Gilani

A lot of investors don’t buy big companies’ stocks because they don’t believe the companies can get any bigger than they are now. They’re wrong. They’ve been wrong. And they’ll continue to be wrong.

Just because a company is gigantic, maybe weighing in with a trillion-dollar market capitalization, it doesn’t mean it can’t get bigger and its stock can’t keep making higher highs.

As long as companies can grow their revenues and profits, their stock prices are going to go higher too.

But that doesn’t mean there aren’t problems with big companies’ getting bigger or their stocks soaring.

There are certain patterns you need to look out for when you’re thinking about investing in one of them.

And that’s what I want to show you today.

Here’s what’s working for big companies getting bigger and the problem with their stocks skyrocketing.

Big Banks Are Starting to Worry About the Market, Should You?

3 | By Shah Gilani

One of my favorite reads, Business Insider, threw me for a loop this week with an article titled, “‘Signs of excess are building’: 4 Wall Street giants explain why the stock market’s rally may have gone too far”.

Wall Street analysts are always worried about something, whether it’s the U.S.-China trade war, Iran’s saber-rattling, or the coronavirus spreading.

But, when big bank gurus are worried about “internals” – metrics surrounding the stocks that make up the market – maybe it’s time to worry.

Here’s what the four giants are worried about and what you should really be worrying about

This Is Your Warning for the “Profit-Taking” That Could Happen in Seven Days

0 | By Shah Gilani

Everybody loves Apple Inc. (AAPL).

Actually, everybody loves everything Apple: the iPhones, Macbooks, iPads, Apple AirPods, the Apple Watches, the whole Apple ecosystem, and especially Apple stock.

Even if you don’t think you own it, you own it if you own any mutual fund(s) or popular index-tracking ETF(s). Apple’s in most of them.

In fact, Apple is so widely held it’s frightening.

Here’s how big an influence Apple stock is on the stock market – the S&P 500, the Dow Jones Industrials Average, the Nasdaq Composite – and what’s frightening about where else Apple resides.

The Stock Market Has the Fed to Thank for its Latest Melt Up

1 | By Shah Gilani

Ongoing trouble in the repo market, where banks, big hedge funds and others borrow from each other, has forced the Federal Reserve to inject $400 billion into the fed funds market over the past four weeks.

That’s what’s fueling the stock market’s melt up.

Here’s how the problem in the fed funds market is driving stocks higher, why the Fed’s going to have to do even more, and what it means for future market moves.

The fed funds lending market is where borrowers use repurchase agreements, or repos, to borrow overnight or for terms of a few days to a few weeks. It has been in existential crisis mode for weeks now.

The bottom-line there is that big banks who usually lend their excess reserves in the fed funds market, to pick up interest overnight or on term loans, have been keeping more of their excess reserves parked at regional Federal Reserve banks. They’ve been doing this to collect IOER (risk-free “interest on excess reserves,” which the Fed’s been paying banks since the start of the financial crisis). Either that or they’ve been using their excess reserves to buy longer term Treasury bonds to earn more interest and speculate on interest rates falling.

That means there’s not enough money in the system to facilitate normal lending. As a result, the interest that borrowers must pay on repos has, at times, skyrocketed. And worse, sometimes the well’s dry.

To calm markets, provide necessary liquidity and not implode the financial system, the Federal Reserve’s been pumping money into the fed funds market like mad

Capital Wave Forecast: Global Debt Is Going to Crash Equity Markets: Just Not Today

0 | By Shah Gilani

Investors keep staying on the sidelines due to one very popular or rather unpopular narrative: the global debt bomb exploding.

For years now, fearmongering headlines on the subject continue to stoke investor anxiety.

When debt levels skyrocketed in 2019, so did headlines like, “Titanic iceberg of world debt could sink a slowing global economy”.

As the last decade of the 2010s wound down, year-end predictions and warnings multiplied with December 2019 registering several doom and gloom debt bomb headlines.

On December 1, 2019, Bloomberg postulated, “The Way Out for a World Economy Hooked on Debt? More Debt.”

A day later, the South China Morning Post warned, “Huge public, corporate and household debt looks like the ‘new normal’ for the global economy – until the next crisis.”

On December 20, 2019, ABC News’ top story was, “The World Bank warns a ‘wave of debt’ could swamp global economy.”

“Buckle up for turbulence: why a global debt crisis looks very hard to avoid” as The Conversation, an academic website, pronounced.

And in Britain, The Guardian on January 4, 2020, fretted, “Debt will kill the global economy. But it seems no one cares.”

The fuse has been lit on the global debt bomb. Here’s how bad it is, how it’s effecting stock markets, and what you should do with your money

Why You Should Understand the Market’s Upward Momentum and What’s Going to Stop It

1 | By Shah Gilani

The most powerful stock market moving engine, whether going forward or in reverse, is momentum.

And while there are lots of drivers of momentum, sometimes momentum itself is the primary driver.

Throughout 2019 the markets had their blips, but overall you can look back and clearly see that the momentum was mostly up.

Starting 2020 off strong, we’ve already hit new all-time record high markets, but you should be asking yourself what is happening now that’s keeping last year’s trend going.

Here’s where the record-breaking market’s momentum is coming from and what’s going to stop it