Unless you have been on a deserted island with no form of communication, you would know that there is a lot of scare mongering around the possibility of another stock market crash.
Some people call it “terrible October” while others refer to it as “red October”, but any way you look at it, Oct. 2018 has continued to live up to its reputation as one of the most volatile months in the stock market.
Oct. has had a long reputation of being a down month in the market given that previous significant crashes have occurred in this month including the great crash of 1929 (black Tuesday) and black Monday in 1987.
To this day, we continue to be reminded of these crashes, which is why people are so wary when Oct. rolls around. But should we be concerned or is the current bearishness just the market being normal?
So far Oct. has produced a new all-time high on the Dow with the S&P having an all-time high in Sept. Charles Dow, founder of the Dow Jones Index, said that for crashes to occur we need to see rampant speculation in the market with hordes of inexperienced investors jumping into anything that is moving at increasingly higher rates.
We also need to see record levels of borrowing to invest and investors moving into mutual funds.
Whilst consumer debt is up, I believe it is more a sign of a good economy and not rampant speculation from individuals borrowing to get into the stock market or to invest in mutual funds.
If we consider the new inflows into mutual funds, the levels have decreased over the past couple of years.
Looking at the market from a technical perspective, we have more than 200 years of market data that proves the stock market has cycles of 80 to 90 years, with the last major cycle low occurring in March 2008, which is also known as the GFC low.
Prior to this, the major lows occurred in 1932 (the 1929 crash), 1842 and 1762. Out of the 1932 low, where the Dow had fallen 90 percent in price between 1929 and 1932, the Dow rose for 56 months and 382 percent in price before falling 50 percent into a low in March 1938.
During this time, we first experienced a depression and then the 1937 recession, which caused the fall into the low in 1938. The next major fall for the Dow did not occur until the 1970’s, where it fell just over 30 percent.
The move out of the 90 year low that occurred in 2008 has been quite different to the move up from the 1932 low in that we have seen the market rise 115 months and 316 percent, so the rise has been steadier rather than the euphoria experienced in 1932.
We have also not seen a depression, and a short-lived recessionary environment. Once the dust settled after the GFC, the economy started improving to now being strong and indicating that a continued rise in the market is likely sustainable.
Given that we are a mere ten years on from the last 90 year low and the next one is not due until the end of this century, right now I believe we are seeing a normal market adjustment to the current longer-term bull market.
Therefore, my expectation is that any fall on the Dow will be in the vicinity of 15 to 25 percent from its all-time high with support between 22,000 and 21,000 points.
We also need to be cognizant of the fact that for a market to crash to occur we need to see fear and panic, which is fueled by widespread concerns over leveraging by consumers and as previously mentioned, we have not seen this in the stock market, but what about leveraging in the housing market, which was the major cause of the GFC.
While there is some justification for concern in the housing market, it is more around availability given that not enough new housing is being built to handle the growth in the population.
Most of you will remember all the talk in 2007 was about dubious mortgages and lending practices and at the time interest rates were over 3.5 per cent, well above today’s level of 2.25 percent. So, in summary we are not seeing large scale stress in lending for housing.
I have often said that if the majority are suggesting that a crash is imminent, then the market will not crash.
This is because those who are likely to panic would have already sold out and the big end of town would have battened down the hatches and adjusted their portfolios.
The process of protecting portfolios from downside risk has the effect of slowing the market as the re-weighting of portfolios occur, and while over the past weeks we could say there has been signs of this, it has not been widespread over many months, which indicates that the big end of town are not too worried.
Investors are known for following the herd and making reactive decisions, rather than being proactive, and it is well known that the herd get it wrong most of the time when it need not be the case.
CHART: How Blockchain Powers Bitcoin
Blockchain, Bitcoin. Bitcoin, blockchain.
The two terms go hand in hand—and have become almost ubiquitous with this year’s insane rise (and fall) of Bitcoin.
But what does it all really mean? How does it come together? In this week’s chart, our friends at CB Insights break down exactly how blockchain powers Bitcoin.
This Mogul Became America’s 1st Black Billion-Dollar Businesswoman
Where to start?
She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.
She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.
Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.
In honor of Black History Month, let’s dive into her remarkable career.
- Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
- Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
- Per Forbes, Johnson has an $820M net worth as of 2019
Foray into real estate…
After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.
“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”
As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.
“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”
So what does that mean?
“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.
“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”
And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.
Forbes: “Everything [she] touches turns to gold.”
That’s a real quote. From Forbes. Last year. It’s also true.
BET? Billion-dollar exit. Washington Capitals? Stanley Cup.
And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)
Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.
Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”
So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.
Breaking glass ceilings.
There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.
“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”
She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”
Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.
“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.
“And it’s just really, really important that they really take a look at this.”
VIDEO: How Far Does $150K A Year Get You In New York City?
No matter what metric or list you look at, it goes without saying: New York City is one of the most expensive places in the world to live in.
In this video, CNBC spoke to a Millennial who runs her own brand consulting agency and wants to #WealthHACK her way to retirement by 40.
She makes $150K a year. But how far does that actually get her? Check it out.