Hello, I’m Ken Moraif and wanted to send you a video this time as opposed to our normal email that we send given the circumstances with the way the S&P and the Dow have behaved last week and have been behaving for the last 2 months, 3 months almost. I thought that this video would be appropriate for you.
If you’re receiving this email of this video, it’s because you’re not a client and so I guess where I’m coming from on this is that I’m concerned about you, and I mean that. We have a strategy that we call buy, hold and sell, and in fact we are going to be selling. We have reached a point where our strategy has told us that the odds are in favor of it being a bear market, and so that’s based on our research and our looking back over time and looking at how our strategy works, and so we at this point don’t think it’s a good idea to be in equities anymore, and if this is a bear market, and it’s a non- recessionary bear market, it’s possible that we could be sitting on the sidelines for 7 months. According to Ned Davis research, that’s how long a non-recessionary bear market lasts.
So, my question though for you is, what is your advisor doing for you at this moment time? Is the only answer your diversified and everything is going to be okay and just stay the course or do they have an actionable game plan to protect you from potentially large losses that could change all your plans. Y2K was a 49 percent drop in the S&P and 2008 was a 57 percent in the S&P. Many people saw their ability to retire disappear in front of their eyes. They were delayed by years. People who were retired found that they had to reduce their lifestyle or had to go back to work in a time when jobs were not available in the middle of a recession so all of those kind of things we don’t want for you.
So, if you’re not a client, which you’re not, if you’re getting this video, please click on the link to meet with an advisor. Come in and visit with one of our advisors. Talk with us about what you’re doing. Look at what we’re doing, what we could do for you and see if it’s a fit. This is not a time for you to be complacent to be just scared and think everything is going to be fine. It may be. Okay. Nobody has a crystal ball, but at the very least you need to talk to our advisors and see what another option might be for you, and if I were to give you the reason why we think it’s a great idea to sell, there are many. I’ll kind of enumerate them for you.
First of all, the yield curve inverted which is that longer term rates, interest rates have gone lower than short-term rates, and over the last 50 years according to Bloomberg every recession we have had has been preceded by that event. So, it’s a worrisome sign. Also, China’s growth slowed to 5.4 percent. Now we would kill for 5.4 percent growth, but China if you think back a few years ago they were growing at over 8 percent. So, if you go from 8 to 5, that’s a significant drop in your growth, and China is a big driver of global growth. Many of the countries around the world depend on China’s growth to sustain their own. So, there’s a big concern there.
According to Bank of America, the selling we’ve been seeing is the second-largest selling in terms of volume in U.S. stocks ever. So, that’s obviously not a good sign, and also we had the death cross. Now, if you’re not family with that one, that’s obviously anything call the death cross is not a good thing right, but the death cross is where the 50-day moving average of the S&P drops below the 200 day. And that happened last week, and it’s not 100 percent accurate, but it’s a relatively accurate predictor of bear markets. Also, leverage loan ETF, BKLN, the largest leverage loan ETF has seen the largest amount of selling that it has seen since 2016. Leveraged loans are very risky loans. Why are people selling those? Well, because obviously in my opinion they think that these are dangerous loans. Right?
They are not going to get repaid. I got to get out now, and these highly leverage loans. Does anybody remember subprime? Those are highly leveraged loans, right? So, again, that’s a dangerous sign. And then, also, we have, well, anyway, I’m not going to continue to iterate them. I’m just going to say that all of that, there’s no one thing you can point to that tells you that this is a terrible time and that you should be seeking safety, but in our opinion the conglomeration of it, the change in the trend, the mood, the amount of debt we have globally and in this country. The bond market is not happy. This is a time where we think, you know what, it’s just better to be safe than sorry.
And so, I encourage you strongly, please, go visit with one of our advisors. You can click on the link, meet with an advisor. If we’ve been communicating with you, call, schedule a time, sit down, review everything. You may still decide you don’t want to do business with us, and that’s perfectly fine. No charge, no obligation, but at least take a look at it, revisit it, and be informed. Make an informed decision. Okay. We don’t want you to go through a bear market and suffer major losses and at least not have had an opportunity to see another side or another opinion. Okay. So, thank you for watching this video. I really appreciate it. I appreciate you following me, listening to my radio show, everything that you do, I really appreciate all of that and I hope you’ll take advantage of this opportunity to visit with our advisors as well. Okay. Thank you.