Juggling Dynamite

Bernie Sanders and Donald Trump are the most vocal candidates in pointing out the unholy financial influence of the finance sector on other Presidental hopefuls.  For good reason, as revealed in this chart:

Sanders has also criticized fellow leadership candidate Hillary Clinton, for accepting $675,000 of speaking fees and $930,000 of campaign contributions from the firm and its executives during her career. Goldman Sachs has donated at least $250,000 to her family’s foundation — which in 2014 held a donor meeting at the company’s Manhattan headquarters.

See:  Election 2016

The Wall Street Journal produced this summary of Clinton’s top 5 contributors.

Perhaps the most disturbing part of all of this, is that the US Supreme Court, the highest court of the self-proclaimed ‘greatest democracy in the world’, enabled this devastating purchase of political influence 5 years ago in Citizens United v. Federal Election Commission, when it ruled that political spending is protected under the First Amendment, such that corporations and unions can spend unlimited amounts of money on political activities, as long as it is done independent of a party or candidate.

Confirmed by a recent report from the Brennan Center, this has been a democratic catastrophe: of the $1 billion spent in federal elections by super PACs since 2010, nearly 60% of the money came from just 195 individuals and their spouses who make the maximum $5,200 donation directly to a candidate, then make unlimited contributions to single-candidate super PACs.

Valuable reminder from Carter in this clip: “96% of money managers are long always.”

This means they stay fully invested in stocks throughout bear markets. This means, regardless of how crazy and dangerous valuations become; regardless of the fact that cyclical declines tend to evaporate more than 40%+ of invested capital during secular bear markets; regardless of a client’s age and stage; regardless of whether clients are approaching or already in retirement; regardless of whether clients are dependent on the capital for income. Regardless of every rational and mathematical fact that confirms avoiding capital losses must be the primary investment objective, 96% of money managers keep their client capital in risk assets as markets enter cyclical declines.

They do this because they chose to put their own best interests of maximizing fee flow ahead of the best interests of their clients.  In the end, it’s that simple.

Is it time to hit the sell button? Carter Worth of Cornerstone Macro analyzes extreme defensive behavior in the market. Here is a direct video link.

Long always managers ‘re-position’ to dividend paying stocks like utilities in an effort–not to avoid losses–to lose less. This is like moving chairs on a sinking ship. Dividend paying stocks, do not dec0uple in bear markets. The last two bear markets (2000-02, and 2007-09), dividend paying stocks fell more than 40%, while the broad markets fell 55%.  Defensive for whom?

Danielle was a guest today with Jim Goddard on Talk Digital Network, talking about recent trends in the world economy and markets. You can listen to an audio clip of the segment here.