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Exclusive: Why the Odds of a Bear Market Are Increasing by the Day

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Why the Odds of a Bear Market Are Increasing by the Day

#Odds #Bear #Market #Increasing #Day

Last week I was a “Doubting Thomas” when it came to the staying power of the recent S&P 500 (SPY) rally. It just looked like yet another in a long line of failed bounces in 2022 before the next leg lower. Gladly this recent bounce gave us the opportunity to take more profits off the table while moving the POWR Value portfolio down to only 69.5% long the stock market (and created a hedge in Reitmeister Total Return where there is more of a market timing element to the trades. And yes, that portfolio actually rallied this week as the market tanked). The point is that the odds of bear market are increasing by the day. And right now we are amassing a 3rd assault on a break into bear market territory (below 3,855). The reasons why that probably takes places is shared in this week’s POWR Value commentary. Read on below for more….



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(Please enjoy this updated version of my weekly commentary from the POWR Value newsletter).

The main headline today is “Inflation is STILL Too Hot” after the not so surprisingly high +8.6% CPI report. This had the positive pre-market futures diving into negative territory in a hurry culminating in a -2.91% slashing of the S&P 500.

Thus, we end the week a mere 45 points away from bear market territory at 3,855.

On top of that the Consumer Sentiment announcement today was the lowest reading since May 1980.

What’s the similarity between that time period? RAGING INFLATION just before a recession and bear market.

The sad fact of is that the Fed is WAY behind the curve. Truly they should have been raising rates and shrinking their balance sheet 6-12 months ago. Thus the odds of them managing a soft landing are between slim and none (and yes, slim may be leaving town 😉

Hey Reity, how about yesterday’s Jobless Claims report? Sure seems like employment is still in good shape.

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Jobless Claims on absolute basis are still low at only 229K per week. But directionally the news is not good as seen by the graph below showing 3 straight months of trending upwards.

If that continues, which is likely, then it will also start to show up in lower job adds. Then at a certain point job losses and worsening of the unemployment rate.

Remember that employment is a lagging indicator. Meaning one of the last economic data points to show weakness. Kind of like a smoke detector that goes off after the house has already burned down.

However, even this early in the game of looking for a recession there are cracks in the employment foundation which is yet another reason we have gotten more cautious now.

In Tuesday’s Reitmeister Total Return commentary I gave a lot more insight to show why the odds of recession and bear market are increasing. So check that out now if you have not already because there is lots more economic evidence and well reasoned insights from other investment experts.

Speaking of other investment experts, this news piece caught my eye today. That being famed investor, Stan Druckenmiller, is yet another in a growing line of pundits who sees this as a bear market with more downside ahead.

One of the things we have to remember is that we have smaller portfolios and thus can literally turn on a dime to go from bullish to bearish. So that often has us hanging on til the last second to make changes.

However, folks like Druckenmiller have BILLIONS of dollars invested…they can’t turn on a dime. Some of their positions are so large that if they sold them all immediately they would crush those stocks by themselves.

Plus they are watched closely by other investors which would have other everyone running for the hills.

So they need to make their moves bit by bit in stealthy fashion over a longer period of time. That is why they often call “bear” so early in the game when the rest of us can’t truly see it with such clarity.

However, part of our job is to appreciate “pattern recognition“. As in appreciating what happened in previous bear market periods BEFORE IT WAS TOO late that would tip the scales in a direction that we too should start heading for the hills.

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Reity, sure sounds like you are ringing the bear market bell…are you?

I have certainly tipped over the 50% likelihood line that odds of recession and bear market are more likely than continuation of the bull. And perhaps now sliding to 60-70% likelihood in my head.

But that shrinking 30-40% chance of bull market continuation is large enough to make me stop in my tracks from doing more at this time.

Because if the market does bounce again and stay on bull track then it could happen very rapidly that create serious damage to any investor leaning too hard in a bearish direction.

Thus, the 69.5% long in POWR Value (and totally hedged in Reitmeister Total Return) is good enough til we see if indeed a break below 3,855 is in the cards.

If so, then POWR Value will likely wind its way down to the new minimum charter of 50% long…but in more conservative positions to mitigate damage.

Whereas in Reitmeister Total Return I will get rid of the long side of the hedge to make more money on the inverse ETFs as we likely see a 30-40% total decline in this bear round (34% is the average bear market decline).

For those doing math at home that would be a likely outcome of 2,891 to 3,372 for the S&P 500. Yikes indeed!

You know the expression it; It is happy hour somewhere

Same could be said this way for investors: It is a bull market somewhere

That bull market just may be in shorting stocks. (read that one again so it sinks in).

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If you are not comfortable with that…then my friend…don’t be an investor. Just hand the money to an advisor riding out the highs and lows overtime. And yes, sometimes that means losing a third to half your money when the next bear comes.

However, if you want to have any honest appreciation that there is an economic cycle which creates bull and bear markets…then you have to appreciate it is as natural as night following day. Gladly there are ready made solutions for making money in each environment.

Yes, less people know how to do it during a bear market. But heck, I just laid it out for you. Not that hard when you think about it.

So if the definition of insanity is doing the same thing and expecting a different result. Then let’s stop that insanity train this time around by you trying something new that actually works for a change.

OK, I am getting off my soap box. I suspect that this coming week is the make or break for this market. We are prepared for either outcome. Let the chips fall where they may and we will react in kind.

Portfolio Update

Our portfolio has beaten the market for 4 straight weeks including a nearly 3% advantage this past week alone. Now as we roll back the clock a full month, we see the following:

-0.90% for S&P 500

+7.23% for POWR Value

I hope that brings a smile to your face on an otherwise somber day for investors

What To Do Next?

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If you’d like to see more top value stocks, then you should check out our free special report:

7 SEVERELY Undervalued Stocks

What makes these stocks great additions to any portfolio?

First, because they are all undervalued companies with exciting upside potential.

But even more important, is that they are all Strong Buys according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +31.10% annual return.

Click below now to see these 7 stellar value stocks with the right stuff to outperform in these challenging markets.

7 SEVERELY Undervalued Stocks

All the Best!

Steve Reitmeister
CEO StockNews.com & Editor of POWR Value trading service


SPY shares closed at $389.80 on Friday, down $-11.64 (-2.90%). Year-to-date, SPY has declined -17.67%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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Exclusive: Spirit delays shareholder vote on merger hours before meeting to continue deal talks with Frontier, JetBlue – TalkOfNews.com

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Spirit Airlines says it will decide on competing JetBlue, Frontier bids before the end of June

#Spirit #delays #shareholder #vote #merger #hours #meeting #continue #deal #talks #Frontier #JetBlue

A Spirit Airlines plane on the tarmac at the Fort Lauderdale-Hollywood International Airport on February 07, 2022 in Fort Lauderdale, Florida.

Joe Raedle | Getty Images

Spirit Airlines on Wednesday delayed shareholder vote on its proposed merger with Frontier Airlines until July 8, hours before a meeting scheduled for Thursday so it can further discuss options with Frontier and rival suitor JetBlue Airways.

It is the second time Spirit has delayed a vote on its planned combination with Frontier and extends the most contentious battle for a U.S. airline in years.

Spirit originally scheduled Thursday’s vote for June 10 but had delayed that for the same reasons.

Both Frontier and JetBlue have upped their offers in the week before the scheduled vote approached.

“Spirit would not have postponed tomorrow’s meeting if they felt they had the votes,” said Henry Harteveldt, a travel industry consultant and president of Atmosphere Research Group. Spirit didn’t comment on whether that is the case.

“We compliment the Spirit Board for listening to their shareholders, who clearly were not supportive of the Frontier transaction, and adjourning the Special Meeting,” JetBlue CEO Robin Hayes said in a statement later Wednesday.

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“It’s clear that Spirit shareholders have now handed the Spirit Board an undeniable mandate to reach an agreement with JetBlue.”

“This is like the end of a soap opera episode,” Harteveldt added.

Frontier and Spirit first announced their intent to merge in February. In April, JetBlue made an all-cash, surprise bid for Spirit, but Spirit’s board has repeatedly rejected JetBlue’s offers, arguing a JetBlue takeover wouldn’t pass muster with regulators.

Either combination would create the United States’ fifth-largest carrier.

JetBlue has fired back at Spirit, saying it did not negotiate in good faith, setting off a war of words between the airlines as they competed for shareholder support ahead of the vote.

Frontier didn’t immediately comment about the postponed vote.

Spirit shares were up about 2% in afterhours trading, while Frontier was up more than 1% and JetBlue was down 1%.

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Exclusive: Get hype for the first images from NASA’s James Webb Space Telescope – TalkOfNews.com

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Get hype for the first images from NASA’s James Webb Space Telescope

#hype #images #NASAs #James #Webb #Space #Telescope

Very soon, humanity will get to view the deepest images of the universe that have ever been captured. In two weeks, the $10 billion James Webb Space Telescope (JWST) — NASA’s super expensive, super powerful deep space optical imager — will release its first full-color images, and agency officials today suggested that they could just be the beginning.

“This is farther than humanity has ever looked before,” NASA Administrator Bill Nelson said during a media briefing Wednesday (he was calling in, as he had tested positive for COVID-19 the night before). “We’re only beginning to understand what Webb can and will do.”

NASA launched James Webb last December; ever since, it’s been conducting a specialized startup process that involves delicately tuning all 18 of its huge mirror segments. A few months ago, NASA shared a “selfie” marking the successful operations of the IR camera and primary mirrors. Earlier this month, the agency said the telescope’s first images will be ready for public debut at 10:30 AM ET on July 12.

One aspect of the universe that JWST will unveil is exoplanets, or planets outside our Solar System — specifically, their atmospheres. This is key to understanding whether there are other planets similar to ours in the universe, or if life can be found on planets under atmospheric conditions that differ from those found on Earth. And Thomas Zurbuchen, associate administrator for NASA’s Science Mission Directorate, confirmed that images of an exoplanet’s atmospheric spectrum will be shared with the public on July 12.

Essentially, James Webb’s extraordinary capacity to capture the infrared spectrum means that it will be able to detect small molecules like carbon dioxide. This will enable scientists to actually examine whether and how atmospheric compositions shape the capacity for life to emerge and develop on a planet.

NASA officials also shared more good news: The agency’s estimates of the excess fuel capability of the telescope were spot on, and JWST will be able to capture images of space for around 20 years.

“Not only will those 20 years allow us to go deeper into history and time, but we will go deeper into science because we will have the opportunity to learn and grow and make new observations,” NASA deputy administrator Pam Melroy said.

JWST has not had an easy ride to deep space. The entire project came very close to not happening at all, Nelson said, after it started running out of money and Congress considered canceling it entirely. It also faced numerous delays due to technical issues. Then, when it reached space, it was promptly pinged by a micrometeoroid, an event that surely made every NASA official shudder.

But overall, “it’s been an amazing six months,” Webb project manager Bill Ochs confirmed.

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Exclusive: Fight for Spirit Airlines goes down to the wire with competing bids from Frontier and JetBlue – TalkOfNews.com

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Fight for Spirit Airlines goes down to the wire with competing bids from Frontier and JetBlue

#Fight #Spirit #Airlines #wire #competing #bids #Frontier #JetBlue

The most heated airline battle in recent years comes to a head on Thursday when Spirit Airlines’ shareholders vote on a proposed tie-up with fellow discount carrier Frontier Airlines while rival suitor JetBlue Airways circles with increasingly sweetened takeover bids.

Spirit has repeatedly rebuffed sweetened, all-cash bids from JetBlue, arguing that such a takeover wouldn’t pass muster with regulators, and has stuck with its plan to combine in an also-sweetened cash-and-stock deal to combine with Frontier, first announced in February.

JetBlue’s surprise all-cash bid in April set off a fight over Spirit that last month turned hostile.

If Spirit shareholders vote in favor of the tie-up with Frontier, it would put the carriers on the path to creating a budget airline behemoth. The two carriers share a similar business model based on low fares and fees for almost everything else from seat selection to carry-on bags.

A Frontier Airlines plane near a Spirit Airlines plane at the Fort Lauderdale-Hollywood International Airport on May 16, 2022 in Fort Lauderdale, Florida.

Joe Raedle | Getty Images

If shareholders vote against the deal it opens the door for a takeover by JetBlue, which would retrofit Spirit’s yellow planes to look like JetBlue’s, including cabins with seatback screens and more legroom.

“JetBlue does not have many options to achieve a step-change in growth, and that explains why JetBlue has pursued this deal so doggedly,” said Samuel Engel, aviation consultant at ICF.

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JetBlue and Frontier have each argued their proposed transactions are key to their future growth, helping them better compete with large U.S. carriers and get fast access to Airbus narrow-body planes and pilots.

Either deal would create the fifth-largest U.S. airline.

Late Monday, JetBlue said it would raise the reverse breakup fee if regulators don’t approve a JetBlue takeover of Spirit to $400 million from $350 million. It also raised the amount it would pay up in advance to $2.50 a share, from $1.50 and added a 10 cent-a-share monthly payment to shareholders starting next year until the deal is consummated or terminated.

JetBlue previously offered to divest some assets in crowded markets to calm antitrust fears, but hasn’t said it would give up its alliance with American Airlines in the Northeast U.S., which Spirit has called out as a sticking point in that deal.

JetBlue’s latest offer came after Frontier late Friday raised the cash portion of its offer by $2 per share to $4.13 and increased the reverse breakup fee to $350 million to match JetBlue’s then-offer.

Spirit has stuck with the Frontier deal. CEO Ted Christie on Tuesday called the Frontier offer “very compelling” and told CNBC the airline wants to “focus our efforts on convincing the shareholders it’s the right thing to do.”

Proxy advisory firm Institutional Shareholder Services on Tuesday said that “the enhancements by JetBlue may be enough to offset the potential upside of the proposed merger with Frontier” but said it didn’t want to change its recommendation in favor of the deal with so little time before the vote.

Spirit postponed the vote from June 10 to continue deal talks with Frontier and JetBlue.

War of words

For weeks, JetBlue has argued that Spirit’s board hasn’t negotiated in good faith or fully considered its offer. It has repeatedly urged the budget airline’s shareholders to vote against the Frontier deal.

“The Spirit Board consistently ignored or refused to engage with JetBlue until faced with certain defeat on the original shareholder meeting date and then, in an attempt to avoid the widespread perception of its poor corporate governance, pretended to engage with JetBlue,” JetBlue said in a letter Wednesday again urging Spirit shareholders to vote against the Frontier deal.

Spirit has repeatedly denied claims that it hasn’t engaged with JetBlue in good faith.

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“Our board believes [the Frontier merger] is the most financially and strategically compelling path forward for Spirit with a greater likelihood of closing,” Christie said in a video message addressing shareholders on Wednesday.

All three carriers have traded heated words as they try to win over Spirit shareholders before the shareholder vote.

JetBlue late Monday wrote a letter to Spirit shareholders detailing its latest sweetened bid and accusing Spirit of making “misleading statements” regarding its antitrust doubts.

Frontier fired back in a lengthy news release Tuesday saying that “a Spirit acquisition by JetBlue would lead to a dead end — a fact that no amount of money, bluster, or misdirection will change.”

The high drama is coming from an already-consolidated industry that hasn’t seen a major airline deal since 2016, when JetBlue lost out to Alaska Airlines for Virgin America.

“This is as much as a potboiler for the summer than any trashy novel,” said Henry Harteveldt, a former airline manager and president of of Atmosphere Research Group.

High regulatory bar

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