Gold News

Ignore Facebook's Crash

...and just keep buying the stockmarket...

FIRST the bad news, warns Brian Maher, managing editor of The Daily Reckoning.

Facebook crash-dove 24% in after-hours trading last Wednesday.

In the span of a few electric hours, the "social" media giant lost some $130 billion of market value – its sharpest decline ever.

It also represented the largest one-day loss any American company has ever suffered.

If you can find it in your heart, please spare a tender moment for Facebook co-founder and CEO Mark Zuckerberg.

The world's fifth-largest billionaire lost $16.8 billion in a day...and slipped to sixth place on Bloomberg's Billionaire Index.

Why the trouncing?

Disappointing revenues...twinned with diminished expectations.

Facebook Chief Financial Officer David Wehner, babbling a tale of woe that could squeeze a pearl of sorrow from the coldest statue:

"Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4."

Has reality ensnared Facebook at last?

Bloomberg's Shira Ovide:

"If what the company predicts comes to pass, the internet's best combination of fast revenue growth and plump profit margins is dead. All at once, it seemed, reality finally caught up to Facebook."

Your concern for Facebook is precisely nil, you say...and Mr.Zuckerberg's headache brings a flush to your cheek.

But here is your cause for concern:

Facebook is a central pillar of the "FAANG" stocks – Facebook, Amazon, Apple, Netflix and Alphabet (Google, essentially).

These FAANGs account for over 80% of the S&P's gains this year.

Remove one of those pillars...and does the entire structure give way?

Or how about two pillars?

Netflix has also come in for rough sledding of late.

Facebook and Netflix aside, trade wars menace markets from another angle.

When the market does collapse it will be a thing for the ages, believe it.

And we are no rah-rah man for the stock market.

But we have it on magnificent authority that the market will nonetheless finish this year higher – despite the sturm, despite the drang, despite the trade war, despite Facebook.

On whose authority do we have it?

History's.

If the S&P rises from April through July, observe analysts at Bespoke Investment Group, stocks will end the year higher.

Since 1928, the market has risen April through July on 12 occasions.

In all 12 instances, Bespoke reminds us, stocks concluded the year higher.

Twelve of 12 represents, if our math does not fail us, a 100% rate of success.

Twelve of 12 is pretty handsome, you concede – but not convincing. More proof, you demand.

Well, the ladies and gentlemen of LPL Financial Research have conducted their own inquiry...

Whenever the S&P enters summer (June 21) at least 3% higher on the year, they conclude, it ends the year higher.

Since 1950, the S&P has begun summer at least 3% higher on 35 occasions.

In all 35 instances – all 35 – the S&P ended the year higher.

And despite this year's "correction", the S&P nonetheless entered summer up 3.5% on the year.

"That," they conclude, "should comfort investors, regardless of the headlines."

We are indeed comforted...as if by the balm of Gilead itself.

More comfort yet:

"That trend will stretch into a 36th year," attests Mark Tepper, president of Strategic Wealth Partners, adding:

"We're still overweight stocks...and we really do expect to hold that positioning at least until the end of the year before we would potentially downshift to neutral. Our research says absolutely no recession until 2020, so it does make sense to stay overweight stocks right now."

Jim Rickards – while expecting a recession – even allows for a possible recession-free window through the end of 2020.

Jim mentions "the odds of this expansion turning to recession before the end of 2020".

Be assured, we'll be keeping a weather eye on developments...and our agents are currently gathering critical intelligence.

The end will assuredly come.

But maybe, just maybe...

2018 may be time to get...while the getting is there to be gotten...

Formerly an independent researcher and writer, Brian Maher is managing editor of The Daily Reckoning, the contrarian investment email launched in 1999 and now read by over half-a-million people worldwide each day.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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