Historian who called every election since 1984 says Biden will beat Trump


The historian who is known affectionately as the granddaddy of presidential prediction models says that Democratic presumptive nominee Joe Biden is a shoo-in to win the 2020 presidential race.

The American University historian Allan Lichtman’s predictions are worth paying attention to because he has accurately forecast every election since 1984, including President Donald Trump’s stunning victory in 2016 over Democratic rival Hillary Clinton.

In an op-ed video in the New York Times published on Wednesday, Lichtman’s model, per usual, outlines his 13 keys to the White House that now lead him to believe that Biden is on track to secure a victory on Nov. 3.

This time around, Lichtman’s prognostication should come as little surprise given national polls indicate that Biden commands a substantial lead over the incumbent.

Biden, polling at 49.4%, holds a seven-percentage-point lead over Trump at 42.4%, according to a national poll average compiled by Real Clear Politics.

Lichtman says Biden leads Trump on seven of the 13 true-or-false criteria he looks at to assess the winner of a race to the White House, which includes factors such as the economy, foreign policy, scandals, social unrest and even the charisma of the candidate.

To be sure, the model is not scientific but Lichtman’s results deserve attention, if only for the novelty of seeing how his forecast plays out.

Recently, Trump via Twitter has been pushing his economic and market prowess as factors that he hopes can lead him to a victory in November. On Monday, he claimed that a record high for the Nasdaq Composite Index
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achieved in the wake of the carnage wrought by the pandemic, would all “come crashing down” if Biden wins the election.

The Nasdaq has soared nearly 60% since hitting a March 23 low and has booked 30 record highs so far in 2020, while the S&P 500 index
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+0.64%

has climbed 48% and the Dow Jones Industrial Average
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+1.39%

has risen by about 46% over the same period.

Still, the success of the stock market isn’t likely to be enough to secure a win for Trump. Strategists at JPMorgan Chase & Co. have made the case that a win for the former vice president would be a “neutral to slight positive” for stocks.



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His fund is up 60% this year after he called the March bottom — now, he sees potential for a ‘severe collapse’


Michael Gayed says he’s not trying to scare anyone, but you wouldn’t know it from his latest take.

Back in May, the fund manager warned of the possibility of two crashes: first bonds, then stocks. With his ATAC Rotation Fund
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-0.06%

continuing to deliver the goods — it’s up almost 60% so far this year to rank among the best in its category — he’s still waving the yellow flag.

“It is a wild time in the markets,” said Gayed, who also runs the Lead-Lag Report. “Despite a crippling global pandemic, where the U.S. is failing miserably at a response with daily record after daily record cases being broken, and a U.S. economy that seems to be teetering on the edge of yet another Fed Monetary Policy response, stock markets have not seemed to blink when recovering.”

Yes, 2020 is certainly unique, considering, as he pointed out, that stocks crashed by more than 30% at one point, only to rally almost 50% from there. All that in less than eight months.

After having been bullish near the March bottom, Gayed now says that leading market indicators could very well be signalling a “severe collapse” in stocks.

The yield on the 10-year Treasury
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0.534%

, for instance, is looking at around 0.5%, while the yield on the 30-year
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1.197%

is under 1.5%., which he says is setting up for a potential reversion to the mean.

“It’s often said that bond-market investors are the smart money and tend to lead the stock market in anticipating economic activity,” Gayed explained. “The fact that yields have not risen meaningfully (quite the opposite) in the very short term is quite troubling as historically such short-term movement has tended to precede major periods of equity stress.”

Add to that, action in the utilities sector, which is seen as a recession-proof, safe-haven investment, could spell trouble for the broader market, he said, pointing to this chart showing how the defensive investments have managed to outperform the S&P 500 in the past month:

“That should raise some red flags as an equity investor, and frankly this alone gives me pause,” he said. “A similar movement occurred right before the COVID crash this year.”

Lastly, complacency could become a serious issue, with Gayed pointing to several factors, including the wild recent trading antics of Robinhood traders.

“The S&P 500 is now positive in a year that is expecting economic catastrophe. The Nasdaq is flying. And no one seems to think the market can ever go down,” he wrote in a recent note. “It sure feels like everyone forgot that investing in stocks carries risk — and the conditions are changing so rapidly right now, it looks like risk might come back into full force.”

No big crash Monday, with the Dow Jones Industrial Average
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+0.43%

, S&P 500
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+0.76%

and Nasdaq Composite
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+1.48%

all starting off the week in the green.



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Sen. Tom Cotton says reports he called slavery a ‘necessary evil’ are ‘the definition of fake news’ — here’s his original quote


After many people on Twitter vilified Tom Cotton for reportedly calling slavery a “necessary evil” in a recent interview, the Republican senator clarified his remarks in a social media post of his own.

“This is the definition of fake news,” the Arkansas Republican wrote in a Twitter
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post on Sunday. “I said that *the Founders viewed slavery as a necessary evil* and described how they put the evil institution on the path to extinction, a point frequently made by Lincoln.”

Cotton was referring to an interview he gave to the Arkansas Democratic-Gazette, in which he criticized the New York Times’ proposed school curriculum under its 1619 Project that would highlight American slavery, rather than American independence, in U.S. history lessons.

“Curriculum is a matter for local decisions, and if local left-wing school boards want to fill their children’s heads with anti-American rot, that’s their regrettable choice. But they ought not to benefit from federal tax dollars to teach America’s children to hate America,” he told the paper.

So Cotton introduced legislation last week to ban using federal tax dollars to teach this in the country’s classrooms. His legislation calls the historical reinterpretation “a distortion of American history,” and the senator called the 1619 Project “left-wing propaganda” and “revisionist history at its worst” in his interview with the Arkansas Democratic-Gazette.

“We have to study the history of slavery and its role and impact on the development of our country because otherwise we can’t understand our country,” he told the Arkansas Democratic-Gazette. “As the Founding Fathers said, it was the necessary evil upon which the union was built, but the union was built in a way, as Lincoln said, to put slavery on the course to its ultimate extinction.”


“As the Founding Fathers said, it was the necessary evil upon which the union was built, but the union was built in a way, as Lincoln said, to put slavery on the course to its ultimate extinction.”


— Sen. Tom Cotton

Nikole Hannah-Jones, the Pulitzer Prize-winning New York Times reporter who created the 1619 Project, tweeted in response to his interview that: “If chattel slavery—heritable, generational, permanent, race-based slavery where it was legal to rape, torture, and sell human beings for profit—were a ‘necessary evil’ as @TomCottonAR says, it’s hard to imagine what cannot be justified if it is a means to an end.”

The “necessary evil” quote was seized upon by other critics on Twitter, and the interview went viral over the weekend, and led Tom Cotton’s name to trend on Monday.

Cotton responded to Hannah-Jones’s tweet by calling the 1619 Project “debunked” and writing that, “Describing the *views of the Founders* and how they put the evil institution on a path to extinction, a point frequently made by Lincoln, is not endorsing or justifying slavery.” He added, “No surprise that the 1619 Project can’t get facts right.”

Cotton also drew criticism last month for a New York Times op-ed entitled “Send In the Troops,” where he called for “an overwhelming show of force to disperse, detain and ultimately deter lawbreakers” and stop an “orgy of violence” to de-escalate the protests across the nation in the wake of George Floyd’s murder.

Times staffers revolted over the paper’s decision to publish Cotton’s column, with dozens of reporters, columnists, editors and producers tweeting: “Running this puts black @nytimes staff in danger.”The Times later said that it made a mistake in publishing the column, and opinion-page editor James Bennet resigned.





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‘Most people don’t want to be called average,’ says Betterment’s Dan Egan, who designs financial tools for them anyway


Dan Egan’s formal title right now is Director of Behavioral Finance and Investing at robo-advisor Betterment, but on his personal web site, he describes his life’s work as “helping us lead more fulfilling, smarter lives by understanding how psychology interacts with design, money, investing, spending and randomness.”

In practice, that means Egan helps design portfolios and other aspects of the way Betterment’s nearly half a million customers interact with the platform. Egan says he’s proud that Betterment investors have the lowest “behavior gap” he knows of – that is, the smallest gap between the potential returns they could ideally realize in the markets and the returns they actually wound up with.

MarketWatch spoke with Egan in early June, a few months after the market shocks of the spring, which many observers believe had an outsized impact on individuals, for better and worse. The company says new accounts were up 25% in the first quarter compared to Q1 of 2019 — perhaps in part because Betterment rolled out a new banking product in the early months of the year.

The interview that follows was edited for clarity.

MarketWatch: What is the demographic of Betterment investors?

Dan Egan: It’s widespread. We have some as young as 18, and I know of one who’s 92. About one-third are over 55. (If there’s a typical client), it’s someone in his or her mid-30s, living in a city, saving for both retirement and one to two other shorter term goals.

MarketWatch: Could you talk about how you select exchange-traded funds for the portfolios?

Egan: Most of it comes down to, how much return do we think the client is going to keep. One (other consideration) is the purpose or the target of the fund. We have some very vanilla market-cap based funds, some that tilt toward value or small cap. We have ones that target quantitative strategies like smart beta or income-oriented. Given a portfolio strategy mandate, we look at what are the best ways of fulfilling the mandate so the investor keeps as much as possible. Can get the exact same theme for a lower price, and we want a general form of liquidity: how easy is it to move in and out of the fund without losing value along the way.

Read:ETFs behaving badly: ‘exactly what they are supposed to do’ or ‘just what we feared’?

MarketWatch: What did you observe among Betterment’s investors through the market
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-0.61%

volatility in March and April?

Egan: Since the disruption, we’ve been opening accounts at a quicker rate. Part of that is that we’re offering a cash reserve product that’s independent of a bank, with a good yield. (It can be) integrated with customers’ investments. There were definitely people who’d been, for lack of a better word, waiting to buy the dip. If you were waiting, this removed the excuse not to get in. Also, a lot of people realized that we are entirely online. In a time when you’re not going to be meeting with a financial advisor in person any time soon, we’ve been doing it this way for years.

MarketWatch: There’s recently been a push by ETF industry leaders to suggest a more comprehensive ETF labeling process. What are your thoughts?

Egan: A big part of this is in the details, the delivery mechanism. A financial advisor who I know once said, the average person should be using Betterment. It was a great intent on his part. But most people don’t want to be called average! If you label these things in some way that implies this is, say, a “power tool,” if you make complexity a good unto itself a lot of people will be attracted to it. While I think it’s a good push to try to prevent retail investors from losing their life savings, making it seem exclusive negates that.

Usually brokerage platforms don’t have a good incentive to provide feedback loops because that would involve trading less, investing in things like simple low-cost index funds. They will make less money off that. They are good at encouraging speculative, concentrated investing. They’re designed in a way that encourages improving their bottom line, not yours.

(MarketWatch note: Egan wrote an opinion piece for MarketWatch a few years ago that outlined many of these principles.)


“If you make complexity a good unto itself a lot of people will be attracted to it.”


— Dan Egan, Betterment

MarketWatch: There have been two stories recently about individual investors. One is that they’re piling into the markets, understanding the notion that we may be a historical low that a savvy investor should take advantage of — but then at the same time, there have been lots of accounts of retail investors losing a lot of money in some fairly sophisticated products that maybe they shouldn’t have been in. You have a lot of interest in how individual investors behave, so I’m curious about your take. Which group do you worry about more? What can we learn from both of them?

Egan: One of the more interesting things is that there’s no professional sports on to watch and casinos are closed. There is an aspect of this which is, this is entertainment. In order for it to feel exciting and fun it needs to be speculative. I think a lot of investors when they start getting into it, they want something very specific that they can have an opinion on. Like oil. it’s easy to put into a construct and say it’s going to go back up. Unless it blows up. For some investors, when they are sold complex products, they don’t realize the inherent risks in them…. What Betterment tries to do is make good, solid, unexciting investing be a little more fun and educational. We are not a trading platform, not a gambling hub. You are not going to lose all your money but you’re probably not going to have a wild ride.

Related:Are ETFs safe… for retail investors?

MarketWatch: Could we talk a little about direct indexing? It seems like a really interesting idea that’s beneficial to the end investor and pretty disruptive for Wall Street. I assume you’re thinking about ways to offer it. Is it feasible? What would it allow?

Egan: That’s exactly that sort of thing we want to do. I look forward to the day when people can come in and tell us in human terms what they want to achieve. People are not all the same. Different people have different priorities even if they have the same rough values. People may be willing to take on more concentrated or expensive portfolios that have a better reflection of the way the world should be run. Figuring out how to connect the investors with the investments that really match them, allowing them to express themselves and we can match them with the set of investments that can match their values. The more clients that we have the more able we are to do that at scale.

See:It’s ‘no fun’ to be a small fund manager most of the time, Jan van Eck says — but right now is an exception



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Stock-market legend who called 3 stock-market bubbles says this one is the ‘Real McCoy,’ this is ‘crazy stuff’



‘My confidence is rising quite rapidly that this is, in fact, becoming the fourth, real McCoy, bubble of my investment career. The great bubbles can go on a long time and inflict a lot of pain but at least I think we know now that we’re in one. And the chutzpah involved in having a bubble at a time of massive economic and financial uncertainty is substantial.’

That is Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., offering up a major warning to speculators driving the stock market to new heights amid the greatest pandemic of the past century.

“This is really the real McCoy, this is crazy stuff,” said Grantham during a Wednesday afternoon interview on CNBC that appeared to knock some of the stuffing out of a market that had been drifting along listlessly.

Gratham painted a very dire picture of the investment landscape in the U.S., suggesting that rampant trading by out-of-work investors and speculative fervor around bankrupt companies, including car-rental company Hertz Global Holdings Inc.
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reflects a market that may be the most bubblicious he’s seen in his storied career.

Read: The rise of mom-and-pop investors in the stock market will ‘end in tears,’ warns billionaire Cooperman

“It is a rally without precedence,” he told CNBC, noting that it comes amid a period in which the U.S. economic health is at its lowest point, with millions of people out of work and bankruptcies likely to continue to rise due to a slowdown in business activity and closures that have come in the aftermath of lockdowns implemented to curb the spread of the deadly COVID-19 pathogen.

Markets, however, have been busting higher since hitting a low on March 23. Indeed, the Dow Jones Industrial Average
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-0.64%

has zoomed nearly 41% higher since late March, the S&P 500
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-0.36%

has climbed 39% and the technology-heavy Nasdaq Composite Index
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+0.14%

has soared more than 44% over the period, establishing an all-time high last week for the first time since Feb. 19

Grantham is worth paying attention to due to his prescient calls over the years. He said that stocks were overvalued in 2000 and again in 2007, anticipating those market downturns, the Wall Street Journal reports. Grantham also signaled that elements of the financial market had become unmoored leading up to the 2008-09 financial crisis.

Check out:‘The dollar is going to fall very, very sharply,’ warns prominent Yale economist

Asked what level of exposure investors should have to U.S. equities, Grantham offered an unflinching view that may leave some bulls gobsmacked.

“I think a good number now is zero and less than zero might not be a bad idea if you can stand that.”

The investment expert noted that monetary stimulus from the Federal Reserve, whose balance sheet has jumped from $4 trillion in March to $7.21 trillion last week, and efforts by the government to help average Americans has been a factor that has helped boost equity values amid this crisis.

“Clearly, the Fed scattering money around has created a favorable environment.”

Even before the CNBC interview that aired on Wednesday, Grantham and those at his firm had been bearish. “Uncertainty has seldom been higher…oddly, neither has the stock market,” warned Ben Inker, GMO’s head of asset allocation, adding that investment company slashed its stock exposure in its flagship Benchmark-Free Allocation Strategy from 55% in March to just 25% by the end of April.

Check out the Grantham interview on CNBC below:



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