Are we officially in the process of being caught off guard?
I wasn’t even going to write a note this morning, because it’s Sunday and I have a couple pieces planned for the week to come. But then I had an interesting set of realizations this morning while walking to get my coffee:
Many young people on Wall Street nowadays have never experienced real volatility in markets
Russia’s invasion of Ukraine and inflation at 7.5% in the U.S. are two extremely different, complex and unmapped pieces of terrain that we are going to be forced to navigate
In other words, we have a ton of inexperienced market participants that should be bracing for the economic shock of their lifetimes, but they’re not - they’re still at the stage where walking around Manhattan in Patagonia vests, drinking Starbucks and making dinner reservations at whatever douche-motel is trendy this week are among their top concerns.
This wasn’t a big deal when I first pointed out in November that I thought the NASDAQ could crash. We
Saxo Bank has a few
Naturally, predictions like this are more for bank PR than education but they have some value.
For one, they're a reminder that unexpected, huge and unpredictable moves happen in markets. And they happen far more often than we expect.
The thing is, they usually happen somewhere you least expect.
As for this set of predictions, let's hope this trader is you (from the report):
"World markets are increasingly full of signs and wonders, and the collapse of volatility seen across asset classes in 2017 was no exception. The historic lows in the VIX and MOVE indices are matched by record highs in stocks and real estate, and the result is a powder keg that is set to blow sky-high as the S&P 500 loses 25% of its value in a rapid, spectacular, one-off move reminiscent of 1987. A whole swathe of short volatility funds are completely wiped out and a formerly unknown long volatility trader realises a 1000% gain and instantly becomes a legend."
Courtesy of ForexLive
Ran across this post and found it interesting although anything that's only been around 7-1/2 years is truly untested but only time will tell. All eyes are on Congress for a break in taxes for the wealthy, as well as 'stumbles' from our leader and chief, Mr. Trump. Between the Russia investigation and foreign relations (yikes!) the tension is building, or at least being applied by the left. Will they reach the proportions where firms hit the 'sell' button? I have to say that September is coming - the worst month for the market thanks to Mutual Fund profit taking at end of fiscal year. Anything is possible. Enjoy the ride. From LyonsShare:
Sentiment indicators can be useful tools for investors, mainly on a contrarian basis. That is, generally when readings get overly bullish, it may signal a lack of remaining buyers in the market and vulnerability to a decline in prices. Conversely, when sentiment is extremely bearish, it is often a sign that selling has been overdone and prices
I don't actually embrace this headline. In my experience, yes, emotions exist while paper trading. It's merely that you can sleep at night knowing your bank account didn't go up in flames but that's just me. It's also essential in my book that you determine what "type" of trader you want to be. It's one thing to say you want to invest like Warren Buffett but just what does that entail? Do you rally know? It's also super easy to be sucked in by get-rich-quick ads and bloggers who entice you to sign up for their premium edition (none of which I recommend). Don't underestimate the market. It's NOT easy, even if you believe you've got a plan and everyone loses. Everyone. The trick is not to be fooled. Ignore the headline newsfeed hype and learn to invest without emotion. You'll be going up against high-frequency programs and number crunchers with degrees. Are you truly ready to put up your hard earned cash against them? Remember, if it were simple, everyone would be doing it
NYSE margin debt fell again during the month of February. After the selloff in stocks that kicked off 2016, this should come as no surprise. Investors are usually forced to reduce leveraged bets during these sorts of episodes in the stock market. In fact, this forced selling can actually exacerbate the volatility. And because margin debt is only now beginning to come down from record highs, surpassing those seen at the 2000 and 2007 peak, this should be of concern to most equity investors.
To fully appreciate this risk, I prefer to look at margin debt relative to overall economic activity. When leveraged financial speculation becomes large relative to the economy, it’s usually a sign investors have become far too greedy. As Warren Buffett would say, this is usually a good time to become more fearful, or conservative towards the stock market.
Not only did margin debt recently hit nominal record-highs, it hit new record-highs in relation to GDP, as well. In other words, over the past s
One item I completely agree with is the pundits and "know it alls" on entertainment news television. They're there to entertain you; not make you rich. I get my economic releases on them and *off* they go the rest of the day. I trust my charts; charts don't lie. People do.
Courtesy of Martinkronicle
Is our economic recovery truly as strong as charts would imply? Are we strong enough to stand on our own at these levels, or have we overshot the boundaries thanks to quantitative easing? Are economics in the U.S. strong enough or does recession lie ahead?
Curve watchers Anonymous has an eye on the yield curve. Here is a snapshot of year-end-closing values from 1998-12-31 through 2015-12-31.
Yield Curve Year End Closing Values 1998-2015
Unlike 1999-2000 and again 2007-2007, no portions of the yield curve are inverted today (shorter-term rates higher than longer-term rates).
Inversion is the traditional harbinger of recessions, but with the low end of the curve still very close to zero despite the first Fed hike, inversions are unlikely.
Yield Curve Differentials: 3-Month to Longer Durations
There once was a series of interviews with Jim Cramer, as you'll see here where he talks about his days as a Hedge Fund Manager, and they were a wonder to behold. It seems many have been 'scrubbed' from the web (nice job Jim) but I came across this one and it'll give you a glimpse into the games that are played behind the scenes. CNBC and its cohorts are entertainment and easily swayed. Get your economic data and hit the 'mute' button. Opinions are swayed by the opinions’ of others but it doesn't make them fact. Learn this early.
Omega Advisors Founder, CEO and Chairman Leon Cooperman discusses his outlook for the markets. Of course he was short on time so we have no idea if he's short bonds but that would be my guess. Hat tip Sadiq for this interview.
1. “We are limited, of course, to businesses whose economic prospects we can evaluate. And that’s a serious limitation: Charlie and I have no idea what a great many companies will look like ten years from now.”
“My experience in business helps me as an investor and that my investment experience has made me a better businessman. Each pursuit teaches lessons that are applicable to the other. And some truths can only be fully learned through experience.”
Treat an investment security as a proportional ownership of a business! A security is not just a piece of paper. Not all businesses can be reasonably valued. That’s OK. Put them in the “too hard pile” and move on.
2. “Periodically, financial markets will become divorced from reality.”
“For those investors who plan to sell within a year or two after their purchase, I can offer no assurances, whatever the entry
Very quickly some morning headlines. While a few of the geopolitical risk headlines may be behind us (Brazil election, Russian border, etc) I believe markets are waiting for this quarters earnings (and guidance) to set the stage. Multi-nationals with exposure overseas may struggle going forward if one believes the headlines below:
- IMF revises and raises growth for the US BUT lowers prospects for the world (4.0 to 3.0%)
- IMF says some valuations are "frothy"
- SODA warns of miss and citing lower US demand (stick a fork in it)
- Women's apparel mfgr CBK warns of lower sales; blames low mall traffic.
- Hong Kong retailers experience sharp sales decline (blames protests of course because happy people would be spending)
- AGCO cuts forecast, shares down 6% premarket
- Taiwan's exports growth slips
- MCD Japan expects net loss this year
- Slide in German industrial output stokes fear of recession
Ask 10 different money managers what metric they use to determine if a stock (or particular market) is overvalued, and you'll more than likely receive 10 different responses. Of course buying at "the bottom" is easier said than done, as we all know so I submit to you this perspective.
Kyle Caldwell, personal finance reporter at the Daily Telegraph, determined whether stock markets were undervalued or overvalued. Caldwell used three measures: price to earnings (P/E), cyclically adjusted price to earnings ratio (CAPE) and price to book (P/B). His analysis included 34 countries, both developed and emerging and compared current measures to historical averages.
The CAPE adjusts for cyclical variations and takes a longer term view than the P/E considering the earnings average over the last 10 years instead of the 12 month average. Its premise is that eventually earnings will move back to their long term trend. Price to book divides the current value per share over the equity value sho
Everyone knows our beloved five year rally seems to be weakening of late. The big question is just "how" weak will it become. If anyone tells you they know that answer, stop reading that website. Certainly more and more sectors are now exhibiting profit taking even as fund managers lounge sipping Mai Tai's from their catamarans off the coast. Indeed selling can beget more selling, however that doesn't mean we may not see a few days of buying to test overhead resistance and see if it holds; if the "top" is truly in.
Now is not a time (imo) to add to a long position.
Now is a time to be hedged or flat in a long portfolio.
Now is the time for day trades or brief swing trades.
Now is a time to let the charts show you direction.
A second enormous week of earnings lies before us. While thus far companies are largely beat (which should be the case if they're well run), forward guidance hasn't been all that impressive from a sales growth perspective.
Buybacks and dividend increases
Last week BTIG's Dan Greenhaus tried to dismiss the talk of the January effect (calm investors) stating “Normal corrections” tend to be anywhere from 5-8%, which is basically what we had/are having. If that’s the case, and our underlying fundamental views have not shifted (they have not), then stepping into markets down more than 5% should prove rewarding over time. Of course me, being a skeptic of MSM (and everything out there for that matter), caught the last two words "over time" and raised an eyebrow. Seriously? Over time? Most small investors won't risk more than 10% of any position. Many only $100 if possible and this prompted me to poke around a little further on this January effect *thang*
The Street seems to buy the theory "When the first five trading days of the new year are positive, the month of January ends positive 76% of the time. When the month of January is positive to start the year, the stock market finishes the year positive 82% of the time." While Barry Rit
"When E.F. Hutton talks, people listen" was the mantra in the 1970's and 80's where commercials typically featured an business man at a holiday party or casual get together and when asked what his broker, E.F. Hutton said, everyone in the room froze, heads turned..........hanging on his every word. Nowadays there's no doubt in my mind that when Art Cashin, the seasoned, ice cube-marinating stock market veteran talks, Chicago traders such as myself listen.
Bull markets have a maximum shelf life of five years, and Wall Street may soon approach the end of this one, UBS' Art Cashin told CNBC on Friday. If the S&P 500 drops below 1,770, he added, the markets could see a wave of secondary selling.
"It's a little bit of catch-up for 2013," he said on "Squawk on the Street." "We've gone for an awfully long time without a correction. Bull markets tend to have a maximum life of five years. We're getting awfully close to that."
What do your tea leaves tell you? Is it time for some s
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