This Week's Message: Second half of September data/trend wrap up...

It's become my recent custom to use my current trends file to provide the weekly message twice each month. Two-weeks ago I shared the mid-September look, below, chronologically, is the balance of the month.

Advisor Fees

A hot topic these days is the fee structure of the various platforms from which financial advice and investment management is delivered. Hedge funds, in particular -- with their extremely high cost regimes -- have been under intense scrutiny the past couple of years. While boutique firms, such as ours, have, for the most part, been able to fly under mainstream media's radar, I wonder if that tide hasn't begun to change.

Our Relationship

The investment advice industry, or, more to the point, the financial services industry, finds itself in the spotlight to a greater extent today than perhaps it ever has before. Beginning next year, anyone who receives compensation for delivering advice has to adhere to a standard that ensures that he or she is solely looking out for the client's best interest. I find it ironic that regulators are attempting to force onto an entire industry a practice that has essentially guaranteed the success of its firms that were already holding themselves to such a standard (folks do business with folks they trust).

Market Commentary: Today's volatility and a quick look at the charts (video)

Quote of the day...

You think maybe the media paints things with a certain emotion in mind to get your attention?

Here's Josh Brown on his blog, linking to a very good article he penned for CNBC:

"I hope you like it, and by the way, I didn’t write this headline. I’m told this is the sort of thing that works really well on the web:

I’ve never seen anything like the massacre of the hedge fund business this year (CNBC)"

This Week's TV Segment (video)

I suspect that a number of my readers don't agree with the stock market's (I have to assume that we all agree with the peso's) analysis of Monday's debate, or disagree with my analysis of the market's analysis. Meaning, maybe Trump did win the debate and the stock market actually liked it. For that to be the case stock traders would have to entirely divorce themselves from the opinions of currency traders (and many traders trade both). Which would be highly unusual.

And allow me one once again to reiterate that what you're reading, and viewing, herein with regard to my analysis of the market's analysis of the election is simply that: my -- entirely objective -- analysis of the market's analysis.

 

The Debate

I'm getting some push from subscribers to weigh in more on the political environment and its impact on the markets. So, hesitatingly, I'll do so. And, as I do, I want to make very clear that I will keep my commentary to my perspective on what the market is signaling. I.e., nothing herein should be viewed as an endorsement for either candidate:

Who's winning the debate?

So my wife is babysitting grand kids tonight, and we want to watch the big event together. So we're recording it. And I'm working.

I'm looking at no news feeds, but I'm tracking the Mexican Peso. Yep, that -- for obvious reasons -- is what to watch to determine who's "winning" the debate.

Quote of the day...

Ben Carson blogging at A Wealth of Common Sense:

Intelligence becomes wisdom with the recognition that no matter how certain you are in your market views, no one really knows how things will play out. This is why it’s so important to fight to keep things simple.

Quote of the day...

For the past several months I’ve been reporting on how the general market sentiment has tilted notably bearish. Conventional market wisdom – as I’ve suggested ad nauseam – says that’s a good thing. 

This Week's Message: Election Year Angst!

There’s definitely something in the air. The question du jour from clients seems to be, words to the effect: “Do you think the market’s about to crash?” or “I think the market’s about to crash, what do you think?”, or “my kid in Connecticut says everything’s about to crash and that we should sell everything now, what do you think?” or some other iteration of “the sky is about to fall, I can just feel it!”

Market Commentary: Good sweat...

So what's got the market so cheery? Is it the Fed not raising rates and not sounding too aggressive toward that aim? Well, sure! The market -- after the Fed's announcement and Janet Yellen's press conference -- spiked higher in a big way, waffled a bit, then smashed through what had been recent resistance.

Why the odds favor no rate hike tomorrow, despite recent rhetoric...

The Fed and The Bank of Japan are holding their respective policy meetings today. I see a Fed rate hike as being highly improbable, given that recent data – while on balance okay – doesn’t seem to be threatening enough relative to the signals the voting members have been sending. Plus, the dollar’s been rallying lately (first chart) and the Fed is clearly concerned about bringing back the strong currency scenario that some would say has tempered the recovery over the past couple of years:   click charts to enlarge

Quote of the day...

It's been nearly eight years since "The Greatest Recession Since the Great Depression". And, yet, the event to some was so traumatic that -- to this day -- a market dip/correction, or a headline suggesting some similar scenario is brewing, brings them to palpitations and cold sweats as they fear it's 2008 all over again. I know this because I counsel some of those somes. 

Quote of day...

Today's quote came to me from a firm that often produces decent research in my estimation. However, in my estimation, it gets a little sketchy on some of its ads.

I won't source it because I don't want to entirely discredit its author and, quite frankly, because this promising of the moon is consistent among virtually all of those firms who make their money by convincing the everyday investor trader that their research (this firm's, at times, is spot on) is better than the competition's; that they can consistently figure out the unfiguroutable.

As you read the below, picture an accompanying photo (I left it out to protect the innocent ignorant opportunistic), of, I'm guessing, an early thirties (no older for sure) rosy-cheeked young man with thick brown locks. Yep, he would be the ungrizzled genius who's so crazy rich, and charitable, as to be willing to send a tip to regular folk that will surely bulge their coffers, at the expense of his own (so, nope!). I.e., when one's done the research and has great conviction in the prospects for a stock, one quietly accumulates it before the world catches wind, then makes a bundle when --- as the world catches wind --- the stock sores.

Don't miss this opportunity to get in on low-priced gems primed for a breakout.

This is a terrific time to snap up shares. In fact, Monday morning, I plan to post a stock that is not likely to be under $10 for long. Earnings estimates are surging upward and there is plenty of other good news.

Doesn't mean he (or they) hasn't done the research and doesn't have the conviction; it simply means that it's a whole lot easier/profitable to get people to pay you a fee for a service about trading (as opposed to investing in) stocks, than it is to actually trade (as opposed to invest in) stocks.

This Week's Message...

So last night, while driving home from the office, I'm listening to CNBC Asia. The guest, an American analyst, or guru, told the story of a U.S. economy that is on the cusp of recession and a Fed that was not only not going to raise its benchmark interest rate this year, but that there's a 50% chance that they'll cut it back to zero at their December meeting. He contended that the dollar's going to tank and the yen is going to rally hard. "Go cash and gold" were his parting words, then came the commercial break.

So I hit my car radio preset that sends me to Bloomberg Radio --- in the evening you get Bloomberg Asia. Their guest, an American analyst, or guru, told the story of a U.S. economy on the upswing and a Fed that'll very likely raise its rate this December. He contended that the dollar's risk is to the upside and that the yen is destined to finally do what the Bank of Japan has been efforting mightily to make it do, tank! His advice was, if recollection serves (the message from the CNBC guy seemed to stick harder with me), to stay long global equities and beware the bond market and gold.

Quote of the day...

While I'll forever stress for you the dangers of "trading" stocks, as opposed to "investing" in companies, I find the characteristics that define the best actors from both domains to be virtually the same.

Mark Douglas, in his insightful book Trading in the Zone, identifies what it takes to become a successful trader. Adopting the following mindset is critical to long-term investing success as well:

Market Commentary: Read this and you'll understand why investor sanity means ignoring the noise!

A few times each week I write myself a little letter about the market; it becomes a nice tool for future reference/commentary. And while my notes often have little to do with what long-term investors should concern themselves with, the exercise keeps me very in tune with the market's day-to-day gyrations, and, thus, the headlines that might pique our clients' interest/emotions. I.e., the stuff that needs putting into investor perspective.

For today's commentary I thought I'd simply (after cleaning it up a bit) share this morning's entry into my log. This, I suspect, merely scratches the surface in terms of what's moving the market around, hence my subtitle:

Quote of the day...

As I read the first paragraph in Steve Reitmeister's (Zacks Investment Research) note, I thought not so fast!, but he recovers nicely in paragraph two and nails it perfectly in the last sentence:

Monday's action looked like a return to sanity after the madness that took place last Friday. That is the beauty of Monday sessions where investors have a full weekend to put their heads on straight. And in that clearer view, they saw plenty of good reasons to become bullish once again. 

I would love to say "Rest In Peace" to the pullback that started Friday. However, one can never be too sure of that outcome. Because for as much as there seems to be a return to sanity, it is quite possible that we now have a return to volatility where bulls and bears have open warfare with big market swings occurring on a day by day basis. 

That is really just an issue for short term traders to ponder.

Quote of the day...

Objectivity is tough amid our own preferences, per Tony Crescenzi:

Quote of the day...

From Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias by Tim Richards:

Most sensible people don't really believe in horoscopes even if they occasionally glance at them for amusement. Yet when it comes to investing we're happy to rely on the financial industry's equivalents: newspaper articles, stock-tipping magazines, and investment reports.

This Week's Message: My Naïve Suggestion

So what happened Friday? Actually, it’s only 11 o’clock Friday morning, but regardless of whether or not the Dow rebounds yet today from its 300 point swoon, the question begs.

Market Commentary QuickTake

Here's a quick and simple technical look at the market that'll help you keep the short-term in perspective:

Britain's Gamble Has Now Become Britain's Scramble

In conversations with folks leading up to and in the aftermath of "Brexit" (Great Britain voting to exit the EU) it became clear to me that those who --- to my, and someday (I assure you, if they get their way) their own, dismay --- have a protectionist mindset believe that the Brits taking back their sovereignty would result in a sort of commercial departure that would lead them to some healthy self-economic-reliance.

Today's TV Segment (video)

This morning Joey and I discussed the reaction to last Friday's jobs number, as well as the inherent unpredictability of the market. And, yes, I'm old, but I'm not 310 years old. Meant to say "3+", not "30+ decades of doing this". Did mean to say, however, that I started when I was 10 :)

Quote of the day...

Every now and again a client will say to me "I just knew the market was going to X." Often, but not always, 'X' stands for "take a dive", "tank", "take a dump" or take a some other four-letter verb (the family nature of the blog precludes me from going further) denoting a decline. Of course the reality of the market --- the uncountable factors, and players, that determine the next market move --- make such knowings utterly impossible.

Market Commentary: QuickTake

How Bad Policy Happens (video)

So, a group, say, a union or an industry that is comprised of, say, 100,000 Americans decides that they'll prosper if they can convince Uncle Sam to tax the foreign imports of the good(s) they produce here at home. In essence, stealing the benefits of international trade from the remaining 324,375,211 American consumers.

Investopedia says the following about tariffs:

Governments may impose tariffs to raise revenue or to protect domestic industries from foreign competition, since consumers will generally purchase foreign-produced goods when they are cheaper. While consumers are not legally prohibited from purchasing foreign-produced goods, tariffs make those goods more expensive, which gives consumers an incentive to buy domestically produced goods that seem competitively priced or less expensive by comparison. Tariffs can make domestic industries less efficient, since they aren’t subject to global competition. Tariffs can also lead to trade wars as exporting countries reciprocate with their own tariffs on imported goods. Groups such as the World Trade Organization exist to combat the use of egregious tariffs.

Allow me to tweak that just a bit:

Governments Politicians may impose tariffs to raise revenue or to protect domestic industries from foreign competition, to literally steal resources from the consumer at large and distribute the spoils to their supporters. In promoting such thievery, the politician and his/her cronies exploit average Americans' fears and misconceptions and actually convince them that they are acting on their behalf.

While consumers are not legally prohibited from purchasing foreign-produced goods, tariffs make those goods more expensive, which gives consumers an incentive to buy domestically produced goods that seem competitively priced or less expensive by comparison. Tariffs can make domestic industries less efficient, since they aren’t subject to global competition. Tariffs can also lead to trade wars as exporting countries reciprocate with their own tariffs on imported goods abuse their own consumers in the same manner. 

So how is it that we allow such things to happen?

This excellent video tells the story:

This Week's Message: August Trends

Back on August 15th I shared the title of each collected data point in my "Current Trends, August" file. Here's the balance of the month:

Market Commentary: QuickTake

Quote of the day...

Matt Ridley, in The Rational Optimist, points to Voltaire's and David Hume's pointing out one of the timeless truths of international commerce --- it makes the world safer:

Voltaire pointed out that people who would otherwise have tried to kill each other for worshipping the wrong god were civil when they met on the floor of the Exchange in London. David Hume thought commerce ‘rather favourable to liberty, and has a natural tendency to preserve, if not produce a free government’ and that ‘nothing is more favourable to the rise of politeness and learning, than a number of neighbouring and independent states, connected together by commerce and policy’.

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