Monday, November 20, 2017

Weekly Message: The State of the Economy Heading Into the Holiday Season

Heading into a shortened workweek, it seems only fitting to offer up a shortened weekly message. Here goes:

While getting a jump on this week's macro analysis over the weekend, I guessed that the forthcoming reading of the Index of Leading Economic Indicators would jump nicely given the positive look of many of the other 72 data points we track. 

Sure enough:     click any insert to enlarge...

Saturday, November 18, 2017

Small Businesses on Taxes and Labor -- AND -- The State of the U.S. Labor Market

Three of the seventy-three inputs to our macro analysis have to do with the results of the monthly NFIB Small Business Survey. We track the headline number, hiring plans and capex (expansion) plans. While we don't score the stated concerns of the employers of 2/3rds of all Americans, we find them to be interesting and instructive. 

Friday, November 17, 2017

Stat of the Day: Housing starts and permits...

Following up on our housing theme from this morning, today's release of new home sales and permits speaks to the sustainability of the single-family housing market. Oh, and by the way, such data does not support the doom and gloom you've been hearing from the media of late:

Charts of the Day: No Housing Bubble Here

We've expressed herein a few times of late (here's one) our view that -- rising/record home prices notwithstanding -- today's housing market does not nearly possess bubble characteristics.

To further support that notion, take a look at the latest quarterly Fed assessment of U.S. consumer credit, courtesy of Bespoke Investment Group. I.e., it takes a lot more (a lot more!!) than the ability to fog a mirror (the mid-2000s litmus test) to qualify for a mortgage these days:    

Wednesday, November 15, 2017

This Week's Message: The Quintessential

The stock market is a fascinating phenomenon! It is the quintessential independent, and unpredictable, entity. Yet there are those who would have us believe that they have its number; that they have indeed figured out what makes it tick and what its next move is going to be. 

Saturday, November 11, 2017

There's Inflation in Them There Surveys! -- AND -- Gold's action made sense to us yesterday...

Once again, the Institute for Supply Management Survey respondents are telling us there is indeed some inflation out there. Thing is, we, as of yet, haven't seen much in the headline indicators; which, by the way, (PPI and CPI) are set to report next week. 

Friday, November 10, 2017

Follow Up To "Headline of the Day"

China's move to free up its financial sector for foreign investment also potentially bodes well for our emerging markets exposure; as China's looming bad debt issues have been a source of concern for global investors.

Headline of the Day: China's starting to get it...

Contrary to what so many hold to be true (completely baffles me!), history -- the history of the U.S.A -- has proven that the countries with the markets most open to trade and investment (not to mention labor) have the most robust economies and the richest citizens!

Thursday, November 9, 2017

This Week's Message: A Wall of Confusion

We think there's something to be said for the old Wall Street adage, "bull markets climb a wall of worry"; if only for the fact that while there's worry in the system, there's uninvested cash in the system. It also jibes with John Templeton's oft-quoted and forever prescient line:
"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria."

Sunday, November 5, 2017

Chart of the Day: Jobs are Presently Plentiful!

One more today to go with the jobless claims chart I posted earlier. Here, courtesy of Bespoke Investment Group, is a look at the "Jobs Plentiful" component of the most recent Consumer Confidence report:   click to enlarge...   

Worried About the U.S. Jobs Market? Don't Be!

As I get a jump on our weekly research this morning, I am yet again baffled by the disconnect between rhetoric and reality. This morning, my baffledness has to do with jobs.

Wednesday, November 1, 2017

This Week's Message: Mispricing, Ms. Yellen, and a Certain Something

Interesting day yesterday. The U.S. stock market began with a nice broad-based rally which ultimately fizzled into a, broadly-speaking, mediocre session that saw the Nasdaq give up all of its morning gains, and some, while energy stocks advanced an impressive 1.13%, followed by our global natural resources (read commodity producers) ETF, up .87% and materials +.49%. Utilities and telecom came in last with .56% and .79% declines respectively.

Quotes of the Day: Gut Instinct Does Not Generally Serve Us Well (when it comes to investing)

Ned Davis's excellent book Being Right or Making Money is a treasure trove of potential Quotes of the Day.

Sunday, October 29, 2017

Quote of the Day: The Defining Reason Why Some Succeed and Others Fail at Investing

In Jack Schwager's Hedge Fund Market Wizards, Columbia Business School professor (and author, and successful investor) Joel Greenblatt describes how he begins his Value and Special Situations Investing course:

Saturday, October 28, 2017

Quote of the Day: THE Mistake Investors Make

In his highly instructive book of interviews, Hedge Fund Market Wizards, Jack Schwager asks the successful investor, author, and Columbia Graduate School of Business professor Joel Greenblatt what mistakes investors make. His immediate response was:

Friday, October 27, 2017

Chart of the Day: Market Reacts to Trump's Affection for Powell

In our October 5th blog post we suggested that Jerome Powell best fit the mold of a Fed chair any sitting politician would love. I.e., he has a reputation for going easy on monetary policy (for our purposes here, read interest rates).

Wednesday, October 25, 2017

Chart of the Day: Very Welcome News!

In our September 27th post we discussed the importance of capex (investing on the part of companies in business-expanding capital); an essential ingredient in a healthy, growing economy. The post serves as a nice, and very short, primer on capex.

This Week's Message: Breaking Records and Broken Records

Sorry folks, but as the stock market continues to break records we have become the proverbial broken record here on the blog. The long and the short of it is simply that for the moment this market remains a long (a buy), and anyone who dares to go short (sell), gets it handed to him/her.

Tuesday, October 24, 2017

Charts of the Day: Worried About the Global Economy? Well, CAT Isn't!

Once in a while we feature our tracking of Caterpillar's global sales. Here's the latest:    click each insert to enlarge...

Sunday, October 22, 2017

Headline of the Day: Communists Acting Like Capitalists

What reducing trade restrictions can do for a stock market:
Shanghai Plan to Lift Trade Barriers Sends City Shares Soaring(Bloomberg) -- Traders are snapping up stocks with Shanghai in their name after the city’s Communist Party chief confirmed plans to set up a free trade port that would aim to ease restrictions for incoming cargo. Eleven of the top 20 gainers on the city’s equity gauge were companies whose names begin with the word Shanghai and all 11 surged by the daily limit. 
The empirical evidence is overwhelming that the countries most open to trade sport the healthiest markets, and, ultimately, the healthiest economies.

Wednesday, October 18, 2017

Chart of the Day: Not So Fast Folks

I take the opportunity at each client review meeting to bemoan the public emphasis on the Dow Jones Industrial Average. We're talking a market benchmark that consists of merely 30 U.S. stocks and, to make matters stranger, the index is price weighted -- the stocks with the highest share prices have the largest impact on the Dow's performance. 

Consequently, the largest company on the planet, Apple -- in terms of its impact on the index -- plays 7th fiddle (virtually tied with IBM)  to, in order of impact, Goldman Sachs, Boeing, 3m, United Health, McDonalds and Home Depot. 

Tuesday, October 17, 2017

This Week's Message: North Korea, The Fed, and The Markets in a Nutshell

Our schedule this week requires that we spend less time here on the blog. While we'll certainly step in and offer some perspective should markets demand, for now we expect that the following will be it for the week (save for perhaps the irresistible quick quote or chart here and there).

Monday, October 16, 2017

Chart of the Day: Scrapping NAFTA?... Hmm...

Here's the postscript to a little something I wrote last week:

P.s. As you may know, the North American Free Trade Agreement  (NAFTA) may be on the chopping block. The President has suggested of late that termination of the agreement, at the hands of the U.S., is likely. 

Friday, October 13, 2017

How We'll Remain Globally Relevant -- And a postscript on NAFTA

I know many of our readers sympathize with the notion that it's time to play trade hardball with the rest of the world. Regular readers and clients know that in my view this is a most dangerous notion.

Thursday, October 12, 2017

Chart of the Day: Worried About the State of Clean Energy Investment? Don't be!

Investors pumped $66.9 billion into clean energy around the world in 3Q, up 40% from the same period a year earlier, according to Bloomberg New Energy Finance. Wind investment reached $34.3 billion, the highest since 2Q 2016, and surpassed solar investment of $30.5 billion. A $4.5 billion Oklahoma panhandle wind project was the biggest deal in the quarter.

This Week's Message: Again, How on Earth??

Regular readers now know this Jesse Livermore quote all too well:
"Not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions."
This is the one I've heard myself repeating most often during client review meetings of late -- given the relentlessness of the geopolitical risk-related headlines. The process involved in "appraising conditions" is how we here at PWA spend a great deal of our time. 

Friday, October 6, 2017

Tillerson, Gold and The Dollar

The strong setup for stocks -- that we've been illustrating herein since last summer -- remains, and appears to be allowing for a surprising sanguineness among the major averages when it comes to the, let's call it, angst, in Washington. Although it does appear to be playing havoc with a couple of other markets: Specifically currency and gold.

Data Favor the Fed Hawks...

In this week's weekly message we noted that our economic assessment isn't screaming inflation, but it's indeed suggesting that the Fed would be well advised to continue to ease up on the gas pedal (nudge rates higher while reducing its balance sheet) going forward.

Thursday, October 5, 2017

This Week's Message: The Fed's Timing is Critical and Let's Pray Not Political!

As we've been reporting herein, the economic backdrop suggests a looming recession is simply not presently... well... looming. Quite the opposite in fact.

Tuesday, October 3, 2017

Quote of the Day: Maintain a critical eye...

Highly respected trader and author Alexander Elder speaks to why investors should view media-spawned prognostications with a most critical eye:

Saturday, September 30, 2017

Quick update to yesterday's post on gold...

In yesterday morning's blurb on gold we began with:
While the price action in gold has confirmed (as we've hinted) our near-term (bearish) sentiment on its prospects, others (the majority I suspect) clearly see it differently.
And ended with: 
Again, if we're right on the present economic setup, we may see a reversal in sentiment, and a continued slide in the price, in the coming weeks.
Here's a newsflash from yesterday afternoon:

Friday, September 29, 2017

Despite recent price action, folks remain bullish on gold...

While the price action in gold has confirmed (as we've hinted) our near-term (bearish) sentiment on its prospects, others (the majority I suspect) clearly see it differently.

Financial sector bullishness...

Back on September 7th we briefly explained why we remain stubbornly bullish on financials. Here's a chart of the moves in major sectors since then: 

Crazy Strong U.S. Job Market

Any "authority" who'd have you believe that the U.S. job market is anything but strong has been politically captured in the worst way.

Charts of the Day: October, the good and the "bad"

Well, if we live through today, September didn't deliver September. I mean, September is notorious for its abysmal historical stock market performance, and this year it turned out okay.

Careful with that populism folks!

Not being from Great Britain, I can't really say whether I would have voted for Brexit. I will say this, I love freedom, and I, therefore, respect the British people's right to... umm... limit freedom. Or, more palatable perhaps, I love freedom, and I, therefore, applaud the British people in their exercising the freedom to break from the EU and chart their own course going forward (sincerely).

Wednesday, September 27, 2017

Quote of the Day: The Key to Successful Investing

While we forever remind you that we (here at PWA) -- on behalf of our clients -- are investors, as opposed to traders, in our perpetual endeavor to understand what motivates market players we've found that studying the methodology of short-term traders helps us put short-term volatility into perspective.

This Week's Message: Businesses Are Looking to Invest/Expand

One of our chief complaints/concerns over the past couple of years has been an historic lack of capex  spending (investing on the part of companies in business-expanding capital), relative to past expansions.

Recessions in red:             click each insert below to enlarge...

Tuesday, September 26, 2017

Gold/Dollar Update

Back on September 7th we pondered herein the positive year-to-date correlation between gold and stocks:
"So what gives? Why is gold rising while stocks appear locked in a strong bull market? Are they indeed presently inspired by the same developments?"

Friday, September 22, 2017

A win for U.S. solar manufacturers, a loss for U.S. consumers!!

One step closer to a win for U.S. solar manufacturers, one step closer to a loss for U.S. consumers, and, ironically, the industry itself:   emphasis mine...

Cat shows global growth accelerating...

One of our favorite under-the-radar global economic indicators is Caterpillar's global sales. Cat's global sway, and the cyclical nature of its business, makes its sales results a true harbinger of global economic activity.

Chart of the Day: No worries about sentiment...

As we've been reporting herein, the macro economic setup supports the notion that the present bull market has more to run.

Thursday, September 21, 2017

This Week's Message: The Fed, the Military, and the Housing Market

In this week's message we're going to jump around a bit.

For starters, I received inquiries pre and post yesterday's Fed announcement. Here was my response to a client who asked about how I saw the Fed meeting playing out and how it would impact gold and stocks specifically:

Wednesday, September 20, 2017

Tech Volatility to Ignore, and Some to Respect...

The following essentially serves as a good example of market myopia. I.e., how short-term trading can shake up stock prices and, alas, have an unsuspecting long-term investor wondering or, worse yet, acting.

Tuesday, September 19, 2017

Things Don't Always Work Out the Way They Ought To!

Remember back when the Fed started creating money like mad and sending it by the billions to the banks, in return for their holdings in treasury bonds and mortgage backed securities? For many legitimate analysts and too many illegitimate fear-mongers/gold purveyors this was a phenomenon that was certain to bring on rampant inflation and mass financial destruction. After all, the production of "paper money" at a pace far exceeding the production of goods and services had to push the prices of goods and services to the moon, right?

Monday, September 18, 2017

Sector Positioning

It's our intent here at PWA, and the primary purpose of this blog, to (between portfolio review meetings) keep our clients abreast of the thinking behind their portfolio allocations. With that in mind, here's a snip from an internal record which shows year-to-date returns by sector, our present target exposures, adjustments we've made within the past year or so, and our view of some of the prevailing and potential key themes that are most likely to either support or diminish the prospects for each going forward.

Saturday, September 16, 2017

The Customers Live Elsewhere!

While we strive to maintain our focus herein on all things market and economic, every now and again we'll risk touching subscribers'/clients' nerves on topics that we believe impact/relate to markets and economics, but nonetheless spark ideologically-inspired rebuttals, if not rebukes (we're talking politics of course).

Thursday, September 14, 2017

The Global Answer

I'd say that the most commonly uttered client question in review meetings of late has been, words to the effect, "How can the market be doing so well with all of the uncertainty in the world?"

Analysts are Loving Financials Right Now. Bummer!

As we've hinted a number of times herein, we presently like financials. The one thing that bothers me, however, is that Wall Street does too. 

Chart of the Day: Producer Price Inflation deserves attention...

Not to beat a dead horse, but, to add to our Monday message on input costs, here's the latest look at the Producer Price Index:

Wednesday, September 13, 2017

This Week's Message: You gotta give me data!

Hedge fund legend Julian Robertson fears a forming bubble in the stock market:
"The market as a whole is quite high on a historical basis," he said. "I think that's due to the fact that interest rates are so low. But there's no real competition for the money other than art and real estate."
 "I think we need interest rates to appreciate, to go up, because I think we are creating a bubble," he added.

Why Europe remains prominent in our portfolios. With a word of caution going forward...

Bespoke Investment Group's morning message spoke to why we remain bullish on European equities.

Worried about U.S. small businesses? Well, they're not.

We think the monthly NFIB small business survey is important to pay attention to.

Here's why (optimism reading and past recessions [red shaded areas]):  

Tuesday, September 12, 2017

Worried about the U.S. labor market?

Worried about the state of the U.S. labor market? Don't be.

Here's Bloomberg's comments on this morning's release of the Job Openings and Labor Turnover (JOLTS) Report (the last line speaks to our position on inflation going forward):

Monday, September 11, 2017

Input Costs are Rising

Yeah, inflation has remained stubbornly low, creating a bit of a conundrum for the Fed. Our view is that, on balance (in terms of the voting members), they'd like to continue nudging rates higher. 

Saturday, September 9, 2017

Charts of the Day: Exceedingly Subpar Long-term Results...

While much ado is being made over the stock market's impressive results of late, when we look back a bit and consider its 10 and 20-year performance, the market's got some serious catching up to do.

Quick Followup to Yesterday's Hurricane/Economy Blog Post

Yesterday, I blurted out a quick post after reading a headline suggesting that hurricanes help economies. I prefaced it with a warning that the topic deserves more, and better, than I had time to present. After my little dinner story below, I'll offer up a bit more reasoning...

I asked our youngest over dinner last night if he thought hurricanes hitting communities ultimately help the economy. He answered "yes" almost instantly. "Why?" I asked. He went on to describe with unwaveringly confidence what many respected personalities -- one Fed president no less -- have been suggesting of late; that the aftermath activity will be legitimate economic stimulus.

Friday, September 8, 2017

Really? A Hurricane Can Be Good for the Economy??

The below is just a quick scribble after catching a headline this morning. The topic deserves more, and better, than you'll get here, but you'll get the point.

One of my many pet peeves is the faulty notion that somehow destruction at the hands of Mother Nature is a good thing for an economy. As New York Fed President William Dudley apparently stated in an interview this morning. I only read the headline:

Thursday, September 7, 2017

This Week's Message: Believe it or not, we -- for now -- are living in a low-stress market environment. Although gold says otherwise...

At the beginning of each week we update a variety of technical and fundamental indicators/data as our way of monitoring market and economic conditions. We often share our interpretations herein.

Quote of the Day: Again, be careful what you ask for!

Scott Grannis points out how important trade is to your portfolio's bottom line (NIPA is "a measure of profits based on information supplied to the IRS"):

Why We Remain Bullish on Financials

Yesterday, the Canadian central bank raised its policy rate (by .25%) for the second time in 2 months. If you're wondering why we remain bullish on U.S. financials, the comments below from Canada's banking sector answer that question. The U.S. economic backdrop/trend ultimately screams (well, let's say yells, or speaks, certainly more than whispers) for higher U.S. policy rates -- plus, trading at 12.8 times this year's earnings makes them really cheap compared to every other sector, save for telecom (which we're currently avoiding):

Wednesday, September 6, 2017

Worried About the U.S. Services Sector? Don't be!

Here are Bloomberg's summaries for today's releases of the Institute for Supply Management's August Non-Manufacturing Survey and Markit's Services Sector Purchasing Managers Index:

Tuesday, September 5, 2017

Brief Market Commentary (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Monday, September 4, 2017

Chart of the Day: Futures traders see volatility picking up...

The VIX Index (aka the Volatility Index, and/or the Fear Index), which tracks the volatility component in S&P 500 options pricing, presently sits at a remarkably low 10.13. However, futures trades on levels 1, 2, 3 and 4 months out (yellow, red, purple and blue respectively) are suggesting that's about to change: 

Trump has smart, experienced folks around him. Question is, will he listen to them?

If any of you happen to be cheering the latest rhetoric regarding foreign trade; specifically the notion that the U.S. will cut off trade with any country doing business with North Korea, and last week's head-scratching (given the timing) threat to abandon an existing trade agreement with South Korea, well, since we're here to talk about your portfolio, you might want to curb your enthusiasm.  

Sunday, September 3, 2017

Fasten your seat belts! Maybe...

Have you heard the claim that September is the worst month for the stock market? Well, actually, that's correct -- historically speaking of course.

Worried about U.S. manufacturing? Don't be!

As we finished up our discussion on the economy -- during a client review meeting last week -- I said "if we could only track one indicator it would probably be the treasury yield curve. A close second would be the Institute for Supply Management (ISM) Surveys."

Saturday, September 2, 2017

The U.S. market this year (as in all other years) offers nothing for either side of the political aisle to hang its hat on... And that's a really good thing!!

Yes, it's been a nice year for the stock market, the world stock market that is. The majority of our readers live in the U.S., thus, we're generally U.S.-centric in our discussions herein (plus, we are talking the world's largest economy). And, yes, the U.S. stock market has been nothing to sneeze at lately. However, as you'll see below, it's been anything but a world leader.

Friday, September 1, 2017

Quote of the Day: Jobs clarity "may prove elusive" for the next few months...

Economist Carl Riccadonna called today's jobs number perfectly. Yesterday I read his preliminary analysis where he pointed out August's strong tendency to miss consensus expectations. He also pointed out the tendency for the number to be revised upward in subsequent months.

Man! Capitalism and the Freedom to Trade Across Borders are Beautiful Things! Pg2

Here's Bloomberg adding fuel to the free trade argument!       emphasis mine...
The shutdown of almost a quarter of U.S. crude refining capacity in the wake of Hurricane Harvey is presenting a rare opportunity for fuel traders in Asia.

Man! Capitalism and the Freedom to Trade Across Borders are Beautiful Things!

From Bespoke Investment Group's morning message:     emphasis mine...
....gas prices in New York (where the NYMEX future is benchmarked) currently trade $15.48/bbl over where they trade in Rotterdam (Europe’s busiest port) net of quoted shipping costs. In Galveston, Texas (currently under partial operations) gasoline is $9.62/bbl over Rotterdam prices net of quoted shipping costs. In other words, if traders can buy Rotterdam spot gasoline, book passage on a refined product tanker, and sell it forward in New York, they could be looking at $9mm gross margins, including the $3.52 in shipping price. For this reason, we expect PADD 1 product imports to surge, and local gasoline price spikes in the US to be temporary amidst a loose global products market.

Thursday, August 31, 2017

This Week's Message: Please, Quit With the Ifs! It's "When" -- And -- More on Trade...

"So, Marty, what'll you do in our portfolio if the market suffers a correction?" How does an adviser answer a question (a common question, in fact) like that? It's like asking someone, "what'll you do if it starts raining while you're driving your car?"

Wednesday, August 30, 2017

Chart of the Day: Financials poised to do well...

Citi's chief strategist speaks to our view of interest rate probabilities going forward, and why financials maintain a significant target weighting in our portfolios:

Quote of the Day: The setup suggests the bull has more to run...

Urban Carmel, popular investment and economic blogger and his team, like us, use macro economic as well as market fundamental and technical data to form their view of present conditions. They, therefore, see the setup precisely the way we've been presenting it herein of late.

Tuesday, August 29, 2017

Quote of the Day

As we've discussed many times herein, investors (looking to exploit infrastructure makeovers) need not wait for the U.S. to get its act together:

Not Yet Begging For A Bear Market -- And -- Not the first N. Korean projectile over Japan

We can't -- while recognizing that, in markets, anything can happen at any time -- overemphasize how derailing (something more than a ~20% correction) a bull market is really tough when it's not in the mood for, well, derailing.

A la the late great Jesse Livermore:
"Not even a world war can keep the stock market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions."
For example, in the fall of 1998, a then storied (and monster of a) hedge fund called "Long-Term Capital Management" (LTCM), run by the two Nobel laureate economists who, ironically, wrote the options pricing model we all use today, and who were, ironically!, huge proponents of modern portfolio theory (i.e., what happened to them -- they theorized -- had one in a bazillion odds), blew to pieces (as Russia, for example, defaulted on its debt). And, yep, among other things, North Korea flew a rocket over Japan (talk about icing on the cake!) -- although, clearly, it was LTCM and an emerging market debt crisis that did the number on global markets. A number that, to the surprise of many, didn't derail the then bull market.

Monday, August 28, 2017

Bonus Chart of the Day: Thinking About Bitcoin?

Thinking about Bitcoin? Well.....

Chart of the Day: High Dividend Stocks and Bonds Going Their Own Separate Ways

We've been making a big deal for some time about what we see as a heightened degree of interest rate risk in today's market. 

Ironically, per the chart below, that's been validated (lately) by the performance of high dividend paying stocks, but, clearly, bond investors -- at least in the near-term -- see things differently. Time, and the economy, will tell who's right:

Sunday, August 27, 2017

Charts of the Day: Well, actually, more of a free trade rant!

As the rhetoric heats up over trade, please remember, a "trade deficit", actually a "current account deficit" is only meaningful in accounting and politics. In the real world, we absolutely know that no country would ever allow the trading of its resources and the fruits of its labor for goods and services of lesser value. Meaning, for example, the Chinese would not be willing to enter into a deal wherein they send us $500 billion worth of stuff during the year in return for a mere $150 billion worth of stuff, plus a bunch of green pieces of paper. Not unless they were certain that those green pieces of paper could be used to acquire stuff of sufficient value to make the entire deal work for them. Oh, and by the way, those green pieces of paper I'm referring to -- those U.S. dollars -- would be claims against U.S. stuff.

Saturday, August 26, 2017

Charts of the Day

In his weekend presentation Chris Ciovacco uses weekly moving averages to compare the present market setup to past turning points. This nicely complements the presentation we posted yesterday:

Friday, August 25, 2017

This Week's Message: A Technical and Economic Look at Past Trouble Spots (video)

This week's message is coming to you via video, as the content was simply too visually rich to cram into a written commentary.

Our aim this week is to give you a sample of the historical testing we do of what we believe to be the most telling data/indicators:

Thursday, August 24, 2017

Quotes of the Day: Be VERY Careful What You Ask For!

In a world where certain players are pushing protectionism, it is incumbent upon us to study its real world effects. Brexit offers us a present day analysis. 

From Bespoke's morning message:

Wednesday, August 23, 2017

Jittery, on balance...

As we've addressed herein ad nauseam, the media forever angles for an explanation -- often a single event or development -- as to why the market does this or that on any given day. Well, as for today's 90-point hit to the Dow (no huge deal of course), the President's threat to shut down the government is as good as any -- actually, probably better than most.

Tuesday, August 22, 2017

Quotes and Bonus Chart of the Day: Careful What you ask for!

Brexit was a surprise, to say the least! Many folks, many whom I know, celebrated the Brit's desire to chart their own course going forward. I can certainly sympathize. However, if they thought the breaking from a hard-fought trade union wouldn't come home to roost on their economy... well....

Chart of the Day: Global corporate earnings prospects look good!

Schwab's Jeff Kleintop points out the extremely positive breadth (my highlight below) in global corporate earnings, which speaks to the general health of the global economy as well as the generally bullish equity setup (we've been illustrating herein) going forward:

Monday, August 21, 2017

Quote of the Day

Take Steve Reitmeister's (Zacks Research) simple, yet critical, point into account the next time a market headline has you rattled:

Sunday, August 20, 2017

Chart of the Day: Buckle up! -- Or -- The Two-Tone Market

It's easy for, and presumably incumbent upon, the media to tie some event to every market blip. But what we've come to realize over many years of market watching is that for the market to at all blip, it first has to be in the mood for blipping. 

Saturday, August 19, 2017

This Week's Message: So what do we do now?

So what are we, as investors, to do amid all of the present turmoil? Let alone the stuff to come; like the looming debt ceiling debate, the ongoing Russia investigation, the U.S./South Korea military drills slated to begin next week, the German election, etc.??

Quote of the Day: Good Investing

From Gregory Morris's insightful book Investing With the Trend:
The Greek philosopher Aristotle wrote, "We are what we repeatedly do. Excellence, then, is not an act but a habit." 

Friday, August 18, 2017

Quote of the Day: Some perspective

While much of the news of late is indeed troubling, recent market action -- at this juncture -- in an historical context shouldn't be:

Thursday, August 17, 2017

Quick commentary on today's action...

Told you not to hold your breath.

Took a moment and added the following to my market diary this morning:


Well, so much for the VIX staying calm. As I type, the S&P 500 Volatility Index is up 25% on the morning. The Dow and the S&P themselves are flirting with 1% declines. Clearly, although 1% index declines are nothing to get excited about, there’s fear in the market today – if, that is, the VIX is any indication. Surprisingly, however, gold and bonds are only up roughly .5% each. That wouldn’t be your definition of panicky risk-off action…

Wednesday, August 16, 2017

Quick Comment on Today's Action

I know, I'm out of the office, but, good or bad, I presently have a connection :)!

I just scribbled (so to speak) the following into my market diary. Thought you might find it interesting, because -- only for this very moment -- it might help put the noise of the week into its proper market perspective.

After this, I should be leaving you alone for the next couple of days. But don't hold your breath :)

Tuesday, August 15, 2017

Chart of the Day

If you're wondering why we've stepped up the volatility reminders of late, it's not because we're feeling bearish these days (in fact our data says stocks remain solidly in an uptrend), it's because we've been doing this a very long time. And, thus, we've learned that even the best of bull runs are replete with multi-point pullbacks. And, per the chart below, it's been awhile since the market's experienced even your garden variety 5% hit.

Quote of the Day: Our trade deficit says we are a very rich country. I.e., be careful what you ask for!!

I can't recall the last time I quoted a sitting politician, other than in pejorative fashion, that is. Well, to my very pleasant surprise, Senator James Lankford basically understands international trade.

Sunday, August 13, 2017

Chart of the Day: North Korea -- and the market -- in the '90s

As stated in yesterday's lead-in to our quote of the day, we should be careful diminishing such things as the present conflict with North Korea. Yet we must also acknowledge that the more the media outlets can -- for any reason whatsoever -- grab our attention, the more they can show paying advertisers how adept they are at grabbing our attention.

Saturday, August 12, 2017

Where's the Inflation??? Well, just wait...

Yes, the economy is for the moment on solid footing. Hence the Fed's recent rate hikes and signaling that they're ready to reduce the monster of a balance sheet (treasuries and mortgage backed securities) they grew as they saved the free world (a little sarcasm there).

Quote of the Day: Hyperbole is profitable...

No doubt, the news has been troubling this week. And while we should be careful diminishing such things, we should also be cognizant of the fact that the media (whose duty, I acknowledge, is to report) benefits markedly when its product spawns trouble in the minds of its customers. Per the last line in the opening paragraph to Bespoke Investment Group's weekly message:

Friday, August 11, 2017

Quote of the Day

The ultimate quote for the patient long-term investor:

This Week's Message: Why Didn't Brexit, Trump's Victory, or North Korea(???) Derail the Market?

Our May 11th blog post was well received (we assume so because of its unusually high number of clicks). That essay came to mind this evening as I pondered what I'd offer up for this week's message. We subtitled it "Why Didn't Brexit, or Trump's Victory, Derail the Market?".

Thursday, August 10, 2017

Video Commentary: A walk through a few charts...

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Bonus Quote of the Day: (So far) just a blip...

I read very few investment blogs these days; I've found the majority to be little more than echoes of the prevailing media noise. 

Scott Grannis's is a rare exception. Below is a snippet from his post this morning. I encourage you to read the whole thing -- it's brief:

Quote of the Day: Half the battle...

Richard D. Wyckoff was one of history’s great investment minds. His teachings/methods are as pertinent today for savvy traders and deep-thinking investors as they were in the early 20th Century.

Wednesday, August 9, 2017

Charts of the Day: What does the intraday action say?

As we've been illustrating herein, the technical setup for the stock market remains bullish for the time being. And while a single day never does a trend make, we do pay particular attention to how the market behaves in the final hour of the trading session.

Is it yet "Fire and Fury" for the markets?

Here's how markets are trading this morning, as I type -- it's 6:46 am PDT:

Tuesday, August 8, 2017

Quote of the Day: JP Morgan CEO won't call it a bubble, but is wary on bonds...

While JP Morgan CEO Jamie Dimon is wisely humble in an interview this morning --

Chart of the Day: Bonds are unusually risky these days...

This morning, Bloomberg featured one of the indicators that we closely monitor; colloquially known as the Modified Duration Index. We call it our "Interest Rate Sensitivity Index".

As you can see in the graph (and commentary) below, it's registering quite the high, which suggests that if, as we suspect, things do ultimately get rough for bond investors, it can get really rough:

Monday, August 7, 2017

Chart of the Day: Losing world market share

While the headlines boast of the U.S. market's record-setting run, in a global context, we're just doing okay; as illustrated in the graph below showing a notable decline in the U.S.'s share of the world's market capitalization.

Saturday, August 5, 2017

Charts of the Day

Per our brief video this week, periods of unusually low volatility inspire some advisers to ready their clients for the norm.

Friday, August 4, 2017

Thursday, August 3, 2017

Video Commentary: Volatility vs 2013

We've illustrated herein the similarities between 2017 and 2013 coming into this year. Here's a quick look at year-to-date volatility by comparison.

This Week's Message: From our July Trends File...

Here's a chronological look at our titles (which include our summary assessments) of the various data points that found their way into our July 2017 "Current Trends" file. I'll add long-term implication color-coding (where clearly applicable).

Wednesday, August 2, 2017

Quote of the Day

Two things to note in today's quote: 1. The U.S. manufacturing industry feels quite good about its present lot. 2. Much of the sector's strength is coming from exports. Please keep number 2 in mind if/when someone cites pejoratively the high level of goods we import from other nations.

Tuesday, August 1, 2017

Quote of the Day: Greenspan sees a bubble!

In an interview yesterday, former fed chair Alan Greenspan spoke to why we've -- for quite some time -- been so stubbornly bearish on bonds:

Charts of the Day: On average, how we doing?

While our clients of course like what they've seen over the past year, many have expressed concern over the 8+-year chasm separating today with the end of the last bear market. I mean, stocks just can't go up forever, right? Absolutely, they cannot! However, as we've expressed herein, bull markets don't die of old age, they die of obesity -- of, let's say, excessive living.

Saturday, July 29, 2017

Quote of the Day: Markets are Never Easy!

I absolutely know that folks are paying unusual attention to their portfolio balances these days. It feels good when stuff's going up! If you can relate, be careful with that. Studies show that individual investors who watch their stuff daily underform those who don't. I.e., market fluctuations tend to spark emotion, and emotion-inspired investment decisions can be killers.

Thursday, July 27, 2017

Stat of the Day: Still Like Europe's Stocks

Bloomberg's graph and commentary below (citing the 6x more inflows to European equity funds vs the U.S. this year, and the yet lowest relative valuation in 5 years) speaks to why -- as we've discussed/illustrated herein (here's a recent example) -- we continue to favor European equities:

This Week's Message: A Few Tidbits From Our Diary

Our job here at PWA is a fascinating one. World markets are an ever-changing menagerie of the decisions humans make. Over time, patterns develop -- inspiring strategies aimed at exploiting them -- only in so many instances to see those patterns disintegrate and make fools out of "strategists" bold (and foolish) enough to brandish their opinions to the financial media.

Tuesday, July 25, 2017

Quote of the Day: Policymakers getting in the way of an indicator...

I was recently asked about the disconnect between the economic signaling of the bond market and that of the stock market. That is, interest rates remaining so low (bond prices so high) suggests that the bond market is signaling anything but robust economic growth going forward -- while stocks at record highs may be interpreted as a signal of blue skies to come. The questioner added that in his view "those bond guys are smart" and wondered if perhaps they have it right when all is said and done.

Saturday, July 22, 2017

Stat of the Day: How Trump's start stacks up...

It's a popular notion in some circles that this year's positive stock market start has a lot to do with our new president. Well, we gotta be careful with that, for, as I pointed out in a recent post, if Trump had taken office in January 2008 he'd be unfairly catching the blame for the worst bear market/recession since the Great Depression.

Friday, July 21, 2017

This Week's Message: One area that warrants caution...

Here's an unlabeled 64-year graph that I'd like you to take a look at:   
click any insert to enlarge

Wednesday, July 19, 2017

This Week's Video: A Quick Technical Indicator Update

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, July 18, 2017

Quote of the Day

Edwin LeFevre, in his timeless 1923 classic Reminiscences of a Stock Operator (the reputed story of Jesse Livermore, and perhaps the greatest book on trading of all time), spoke facetiously to why we so consistently question herein the motives of the tipsters and prognosticators the financial media trots out to steal your attention (if not your money):

Sunday, July 16, 2017

Charts of the Day: Small businesses are getting a little impatient with Washington...

While the factors that underpin the continuing bullish setup for stocks can be debated, the one area where I have found last year's election to have been unambiguously positive is the NFIB's monthly small business survey (aka Small Business Optimism Index).

Quote of the Day

The siren song of populism can be very hard to resist (btw, I'm not entirely unsympathetic to the independence the folks in Great Britain were after). When, however, and alas, it wins what it plays for, it can be costly for the populace:

Friday, July 14, 2017

This Week's Message: On the ground, things look good...

Fed Chair Janet Yellen gave her 2-day semiannual report to Congress this week and offered up what you might say was a moderately optimistic view of the economy going forward. Like us, the Fed tracks an array of published economic data to gauge its view of general conditions.

The Fed's overall assessment is what guides its monetary policy moves. Our overall assessment influences (technical data plays prominently into our view as well) the sector and regional weightings within our portfolios' equity exposures, and -- along with our technical market assessment -- guides our approach to the fixed income allocation.

Wednesday, July 12, 2017

Quote of the Day: Stealing the benefits of a steel glut...

Driving by Clovis Community Hospital yesterday evening I noticed a large construction project on the south-end of the complex. The setting sun reflected brilliantly off of the building-to-be's dense steel skeleton. I suddenly found myself pondering the current threat of what I consider to be the most destructive government act of cronyism imaginable -- the tariffing of foreign imports.

Monday, July 10, 2017

Chart of the Day: China Risk

To the dismay of those who've been betting big that China's gotten too far out over its skis, its economy remains unwilling to buckle under the weight of a rapidly expanding credit system.

Friday, July 7, 2017

Charts of the Day: Who Buys U.S. Exports?

As we all know (right?), political narratives (influenced dictated by political incentives) often stray far from reality.

Amazingly, two countries that combined account for less than 4% of the world's economy (ex the US) buy an astounding 1/3rd of U.S. exported goods!

Thursday, July 6, 2017

This Week's Message: Trade Data Says Global Economy Growing -- which has to have (some) short-term traders wary...

Thursday morning we added two charts (U.S. and Australian trade data) to our current trends file. Both speak positively about the current state of the global economy.

While we believe the U.S. trade deficit receives far too much, and ill-conceived, attention, we do look into the data to help gauge our view of the global economy. We agree with Bloomberg's note below that American export growth speaks positively:   click charts to enlarge...

Wednesday, July 5, 2017

This Week's Video: The U.S./Foreign Equity Setup Vs A Year Ago

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Sunday, July 2, 2017

Quote of the Day: Know the risk before you go chasing the return!

Highly respected money manager Colm O'shea, in his interview for the Market Wizards series, explains why he bought beaten down Berkshire Hathaway amid the late '90s dotcom mania:   (emphasis mine)

Friday, June 30, 2017

Quote of the Day: Know the difference between the wind and the tide!

In an interview for Jack Schwager's Market Wizards series, uber-successful money manager Colm O'shea offers the perfect analogy for why -- as we continue to illustrate herein -- we focus on prevailing long-term trends and the fundamental backdrop:

Thursday, June 29, 2017

This Week's Message: How's the present look compared to what we presented in our 2016 year-end letter?

Well, we're halfway through 2017, and so far so good. In this week's message we're going to take a look back at our 2016 year-end commentary and compare the signals we illustrated then against the progress 6 months hence.

Wednesday, June 28, 2017

Quote of the Day: The Key to U.S. Business, and Investor, Success in the Years to Come!

Sticking with this morning's theme (globalization), here are a few excerpts from yesterday's Bloomberg Economics Asia brief:     emphasis mine...
China's transformation from rags to riches isn't over quite yet.
... the China miracle is set to continue with its per capita GDP seen rising to 64th out of 166 countries by 2022, up from being the 133rd-poorest in 1992 — on par with Haiti and with over half its population living on less than $2 a day. The current $16,676 per capita GDP level is already higher than Brazil's when adjusted for purchasing power, according to a Bloomberg analysis of International Monetary Fund data.

This Week's Video: Investing Globally

One point we've made consistently herein over the past year+ is our view that the rest of the world, particularly Europe, lags the U.S. in terms of the economic cycle. We've also noted via video(s) that global equities (again, particularly Europe's) have underperformed the U.S. for an unusually long stretch. Hence, our persistent optimism over European equities.

Tuesday, June 27, 2017

Friday, June 23, 2017

Is The Eurozone's 'Recent' Underperformance Something to Sweat?

While our core Eurozone ETF (FEZ) has produced a substantially higher year-to-date return versus the U.S. market (5.9% better as of this morning), the past few weeks have been an altogether different story (FEZ was better by a whopping 11.4% on 5/19).

Click to enlarge...

Thursday, June 22, 2017

Stat of the Day: Abnormal Volatility

While the headlines have indeed been volatile thus far in 2017, the U.S. stock market has been anything but. The S&P 500's largest drawdown year-to-date has been a measly 2.8%! While applying that percentage to the Dow would be -600+ points, in the historic scheme of things, make no mistake, that's measly!

Wednesday, June 21, 2017

This Week's Message: Eeyore Would Be a Star!

In two recent blog posts I touched on the seemingly popular notion that a market at all-time highs is doomed to collapse under the weight of its all-time-highness, and on the dire prognostications of a gentleman who -- despite his dismal track record -- receives a visionary's welcome by the mainstream financial media.

As regular readers/viewers know, we prefer to let the somewhat slow-moving, generally boring and often redundant data do the talking. No wonder CNBC never calls us for an interview!

Tuesday, June 20, 2017

Charts of the Day: Embracing (as an investor) Globalization!

In my June 3rd blog post I suggested that Western investors would be ill-advised to ignore China's Belt and Road Initiative.

Monday, June 19, 2017

Quotes of the Day: Stockman Strikes Again -- Or, Perhaps -- Stockman Strikes Out Again (time will tell)

David Stockman -- a man who has leveraged his tenure with the Reagan administration to the absolute hilt -- has a warning for all investors:
"This is one of the most dangerous market environments we've ever been in. It's the calm before a gigantic, horrendous storm that I don't think is too far down the road."

Friday, June 16, 2017

Chart of the Day: Financial Sector Breadth

The financial sector -- our presently highest target weighting -- seems to be finding its legs.

Thursday, June 15, 2017

This Week's Message: The Fed's Green Light -- And Its Implications

In last week's message I shared an email conversation where I suggested that despite present yield spreads denoting a low financial risk environment (essentially paving the road to higher interest rates), folks were nonetheless willing to buy bonds. Here's that part:

Wednesday, June 14, 2017

How to Sleep Well Amid Uncertainty

As the market traverses present-day domestic politics, geopolitics, central bankers, corporate earnings and economics, it's incumbent upon you (the investor) and us (the investment counselors) to keep our thinking above the fray.

Tuesday, June 13, 2017

That the-market's-gotta-come-down-because-it's-at-an-all-time-high attitude...

Last year, when the S&P 500 moved into all-time high territory with momentum, a trader friend or two asked for my view on what to short. It wasn't "if" to short, it was literally "what" to short. The sentiment there was that the market surely couldn't sustain that level and, therefore, virtually had to come crashing down. Since the data we track suggested otherwise, I had nothing to offer in response.

Monday, June 12, 2017

This Week's Video: Putting Recent Volatility Into Context

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Saturday, June 10, 2017

What the &$#! Happened Yesterday?

Really rough day for tech stocks yesterday:    click charts to enlarge...

Quote of the Day

The great challenge as a market participant is of essentially the same mental character that has us interpreting the world around us in a manner that fits what we desire, and/or supports our personal biases.

Friday, June 9, 2017

This Week's Message: The Age of the Machine Has NOT Risen -- OR -- The Effects of Little League Games and Piano Recitals

I need to preface the following with the acknowledgement that, as with virtually everything else in life, future market prices are undeniably uncertain. Stocks can fall out of bed at anytime for any reason -- whether they've enjoyed an uptrend lasting 8 years, 8 months, 8 weeks, 8 days or 8 minutes. They can fall from what some construe as great heights, they can fall from any number above zero... 5,000 was considered a great height when the Dow reached that milestone back in November 1995:

Wednesday, June 7, 2017

This Week's Video: Sectors Sending Mixed Signals

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Saturday, June 3, 2017

While Western Leadership May (or may not) Resist Belt and Road, Western Investors Absolutely Should Not!

From Bloomberg's May 12, 2017 Economic Brief:
China is one of the few countries in the world today with money to spend, and Xi Jinping is ready to write some checks.
Those checks would be written to fund China's "Belt and Road Initiative".

Friday, June 2, 2017

Quote of the Day: Really? Tax reform in the face of such perverse incentives??

All in favor of tax simplification say "aye". AYE!!! All opposed say "nay". ..................

I know that all of you, umm, well....., we do have a client/subscriber or three in the tax-planning business (each of whom I respect and admire [sincerely!])..... so let's say most of you sympathize with my AYE!!

Thursday, June 1, 2017

This Week's Message: Are Stocks Dangerously Expensive? -- AND -- Highlights of our in-house study on the financial sector

Here's a look at our tracking of current-year price to earnings ratios for the S&P 500 (spx), major U.S. sectors, and much of the rest of the world -- along with our target allocation percentages:   click charts to enlarge

Sunday, May 28, 2017

Quote of the Day

As you've gathered, our chief aim herein is to help our readers/clients keep the day-to-day world of markets in proper perspective, and to keep their eyes on the long-term ball.

Saturday, May 27, 2017

Quote of the Day

I can virtually assure you, any ad for a sure fire investing/trading system isn't worth the cost of whatever medium utilized to bring it to you (in the olden days we said "the paper it's printed on").

Thursday, May 25, 2017

This Week's Message: What Motivates the Seers

RBC's guy feels very good about the market these days:              emphasis mine...
(Bloomberg) -- Risk assets should continue higher amid an economy that’s in good shape, barring “some exogenous event,” and “bearish arguments appear to be increasingly contrived,” RBC strategists led by Jonathan Golub write in a note. * Drivers of market upside include: synchronized global pickup, easier lending conditions, improving consumer situation, renormalization of rates and corporate profits.....
And, clearly, he's in no mood for dissenting opinions.

Sunday, May 21, 2017

Four Types of Investments -- AND -- This Week's Video

I play a lot of basketball, and, as my son and the dudes I play with will attest, I like to attempt three-pointers. In that success enhances the enjoyment of virtually any endeavor, I knew from the start (my late start [not surpassing the 5'5" mark till after highschool and, thus, being a wrestler during my formative years]) that if I was to score enough to justify my itchy trigger finger, I had to learn good shooting fundamentals. While I'm fully aware that 100% from the field is infinitely beyond my reach, I know that if I can stay in rhythm, if my form is sound and if I practice good shot selection, my odds of maintaining a respectable enough percentage to keep me from being the lowly last pick come time to select the teams increase dramatically.

America: A Talent Magnet!

Edward O. Thorp, one of history's great investors, has lived a fascinating life! While nearing the end of his amazing, and instructive, autobiography A Man For All Markets, I found myself pondering the heightened nationalist sentiment that (recent French election notwithstanding) seems to be gaining traction throughout the developed world.

Friday, May 19, 2017

This Week's Message: The Cure Can Hurt a Little - OR - The Unavoidable Fact - OR - They Come and They Go

I sense a little hesitation among some clients these days -- that is, a hesitant feeling about global markets. This, frankly, I welcome, especially during a bull market. It speaks to our clients' understanding that stock prices forever fluctuate. It says that they're not the typical bleary-eyed individual investors who tend to embrace the prevailing emotion of the crowd.

Wednesday, May 17, 2017

Bonus Video: This Morning's Selloff and Past Presidential "Panics"

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Quote of the Day: The term "Watergate" got you jumpy?

From Bespoke Investment Group's morning commentary (also, I shot a 5 minute video on past US political turmoil and the market that I'll be sending shortly [the YouTube upload is very slow this morning]):

Tuesday, May 16, 2017

This Week's Video: Potential Fuel Going Forward

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Chris Ciovacco's recent excellent analysis inspired this week's message...

One minute of pure inspiration for our kids and grandkids!

Thursday, May 11, 2017

This Week's Message: Why Didn't Brexit, or Trump's Victory, Derail the Market?

The great conundrums of the past year have been Brexit and Trump. Pundits, en masse, had global markets tanking should either, let alone both, succeed. Well, as you know, both succeeded and, go figure, a number of the world's equity markets marched to all time highs in the aftermaths.

So, is it that Brexit and the President's proposals/policies/positions are -- contrary to early "expert" opinion -- inherently good for markets? Or is it something else altogether?

Wednesday, May 10, 2017

This Week's Video: Trend Line Perspective

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, May 9, 2017

Chart of the Day: Housing Stats

Have you been thinking that since, in some areas, home prices have moved back into record territory, that there exists yet another housing bubble just waiting to pop? Well, trust me, you're not alone. Although, while I completely understand, I wouldn't be one who presently shares your concern.

Monday, May 8, 2017

Chart of the Day: Not rethinking our bullish Euro Zone view just yet...

Just a quick note regarding market action immediately following the French election -- which yielded the result the market was hoping for.

So, if the market was hoping for a Macron victory, which it got in landslide fashion, why would Euro Zone stocks be trading down 1.6% as I type? And why would the Euro trade notably lower as well (recall that I hinted in yesterday's blog post that the initial spike higher could've simply been a knee-jerk reaction)? I mean, yesterday's financial news offered up pieces that, for example, talked of the Dow stocks to own in a rising Euro environment.

Stat of the Day: Industrials Look Compelling

The industrials sector ties for the 2nd largest (along with tech and materials) target weighting within our portfolios. Obviously, we believe the setup (technically and fundamentally) to be presently quite favorable.

During each earnings season Bespoke Investment Group produces a periodically updated list of the companies they call "triple plays". These are the ones that beat analysts' estimates on earnings, revenue and forward outlook. Last week they refined the list to 14 names that they see as showing unusual technical strength as well.

Here's a look at the sectors that house each name:

While tech actually takes the top spot on the unrefined triple play list, I found it interesting (although not surprising) that industrials dominate the best-trending list.

Sunday, May 7, 2017

Charts of the Day: French Election Exit Polling and the Euro

Two weeks ago, herein, we focused a bit on round 1 of France's presidential election. In our view (totally based on the polls and the odds makers), the election was essentially decided in the first round. Any divergence from the trend in polling and/or in the odds would've inspired additional commentary from me.

Friday, May 5, 2017

Stats of the Day: What's up (or down as the case may be) with the dollar?

One of 2017's conundrums has been the non-rally in the U.S. dollar.

Here's a look at the net long position among futures speculators in the U.S. Dollar Index over the six months leading into this year:

Traders were the definition of bullish on the dollar to start the year.

Thursday, May 4, 2017

Economic Update Part 3 and Your Weekly Message: Levels of Stress in the System

We'll make part 3 of this week's look at the economy our weekly message as well. As you noticed in the previous two updates (here and here), U.S. consumer and business activity is not sending signals that we should be fretting the next great recession just yet.  

As I've stated here before, there's no better place to look for stress in the system than in the credit markets -- so we'll explore some key indicators to paint the present picture. 

Wednesday, May 3, 2017

Quote of the Day

When you find yourself stressing over market volatility, think the following:
By their actions, negative feedback traders provide a check on positive feedback and, in effect, regulate the trend. Without constraints introduced by contrarians, the market would be at risk of runaway, and possibly terminal, positive feedback.
Gary E. Anderson. The Janus Factor: Trend Follower's Guide to Market Dialectics

Tuesday, May 2, 2017

Economic Update Part 2: The Business Outlook

In part 2 of this week's look at the economy, we'll highlight a few key indicators that point to the general state of business in the U.S.

The following charts (click to enlarge) go back as far as the data allow. Note the trends leading into past recessions (red-shaded bars) and compare to the present. I highlight each title green, yellow or red to reflect my view of the prevailing trend.

Monday, May 1, 2017

Quote/Message of the Day: We'll defer to the market...

Just finished James Owen Weatherall's The Physics of Wall Street. I found it fascinating, although I suspect others more tightly wed to Wall Street dogma have a number of understandable bones to pick with the brilliant young physicist, mathematician and philosopher.

I will say that I'm glad I didn't read the book back when it was published in January 2013. For, being so impressed with the author's intellect, I might have been swayed by his gloomy assessment of the global economy at the time. Per his epilogue:

Economic Update Part 1: The Consumer

This week we're focusing on the economy. In that we track too many data points to bury you with one blog post, we'll break it up. I'll summarize at the end of the week.

Today we'll highlight a few of the key indicators that speak to the health of the consumer (consumption btw is 2/3rds of the U.S. economy):

The following charts (click to enlarge) go back as far as the data allow. Note the trends leading into past recessions (red-shaded bars) and compare to the present. I highlight each title green, yellow or red to reflect my view of the prevailing trend.

Sunday, April 30, 2017

Quote of the Day: A Silver Lining in the GDP Report

As I stated yesterday, we'll be focusing more on the economy this week here on the blog. Here's a little appetizer via Bespoke Investment Group:
• The rebound in business investment (strongest contribution to growth since Q3 2014) is extremely encouraging, and suggests that the soft patch in US business investment driven by declining Energy sector capex is ending. Business non-energy structures investment was a bit weak but equipment investment was very strong, as were housing-related series.
Capital investment has been something that, on balance, has been sorely missing -- even before the huge decline in oil prices -- during the present expansion. The past several months have seen a pickup, as confirmed by the GDP report. While much of the recent surge in structures owes to the energy patch, the strong equipment numbers (not to mention housing) speak positively about economic prospects going forward...

Saturday, April 29, 2017

A Letter from China Inc.

In the following, I stray into sensitive territory I know for some of my readers. While I expect a little keep-it-on-the-markets-Marty feedback from an unsympathetic soul or two, I must -- in my own defense -- express my own humble view (one shared by economists not captured by political interests) that a true free trade policy (unilateral even) would be the most market (not to mention consumer at all rungs [especially the lower] of the economic ladder) friendly endeavor Washington could pursue.

If you read this with an open mind you may find yourself embarrassed by its simplicity. But, please, don't be too hard on yourself. Most of us simply don't have the time to scratch beneath the surface of economics and we, therefore, take verbatim the stuff couched in ways that make sense at the first, and, alas, only, blush. Truly, the couchers are adept at identifying and exploiting our grandest misconceptions.

Quotes of the Day: Europe's bullish narrative intact...

My quote of the day last Thursday spoke to an improving Euro Zone economy. Looks like earnings support the narrative, as do investment flows:
Europe Starts Earnings Season With a Bang, Leaving U.S. Behind(Bloomberg) -- No false dawn this time. After years of disappointments, European companies are finally living up to market expectations, enjoying their best season in almost seven years as earnings per share grow at more than twice the pace of their U.S. counterparts. About a third into Europe’s first-quarter earnings season, companies listed on the Stoxx Europe 600 Index have so far reported a 24 percent jump in EPS year over year ... 
Investors Are Pouring Money Into European Stocks Like It’s 2015{Bloomberg) -- The evaporation of political risk in Europe is seeing money managers rush into the region’s stocks at a clip not seen since the year the equities last surged to an all-time high. Buoyed by relief over the outcome of the French first-round vote, investors poured $2.4 billion into European equity funds in the week through April 26, the most since December 2015 ...

Friday, April 28, 2017

This Week's Message: To be successful at investing, imitate The Great One. And I don't mean Warren Buffett

Yesterday evening I found myself in deep discussion with a gentleman who, among other things, builds basketball courts. Other than his stated belief that his company is "the Rolls Royce" -- as opposed to "the Volkswagen" -- of court construction, I found him to be generally humble. He told me about a man he once worked for, when he was learning the demolition business (he later founded his own such business), who acted as if he was the inventor of everything having to do with structure destruction. While sharing his story, he chuckled, and said "I wonder how people knocked stuff down a hundred years ago without this genius telling them how to do it". His boss's bravado aside, he admitted that he indeed learned a great deal by watching the man work.

Thursday, April 27, 2017

Bonus Quote of the Day: Yes -- for now -- The Euro Zone is Looking Up!

Despite the Euro Zone's usual geopolitical risk (I say "usual" because the place has been a hotbed of political risk for the past several years), I've been talking up its prospects -- both in terms of its economy and its equity markets -- to clients for months.

Here's Bespoke Investment Group on the EZ's most recent economic data:
Economic data today in Europe has been broadly good as prelim April Spanish CPI beat estimates, Germany consumer confidence beat, CBI reported retail volumes surged (though the more predictive 3m average remains subdued, chart), and Eurozone survey data surged. Consumer confidence matched the cycle high of -3.6, industrial confidence made a new local high and signals industrial production growth of over 6% YoY, and economic confidence suggests GDP growth of 2.5% YoY which would be near 2011 highs. The big disappointment was Spanish unemployment, where the rate missed estimates.
And here's a look at how well Euro Zone equities (using our preferred Euro Zone ETF) have performed relative to the U.S. so far this year:     click to enlarge...

Wednesday, April 26, 2017

This Week's Video: The Not-So-Great Bond/Stock Debate

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Tuesday, April 25, 2017

Quote of the Day: Worthless White Noise

I swear, not a day goes by where I don't catch a headline, or a passing comment from someone who truly ought to know better, that has me thinking precisely what Michael Covel points out in today's quote.

Yesterday, for example, I walked into my office to find my television on. I was surprised, for two reasons: 1. I didn't know it still works (that's how long it's been since I've had it on). And 2. It was turned on.

At the time, Nick was setting up my computer (we're remodeling and last weekend the new carpet happened), he swore it wasn't him. My best guess is that the folks who reassembled the hutch upon which the TV sits tested to make sure they plugged it back in properly and forgot to turn it off. What made it particularly annoying was the sight and sound of CNBC's Rick Santelli (I recall him from years past while I was learning that there was absolutely nothing to learn by watching financial television) working a dry erase board and describing some dynamic about the dollar that deserved hollering at the camera in the most condescending fashion. The problem I have (my palpable annoyance, that is) is my recollection of past rant-filled predictions -- the majority of which of course turned out to be utter intellectualized rubbish.

Not to single out Mr. Santelli (he just happened to be the one on the tube when I walked in), for he's just one of the many whom the media trots out who apparently can't (we know this, trust me, otherwise they'd be trading, never talking at cameras, during the trading session), therefore they teach, or, as the case may be, they preach.

From Covel's The Little Book of Trading (an insightful read, by the way):
White Noise
Watching the news, reading the financial news and listening to the President is not how you make money in the markets. You don't make money by explaining what just happened or by guessing what's going to happen in the future. You don't know what's going to happen in the future, the things that occur in the future that make you money are all things you couldn't figure out were going to happen.
It always makes for an interesting story to say "well this is going to happen because this or that'; that is information everybody already knows, it's already baked into the market price. 

Sunday, April 23, 2017

Quotes of the Day: The predicament of investing...

Early in my career I was fed large helpings of "Modern Portfolio Theory (MPT)". We had this wonderful optimizing software that would place a portfolio on the "Efficient Frontier" and score it based on a variety of risk and return measures. The "Efficient Market Hypothesis (EPH)" is the cornerstone of MPT. It goes like this:
The efficient market hypothesis (EMH) is an investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

Friday, April 21, 2017

Don't (at this point) Fear Frexit...

I want to get out in front of the French election for you, just in case. Why? Because probabilities suggest that should Marine Le Pen and Jean-Luc Melenchon (the nutcase I referred to in this week's message) emerge the victors in Sunday's first-round voting, global markets will take notice -- in un-pretty fashion.

This Week's Message: All You Need To (or Can) Know...

France's first round of voting -- Sunday -- appears to loom over the market this morning. In a nutshell, the legit contenders consist of one candidate who is, frankly, nuts, another who appears to be a Kremlin crony (leave the Euro, anti-NATO, pro-Moscow, campaign funded by loan from Russian bank, and -- unlike her competition -- has been left alone by alleged Russian hacking attempts and "fake news" stories galore) and two relative mainstreamers. Either of the former two taking the first round would likely have European and U.S. markets flashing red at the open come Monday morning. Either of the latter two could have markets in rally mode. Odds makers see Macron (a mainstreamer) the ultimate (involves two rounds) winner, but recent history, to put it mildly, has not been kind to the odds makers.

That's all I have to offer on France for now. Possibly more next week depending on Sunday's outcome.

A personal story:

Growing up, duck hunting and trout fishing were my things -- the latter still is. As it happens, football season and duck season coincide each year. So, back in the mid-70s, every Friday night after playing for the legendary Kerman High Lions -- rather than doing whatever high school football players did on Friday nights -- I'd hop into my oldest brother's heavily-speakered VW Beatle (Dad called it a stereo on wheels) and we'd head out to the Mendota Wildlife Preserve (rockin the whole way to Aerosmith, Neil Young and Ronny Montrose on the 8-track) to get in line with all the other crazies. We'd sleep in the car till 4 a.m. then, after flashing our hunting licenses and paying our ten bucks each at the booth, we'd race to whatever flooded field had been working for us the prior weeks, or to one we had noticed the week before was attracting more birds.

Tuesday, April 18, 2017

This Week's Video: Pound shorts got pounded today...

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Monday, April 17, 2017

Quote(s) of the Day: Just the Facts Ma'am...

During client review meetings -- along with performance results, sector weightings, etc. -- I generally offer up a bit of the data that influence my view of the current market setup. In virtually every instance I follow my assessment with words to the effect: "my view is based entirely on the data I presently have at my disposal. Ask me tomorrow and, as the data may have changed, I may have changed my view."

In other words, I never tell it like you might think I'd like it to be. In fact, I am agnostic when it comes to market direction. Truth be told, I really don't care if the trend is up or down, I only care about recognizing it.

William Dunnigan in New Blueprints for Stocks and Grains had it right back in 1956:
"Let us believe that it is possible to profit through economic changes by following today's trend, as it is revealed statistically day-by-day, week-by-week, or month-by-month. In doing this we should entertain no preconceived notions as to whether business is going to boom or bust, or that the Dow-Jones Industrial Average is going to 500 or 50. We will merely chart our course and steer our ship in the direction of the prevailing wind. When the economic weather changes, we will change our course with it and will not try to forecast the future time or place at which the winds will change."
As did Joe Friday:
"Just the facts ma'am."