Tuesday, January 31, 2017

Quote of the Day

Nassim Taleb in his excellent book Antifragile stresses the point that I constantly stress herein about the market (did just yesterday in fact):
In the complex world, the notion of “cause” itself is suspect; it is either nearly impossible to detect or not really defined— another reason to ignore newspapers, with their constant supply of causes for things.

Monday, January 30, 2017

Quote of the Day: What the tape is 'presently' telling...

Jonathan Krinsky, chief market technician at MKM Partners, echoes the last sentence in my morning blog post:

The long-term bullish case is still intact. The bumpy policy road was expected with Trump in charge. Investors are betting once Trump is done pleasing his base with executive orders, he'll become the dealmaker-in-chief on taxes and infrastructure and the other market-pleasing policies. Krinsky says the tape is telling you this much.
"The evidence for a meaningful top is lacking," wrote the technical analyst. "We would welcome any weakness as a buying opportunity, rather than viewing it as the start of something bigger."

The Administration's 'Market' Faces Face-Off

As I've suggested here a number of times since the election, from an economic/investment standpoint, the new administration wears two distinct faces.

Its pro-market face expresses a desire to deregulate industry, demystify the corporate tax code and rebuild some infrastructure. Its anti-market face expresses a contempt for existing trade agreements and a defiance of international protocol.

Sunday, January 29, 2017

Quote of the Day: Declining Bullishness is Bullish

Like the folks at Bespoke Investment Group, I feel better about the market when the majority of individual investors don't:
While consumers continue to feel more and more positive about the economy, the post-election jump we saw in bullish stock market sentiment has faded quickly. This week’s AAII bullish sentiment reading of individual investors dipped down to 31.58%. It has now given up nearly all of its post-election bump. As we always mention, this constant skepticism about the market from individual investors is actually a good thing for the long-term health of stocks in our view.
In case you missed it, here's the link to my January 14 post, where I dug into the topic. Here's a snippet:
Fascinating! In all nine instances when bullishness was reaching its lows -- and yes it was indeed low in those instances (under 40%) -- the market was either beginning. or in the midst of, an impressive upward run. So, apparently it does indeed pay to be the contrarian -- just more so when the crowd's the most gloomy.  

Saturday, January 28, 2017

Thinking on Protectionism

Aside from the monster problems with protectionism (like the hit to our small local businesses who employ 2/3rds of our workforce, and exist largely because you and I can buy items from countries who produce them the cheapest [saving money with which to lavish onto our local employers] -- not to mention the subtle robbing of our ability/freedom to do business wherever and with whomever we choose), it threatens the stories behind the headlines below (save for the last one). Stories, by the way, that (save for the last one) not only make America richer, they make it safer. Per (it's believed) Frederic Bastiat:
Where goods don't cross borders, soldiers will.

Thursday, January 26, 2017

This Week's Message: Should You Fade the Rally?

I've been asked a few times lately if, from a trading (as opposed to a long-term investing) perspective, I'd fade this rally. Meaning, at these levels, could a trader make money betting on a fall?

The thing about the market is that it can fall from any height, be it Dow 20,000 or Dow 2,000. And whether it hits that level from above or below doesn't help us all that much in terms of guessing where it goes from there.

Quote of the Day: "I Ain't Worried"

Douglas Merlin Carlson -- the man famous for his Rustic Rub seasoning -- shared his sage wisdom with me today:
I ain't buyin', I ain't sellin', so I ain't worried about it!

Wednesday, January 25, 2017

Quotes of the Day: The Bullish Condition -- And -- Market Metaphysics

Did the Dow settle above 20k today because of the goings on in Washington? Deregulation, lower taxes, infrastructure? Very market-friendly stuff! Okay, but what about "border adjustment taxes"? What about the threat to companies that if they move labor across a border to gain productivity and market share, they'll pay oh so dearly? What's market friendly about that? Hmm...

Could it be that the market (millions of investors and traders collectively) is simply in bull-mode and hears only what a bull would want to hear?

I feel that old Jesse Livermore quote coming on:
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.
Or, has the market done the math and determined that the potential good outweighs the potential bad? Or perhaps the potential good has more potential of coming to pass than does the potential bad?

But, you know, you just can't know. As we've explored herein a thousand times, the factors that impact the world's markets and economies are too numerous to count, let alone assemble and base predictions on.

Dean Moriarty, may as well be writing about the collective global market as he writes on metaphysics:
... there is too much to see, and in the looking is found the part, but not the whole. It is known that the part is in the whole, and to know the whole you have to see all of the parts. But the parts are too small to be seen all at one time. 

Monday, January 23, 2017

Thought of the day: If we act like China, won't we live like China?

I keep hearing about how other countries have been "eating our lunch" and somehow doing massive harm to the U.S. worker. I'm puzzled???

The U.S. has been really the world leader, the standard-bearer, if you will, for international trade. Among large developed nations, we've set the tone, championed the agreements, pushed for more international commerce.

Sunday, January 22, 2017

Quote of the Day: U.S. Consumers, Employers and Investors will be the ultimate payers of a border tax...

We all know (right?) that if we go the way of a "border tax" the U.S. consumer will pay the price, via higher prices. And the small domestically-driven employer will pay the price, via lower revenues (as its customers have less to spend). The U.S. investor stands to pay a dear price as well:
Overall, U.S. equities have more to lose than their Chinese counterparts in a trade war, at least in the view of Morgan Stanley’s Garner. While almost 10 percent of companies in the MSCI U.S. index derive at least a tenth of their sales from China, less than 2 percent of firms in China can say the same about the U.S., according to Morgan Stanley.

Saturday, January 21, 2017

Quotes of the Day

Be thoughtful as you take in the headlines, financial or otherwise:

Robert Mortorana, CFA on web-clutter:
It’s a necessary skill when confronted with the hype and sensationalism now masquerading as news: press releases that spin the facts, earnings reports that ignore basic arithmetic, and management explanations that test the boundaries of probability.
It is worse now that investment blogs have embraced the golden rule of tabloid journalism: simplify, then exaggerate. Pseudo news and pseudo analysis clutters the web, making it harder to stay well informed.
Ben Carlson, CFA, headline-interpreting:
Headline: [Democrats/Republicans/current or past president] Caused X% of Economic or Stock Market Growth
How to read it: Presidents or political parties don’t personally control economies or stock markets made up of millions of participants and trillions of dollars all wrapped up within a complex adaptive system. These things don’t come with levers that you can pull to make them rise or fall.

Friday, January 20, 2017

This Week's Message: Recession Odds Very Low

Well, here we go. To say the least, we've got some interesting, exciting, what have you, times ahead. My aim herein is to not inject politics -- other than their impact on financial markets -- into the discussion. My aim is to report to you how the world looks within the context of markets and economies.

Wednesday, January 18, 2017

Market Commentary: Past setups heading into inaugurations (video)

Quote of the Day

Writing on recent commentary surrounding Britain's currency, the ever-insightful blogger Polemic Paine perfectly describes what ultimately moves markets -- and why my office TV is virtually never on:
I have come to the simple conclusion that the reason that the commentary is so wrong is because very, very few of those commenting actually trade the thing. The reason prices move is because people buy or sell in differing ratios upsetting the equilibrium of the assumed fair price. The reasons that people trade is hugely complex. The drivers behind the individual trading decisions can vary massively. Commentators can not accurately define why GBP is lower or higher unless they have actually spoken to a person who has traded it. Here I am not talking about an FX salesperson who has transacted a trade for someone else, nor even a spot FX trader (who manages flow but rarely knows the ‘why’)  but the fund manager, central bank, sovereign wealth fund  manager, hedge fund or real money PM, or collection of electrons in an algorithm who actually decided to swing the bat. And funnily enough, practically none of them will ever a) want to tell you b) want the fact that they have traded be known in the first place.

Tuesday, January 17, 2017

Quote of the Day

As with every time the Dow has reached a record level throughout my career (it closed at 1,134 on my very first day [yeah, I'm that old]), folks are asking me if the market can go higher from here -- some are outright telling me it can't.

Famed trader Alexander Elder says to be very careful arguing with the trend:
Each price reflects the latest consensus of value of market participants. Putting on a trade challenges that consensus. A buyer disagrees with the collective wisdom by saying the market is under priced. A seller disagrees with the wisdom of the entire group, believing the market is overpriced. Both the buyer and the seller expect the consensus to change, but meanwhile they defy the market. That market includes some of the most brilliant minds and some of the deepest pockets on Earth. Arguing with this group is dangerous business, and it has to he done very cautiously.

The Lament of a Great Economist -- And -- The Motivations of the Appeasing Economist

Here's a snippet from Don Beaudreaux's excellent January 2nd blog post, The Lament of the Merely Decent Economist:
Any decent economist can point to tariffs and note that the result is the protection of some jobs and firms at the expense not only of other jobs and firms (and of consumer welfare), but also at the expense of the economic openness and dynamism that are essential for sustained economic growth.  But it takes a Very Special economist to craft an economically coherent account of why the man-in-the-street is, after all, correct that tariffs are a boon for, rather than a burden on, the economy.
So why would an economist strive to become "Very Special", when becoming such exposes him/her to the decent economist, and the freshman econ student of a decent econ professor, as a manipulator who preys on the average citizen's lack of a basic understanding of economics? Well, he/she gets appointed to high posts (as his manipulations support the interests that support the political ambitions of the high post appointer), becomes a journalist for a politically-motivated publication, gets quoted, gets attention, rubs elbows, etc. While we the people get, excuse me, screwed!

Saturday, January 14, 2017

This Week's Message: When it pays to be the contrarian...

Maybe a dozen times a year a client will tell me about a book he/she read, or send me a link to an article or a YouTube presentation where some really smart individual who once uncannily predicted some cataclysm (or so somebody claims [typically  the soothsayer him/herself]) offers up yet another gloomy prediction. In perhaps less dire fashion, the financial networks forever parade those stock picking celebs who, with great condescension, pick apart the case that stocks -- as a group -- can move much, if at all, above present levels.

Now who's seeking to put U.S. workers at a disadvantage?

I have two questions for Sean Spicer, spokesman for the President-elect, in response to (emphasis mine):
Asked whether an auto border tax could impact Canada, President-elect Donald Trump’s spokesman, Sean Spicer, told reporters their policy isn’t specific to any one country. “When a company that’s in the U.S. moves to a place, whether it’s Canada or Mexico, or any other country seeking to put U.S. workers at a disadvantage,” Spicer said on a conference call Friday, then Trump “is going to do everything he can to deter that.”

Tuesday, January 10, 2017

Quote of the day: It's discipline!

While markets are complex and may be approached from a wide variety of angles, there is one common denominator among the world's best investors and traders, it's discipline. And my how the world's best exploit the lack thereof of the crowd:

The words of one of them:
As a matter of fact, other market participants want you to be undisciplined and impulsive. That makes it easier for them to get your money.
Alexander Elder

Friday, January 6, 2017

This Week's Message: Trade

Over the past couple of weeks we've looked at a wide array of economic indicators, assessed the trends in each sector of the economy and noodled over the current setup for the equity market going forward. So, here I've been sitting for awhile, thinking about what I might offer up in this week's message that wouldn't be too redundant. Hmm....

Wednesday, January 4, 2017

Market Commentary (video)

My plan for 2017 is to limit the videos to one per week -- save for those extra-volatile weeks (and I suspect there will, as usual, be plenty) when a quick video will be the most expedient way to reach out. They'll be tailored to those of you who appreciate a technical look at markets. Although, I'll generally touch briefly on the economic/fundamental picture as well:

Sunday, January 1, 2017

Quote of the Day

While it's my practice herein to constantly distinguish for you the investor from the trader, I find the core characteristics that distinguish the successful from the unsuccessful in each endeavor to be virtually the same. From Kennedy and Gorman's insightful Visual Guide to Elliott Wave Trading:
......psychological factors that prevent traders from becoming consistently successful: lack of methodology, lack of discipline, unrealistic expectations, and lack of patience.
I suspect the above applies to more in life than just investing and trading...