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?"

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.

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.

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:

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.

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:

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:

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:

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.

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:

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:

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. 

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." 

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:

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:

8/17/17

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…

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 :)

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.

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.

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:

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?".

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 20^th Century.

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:

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:

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.

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.

Quick note on market reaction to this morning's jobs number...

Jobs number came in at 209k, which was notably above consensus estimate. The internals were strong. 

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).

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.

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.