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.